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How advertising works

Behind Powerful Brands by John Philip Jones

Publishers: Tata McGraw-Hill, New York

Price: Not Mentioned

Raghu Dayal

Though well developed in India, advertising is addressed essentially to a fraction -- a little under a tenth -- of the population . The author terms this group `economically active'. Although small in numbers, the economically active class in India comprises of more people than in South Korea, Taiwan, Thailand or Malaysia.

The book, comprising 11 chapters, goes behind the glitz and glamour associated with advertising into the arguments, theories and strategies that go on to make a campaign successful. It addresses the problem of increasing efficiency and reducing the waste associated with the advertising process. The author also advices on how to improve the efficiency of specific aspects of current professional practice. By drawing up an inventory of advertising knowledge, the author hopes to encourage practitioners to a dvance the frontiers of knowledge. To think about their work in a broader context, and sharpen their ability to discuss advertising and defend it because of its undoubted contribution to competitive capitalism is also discussed.

The topics covered in the book include: increased knowledge of how advertising works, improved methods of formulating advertising strategy,a greater range of creative ideas that are better, more efficient pre-testing of creative ideas, better methods of budget optimisation, reduction of wastage in tactical media deployment, and improved efficiency in retail distribution.

Advertising, by its very nature, involves some wastage. The most obvious form of wastage, although not the only one, is the cost of addressing the large numbers of people who cannot (or will not) buy the advertised brand. There is, however, a more avoida ble type of wastage, which is the main concern of this book.

It is extremely common for small brands to run campaigns that achieve minor or non-existent sales increases and for large brands to run weak advertising that fails to prevent sales erosion. Advertising's contribution to competitive capitalism, as a lubri cant and accelerator, brings benefits to society in addition to its contribution to the manufacturers of efficiently advertised brands.

The second chapter refers to the different attitudes of American and European practitioners: a strong force describing the traditional attitude towards advertising, and a `weak force' meant to describe a typical British view. In the third chapter the wor d `strategy' derived from military science is most simply defined as `generalship; the art of war'. In the same way that a nation has a grand strategy, a firm has a company business plan detailed in `Four P's: Product, Price, Retail distribution, and Pro motion'. An effective strategy reduces waste in the process of developing advertisements because it helps to prevent the misuse of expensive and scarce creative resources.

The next chapter on Advertising Arguments explains the evolution of American advertising. To the author, British advertising is more national than that of any other country, with the possible exceptions of Japan and Australia. American advertising, by co ntrast, is more variegated. This is an expression also because of the multi-faceted nature of American society; and of the over-riding importance in most product categories of rooting the advertising in brand differentiation.

Chapter five tells us about advertisement budgetting. The best way to examine advertising intensity is to estimate the advertising-to-sales ratio fairly precisely on a brand-by-brand basis. The comparison of brands of different sizes introduces the conce pt of a normal approximate similarity between a brand's Share of Market and its Share of Voice. The next chapter deals with advertising versus sales promotions. Sales promotions are often described as `below-the-line' activity, to distinguish them from m edia (theme) advertising, described as `above-the-line' activity. What promotions mean in the majority of circumstances is price reductions. Price elasticity is essentially a measure of how easily the consumer will accept the brand being promoted as a su bstitute for other brands.

How to spend media budget is the theme of the seventh chapter. Michael Naples' monograph provided a valuable service in publishing in succinct form the most salient evidence on the issue of effective frequency. In Germany, the rate of diminishing returns is much less sharp than in the United States, with a sales effect from the first exposure compared with additional exposures in the ratio of 46:54.

One obvious aspect of an agency's culture is the extent to which the agency is `account-driven' (that is, dominated by the account executives) or `creative-driven' (that is, dominated by the creative department). The early 1960s saw an important new tren d in advertising -- a strong revival of emphasis on the agency's raison d'etre, its creative product.

To the author, the culture of Ogilvy & Mather resembles a coin. The obverse describes the ways in which the agency believes that advertising, particularly press advertising, should be written. The reverse demonstrates that all the Ogilvy rules are based on research covering a wide methodological spectrum.

Chapter 9 goes to describe that there are advertising-related economies of scale accruing to large brands. The connection between the penetration supercharge and these budgetary economies of scale is something known only impressionistically. Successful b rands benefit from improvements in their formulations on a regular basis and certain enlightened manufacturers carry out comparative product testing for their major brands against their competitors as part of an ongoing programmes.

Market research is the only scientific tool available to the advertising practitioner. To carry out useful research, one needs to do at least five things: choose and describe the sampling frame -- the universe to be covered, second, select a sample and t ry to arrange that there are not too many refusals for using the probability method (or variants of it); the third problem is the worst of the five; it concerns the questions to be asked; the fourth problem with research is a matter of interpretation, th e assessment of the direction of causality; and the fifth point about research is that most research reports are not well written.

The creative leap is less an intellectual and more an imaginative and intuitive process. The most fruitful single idea that is germane to advertising creativity is Arthur Koestlers' concept of `bisociative fusion'. This describes how, when one reaches a creative `block', one has to search around the subject and move into completely unrelated areas.

To help understand how advertising works in terms of consumer psychology, the author talks of the earliest theory of psychological causality based on a simple chain described by Charles Ramond as `learn-feel-do'. The term hierarchy of effects has been co ined to describe the sequence. It has also been called the learning hierarchy. Behaviour influences attitudes, as people strive to reduce cognitive dissonance; indeed, probably the greatest single influence on attitudes towards a brand is people's use of it.

The reader is appraised of a more pregnant theory than the learning hierarchy is the low-involvement hierarchy, first propounded in the mid-1960s by Herbert E.Krugman. This has been described as `learn-do-feel'. The notion hinges on the concept of low in volvement, as it applies to people's relationships to products, brands and also media. This hierarchy proceeds by changing awareness and knowledge of brands, in turn, leading directly to a relatively casual purchase decision.

Opinion in the United States and other developed countries has moved during the 1990s towards a greater use of continuous advertising, which is seen as a more economic way of developing budgets than to concentrate them in bursts. The way to make sense of the relationship between changes in advertising and changes in sales is to look on an advertising campaign for a brand as a large number of individual advertisements. This analysis suggests, therefore, that people respond to advertising in a very simple and direct way. They buy when they are reminded. They respond to individual exposures.

In the context of advertising's power to manipulate, it is held that there are isolated examples of people having been cheated by advertising. Advertising can have power, but this is most commonly in its ability to reflect and reinforce consumers' percep tions of a brand. It operates best with existing consumers. This ability has nothing much in common with manipulation.

This leads to a discussion on the ethics of advertising. The awareness of the ethical issues involved in advertising -- encouragement of materialism, absolute versus selective truth and effects on vulnerable minorities -- is reasonably complete. Informat ive advertising is considered ethically neutral, but the persuasive variety is less than fully acceptable.

Dealing with advertising and the economic system the tenth chapter shows that advertising is a force for stability and continuity as well as a force for change. Microeconomics is, more than anything else, a study of the price mechanism. The analysis assu mes that consumers will buy goods at the cheapest price possible. There is often a severe dissonance between immediate and long-term profit, although manufacturers are obviously concerned about both.

In the same way that consumers have a less than perfect knowledge of prices, manufacturers have an imperfect knowledge of their costs and, therefore, their profits. Microeconomic analysis describes competition between manufacturers as being of three main types: pure or atomistic competition, oligopoly, and monopoly.

The cost of advertising to the manufacturer is generally a small although significant portion of the total cost. There is a tendency for brands to fragment, but for concentration ratios of the leading firms to remain stable, in the aggregate.

In penultimate chapter the author indulges in proffering advice to advertisers and lists as many as fifty proposals for action. The vigorous response by competitors in a category to a single manufacturer that tries to establish a market niche has been th e main cause of the astonishing fragmentation which has been such a feature of consumer goods marketing in the 1980s and early 1990s.

The manufacturer is the custodian and steward of every brand it markets, although with advertising-intensive brands, the agency often develops, over time, a role almost as important as that of the manufacturing company. By a word of advice to agencies, t hey must pay more than lip service to the notion that advertising sells brands. Agencies should not shy away from accountability. It is in the agency's as well as the client's interest to use research. Carrying it out should be an agency initiative. The culture of the agency should also not act as a barrier to recruiting people who are bold enough to question it.