Page 41 - Encyclopedia of Business and Finance

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Advertising

Continuity. Continuity advertising is a strategy to keep Market Share. Desired market share is also an important
current customers using a particular product. Existing factor in establishing an advertising budget. Increasing
customers are targeted and are usually provided new and market share normally requires a large advertising budget
different information about a product that is designed to because a company’s competitors frequently counterattack
build consumer loyalty. with their own advertising blitz. For example, when Gen-
eral Motors Corporation initiated an employee pricing for
Brand Switching. Companies adopt brand switching as everyone campaign, both DaimlerChrysler and Ford
an objective when they want customers to switch from Motor Corporation established similar offers. Successfully
competitors’ brands to their brands. A common strategy is increasing market share depends on advertisement quality,
for a company to compare product price or quality in competitor responses, and product demand and quality.
order to persuade customers to switch to its product
brand. Product Differentiation. How customers perceive prod-
ucts is also important to the budget-setting process. Prod-
uct differentiation is often necessary in competitive
Switchback. Companies subscribe to this advertising
markets where customers have a hard time differentiating
objective when they want to get back former users of their
between products. For example, product differentiation
product brand. A company might highlight new product
might be necessary when a new laundry detergent is
features, price reductions, or other important product
advertised. Since so many brands of detergent already
information in order to get former customers of its prod-
exist, an aggressive advertising campaign would be
uct to switch back.
required. Without this aggressive advertising, customers
would not be aware of the product’s availability and how
ADVERTISING BUDGET it differs from other products on the market. The adver-
Once an advertising objective has been selected, compa- tising budget is higher in order to pay for the additional
nies must then set an advertising budget for each product. advertising.
Developing such a budget can be a difficult process
because brand managers want to receive a large resource Stage in the Product Life Cycle. New product offerings
allocation to promote their products. Overall, the adver- require considerably more advertising to make customers
tising budget should be established so as to be congruent aware of their existence. As a product moves through the
with overall company objectives. Before establishing an product life cycle, fewer and fewer advertising resources
advertising budget, companies must take into considera- are needed because the product has become known and
tion other market factors, such as advertising frequency, has developed an established buyer base. Advertising
competition and clutter, market share, product differenti- budgets are typically highest for a particular product dur-
ation, and stage in the product life cycle. ing the introduction stage and gradually decline as the
product matures.
Advertising Frequency. Advertising frequency refers to
the number of times an advertisement is repeated during SELECTING THE RIGHT
a given period to promote a product’s name, message, and ADVERTISING APPROACH
other important information. A larger advertising budget Once a company decides what type of specific advertising
is required in order to achieve a high advertising fre- campaign it wants to use, it must decide what approach
quency. Estimates have been put forward that a consumer should carry the message. A company must decide on
needs to come in contact with an advertising message such items as frequency, media impact, media timing, and
three times before it will be remembered. reach.

Competition and Clutter. Highly competitive product Frequency. Frequency refers to the average number of
markets, such as the soft-drink industry, require higher times that an average consumer is exposed to the advertis-
advertising budgets just to stay even with competitors. If ing campaign. A company usually establishes frequency
a company wants to be a leader in an industry, then a sub- goals, which can vary for each advertising campaign. For
stantial advertising budget must be earmarked every year. example, a company might want to have the average con-
Examples abound of companies that spend billions of dol- sumer exposed to the message at least six times during the
lars on advertising in the United States alone in order to advertising campaign. This number may seem high, but in
be key players in their respective industries (e.g., Ford a crowded and competitive market, repetition is one of the
Motor Company, Johnson & Johnson, and McDonald’s best methods to increase the product’s visibility and to
Corporation). increase company sales. The more exposure a company

18 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION