Advertising Efficiency

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Advertising Efficiency and the size of advertisement outlay:

“Inter brand choice, media mix and market performance” written by Porter (1976). The paper outlines a framework for modeling the cross product variation in the observed pattern and level of product information flow. He explains that one implication of differing information equilibria across product markets is that the mix of advertising media utilized by sellers will vary from industry to industry. He argues that this variation has important implications for market performance, and has also tested this through hypothesis in the article. The researcher has used empirical data to prove his point; he has taken a sample of 39 of the 42 consumer goods industries and has run multiple regressions on the data about there advertising expenditures. This type of analysis is central to the policy making so by the result of this paper there can be a total change in the policy making in any company or even a whole industry. The major variables that were under discussion in this paper are profit after tax as a percent of stockholder's equity, eight- firm confirmation ratio, minimum efficient scale a s a percent of industry sales , industry growth. The key findings of this paper are that the elevation of market power due to advertising is primarily due to the size of advertising outlays on network television and magazines, especially the former. Secondly, the equilibrium in the information markets that determines sellers' proportional outlays on the various advertising media is central to industry performance, because the results suggest that the media have asymmetrical implications for market power. The major limitations that are there in this particular paper are that data for some media was not available, but the ones that were included represent a substantial majority of estimated total media outlays. So we can say that there is not any big flaw in the research other than the data missing but the data available covers, that missing link. The only thing which I like to say is that an analysis of consumer protection should be related to comprehensive model of consumers' investment in information to get a better view of what really is the issue.

Effects of Advertising on Sales:

“Seasonality in the consumer response to milk advertising with implications for milk promotion policy” written by Kinnucan and Forker (1986). In this paper, monthly data pertaining to New York City for the years 1971-80 were analyzed to determine if a seasonal response to milk advertising existed or not and the results were then used in simulations based on modified version of Thompson and Eiler (1977) model to obtain estimates of optimal monthly expenditure for milk advertising. A regression equation have been used to estimate the additional milk sales that would have occurred had the advertising budget been spent according to the computed “optimal” seasonal pattern. Finally an estimate of the value to producers of following a prescribed seasonal advertising pattern was provided. Empirical data has  been used in the research that shows the effects of advertising on the sales is always positive or you can say that advertising is subject to diminishing marginal returns. The data of the New York City metropolitan area was used because non- brand advertising and promotion of milk in this market was heavy between 1971-80, and monthly sales and advertising data over an extended period of time was readily available. The variables that remain under consideration in this paper were advertising, goodwill, milk demand, milk promotion and seasonality. The data is statistically analyzed using regression. The major findings of the paper were that firstly, significant seasonal differences in the ability of milk advertising to influence sales. Secondly that producer returns from milk advertising would be maximized when the expenditures follow regular seasonal pattern. Thirdly, firms should try to keep a constant ratio of sales to advertising. The major limitations in this research were that the producer used to estimate the seasonality in the response to advertising which imposes a number of implicit restrictions which influence the estimate pattern, and other than this the study fails to take into account a number of other factors that affect the seasonal advertising allocation decisions and finally this study does not explicitly account for the cost savings that advertising agencies may achieve by having complete discretion over the monthly distribution of the annual advertising  budget. In my view managers of milk promotion funds should take a close look at likely changes on all factors before allocating annual advertising budget throughout the year in manner that provides the maximum possible return from the advertising investment and an other thing that an in-depth research should be done taking into account all the variables that affect the seasonal milk advertising so that it would be easy for the milk advertisers to decide there budget and advertising expenditure.

Advertising and Consumption Pattern?

“Teenage Drinking: Does Advertising Make a Difference?” written by Atkins, hocking and block (1984) .The paper is about the fact that whether advertising has an effect on the consumption pattern, or you can say that what are the social impacts of adverting. The main assumptions that are taken in this paper are firstly, those young people who say they have seen more television and magazine ads for beer, wine and liquor generally drink more or expect that they will begin drinking. Secondly, considering the quantity and enticing quality of alcohol advertisements and susceptibility of youthful audiences, we expected to find higher levels of drinking among those most exposed to beer, wine, and liquor advertisements in the mass media. To test the predictive positive association between amount of naturalistic exposure to alcohol advertisements and amount of reported alcohol consumption by teenagers, the researcher has used a co relational survey design. A questionnaire was used to ask teenagers about their drinking behavior, their exposure to alcohol advertising, relevant demographic information and other possible communication influences. A sample of 665 teenagers from the seventh grade to twelfth grade was taken for conducting the survey. Then a statistical analysis was done which involves the computation of correlations between all predictor variables and the indices representing amount of drinking. The main variables that were used in the research are advertising exposure, age, sex, church attendance, parental influence, peer influence. The key finding of this particular research paper is that advertising has an influence on drinking behavior during the adolescent years. Furthermore, it appears that the relationship is primarily explained by advertising influence rather than reverse causation or contaminating antecedent variables. According to my view this article has given an in-depth analysis about the fact that advertising do have an affect on a persons drinking behavior and according to my instinct or thinking the same is the case with every other beverage that is available in the market.

Advertising Efficiency and Customer Satisfaction:

“The effects of marketing efficiency, brand equity and customer satisfaction on firm performance.” Written by Angulo. This research focuses its attention to support empirically and not separately the impact of marketing activities, brand equity and customer satisfaction on firm performance. In addition, this study intends to fill the gap of marketing efficiency effect on long-term profits. Through methodology of three stages, two by econometric models and one using data envelopment analysis, the authors provide empirical evidence for the marketing link to firm value. Firstly, the results in the first stage confirm the impact of marketing assets on short-term performance. Secondly, the marketing efficiency shows that there are firms that have better abilities to maximize results in terms of marketing activities. Finally, some future research lines were considered. In reference to academic relevance, this research pretended to support empirical evidence to the field of marketing metrics in a global context. The suggestion of Rust et al. (2004) about search for empirical support to the chain of marketing activities has been taken into account. Another relevant aspect is the conjunction between effectiveness and efficiency of marketing (Sheth et al. 2000). Studies of marketing efficiency evaluate the maximization of sales in terms of advertising. Studies of efficiency focus on measuring the efficiency score and then treat this score as a dependent variable. This study measures the efficiency score and then uses it as an explaining variable. Consequently it works based on the rationale of being effective but with an efficient use of inputs and In reference to managerial relevance, this research pretended not only to tell the board that marketing contributes to the company, but also to give them the effectiveness of marketing in money terms. On the other hand the use of Data Envelopment Analysis (DEA) as an evaluative technique is practical because managers can measure their efficiency based on multiple inputs and outputs. The main variables that are being used in this paper are advertising, brand equity, customer satisfaction, marketing efficiency, marketing impact and firm value. A theoretical model has been adopted and hypotheses have been formed. The research methodology which is used consists of two stages one is econometric approach and the second one is data envelopment approach. The key findings of this research paper are firstly, there are significant effects of advertising spending, customer satisfaction and brand value over short-term performance. On the other hand there is a significant relationship among marketing activities, positions and Tobin's q after the inclusion of the efficiency scores. According to these results, the application of DEA permits us to discriminate between efficient and inefficient firms, and to incorporate the efficiency score in a-posteriori regression analysis.

Advertising and its effect on Demand:

“The measurement of industry advertising effects” by Schultz and Wittink (1976) .the article explains that the statement, "advertising influences primary demand," is one that forms the basis for many marketing plans and forecasts. Some studies have reported a positive influence of primary advertising on primary demand; no conclusive empirical evidence has been brought to bear on the major premise. The article offers an analytical framework for assessing the nature of different industry advertising effects. Necessary and sufficient conditions for distinguishing among a set of theoretical cases of the various effects are presented. The variables that are mainly used in the article are primary advertising, selective advertising, primary demand, advertising effects. The research is mainly done my considering the facts of selective advertising and primary demand. There is an example that if considered, with no loss of generality, an industry made up of just two brands: Brand 1 and Brand 2. When the effect of a brand's advertising is to increase its own sales without affecting competitive sales, we call this the primary sales effect of selective advertising. When the effect of a brand's advertising is to increase its own sales and that of its competitors, we call this the primary demand effect of selective advertising. In addition, the situation where the effect of a brand's advertising is to increase its own sales and to decrease sales of its competitors can be referred to as competitive advertising. Considering, three pure cases of advertising effect: primary demand effect, primary sales effect, and competitive advertising. Basically an empirical study is being done to understand the difference between the three cases. From all this we can conclude that theory of industry advertising effects is outlined which can be used to investigate empirically the influence of selective advertising on primary demand. A set of cases corresponding to this theory is described and a model to discriminate among them presented and this model can, be applied, and it was our purpose to provide an analytical framework to aid marketing managers in determining the nature of industry advertising effects as precisely as possible.

Competition and Advertising:

“Territorial Exclusivity in the Soft Drink Industry” written by Katz (1978). This article is divided in two parts. Part one provides a background description of the market structure of the soft drink industry and Part two examines reasons why syrup manufacturers find territorial exclusivity desirable and evaluates the implication of these exclusive arrangements for market performance. The article states the vertically imposed territorial exclusivity in the soft drink industry eliminates direct intra brand competition and creates regional bottlers with monopoly power in the manufacture and distribution of trademarked sodas. Syrup manufacturers had several motives for creating geographical franchises and continue to find these restrictions advantageous for a variety of reasons and exclusive geographic territories benefit syrup producers both by increasing bottler profits and by facilitating the recovery of these larger profits by the syrup manufacturers. Some of the profit recovery methods operate by fostering increased syrup sales. Regarding advertising volume and the 'free rider' problem, the writer say that, the existence of territorial exclusivity causes more resources to be channeled into advertising by the bottlers than presumably would be bought in its absence. The resulting impact on resource allocation, however, is unclear as the relationship between the amount of advertising that would in fact be done if there were no territorial restrictions and the socially optimal level of advertising remains unknown, as does a proper definition of the socially optimal level of advertising in the soft drink industry. The research is mostly dependent on the literature rather than any facts or figures and that is the week point of this article that the things that are said in the article aren't backed by proofs. So, for further study on this topic one has to be more precise and use more numbers to interpret and present the results in a better way.

2.1 Brand image and advertising:

The article “The role of advertising in brand image development” is written by Meenaghan who was a Lecturer in Marketing, Department of Marketing, Graduate School of Business, University College Dublin, Blackrock, County Dublin, Ireland in year (1995). The article is intended to give information about the brand image development by the use of advertising. The author briefly explains about the increasing concerns of brand image by the corporations/firms and their use of advertising for better results. In this article the concept of branding is regarded as a relation with consumer. The author used various variables and related them together in a form of dependence and created a whole picture of brand image development. His study is not in terms of research but his article is intended to give a better understanding to readers about the topic with proper references and using simple explanations. In this article the author discussed that the most confusing terminology is brand identification and brand image. The concern of which he mentioned was that on corporate level both of the above mentioned terms are taken with the same meaning and representation. But in fact both are different in meaning and elaboration. In this article, the lion's share of discussion went to brand image. But brand identity, brand itself, consumer's lifestyles, their values and their perception about the brand were also discussed in a considerable detail. The author used very simple language and the 34 best possible references to explain the development process and the way the variables interact and stack together. The articles states that increasingly consideration is given to the image of the brand and the best way to improve, or develop is by advertising. It states that the brand name states its perception, values and benefits for the consumer. It has to meet the expectations of the consumers. Lastly it says that the brand should be given values more realistic and human like, instead of mechanistic values. In my opinion, the author is successful in relating all the identified variables with the development of brand image. One thing which I would recommend is that he should have given the latest explanations using the market share and top of mind recall by referring to specific top brand and the way they could improve their identity and image.

2.8 New approaches towards measuring advertising effectivess:

The article “A New Approach to Measuring Advertising Effectiveness” is written by Hall, in June (2001). This article is about the measurement of effectiveness of advertising. The author described new ways of measuring effectiveness of advertising and helped us better understand the core effects and responses from consumers to measure the effectiveness of advertising. This article is intended to provide the readers with the information about the working mechanism of advertisement and the perception a consumer has for it. The article is study based in which several references, and general knowledge is used to explain the 42 information which is very effective for managements to understand. Observations are made and references for those are used while making statements in the article. This article is very informative for marketing managers as well as the senior level managers, because is provides us with the base of advertising and its effects on consumers, and as high level managers are mostly ignorant of this all, this would help them take better decisions in the interest of achieving their set goals. Also students get a lot of information from this article. The discussion about the exposures is very important for young marketing students. The core of advertising AIDA is discussed to better help and understand the working of advertising, making it very interesting and useful for marketing students. Major variables discussed in this article are Accuracy, sensitivity, marketing, Post-Experience exposure and Pre-Experience exposure. The article overall is well written and the authors effort for combining all the perception variables together and relating them in a way that it makes sense of its effects on the advertising effectiveness has made it very interesting indeed. The article has no special research discussed. If it could include some examples and research than it would have been easier to understand some psychological concepts discussed in this article.

2.9 Measuring advertising effectiveness:

This article “A Model for Predictive Measurements of Advertising Effectiveness” is written by Lavidge and Steiner in October (1961). This article is about the functions of advertising and its core goals of, as in what it is supposed to do. The 43 authors then related these goals with the advertising itself and showed implications of these for the measurement of the effectiveness of advertisements. The authors stated that the effects of most of the advertisings are long term. The authors mentioned that if the results are visible in long run, then there would be some short term effects which eventually will increase the sales results in the long run. So the author in this article suggested that by measuring those effects we can predict the effectiveness of advertising in the long term. The authors made their statements on their knowledge and observations. No as such study is being used, but these statements are very effective for understanding the behaviors of consumers as a response to the advertising and hence making the managers predict the effectiveness of advertising in the long run. The article is basically for the managers who are planning and measuring the advertising and its effects on the company. The major variables discussed in this article are Awareness, Conviction, Purchase, Preference and Knowledge. The major limitations of the article are that it is not proved that these statements are true and are really effective for making a plan or decision for measuring advertising effectiveness. The article could have been more useful if it could give a study or a prove that all the statements and models discussed are in reality useful for measuring the advertising but the authors did not include their study in this article. Secondly if few examples of short term effects leading to long term effect could be presented then it would have been easier for the readers to understand the whole concept.

2.13 Effects Psychographic variables on advertising effectiveness:

The article “Consumer Lifestyles: A social Stratification Perspective” is written by Lawson and Todd, Marketing theory, University of Otago. The article is about the lifestyles and the social phenomenon which affects the lifestyles. According to this article, previous thinking was that social class has an effect of lifestyles, but in reality the psychographics affect the lifestyles. The article is intended to provide a better insight of how to segment lifestyles and achieve the desired marketing results. The authors presented a brief explanation about lifestyles and then related the lifestyles with psychographics. The article explained the relation of lifestyles with VALS (Value added lifestyles), social class and status. The major variables discussed in this article are psychographics, social class, social status and lifestyle but the major discussion was projected towards the lifestyles. The writing style used for the article is relatively simple and most of the managers and readers can understand the article without any prior knowledge, but if it few examples would have been there, then it would have presented a better picture about the effects of psychographics on the lifestyles. This article is very useful for the managers as lifestyles are very dynamic and segmentation is the core of any marketing mix. The management would like to know that what segmentation is better for them and how to target their specific customers. This article is also very important for young students to understand the working of psychographics in the real world. The demographics are effective for segmentation but psychographics are difficult to be measure creating any affect on segments. Therefore this article was very informative and important indeed.