FHCE 3100 1nd Edition Lecture 12 Outline of Last Lecture I. Ch.7 part 1Outline of Current Lecture II. Ch.7 part 2—Consumer Decision Making & the Influence of AdvertisingCurrent Lecture What is advertising? Producer generated information about products and services  The activity of attracting public attention to a product or business, by paid announcements in the print, broadcast, or electronic media  In our quest for information we are exposed to advertising… What are the benefits and costs of advertising? What are the characteristics of different types of advertising? What is deceptive advertising? What is the role of the Federal Trade Commission? Why do we do advertising Personal selling is preferred because it is so effective—but it is expensive sometimes to contact EVERYBODY this way Door to door—ex. Girl scout cookies, sold once a year and no need for advertising yet wildly successful  Advertising allows the seller to reach more potential customers Advertising Has been used for centuries  US advertisers spend more than $237 billion each year Worldwide spending approaches $470 billion  Identity Market Consumers wear or display their homes product logos (t-shirts, shoes with Nike, UGA lamp shades)  Solomon says our identities are formed by an allegiance to common value systems expressed through affiliation with product sets  Ex: I identify myself as an athlete by wearing NIKE  *We are advertising for these companies but not being paid  Ex: Dakota Fanning for Gap (getting paid here) but this attracts us These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Advertising Can reach masses of geographically dispersed buyers (ex. Macys)  Can repeat a message many times Is impersonal, one-way communication *470 billion dollar industry!! Advertising… Benefits Increased sales, increased consumer base (ex. Gap & Baby Gap) Costs The actual dollar amount, loss of sales if ad is bad (ex. Offensive ad, politicians use “attack ads”)  Advertising: classified by purpose  Inform, persuade, compare, remind (ex. PSA) Commercials  Short ads shown throughout TV program  Timing is targeted to specific programs  Ex. Soap Operas—have to have something to break up the commercials so created stuff like this to go in between  Ex: if running commercials for kids, do it during SpongeBob or after school/Saturday mornings  Commercial Components  Familiarity (ex. Snap, Crackle, & Pop, Tony the Tiger) Humor (positive association) Sexuality (ex. Cindy Crawford and Pepsi) Animals  Infomercials  Program long advertisements  One step ahead of us… They (meaning advertisers) know that we are now TVO’ing our way through commercials So what have they done instead to get us to see their products?  Product placement  Product placement  Products or logos used in movies and TV programs  Ex: actors/actresses drinking Pepsi or wearing Nike, Volvo as family car in movie  Consumerspace Is a system in which companies sell WITH consumers  Ex: you wear a t-shirt on which a business’ name is located. You are advertising WITH a company Magazine ads Ads are placed to target the readers’ interests (ex. Captain Morgan ad) Sports Illustrated, Cosmo, Seventeen, Maxim, People  Billboards Tiger “here human human human”—play on the “Here, kitty, kitty, kitty”, come to the Toronto zoo  Sports events Corporations use major sporting events to advertise their products  Ex: coors light car racing  Companies sponsor race car drivers so they wear their stuff  Money facts 30 second commercial during Superbowl costs $3.5 million  Advertising is used by— Business firms, nonprofits, professionals, social agencies, government  Types of advertising: FTC classified  Informative ads, puffing ads, deceptive ads, comparative, defensive Informative ads Also called PIONEER advertising Provides the consumer with specific, understandable, verifiable claims Ex: Macy’s winter boots all 20%--this better be true  Research indicates  Informative ads reduces consumers’ uncertainty about the product  Tendency of purchasing increases with the number of ads they were exposed to  Increase in exposure leads to increase in expected utility The effect of the expected utility relies on: 1) the importance of the product attributes tothe consumer, 2) the familiarity of the consumer with the product, 3) the personal risk parameter Puffing ads Ads that do not give any relevant information but also do not mislead consumer  Ex: captain morgan ad—tells you nothing about the actual liquor (ex. Percent alcohol) Deceptive ads Tendency to deceive  Impression that the ad is truthful when it isn’t Omission of important info Bait and Smith  The bait: an unrealistically low price for a product  The switch: to a much higher priced model of the same product *Think Black Friday Ex: advertisers a huge tv for just $12, but you get there and only one was that price, thenthey try to sell you it anyway for much more yet still “bargain”  Comparative ads  Companies used to hesitate to do this but now they do it freely Sometimes it can backfire and cause the viewer to not want to buy the product—if the comparison is too harsh  Ex. Political advertising that is too nasty  Defensive ads  In a market that is saturated with a certain product everyone selling that product has to advertise or be left out of the market. You don’t gain anything necessarily by advertising but at least you are still in the game Setting advertising objectives  An advertising objective is a specific communication task to be accomplished with a specific target audience during specific period of time Advertising objectives are a strategy decision  Every ad should have clearly defined objectives  These objectvies guide the people who create the ads Developing advertising strategy  Consists of two major elements: Creating advertising messages Selecting advertising media