How Advertising Works

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How Advertising Works – Explained

1.1. Introduction:

Advertisers have varied motives to advertise. They may want to increase their sales,
brand loyalty or may want to increase the brand awareness (Jobber, 2007). Undoubtedly advertisers have been achieving their motives for decades now. However since advertisements are meant as an influencing tool to persuade human minds
and each human mind is different, this chapter will put light on how well are the motives of the advertisers achieved and what form of advertising works for their respective motive to be achieved, by working out the answer of the following question:

  • What is the effect of advertising on the market and on the brand?
  • How long does it take for the advertising to make an effect on the consumers and hence the market? Does the form of advertising affect to achieve the same?
  • How does it affect the consumers’ minds and how do consumers respond to advertisements.

1.2. Advertising overview

Advertising is so varied that almost everything said about it is accountable to be disproved by some contrary example, yet they share an ambiguous awareness and hence advertising can be recognized when seen (McDonald, 1992). For instance, a commercial for a washing detergent, a press or a poster ad for a new laptop computer and a circular from a bank explaining the new loan scheme are all very different but poses no difficulty to anyone to see them all as advertising. McDonalds (1992) argues that there is no science of advertising.

dropped-calls-adJobber (2007) defined advertising as, ‘Advertising is any paid form of non-personal communication of ideas or products in the prime media i.e. television, the press, outdoor, cinema and radio’. IPA (Institute of Practitioners in Advertising) however defines advertising as ‘The means of providing the most persuasive possible selling message to the right prospects at the lowest possible cost’ (Jobber, 2007) needs proper referencing.

1.3. Key Characteristics of Advertising (Jobber, 2007)

It reaches a wide audience and reaches quickly, hence it is good for building awareness

It is used to enhance the sales effort,

This section will cover the discussion on ‘How advertising works’, where each word of the aforementioned phrase will be dealt with in detail. For instance, to deal with ‘Advertising’, the discussion will cover things like: at what level, i.e. its micro and macro effects, its effects at the product category and the effect of the brand – In what form and in what time span, i.e. a single advertisement effect, a burst, a sequence or a yearlong campaigns – in relation to whom i.e. consumers. And the term ‘works’ will cover – how does it affect sales, how does it affects the consumer minds and how does consumers respond to advertisements.

At the Macro level: One important question posed for advertising is that – Can it increase whole market? This is often discussed with two opposing arguments (McDonald, 1992).

Advertising helps and /or increases the overall demand of a product. This means that a considerable number of people actually start buying the product advertised. It is also argued that advertising persuade to alter the will and habits of the people.

The counter argument states that advertising does not alter the basic orientation of people and has never made anyone buy a product they didn’t want to or more than what they wanted to. It only persuades them in choosing one brand over another.

McDonald (1992) states that these arguments are stated in an extreme form. He argues stating that since the above mentioned arguments talks about persuading wills, do they consider the weak-willed and vulnerable, if they are on the edge already

Jones (1992) mentions an exception with an example of the rise in the total demand of avocados in California, which was exclusively an effect of advertising. However, the key factor to this result of advertising was that there was no countervailing competition; as there is only one avocado. Hence it can be concluded, as Jones puts it, when the context of advertising is competitive, which usually is, then consumers moves towards a certain brand and hence move away from another brand. But they do not increase their total use.

As seen in the example of Avocados, the sales increased as there was no competition. Also the market does not increased but can only be shaped (Benham, 1972). Hence it can be further argued that this might be the reason why some brands position their products as if they were unique and there is no competition to them. One recent example to this would be Apple’s iPad – a tablet computer. It has the same functionality as that of a laptop computer, however it is positioned in such a way that a laptop owner feels the need to own an iPad too.

best-ad-campaigns-10

1.4. Advertising motive: Shape markets:

Advertising works as a major force in establishing the product differentiation and hence in branding and building market share. In addition, it encourages competition.

Jones (1992) traces a sequence of stages in which advertising operates.
1.4.1. Advertising raise the effective price:

In the short term, advertising increases demand, which hence raise the effective price: Though this is hard to measure, because one would have to freeze the initial advertising effect to record the changes after advertising is introduced. However besides the avocados example there is a case of ‘Kellogg’s – Rice Krispies’, where a new advertising campaign moved the demand curve, which is in inverse proportion to the quantity purchased and price, to the right (Elliott, 1981). When this happens then it means that the price increase of the product will still deliver the same sales of that product (McDonald, 1992: 42).
1.4.2. Advertising encourages competition:

Price changes are often immediately acknowledged by the competitors. Thus, if a brand prices with too high difference then it has a high probability of losing the market share. A study by Benham, which compared the prices of eyeglasses in two areas, where adverting was encourages versus the area where advertising was banned, pointed out that the price of eyeglasses was $33 in the areas where advertising was banned compared to only $26 where advertising was encouraged (Benham, 1972).
1.4.3. Introduce new brands and products:

Advertising makes it easier for the established companies to introduce new brands and products: Evidences show that advertisers who cut their budgets during recession lose their return on investment and make only small gains in attaining market share. However, the advertisers who act aggressive, during recession, and increase their spending, gain a full point in market share. It is obvious that the brands who can afford to increase the spending in recession are established brands and it pays them off when they introduce new sub-brands and new products (Benham, 1972).

best-ad-campaigns-161.5. Advertising motive: Sales effectiveness

With findings from Behaviourscan test; Information Resources Inc (IRI) have issued a report (Information Resource Inc., 1991) conducting a behaviourscan test to study the effect of advertising on sales effectiveness (McDonald, 1992:75). This test not only considered the test results but also the advertising objectives as revealed by the advertisers and their agencies. The study revealed the following points

  • Only half of products advertised showed an increase in sales.
  • The increase in sales only exists for the first 6 months. It does not have any effect on sales after 6 months.
  • Only half of the products were able to show some kind of persuasion.
  • Compared to the established brands, new products advertising yielded sales increase.

For established brands, 20% of the campaigns cost was covered by the resulting sales profit. This figure was 40-50% for new brands. (Abraham and Lodish, 1990)

Advertising yielded more profitability than other forms of promotions; however activities like in-store displays and couponing acted as catalyst.

1.5.1. People are different: (McDonald, 1992: 82)

It wouldn’t be appropriate to assume that everybody in a group is the same. Ehrenberg (1988) argues that most people in most time do not change their behaviour in response to advertising because most of the advertisements are seen by people who are not interested in the subject or by those who cannot be persuaded any further than what they already are. But on the contrary there are always few who will respond in the desired way, at least some of the time. McDonald (1998) points out that most buyers are not persuaded by advertising because they do not have an incentive to change.
1.5.2. Analysis of buying pattern:

McQueen (1991) identified five type of buying behaviour.

The Loyals: This includes those who are ‘involved’ with the brand.
The Rotators: This includes those buyers who move between brands but are ‘involved’ with the category.
The Deal selective: This includes those who only buy on a promotion.
The price driven: This includes those who are extremely sensitive to price.
The Light users: This includes those who buy so seldom, that the strategy cannot be detected.

1.6. How advertisers and planners think it works?

Hall and Maclay (1991) conducted a study amongst advertisers’ marketing and research staff and advertising agency
account
directors and planners.  The finding suggests five main conceptual ‘models’ for how advertising works.

  • The sales response model: This model suggests that sales are the only indicator of the campaign effectiveness.
  • The persuasion model: This model suggests that a linear sequence from awareness to understanding to choice is an indicator and measurement of how advertising is working.
  • The involvement model: This model suggests that advertising works when a relationship is built by talking to them intelligently and entertainingly.
  • The salience model: This model suggests that advertising works when it differentiates a product and makes it look unique.
  • The Commodity model: This is not really a model and suggests that advertising is entirely a function.Sugar Free Lollipops

1.6.1. Two basic views of advertising – Sequential and necessary conditions (McDonald, 1992: 94):

It can be argued that there are two important functions of advertising. First, it is intended to make the consumers aware of the product or the function by communicating it to them and secondly and more importantly, persuade them to get the desired action from them.

McDonald (1998) suggests a number of forms explaining the above mentioned idea. These models are called a ‘hierarchy of effects’ or ‘linear sequential’ models. (Joyce, 1967). They are also called as ‘necessary conditions’ model and they only flow in one direction because it is further argued that one must be aware of something in order to want it and one must want it to buy it. This logic does not word the other way around and hence the models are called linear unidirectional models. There are number of linear models suggested by various authors and organisations and some of them are listed below.

Starch (1925): an advertisement must be seen – read – believed – remembered – acted upon

DAGMAR: (Colley, 1961): This is said to be the best known linear sequence to achieve communication and persuasion. Awareness – Comprehension – Conviction – Action.

AIDA (McDonald, 1992): Attention – interest – Desire – Action.

AIETA (McDonald, 1992): Awareness – Interest – Evaluation – Trial – Adoption.

1.6.2. Active consumers vs. passive consumers

Cioffi and Garner (1996) pointed out that the main distinction between active and passive consumers is that active customers search for information in order to be able to make a deliberate and conscious decision. Although such a search process takes time, the result of the process is an ability to cite more conscious reasons for the deliberate decision. In contrast, a passive customer is one who has not searched for information and therefore has fewer conscious reasons for his or decision.

1.6.3. Direct and indirect responses (McDonald, 1992:110):

Once the advertisement is communicated, it fetches different types of desired responses. These responses can be classified as direct or indirect responses.

1.6.3.1. Direct responses:

Take action: If an advertisement asks to fill in the form then under this type it is responded with by the filled form. This response is typically for low involvement (discussed in the next section) and infrequent products.

Seek information: In this type the advertising aims to get people to responds with inquisitiveness so that they try to find more about the message conveyed in the advertisement. This response is typically for infrequent but expensive goods.

Relate to needs, wants and desires: In this type the advertising the aim is not to get people to respond immediately but to link the message conveyed with their needs and desires. The action is the result of the long-term effect of the advertisement where one remembers the product as a result of continued advertising. This is aimed by trial of a new brand or something that is only occasionally used, like a proprietary drug or cosmetic.

Bring to the top of mind, recall previous satisfaction: In this type the advertising aims to get people to remember the product over its other competitor and usually aimed for the repeat purchases of habit dominated products.

Modify attitudes: In this type the advertising aims to get people to change their attitude towards a brand and make even take years at times. This is aim by the brands that are in an attempt to give them a new personality. E.g.: Levi’s tried to get cool (Jobber, 2003).

1.6.3.2.  Indirect response:

Reinforce attitudes: In this type the advertising aims to get people to feel that they have made a right decision by buying the product or service advertised. This adds value to the brand and is communicated further by the buyer.

1.6.4. High and low involvement in advertising: thinking and feeling

The FCB Grid developed at Foote, Cone & Belding indicated that  Advertising agencies make use of psychological and neurological theories, such as function of left brain, which is responsible for feelings like Conscious, Analytic and verbal Vs Right Brain, which is responsible for feeling such as unconsciousness, intuitive and symbolic (Berger, 1986). It was further argued that people spend less time thinking about which brand product they should buy is termed at ‘low interest product’, for instance, toothpaste or dog food (Vaughn, 1980).

However, it does not mean that ‘low interest product’ does not need advertising. ‘Low interest products’ are not inferior products. If the product is inferior that it will not sell irrespective of the kind on advertising (Vaughn, 1980). The FCB Grid has 4 quadrants. Vertical columns consist of attributes like ‘Think’ and ‘Feel’, horizontal rows consists of ‘High’ and ‘Low’ involvement. The FCB is as represented below.
THINK     FEEL
HIGH INVOLVEMENT     EconomicLearn-Feel-Doe.g.; Buying a Camera, Insurance, Stereo / Music System     Psychological
Feel-Learn-Doe.g.; Perfumes, Fashion accessory, car, house
LOW INVOLVEMENT     Responsive
Do-Learn-Feel
e.g.; household cleaners, pet food     Social
Do-Feel-Learne.g.; Mars Bar, pint of large beer.

(McDonald, 1992)
1.6.5. Involvement:

Brown (1991) argues that advertising does not influence repeat purchase. He also pointed out that brand linked buying involvement remains low and it depends on events such as seeing the brand on the shelves of the store where  consumers shop. Long term branding creates long term impact on memory.

‘Emotional involvement’ does not means high intensity of feeling and very less impression of advertising, like a glimpse of a print ad even un-remembered does its job, but TV commercial creates much impact than print ad, irrespective of the length of the commercial (Krugman, 1965). Brown (1991) stated that when audiences are seeing the advertising they don’t decide to buy the product, they are in evaluating or experimenting mode, but when they are actually shopping they are in decision making mode.

While actual shopping they are back in evaluating or experimenting mode, as they would like to try other brands and other alternative. Now the ad of other brands makes a recall and helps them in making decision (Brown, 1991).

Thus, repeated and creative ad plays important role in repeated buying and that is why adverts of newly launched product does not has immediate impact on the  short term sales, and cannot justify the expenses on further advertising.

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I'm an eCommerce Project Director at an agency in London and a consultant for a number of eCommerce start-ups. I founded Think etc 9 years ago which now lets me share my research and experience with all the interesting brands, people, places and projects that I have been privileged to work with. My work on crowdsourcing was published by Oxford as part of a journal article and I have been obsessing over eCommerce and Magento over the past several years.

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