Introduction To Advertising & Advertising and Media Planning I

Introduction to Advertising | Advertising and Media Planning STIKOM LSPR - Jakarta
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INTRODUCTION TO
ADVERTISING
&
ADVERTISING AND
MEDIA PLANNING

STIKOM LSPR - JakartaIntroduction to Advertising | Advertising and Media Planning
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STIKOM LSPR - Jakarta
STUDY GUIDE
INTRODUCTION TO ADVERTISING
COURSE DESCRIPTION
The market place is crowded with many brands of product, all competing to be the leader.
In their effort to gain market leadership, marketers use Advertising as one of their promotion
tool.
This study guide will help you understand how Advertising as a Promotion Mix supports
Marketing and Marketing Communications effort of brands. Therefore the learning process
will begin at understanding the role of advertising in marketing and promotion, and continues
on to describe how advertising works in creating image and differentiation of brands to
achieve competitive advantage in the market place.
As the creator of advertising, Advertising Agencies plays a major role in creating winning
brands. You will also learn how Advertising Agencies work in planning and creating winning
advertising campaign.
SUBJECT OBJECTIVES
After studying this subject, students will be able to:
• Define Advertising
• Understand the role of advertising in the marketing mix
• Understand the characteristics of advertising compared to other promotion tools
• Understand market segmentation, target market and target audience
• Understand the different types of advertising campaign
• Understand the cooperation of the marketing department and its advertising agency
• Understand the different types of advertising agencies and advertising agencies
organization
• Understand the advertising creative process
• Understand the advertising production process
• Understand the media process in advertising
• Understand the ethics and law governing advertising
• Understand advertising testing and evaluation

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Scheme of Work
Semester I Introduction to Advertising
WEEK 1
Topic 1 The Role of Advertising in Marketing
WEEK 2
Topic 2 Advertising and the Promotional Mix
WEEK 3
Student Presentation on Advertising of Choice
Objective: To create awareness and basic knowledge about the elements of advertising
which makes it an effective or ineffective advertising.
WEEK 4
Topic 3 Understanding the Customer and Consumer
WEEK 5
Topic 3 Understanding the Customer and Consumer
WEEK 6
Topic 4 Types of Advertising Campaign
WEEK 7
Topic 5 Specialist Forms of Advertising
MIDTEST
WEEK 8
Topic 6 The Advertising Manager and Advertising Department
WEEK 9
Topic 6 The Advertising Manager and The Advertising Department

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WEEK 10
Topic 7 Determining and Setting Budget
WEEK 11
Topic 8 Types of Advertising Agencies
WEEK 12
Class Presentation and Discussion on Advertising Agencies in Indonesia
WEEK 13
Topic 9 Agency Recognition and Remuneration
WEEK 14
Topic 10 Functions of Departments in Advertising Agencies
FINAL EXAM
Semester II Advertising and Media Planning
WEEK 1
Topic 11 Creation of Advertisements and Commercials
WEEK 2
Topic 11 Creation of Advertisements and Commercials
WEEK 3
Presentation of Advertising Creative: Storyboard / Storyline
WEEK 4
Topic 12 Production of Advertising Materials in Media
WEEK 5
Topic 13 Media in Advertising and Printed Media

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WEEK 6
Topic 14 Broadcast Media and Other Media
WEEK 7
Topic 15 Media Research
MIDTEST
WEEK 8
Topic 15 Media Planning
WEEK 9
Group Exercise on Media Planning
WEEK 10
Topic 16 Ethics and Codes of Practice
WEEK 11
Group Presentation on Codes of Practice
WEEK 12
Topic 17 Advertising and The Law
WEEK 13
Topic 18 Advertising Testing and Evaluation
WEEK 14
Topic 18 Advertising Testing and Evaluation
FINAL EXAM

Introduction to Advertising | Advertising and Media Planning
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STIKOM LSPR - JakartaIntroduction to Advertising
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Introduction
Marketing departments create products and brands that suit the demands of the
customers and consumers. Advertising agencies help by encouraging the target consumers
and customers to buy the brands through their persuasive messages. If the advertising is
successful and if the customers like the products, they will buy again and again.
Advertising is also used to promote a corporate image, to persuade target audiences
of a company’s performance and abilities, and it may also be used to inform by providing
data such as specifications or details of financial services.
Whatever the form of advertising, advertisements and commercials have to be
created with messages that are appealing, attractive, and convincing. The messages must
also be communicated to customers at the right time and in the right place. Hence, the
advertising industry needs media – newspapers, magazines, television, radio, posters and
cinema. Each publication and each television or radio programme is seen by different types
of people. Equally, a variety of people pass posters and visit cinemas.
The variety of products advertised and the media used mean that advertising is
acomplicated process. It is an area that requires the expertise of specialist companies –
advertising agencies. These agencies form the backbone of the advertising industry, together
with sales promotion, public relations, direct response and other agencies, consultancies
and suppliers.

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CHAPTER 1
THE ROLE OF ADVERTISING IN MARKETING
PART 1 BACKGROUND TO ADVERTISING
CHAPTER OUTLINE:
This chapter is about understanding the relationship between marketing and advertising and
how advertising as part of the marketing mix helps marketers influence their target consumers
into using their brands. It also discusses how advertising can provide a competitive edge by
establishing image and brand differentiation.
OBJECTIVES:
1. To understand the role of business
2. To understand the role of advertising in marketing
3. To understand the marketing mix
4. To understand push/pull concept
5. To understand advertising objectives
Making a profit is the ultimate goal in a business venture and this is achieved by marketing
products which are successful in fulfilling customers needs and wants, be it a physical need
such as to overcome hunger and thirst, or emotional need such as to be accepted by family,
friends and society.
The marketing effort is supported by promotion techniques such as sales promotion and
advertising, so that the target consumers are informed of the availability of products and
services that fulfill these needs and wants.
The Role of Advertising in Marketing
While marketing will establish the goods and services that will sell, advertising will inform the
market that they are available. Advertising will promote the product and service in such a
way to appear attractive to consumers and customers as well as different from competitors.
Advertising will continue to highlight the different benefits and advantages long after the
initial launch, therefore, helping to maintain demand in a competitive market where rivals are
trying to sell their products as well.
Advertising does not only address customers and consumers, but also wholesalers,
distributors and retailers who must be convinced to stock the products before advertising to
the customers and consumers begins.

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The Marketing Mix
A company must find products and services that are needed and wanted if they want to
embark on a successful relationship with customers, so that they will come back for more of
the same product. Therefore, there are factors which have to be considered when launching
a new product and are referred to simply as the Four P’s :
the right product
at the right price
in the right place
with the right promotion
The Right Product
It has already been stated that if the product doesn’t suit the customer, it will not be bought,
so there is little point in attempting to advertise in the hope that it will be consumed. Hence
the need to research the market-place to establish what product is wanted by customers;
but the emphasis is on the right product to satisfy the needs and wants of the customer
and user. The right product is more than the physical product –sometimes called the core
product. It means the total product offering with all the variations and combinations.
The Right Price
Pricing is a crucial part of the marketing mix. If you sell a product cheaply enough, customers
will be very eager to buy. But a low price may also indicate the product is lacking in quality
and may not be attractive to the customers. Most often customers are prepared to pay for
products and services that the company has developed that meet their demands.
The Right Place
The right place for products and services are where they must be readily available and
convenient for the customers to have access to them. If they are not located where the
customers want them, then other products and services, often from the competitors, will be
bought.
The right place also means that it will project the image and reputation of the brand.
The Right Promotion
Promotion is the total activity to project the total reputation or image of a product, service, or
company together with their associated names ( i.e. brand and corporate image).
Promotion covers packaging, advertising, public relations, sales literature, sponsorship and
point-of-sale (POS) displays – in fact, all of the above-the-line and below-the line techniques
to assist the sales process. Promotion, therefore, is the total way that a company presents its

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products to the market. The result is that promotion communicates the company’s reputation
and the reputation of its products and services. A company’s reputation is a valuable
commodity and many businesses profit from the goodwill that is generated as it results in
more sales and easier sales.
Selling in- Push /Pull
“Push” means “selling in” the products to the wholesalers and retailers to encourage stocking
up once the consumers have seen the advertising or other promotion activities. This process
involves informing the wholesalers and retailers about the products that will sell at the right
price to allow profit for the wholesalers and retailers.
“Pull” is the encouragement for the customers to go to the stores to buy the products, after
they have been exposed to the advertising and promotion activities.
Advertising Objectives
It must not be assumed that once a product has been launched, then the manufacturer, or
indeed the retailer, can sit back and relax. Customers must be reminded to keep buying the
same brand, and failing to do so will lead to brand switching and buying a competing brand.
New brands from competitors will also lure the customers to try them.
This means that manufactures need to innovate by promoting their brands differently, such
as by adding new ingredients or reformulating the products
With regard to the above, aims of an advertising campaign or advertising objectives may be
one of the following:
• to launch a new product or service
• to create brand awareness
• to generate interests
• to generate sales inquiries
• to promote new or improved version
• to inform of another promotion such as sales promotions

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Points to remember
• Advertising is a promotion technique which helps marketing of products and services
by making them appear attractive and different from their competitors.
• Advertising is only a part of the marketing mix, therefore, successful marketing effort is
also contributed by other elements of the marketing mix.
• Advertising is only one promotional tool and has to be used with other means such
marketing, public relations, sales promotion, etc to ensure effective promotion efforts.
• Advertising reflects the image and the position of the product within the market place.
• Products and services have to be available in the stores, before they can be effectively
promoted to the consumers.
• Advertising can be used to support existing brands as well as to introduce a new
brand.

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CHAPTER 2
ADVERTISING AND THE PROMOTIONAL MIX
CHAPTER OUTLINE
This chapter will provide an understanding of how advertising as one of the promotion
technique can collaborate with other promotion techniques: marketing public relations,
sales promotions, personal selling and direct marketing to effectively promote a brand in the
competitive market place.
It will discuss the characteristics of each of the promotion technique and how it can be used
as a promotion tool. Other supporting element such as packaging and sponsorship is also
discussed to show its contribution in the promoting and establishing brand image.
OBJECTIVES:
To define promotional mix1.
To define advertising2.
To define other promotion tool: marketing public relations, sales promotion, personal 3.
selling, direct marketing
To understand how promotion mix are used to achieve marketing objectives4.
To understand how other elements of promotion such as media relations, sponsorship,5.
packaging design contribute to the promotion efforts
Elements of the promotional mix
The promotional mix consists of the various ways companies use to promote and sell their
products and services to their customers.
The elements of the promotional mix are:
1. Public Relations
2. Advertising
3. Sales Promotion
4. Direct Marketing
5. Personal Selling
Elements such as packaging are also considered as a major element in the promotion effort,
along with other activities such as sponsorship, or a public relations tactic which is effective
in getting across advertising messages as well enhancing brand and corporate image.

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A company can use any of the above promotion tool together, or just one, depending on the
marketing communication objectives.
Public Relations
The Institute of Public Relations defines public relations as follows:
Public relations is about reputation – the result of what you do, what you say
and what others say about you. Public relations practice is the discipline which looks after
reputation with the aim of earning understanding and support, and influencing opinion and
behavior.
Public Relations is assuming greater importance in the promotion efforts of brands and
companies. Public Relations strategy and tactics are often used to communicate effectively
with costumers, employees, and share holders.
However, it is not the role of public relations practitioners solely to build an image
in the market-place, but also to ensure that the company is delivering the products and
services to the satisfaction of its publics. The public relations person does not merely
mount a campaign to state this but makes sure that the company is doing it by advising the
organization on its actions (after all, ‘public relations is about reputation – a result of what
you do . . .’).
Media Relations
Media relations is used as part of the public relations program to get the
company’s message across to everyone who has an influence on the acceptance of the
company, its products or services. Media relations does this by:
● educating the customers about the benefits and advantages of new concepts
● informing customers of the benefits and advantages of dealing with new companies in
the market-place
● encouraging interest in the product
● easing the sales process by establishing goodwill and reputation
● promoting the corporate, brand and product image
● creating awareness
● providing detailed information (e.g. on specifications as well as on the use of products
and services)
● launching the product (by news release and news conferences)
Techniques often used are:
● news releases to announce new products or developments which can be used and
developed as news items in the media
● media statements (oral/written) to make announcements which the company does not
want to expand upon

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● articles and features to expand on issues surrounding the product (e.g. nutrition, when
promoting a snack bar)
● interviews, receptions and briefings to give background to the product, service, company
or key staff (e.g. an inventor)
● news conferences to announce products, services or a key development (e.g. a launch
or take-over bid)
● photo-opportunities or press calls for newspaper photographers and TV cameramen
to obtain shots of a personality or product (e.g. a personality endorsing product or a
stunt)
● case history featuring a product in use – especially in trade and technical public
relations
● facility visit to factory where products are made
● product loans (of computers, for example) for journalists to review.
Other Publicity Tools
As a company cannot always expect that the media will publish their news, it often used
other publicity tools:
● leaflets and booklets to explain, educate and inform, especially of new concepts or
ones difficult to grasp and understand
● news sheets and newsletters to carry more immediate information and items of interest
about the company
● house magazines (external and internal) to inform and give greater background
(including perhaps, social aspects of the organization)
● brochures and videos, particularly for promoting the corporate image.
Advertising
Advertising may be defined as follows:
Advertising is a means of communication which uses printed, broadcast or other media, where
space or air-time may be purchased for the purpose of persuading customers, consumers,
users or other interested parties of the benefits and advantages of an organization and/or
the products or services it delivers.
Advertising aims to create awareness and interests, and its persuasive message convincing
the target audience that the advertised brand will fulfill their needs and wants.
While brand advertising establishes brand image, corporate advertising on the same level
will create corporate image, and thus ensuring customers that brands manufactured by the
company will benefit them.

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Sales Promotion
The Institute of Sales Promotion defines sales promotion as:
Sales promotion comprises that range of techniques used to attain sales and marketing
objectives in a cost-effective manner by adding value to a product or service either to
intermediaries or end-users, normally but not exclusively within a defined time period.
Customers still need that final incentive to actually buy, and so manufacturers, in
conjunction with retailers and wholesalers, will use sales promotion techniques to
ensure that they get the sale. It is no longer a panic measure used when sales are slow
or the stockroom is too full – sales promotion is a strategic tool used in a planned way to
achieve marketing objectives.
Consumers Incentives
• Discount coupons
• Free sample to try the product
• Discounted price
• Added volume
• Gifts
• Buy 1 get 1 free
Trade incentives
• Discount price to increase profits
• Prizes
• Co-operative advertising or joint promotion
• Display material at point of sales to attract customers.
• In store demonstration
Direct-Response Marketing
Direct-response marketing may be defined as:
Direct-response marketing is selling goods or services without shops and usually without
personal salespeople, direct to customers in response to orders generated by direct mail
shots, leaflets, catalogues, telephone calls and printed or broadcast advertisements.

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Differences between direct-response marketing and direct mail
Direct Mail
• Direct mail is dispatch of promotion materials by mail.
• The recipient of the mail shot is asked to do certain action such as asked for brochures
to be sent.
Direct Response
• In direct response mail shot is an order form with information for purchase.
• There is also information for payment of purchase.
Direct-response marketing is a very attractive way for companies to get into the market-
place as it does not involve retail outlets and so there is no need to ‘sell in’ to establish
retailers or to open an individual shop or store. Some very successful companies have been
started in this way (e.g. Body Shop). In addition, computer technology has eased the job
of compiling mailing list of customers, addressing envelopes as well as analyzing customer
preferences and buying habits. Improved telecommunication systems has led to the growth
of telemarketing.
Direct Response Marketing Techniques
• Press advertisements
• Broadcast advertising (radio and TV shopping channels)
• General mail- order catalogues
• Leaflets inserted into magazines and newspapers
• Leaflets and catalogues sent to mailing list
• Leaflets and catalogues distributed door to door
Personal Selling
Salespersons are assigned and trained to promote product and services directly to customers.
Salespersons can range from someone who merely takes sale orders to people who provide
expertise in finding solution to customers’ problems.
Consumer Sales
• Door to door salespersons
• Salespersons working in retail outlets
• Specialist salesperson selling services (insurance)
• Salespersons in showrooms
• Sales/account officer/customer service in bank, etc.

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Trade Selling
For selling in or push strategy, usually performed by salesman and account managers
responsible for corporate sales.
Commercial and industrial selling
Industry requires raw materials, equipment etc, therefore there is a need of business to
business marketing which involves personal selling by:
• Sales representatives to sell office equipments and commercial services
• Sales engineers selling tools, machines, raw materials, chemicals, etc
Packaging
Packaging not only contains the product and protects it during transit from the
manufacturers to the customers and consumers, but it will also preserve it by keeping it
fresh. The pack is also a means of storing, stacking and dispensing the product.
In addition to the above, the pack has become the final means of communicating brand
benefits. The pack can also be used to inform promotion activities.
The elements in the pack design such as shape, size, color, brand name and type face
reflects brand identity and brand image as established by advertising communication. .
Sponsorship
Frank Jefkins gives his definition of sponsorship as :
The giving of monetary or other support to a beneficiary in order to make that beneficiary
financially viable, sometimes for altruistic reasons, but generally to gain some advertising,
marketing or public relations advantage.
Sponsorship may not have a direct effect on sales but it creates a climate of goodwill
where the corporate or brand image is associated with benefiting sports, cultural and other
worthwhile activities, players and performers.
Areas of Sponsorship
• Sport events
• Art/ music events
• Festivals
• Awards ceremonies
• Television and radio programs, etc

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Aims of Sponsorship
● to brand and position a product or service by association
● to create brand awareness by exposure
● to support associated promotional activity
● to reinforce corporate identity
● to overcome an advertising ban
● to target a particular audience
● to generate goodwill in the community
● to support customer relations.

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Points to remember
• Advertising is part of the promotional mix (consisting of public relations, sales promotion,
media advertising, and direct response marketing) and is, therefore, not the sole means
of promoting a product, service, brand or company.
• Within each element of the promotional mix, there are a number of means and methods
that can be used to achieve the sales and marketing objectives.
• However, not all of the elements have to be used for a promotional campaign – only a
combination of the most suitable to achieve the objectives.
• Public relations consists of media relations and publicity tools such as printed matter
and videos, together with presentations and special events to support marketing by
communicating the company’s reputation.
• Media relations can be used to create the climate for the acceptance of new concepts
and new suppliers.
• Advertising uses printed, broadcast and other media to communicate the advertiser’s
message to the market.
• Media advertising can be used to create interest and gain attention.
• Sales promotion uses a range of techniques to stimulate customers to stock or buy the
product as promotions can be targeted at end customers as well as wholesalers and
retailers.
• Direct-response marketing is used to ‘sell off the page’ from catalogues and press
advertisements amongst a range of other techniques.
• Personal selling is used to sell goods and services through retail outlets as well as to
the proprietors and owners of retail outlets.
• Salespersons are used for selling to wholesalers and distributors.
• Personal selling is also used to sell products and services to industrial and commercial
companies.
• Packaging is used to protect and contain products but also to convince customers to
buy the brand or product.

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CHAPTER 3
UNDERSTANDING THE CUSTOMER AND
CONSUMER
CHAPTER OUTLINE
Although many products and services are said to be “mass-market”, but in actuality, no
company markets its products and services to the whole general public. Therefore the
target market, (the people who are most likely to be interested in your products) must be
identified. Through research and then by using the process of segmentation, the company
will select its target market. This chapter will discuss the research process and the means
of segmentation.
OBJECTIVES:
To define target market1.
To define target audience2.
To define segmentation3.
To understand the process of segmentation4.
To understand the use of research in identifying target market5.
To understand the role of positioning and branding6.
Establishing the Market-Place
As it is virtually impossible to get everyone to buy your products or services, a company
must identify the sector of the market that is most likely to buy or use their offerings. The
steps are:
1. establish a sector where there is a demand for which customers are prepared to pay
2. develop the product
3. arrange production cost-effectively
4. distribute the product to the wholesalers and retailers
5. use advertising to tell the market-place about the product.
The Target Market
The marketing department does extensive market research to discover how the market-place
is segmented. It can then study the segments to find the needs and wants of the individuals
within specific segments. The members of the selected segment is then determined as the
target market. In other words the target market are the people who are most potential to buy/
consume the company’s product/ services.
UNDERSTANDING THE CUSTOMER AND CONSUMER

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The Target Audience
The target audience are members of the target market to whom promotion and advertising
messages will be addressed. Target audience can be broken down into smaller more
manageable markets that have different wants and lifestyles. One of the biggest – and most
important target audiences is housewives, because of the major decisions that they make
on household purchases, but even this segment can be broken down into smaller categories
such as urban housewives, working housewives and housewives with children.
Further research will enable the marketing department to find what publications the members
of the target audience read, the radio stations they listen to and the
television programs they watch. Similar research is often done by the advertising agency as
it is vital to develop a message that appeals to the target audience and to ensure that the
commercials and advertisements are seen and heard by the right audience.
Segmentation
A segment must have the following qualities:
1. it must have specific characteristics that can be defined and measured
2. it should be accessible for distribution chain and for advertising and promotion
messages.
3. it must be sufficient in size or volume for the company to gain profit
Once isolated, the segment can be further studied, to establish
1. its precise needs, wants and aspirations
2. the incomes and types of job of people within the segment
3. its location
4. its potential in terms of sales and profit
5. effective means of communicating with it (so that the right media and messages can
be used)
6. economic budgets for advertising and promotion
7. what to offer to suit the characteristics of the segment
The benefits for the company:
1. cost are kept low as they targeted to profitable marketing
2. production are more efficient since as can concentrate on specific items
3. minimized wasted stocks
4. more profits

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Means of Segmentation
● demographics
● geo-demographics (a combination of demographics and location)
● social grades
● family lifecycles
● lifestyle
● behavioral types
Demographics
Classifying target market/target audience on measurable factors:
• sex
• age
• social class
• family life cycle
• education
• employment
• occupation
• marital status
etc
Geo-demographics
Geo-demographic is classifying the target market/audience into location of residences such
as , urban, suburbs, rural, etc.
Social grades
This classification is based on social class which may use annual income or monthly
expenditure as means of classification.
Family life cycle
The family life cycle is used to segment th market based on life stages:
• single
• newly married
• full nest ( have children)
• empty nest ( no more dependents)
etc

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Lifestyle
Lifestyle or the way people live as affected by numbers of factors such as
• daily activities ( hobbies, work activities, social and family activities )
• interests (fashion, music, etc)
• opinions ( attitudes to political, social, economic, cultural issues, etc)
Behavioral Types
Behavioral types are further variation of lifestyle. It is based on social expectation, goals and
beliefs.
Market Research
To determine the different segments and target group, process called market research is
conducted.
Market research will identify:
• market size
• market potentials
• market location
• target market attitudes concerning a particular product
Marketing Research
Marketing research is conducted to provide information that will assist the process of
marketing, for example in identifying which media is effective in reaching the target audience,
which advertising message is credible, etc.
Research Terminologies
Qualitative Research
Based on the work “ quality”, this type of research is looking for qualitative information in
the market place. The qualitative information could refer to consumer needs and wants,
their behavior in using a certain products. This information is helpful to advertisers and
advertising agencies in establishing marketing communication strategies to influence the
target audience to use the products. Another name for this research is Attitudinal Research,
as it considers the attitudes of potential customers and consumers, such as beliefs and
values, as these will influence behavior in the market place.
Attitudes, values and beliefs play an important part in people’s motives, therefore it is vital
that they are examined and tested. The motives that can be investigated include not only
physical needs (such as food, drink, shelter and warmth) but also psychological wants

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(e.g. security, status and esteem). As Maslow’s Hierarchy of Needs (Figure 3.1) suggests,
customers move upwards from satisfying their physical needs until they reach their full
potential.
1
2
5
4
3
4
1 S elf-actualization 2 E steem 3 Belonging
4 S ecurity 5 Physical needs
Figure 3.1 Maslow’s Hierarchy of Needs
Figure 3.1 Maslow’s Hierarcy of Needs
Quantitative Research
Quantitative research looks for answers in terms of quantity or how many, for instance
how many people believe in family planning. The method involves interviewers finding
respondents and asking them appropriate questions. Questions are designed to get a “yes”
or “no” answer, which are called closed question. Quantitative research is often used to find
the number of people who share attitudes based on age, income bracket, sex or any other
demographic factor recorded in the interview. This information is very useful in determining
the target market and target audience.

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Secondary Data
The word secondary suggests that the data is collected after the primary data has been
obtained. However that is not the case. Secondary data which is collected from published
materials such as books and websites is usually collected first and then followed by collection
of primary data.
Desk Research
Desk research referred to acquiring information behind a desk, such as from books in a
library or by using a computer to search for websites. Secondary data is obtained in this
way.
Field Research
Field research is carried out face-to-face by speaking to customers or other respondents
either in their offices or homes or on the street, and it is the favored way of obtaining primary
data.
Primary Data
The objective of obtaining primary data is to find information specifically related to certain
issues important to the advertiser or advertising agencies, such information regarding
motivation and attitudes in consuming certain products.
Primary data are obtained through interviews, questionnaires or discussion with a sample
group.
Sampling
Sampling involves questioning a pre-determined number of individuals who are as ‘sample’
of the overall market sector that is under investigation.
Random Sampling
Random sampling means that anyone has an equal chance to being asked questions, or
participate in the survey. Once the research has
been completed, the data can then be analyzed to establish opinions and
attitudes related to various classifications (by age, sex or other demographics).
Data gained from random sampling might subsequently be used to identify a group (or
segment) that shows a demand for a certain type of product or service.
Quota Sampling
Quota sampling is used when the researchers are seeking to explore a particular group
of people. They will want to establish the size, breakdown, attitudes and opinions of that
particular group, for example students, 18-21 years old, female.

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The quota sample represents a segment which have potentials to be exploited, providing
certain characteristics such as needs and motivation are discovered in the research.
Syndicated Research
With syndicated research, either a number of advertisers join together to commission joint
research or a research agency establishes research programs which it sells to a group of
manufacturers or suppliers. Advertising agencies can also participate either to improve their
own understanding in developing campaigns or on behalf of the client.
Omnibus Surveys
Omnibus surveys are continuous research which is carried out on a regular basis with
regular samples so that an advertiser or an advertising agency can buy the right to have
specific questions asked on particular subjects. The advertiser or agency pays only for the
questions that it wants answers to, although the fee includes a contribution to the overheads
of maintaining the survey. The costs are therefore shared by all those taking part in the
surveys and not by a single company.
Using the results of research
After analyzing the data, the result of the survey is used to determine:
• market trends
• market size and potentials
• target market characteristics such as buying habits
Positioning
Brand positioning means placing the brand in the consumers mind so that it is perceived
differently and more superior than competing brands. Successful brand positioning often
relies in how the brand is viewed as meeting the needs and wants of its target audience and
in how actually the brand fulfills its promise to the consumers.
The brand may have many benefits, but in establishing positioning, the marketer or the
advertising agency should focus on one benefit of the brand that is related to the product, the
competitors (what they say about their brands), and the characteristic of the consumers. If too
many benefits are conveyed, then the message is not “single minded” or focus. For example
Volvo has always stayed with the same positioning : the safety aspect of the brand.
Branding
Branding in marketing terms today means creating an image for a product. It is a combination
of character, identity and the reputation that is developed by the product and its associations
(e.g. the product might be coffee but it is identified and branded as a particular make, such
as Nescafe-Classic). A major task of advertising is creating and maintaining brand image as
means of establishing competitive edge in the market place.

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Brand Image
Brand image is about perception. Perception is not reality but what is believed. Brand image is
the consumer’s total perception of the brand, what he believes the brand is about. Therefore,
brand image indicates how the advertising message is understood and interpreted by the
consumer.
Communicating with the consumers
Advertising must be visually attractive and their messages must be credible as to gain
interest, desire to use and finally the act of purchase.
Advertisers and advertising agencies often used models of communication to measure
consumer response to the advertising message. The most often used model is AIDA:
A – attention
I – interest
D – desire
A – action
AIDA shows the steps in persuading the target audience to response to an advertising
message. A variation includes creating awareness, stimulating interest and understanding,
encouraging evaluation, generating a trial or test and ensuring conviction by the customer
taking action (by buying the product).

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Points to remember
• people have different needs and wants, therefore a company cannot sale its products
and services to everyone
• a process called segmentation is used to identify the target market
• the market place can be segmented through
o demography
o geo demography
o socio economic classifications
o family life cycle
o lifestyle
o behavioral types
• market research and marketing research are conducted to study the market place to
obtain information about the target market and target audience
• qualitative research is to gain information about attitudes, motivation, etc, while
quantitative research to measure size of segment, target markets and audiences
• primary data is collected directly from the source to provide information on a particular
marketing problem. It usually involves field research
• secondary data is obtained from published sources, and likely to be desk research
• communication models such as AIDA can be used to communicate with a brand’s
target market.

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CHAPTER 4
TYPES OF ADVERTISING CAMPAIGN
CHAPTER OUTLINE
Advertising campaigns are directed at two main audiences: the consumers and traders
(retailers, wholesalers).
Consumer advertising campaign has specific objective and therefore specific messages to be
delivered to the target audience. Hence the many different types of consumer advertising.
Many products are sold directly to the consumers without outlets or shops. In order to
purchase the products, a customer must make a direct order by calling a phone number
of filling up order forms. This type of marketing strategy is supported by Direct Response
Advertising.
Trade advertising are implemented to ensure “selling in” process to retailers, distributors and
wholesalers.
This chapter will examine the different types of consumers advertising as well as trade
advertising and briefly discuss direct response advertising.
OBJECTIVES:
To understand the difference between trade advertising and consumer advertising1.
To understand the different types of advertising campaigns directed at the2.
consumers
Trade Advertising
The objective of trade advertising is to support the “selling in” process to distributors,
wholesalers and retailers. It often involved promotion scheme such as:
• The trade are given special price for bulk purchase, so they can make a profit when
they sell to customers at retail price.
• Providing POS (point of sales) materials such as leaflets, special display materials,
hanging mobiles, etc , to enhance customers interests leading to purchase
• Product launching campaign
• Sales promotion campaign

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Consumer Advertising
Consumer advertising is to support the “Pull” of the “push/pull” process, by motivating
consumers to buy products and so take them out of the outlets. It uses the mass media
intensively to communicate the advertising message and influence the target market.
Types of consumer advertising
(i) generic advertising
(ii) product advertising
(iii) brand advertising
(iv) range advertising
(v) corporate advertising
(vi) retail advertising
(vii) co-operative advertising.
Generic Advertising
Generic advertising means advertising a product type rather than a brand and is
usually undertaken by a trade association or consortium of manufacturers and
suppliers.Agood example is a campaign to promote fresh products like milk, fruit, vegetables
and meat. Generic advertising does not promote a particular supplier but promotes the
overall benefits and advantages of the product type. One of the most well known campaigns
is the “Get Milk.” It can also include the promotion of services like insurance, to enhance
awareness of the benefits of insurance to the target market.
Product Advertising
Product advertising concentrates on promoting the benefits and advantages of the product,
such as the price, value and performance. It is often confused with brand advertising, but
product advertising is aimed to promote the product benefits, whereby brand advertising is
directed to establish brand image and enhance positioning for brand differentiation.
In print advertising, product advertising can be identified because the pack shot is as the
main and often the only visual. The copy will talk about the benefits of the product. As for
TV commercial, it is off course a waste of advertiser’s budget to show 30” of pack shot,
however the pack is still dominantly displayed, with the benefits of the product spelt out in
the storyline.
Brand Advertising
The emphasis of brand advertising is on the brand name, with sometimes little or no reference
to the product This is especially true when there are a number of products sold under a
family brand such as ABC.

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However, a huge number of products have a single brand name which has developed a
reputation over many years of advertising that goes beyond the mere contents and benefits
of the product. Good examples are found in the highly competitive personal hygiene or
toiletries market, with brand names such as Sunsilk, Pantene, etc
Nowadays, manufacturers are trying to build global brands. Coca-Cola has had the greatest
success with this; its name, logo, bottle and can design are known throughout the world.
The essence of brand advertising is usually image-building for the total product
offering – developing that feeling of goodwill between the branded product or brand name
and the customer.
Range Advertising
Sometimes, a manufacturer has a complete range of products to suit the different
needs of different customers. A common example is hair care products such as
shampoos, conditioners, tints and permanent colors. Ranges are frequently
promoted in a single commercial or advertisement either using the various media available
for advertising. By promoting through range advertising, the advertiser is suggesting that
this brand is “one stop shop” for hair care, so why use another brand. New products can be
introduced easily as the range image is transferred to them.
Corporate Advertising
Corporate advertising promotes the company not the individual products. Corporate
advertising differs from brand advertising because the company name is not always the brand
name. An example is Unilever whose brands include Rinso and Pepsodent . Unilever relies
on brand advertising to promote their products and may rarely see the needs to implement
corporate advertising
Corporate advertising is often used to establish customer relations, so that the customers
readily accept the company and thus smoothing the sales process.
It may also be used for investor relations and community relations, or when research shows
that people are unaware of what the company’s name and what it does.
Retail Advertising
Retail advertising is undertaken by retailers when they want customers to visit and shop
at their shops. Most often the advertising message contains information of specific sales
promotions for specific types of products. The media used are print media and television
and the timing is usually close to the weekend or holidays, when people have more time for
shopping.

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Co-operative Advertising
Often manufacturers and retailers will combine their efforts (and their budgets) to
undertake specialist promotions emphasizing that a particular brand or product is to be
available only through a certain outlet. Or it may involve two service providers, for example
buying an airline ticket using a credit card issued by a specific bank (purchase Garuda ticket
using credit card issued by Bank Mandiri).
The message is relatively simple – for a limited period, this brand of product is available only
at this outlet at a special offer price or with a gift, or eating at a particular restaurant using a
specific credit card to get a discount on the bill.
Direct Response Advertising
Manufactures without intermediate wholesalers or retailers often use Direct-response
advertising to reach their customers. The customers complete order forms inserted into
magazinesandcataloguesorgivetheirordersoverthetelephone.Direct-responseadvertising
is an effective means for new companies and new products to get into the market-place.
However, it has also emerged as a major selling force in its own right.
Direct-response advertising has to work very hard to sell the product because there is no-
one to sell the product on a face-to-face basis. So press advertisements have to convey
all the sales messages in one go and even television and radio advertisements have to
cover all the selling points comprehensively. Often, the advertisements and commercials
will incorporate sales promotion techniques (such as money-off discounts, which are quite
believable as wholesalers and retailers do not take a cut of the profits).
Direct mail is often used in direct response advertising, whereby a tool such as catalogue is
mailed to a prospect, and the prospect can place an order if he/she so desires.

32
Points to remember
• Trade advertising is used to encourage stocking, so joint promotion between
manufactures and retailers will result in profits for both parties.
• Trade advertising uses specialist media targeted at the buying departments and
proprietors of stores, shops, supermarkets and retail chains.
• If trade advertising is the ‘push’ encouraging intermediaries to stock the product
for onward selling, consumer advertising uses the ‘pull’ of the push/pull process to
encourage customers to buy the products and so take them out of the retail outlets.
• Consumer advertising uses several forms of promotion including generic advertising (to
promote the product concept), product and brand advertising (for individual and named
items) and range advertising (to cover a series of variants of the named product).
• Corporate advertising promotes image and goodwill to re-assure the market-place,
lubricate the sales process and create a selling environment in consumer advertising.
• Retail and co-operative advertising promote the availability of products and services
from specific retail outlets.
• Direct-response advertising is a major selling force in its own right, and it is particularly
useful for new companies and products because of the avoidance of intermediaries.
• Direct-response advertising can be used to sell/promote products and services that
customers may not be readily prepared to buy face-to-face in a shop.

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CHAPTER 5
SPECIALIST FORMS OF ADVERTISING
CHAPTER OUTLINE
Aside from the consumer market, there is also the industrial and commercial markets. Due to
the specific characteristics of these markets, specific forms of advertising, must be planned
and implemented to ensure effective communication. This chapter will provide information
regarding the purpose and use of such forms of advertising.
OBJECTIVES:
To understand the objectives of promotion to industry and commerce via business to1.
business, industrial and technical advertising
To understand the objective and use of specialist advertising to promote high technology,2.
pharmaceutical and healthcare products
To understand the objectives and use of recruitment advertising3.
To understand the objectives and use of financial advertising4.
To understand the use of advertising in special circumstances such as crisis5.
management
Promoting to Commerce and Industry
The business sector such as a manufacturing company or an airline have needs for
products and services unique to their own type of business. Although business people
read newspapers and watch television and therefore it is possible to use these mediums to
promote the products used for commercial purpose, but alternative means of promotion are
also available and often more effective.
Business-to-Business Advertising
A business office needs computers, desks, chairs, and stationery. It also needs services
such as security service and cleaning service. Ultimately, there are businesses that supply
these needs, like Hewlet Packard who would supply computers, and another manufacturer
would supply desks and chairs, etc.
Hence when one company promotes through advertising to another company, its called
business-to-business advertising.
Unlike consumer promotion, when promoting to a business, there are many different needs
and motivation to fulfill. For example, the department manager when purchasing a computer
is motivated by the advanced features as he needs something reliable to do his job, but the

34
purchasing manager may have a budget, therefore he is considering price over features.
Moreover, the advertising must consider the fact that it is trying to influence an expert
audience. Details of specific features, capacities, etc needs to be exposed as well as other
specifics such as track record, prompt delivery, etc.
Industrial and Technical Advertising
The industrial market is highly technical and complicated and relies not only on
communicating complex specifications to meet critical manufacturing and processing
needs, but also on the capability to deliver consistent quality, on time and within an agreed
budget.
Advertising of this type may offer not only the physical product , but also designs a total
system so that the company control the supply of all equipment including the installation.
Specialist Sector Advertising
High technology
Specialist sector advertising offers high technology products, sophisticated electronic
components, telecommunication systems, to different types of business sectors.
Pharmaceuticals/ healthcare
Pharmaceuticals/ healthcare products operates at three levels: OTC (over the counter),
pharmacist recommendation (P) and prescription only medicines.
OTC can be advertised to the general public, but the other two are strictly controlled. The
promotion of prescribed medicines in Indonesia can only be promoted through personal
selling to medical doctors.
Specialist Advertising
• Recruitment advertising is used for finding candidates for a position in a company.
The specific job title and the qualification of the candidate searched are fully explained
in the advertisement. The identity of the company looking for candidates maybe
identified in the advertisement if it is believed to lure qualified candidates. The primary
media used for this type of advertisement is newspaper.
• Financial advertising is used to inform the public about the company’s performance
and potential. Financial advertising is strictly regulated in both content and format.

35
Points to Remember
• Promoting to industry, business and commerce requires an emphasis on different
techniques and media compared with consumer advertising.
.
• Although some advertising for this sector can use television, most advertisements are
placed in the trade, technical, professional and management press.
• There are a number of specified purchasers and end-users involved in buying decisions
for business, industrial and commercial equipment, services and supplies. All of them
have to be influenced by advertising, most probably in different publications.
• Pharmaceuticals and healthcare promotion are similar, but there are also strict
mandatory and voluntary controls that involve advertising within the health sector. It
too has its specialist media and techniques.
• Recruitment advertising is used by virtually every type of enterprise to find the right
candidate for a job opening. Primary used is newspaper.
• Financial advertising involves investor relations, i.e. communicating with shareholders
and consumers (for banks). It shows the company’s performance and potential.

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CHAPTER 6
THE ADVERTISING MANAGER AND
ADVERTISING DEPARTMENT
CHAPTER OUTLINE
The term advertiser refers to manufacturing or service companies who have brands that
need promotion in the market place to establish favorable market share. As promotion is one
of the responsibilities of marketing, therefore, in the marketing department of the company
there is a position called Advertising Manager. The Advertising Manager plays a crucial role
in ensuring that the brands are well received in the market so that the company will achieve
its sales target leading ultimately to profitable venture.
This chapter will describe the role and responsibilities of the Advertising Manager, how he
coordinates with his department internally and how he works with the selected advertising
agencies, to establish and maintain favorable market position for the company’s brand under
his care.
OBJECTIVES:
To understand the strategic role of the advertising manager in planning and determining1.
the policy and objectives for the company’s advertising
To understand how the advertising manager coordinates work with his staff in the2.
advertising department
To understand how the advertising manager works together with the selected advertising3.
agency.
The Advertising Manager
The job of coordinating and managing advertising in an organization belongs to the
Advertising Manager. The Advertising Manager is employed in-house as the manager of
the company’s internal advertising department. For a company to get full value from the
Advertising Manager, he or she has to be given full responsibility for the task of managing
all aspects of the company’s advertising programs. However, there will be subordinates and
colleagues who take responsibility according to the amount of promotional work undertaken
by the organization.
THE ADVERTISING MANAGER AND ADVERTISING DEPARTMENT

37
Role and responsibilities
Strategic planning
To plan the advertising strategy, the advertising manager must work with colleagues from
other departments such as marketing and sales, because the advertising strategy evolves
out of the marketing strategy which in turn evolves out of the business strategy. However, the
effective advertising manager is not merely taking orders from above, but also contributes
his/her expertise upwards, especially in companies where it is realized that advertising has
a powerful effect in the market-place. The process can be expressed as follows:
Business strategy—Marketing strategy—Advertising strategy
The above process shows that advertising strategy derived from marketing strategy, which
must reflect the business strategy.
Determining policy, aims and objectives
Basedonthemarketingstrategy,theAdvertisingManagerandhisteamdeveloptheadvertising
objectives and what results in the market place are expected from the implementation of
the advertising campaign. To ensure that all activities are carried out in accordance to the
company’s value , the Advertising Manager also sets out the advertising policies such as
advertising code of ethics that must be abide to when creating advertising communication.
Promotional planning
At this stage, the planning for the whole of the promotional activity for the company can take
place. This is not restricted to advertising but includes all the activities of the promotional mix
in order to develop an integrated marketing communications approach, an approach now
adopted by many competitive brands.
Budgeting
Basically, budgeting is calculating costs for all promotional activities and is one of the
important elements in ensuring that marketing communications objectives are met. Marketing
communications objectives are set to answer to marketing problems, and objectives are
translated into strategy and promotion programs. To be implemented effectively, promotion
programs require a budget. Although it is mentioned at this stage, the budget may have
been set earlier, depending on the company’s financial policy.
Planning – administration and staff (procedures)
First and foremost, the advertising manager is an administrator running the advertising
department. He is responsible for controlling the department, not just coping with the
workload. Consequently, it means planning the department so that it is prepared to deal with
the activities it handles, and that it is adequately staffed and equipped to undertake its role.

38
He or she will look at the needs of the department in both areas and so determine what staff
he or she needs to employ and at what level of ability. He or she might look at training needs
to see who can be developed to take on responsibility for some roles and activities. All of this
will involve deciding on salary levels and other benefits.
Implementing the promotional campaign (tactics)
The Advertising Manager is the guardian of the company’s reputation. He must ensure that
the company’s brands are always seen in a positive way, or good brand image. Although
the advertising industry has often been accused of manipulating image, it is realized that
image must be based on facts. If customers are buying a brand because of its quality (the
advertising message/positioning is quality), then the Advertising Manager must liaises with
the production department to ensure that the standard of quality meets the customer’s
expectation.
Below are the activities managed by the Advertising Manager and he may or may not use
outside help to perform some of these tasks:
• Promotional activities : advertising, sales promotions, publicity, direct mail, direct
marketing
• POS ( point of sales), and other merchandising materials
• Sales literatures : brochures/ leaflets
• Exhibitions
• Event marketing/brand activation
It should be noted that not all of the above will be included in the promotion campaign, as the
above tactics are only included if deemed effective in supporting the marketing objectives.
It should also be noted that corporate public relations activities such as financial public
relations, employee communication are not the responsibilities of the Advertising Manager,
but marketing public relations activities such as sponsorship, exhibition, is within his area of
responsibilities.
Internal/external responsibilities
The Advertising Manager has internal responsibilities because some of the work is being
done by his internal staff, and while other activities are carried out external suppliers and
consultants.
External suppliers/consultants that may be used are:
• Integrated marketing communications consultancy
• Sales promotion consultancy
• Direct mail consultancy
• Exhibition contractors
• Printers

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• Design studios
• Photographers
Agency Selection
Advertising agencies should not be viewed as suppliers for the main reason that advertising
agencies are consulted by the marketing department for their strategic approach in
supporting the marketing objectives. Nowadays, advertising agencies approach to solve
marketing problems is to design a total marketing communication approach known by
many specialists in this area as Integrated Marketing Communication. Integrated Marketing
Communication (IMC) uses several promotion techniques as a unified force to influence
consumer’s perception, attitude and behavior.
Finding agencies
There are a number of ways of finding advertising agencies. The first is by reputation. Some
agencies have become household names, but agencies selected because they are well-
known may not be suitable for the type of work that the company wants. A large and famous
consumer advertising agency is not suitable for a small business-to business advertiser and,
conversely, the large agency may not want the account because the work involved may not
be rewarding enough financially.
The Indonesian Advertising Agency Association (Persatuan Perusahaan Periklanan
Indonesia- P31), a trade associations for advertising agency, may be a good source for
finding appropriate agencies.
Another source would be through referrals by colleagues of the Advertising Manager, who
can vouch with regards to the agencies reputation through their own experience
Making a short list
The selection process includes studying the agencies credentials, such as personnel, clients
list, and sample of successful campaign.
Short list approach may be as follows
• Studying the agency’s credentials
• Considering the services provided ( full service/ part service)
• The fee structure
• Selecting agency for pitching.
A pitching is a final agency selection process involving two or three short listed agencies
presenting their strategy/concept in solving the potential client’s marketing problems.
Briefing the Agencies
At the individual presentations (or new business pitches, as the agencies call them), the
advertising manager will expect to see the ability of each agency to solve the company’s

40
marketing problem. However, agencies cannot pluck solutions out of the air and so will
expect, and ask for, campaign and advertising briefs.
Advertising brief
The advertising brief or sometime may be called by other terms such as campaign brief,
agency brief, is a document prepared by the Advertising Manager to provide information and
guidance for the agency in creating the advertising strategy.
It contains the following information
• Background on the company’s market (market size, market share and competitors)
• Marketing objectives
• Target market
• Product/service (including total product offering)
• Timing (for launches or season selling)
• Other planned promotional activity
• Past advertising campaigns
• Existing company, product and brand images
• Market research results
It may also contain additional information, if available to the company:
• Advertising objectives
• Proposition (or theme for positioning the product, brand or service)
• Benefits, advantages or features that the product might have that differentiate it from
its competitors
• Tone or style required (humorous or prestige, for example)
• Mandatory client requirements (such as use of corporate identity or house style and
tag lines).
Based on the briefs, agency will prepare their concept and strategy and will perform their
best to convince the potential client how their strategy and concept will help achieve the
clients marketing objectives.
Before making the final selection, would-be clients should consider such questions as
these:
● Has the agency come up with a solution to our problem?
● Does it know/understand our market/product/company?
● How long do clients stay with it?
● How long do account handlers stay with it?
● Have the staff got experience of our industry?
● Has the agency got experience of our industry?
● Have the staff got the creative and technical ability to handle the account?
● Is the right chemistry there – between us and them?
● Can we trust them?
● Can we afford them?

41
● Are they suitably equipped?
● Are they recognized?
It is also recommended that the client visit the agency as this may help in providing answers
to some of the above questions.
Working with the agency
A major role of the advertising manager is to liaise with the agency on a regular basis. This
involves a series of quarterly and monthly meetings which are often put into the diary at the
start of the client–agency relationship although there will also be other meetings to look and
approve the detail of the work being done.
The decisions reached at any client–agency meeting are recorded on a contact report. This
is not the minutes of the meeting but a confirmation of decisions made and an action plan
(it is sometimes called an action report). It will include actions that the advertising manager
needs to take (like supplying a product for a photo-shoot) as well as actions required from
agency personnel. Each person who needs to do something will be identified by his or her
initials, and the report will be circulated to all those who could be involved, as well as to key
executives in the company and the agency.
Insert table 6.1 on page 110
Client –agency relationship and staff liaison
Monitoring- quality control and approval
Monitoring is crucial so that the advertising manager can establish how the promotional
program has affected any change – hopefully positively – measured
against research undertaken prior to any activity.
Other more routine monitoring:
• Works are done on time as scheduled
• Advertising appeared as per media plan and schedule
• The quality of work are in line with expectation
• Costs control
• Invoices are processed and paid as in terms of agreement
All of the above needs the advertising manager’s approval to ensure that objectives of
advertising and promotions are met as planned. These activities also provide ways to
analyzing situation so that problems can be identified and advertising can be continuously
improved.

42
Points to remember
• The advertiser is any organization that promotes its products, services or policies
through the promotional mix and includes profit-making companies as well as charities
and public sector organizations.
• The advertising manager works in the marketing department of a company and is
responsible for advertising and promotion activities.
• The advertising manager is responsible for strategic planning; determining policy,
aims and objectives; promotional planning; budgeting; departmental organization; and
implementing the tactics of the program.
• The major responsibility of the advertising manager is to ensure that the promotional
program is implemented effectively.
• The advertising manager is also responsible for building, managing and maintaining
the image and reputation of the company, its products and services.
• The advertising manager does not work in isolation but liaises with other departments
such as marketing, sales and production.
• The advertising agency is selected by the advertising manager and its appointment is
approved by him or her together with the marketing manager and possibly the board.
• The advertising manager liaises with the advertising agency by regular meetings and
routine contact to ensure that it is fulfilling the requirements of the client company.
• The advertising manager decides on which work will be done internally and which will
be done by external suppliers.
• Monitoring and evaluating the work of the external suppliers and the internal staff to
ensure satisfactory standards is the responsibility of the advertising manager.
• The advertising manager also monitors expenditure to ensure that all work is done
within budget.

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CHAPTER 7
DETERMINING AND SETTING OUT BUDGETS
CHAPTER OUTLINE
Everyprogramandactivitiesperformedbythecompanyrequiresbudgetallocation.Advertising
and promotion are no exception. Before the fiscal year the marketing department and the
advertising department sit down together to discuss budget allocation for all advertising and
promotion activities.
The basis of budget calculation is based on many factors such as objectives, target sales,
and market data such as expenditures of direct competitors.
This chapter will describe the many methods for setting advertising and promotion budget.
OBJECTIVES:
To understand that budgets are based on past performance and future forecasts.1.
To understand how budget are based on promotional plans and that it must have2.
senior management approval.
To understand the various ways of setting up budget3.
Setting up budget and budget period
All program and activities to be carried out in a fiscal year must be carefully established and
approved by senior management of the company. Budget is based on past performance and
forecast of future sales and the number of tasks to be carried out within the budget period.
The budget period is usually a year, normally the financial year of the organization. Budgets
are therefore prepared by the advertising department and other departments towards the
end of each financial year and approved by the board of directors ready for the next year.
In setting up the advertising budget, theAdvertising Manager relies on some information. One
is information from the sales department indicating sales achievements and also problem
areas. Other information is market research from the marketing department which provides
information on market trends, consumer behavior, competitor’s activities, etc.
Methods of setting up budget
• Objective task method
• Historical method

44
• Percentage past sales method
• Percentage of future sales method
• Competitor parity method
• The market share method
• Affordability method
• Marginal method
• The unit method
The above methods can be used in combination as the aim is to a structured table of
expenditure so that the promotional plan can successfully managed.
The objective task method
This method requires the setting up of advertising and promotional objectives, and then
putting sums of money against all that needs to be carried out to achieve the objectives.
Therefore the steps in using this method are:
• Set up advertising/promotion objectives
• Decide what promotion activities to be carried out to achieve the objectives
• Set up the budget.
Historical method
The historical method is based on advertising and promotion spending of the previous years.
A percentage may be added to cover inflation and will be added if there are extra activities,
for example using more media to extend media coverage.
Percentage of past sales method
This method is based on the idea that if a product sold well in previous years then it should
be supported for future years. Alternatively stated, it is a way of maintaining sales at the
previous year’s level. The idea works well if the product is growing and reaching saturation,
but not if it has reached maturity or is in decline and needs abandoning or bolstering. There
is also a danger that, if the product is becoming successful, it may sell well in any case, but
this is a difficult decision that needs the joint deliberations of the marketing manager, the
sales manager and the advertising manager.
Percentage of future sales method
This method is based on predicting the volume of sales that is likely to be achieved. This is
not simply guesswork but based on market research and scientific forecasting.
Deciding on percentage.

45
There is no magic formula to be used, but based on discussion and deliberation of the senior
management. A fast moving consumer product with heavy competition may spend more
than 15% of its sales on promotion. A leading brand may spend less, but because of high
volume of sales, a small percentage will represent a large amount of money.
Competitor parity/market share method
One of the most important responsibilities of theAdvertising Manager is to monitor competitive
brands promotional activities. He can access this information by purchasing advertising
expenditure data.
However, it is not always a good idea to let your rival dictate your advertising expenditure,
especially if similar media strategy is followed. Directly competing brands do not have exactly
the same market characteristics thus lending to different advertising objectives and strategy.
Moreover, if the competing brand has bigger market share, it is definitely not wise to have
the same expenditure.
Therefore, competitor’s expenditure is to be used as a guide in setting up the advertising
budget.
The affordable method
The affordable method is simply a decision made by a senior member of the board, such as
the finance director, without the need to consult with the marketing or sales department.
This method is rarely used anymore, especially if the company is marketing oriented. This
method may be used for a new company or new product, where promotion costs will be
calculated like any other activity in the company.
The marginal method
The marginal (or stratified) method is based on justifying levels of expenditure in relation to
the amount of increased sales that will occur and is a favored method of sales-orientated
companies. It can, therefore, be applied to the various layers of activity in the promotional
mix or the integrated marketing communications approach. It can also be used to justify
increasing sophistication in each of the techniques employed (eg using full-color advertising
rather than black-and-white advertisements, which have lower media and production
costs).
Sales promotion and product advertising may have an immediate effect by selling more,
so these would be given priority under the marginal or stratified method. The advertising
manager has to decide on the various techniques, methods and even media that would be
appropriate, and cost them according to the importance that they will have in achieving the
company’s sales targets before including them within the budget

46
Per unit method
The per-unit method is a very scientific method, but is unfortunately production-led rather
than market-driven. It depends on every operation in the production and supply of a product
being costed – from raw materials to the cost of distribution. Advertising is regarded as a
distribution cost in some companies.
This method requires a detailed cost analysis, where some money from total cost of supplying
each unit is allocated to promotion, after accounting for profit margin. This method could
cause overspending if greater volume of units is sold than was forecast and if conversely if
sales decrease, it does not account for more money.

47
Points to remember
• Budgets are set annually for the company fiscal year.
• One of the key methods for setting up budget is the objective and task method, where
by what needs to be done is established and costs are calculated.
• Certain methods of determining budget are based on past performance
o Percentage of past sales
o Historical method
o Competitor parity/market share method.
• Other methods are based on future forecasts: task and objective method, affordable
method, percentage of future sales.
• Budget should be market oriented not production based ( per unit method).

Introduction To Advertising & Advertising and Media Planning I

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Introduction To Advertising & Advertising and Media Planning I