Advertising is any form of paid communication by an identified sponsor, aimed to inform and/or persuade target audiences about an organization, product, service or idea.

What does modern day advertising and its beginnings entail?

Advertising doesn’t create needs, but channels needs by reshaping them into wants. A side effect is the growing importance of a brand; this is the label with which to designate an individual product and differentiate it from competitors. Unique Selling Proposition (USP) is a summary statement used to meaningfully differentiate the brand from the competition. This is the key challenge in building brands.

Newspapers and magazines are among the main advertising media. Advertisers reach about a billion people per day through display and classified ads. Market shares have decreased due to television and internet, but magazines are still popular when targeting audiences with special interests; consumer segments that share common interests, values, or lifestyles.

Informational/argument-based appeal means straightforwardly informing consumers about the product, its price, and where it can be bought. This approach is also called the ‘reason-why approach’. A less aggressive approach, emotional/affect-based appeal, aims to influence the consumer’s feelings/emotions rather than his or her thoughts. These appeals coexist.

What do advertising and its functions entail?

Advertising has a place in society both on an aggregate and individual level. On an aggregate level it facilitates competition among firms for consumer attention, preferences, choice, and consumer resources. It also is the primary means by which companies have to inform consumers about products. In addition, it is a key source of funding for major mass media and it creates many jobs.

On an individual level, advertising can inform and persuade the individual consumer. With informing, the emphasis is on creating/influencing non-evaluative consumer responses like knowledge or beliefs. When persuading, the focus is on generating/changing an evaluative (valenced) response, in which the advertised brand is viewed as more favorable than before compared to competitors.

Sometimes informational appeals are called for, for example to communicate something new and potentially relevant about a product, service or idea. These appeals are used more frequently for durable goods (products that can be used repeatedly, e.g. a freezer), than for non-durable goods (e.g. food). They are also more often used in developed countries than in developing ones. The most frequent communications are about performance, availability, components/attributes, price, quality and special offers.

The product life cycle (PLC) has four stages:

1. Introduction stage: create brand awareness and induce product trial.

2. Growth stage: build market share, improve the product, or develop brand extensions and communicate those.

3. Maturity stage: consolidate/strengthen market share and shift of focus to creating consumer brand loyalty and maintaining top-of-mind awareness.

4. Decline stage: use informational appeals to convey new/additional uses.

For more complex new products/services, advertising may provide a means to ‘educate’ the consumer about the way they work. For existing products, informational appeals are also used when there are problems with the product. Communicating a product recall means informing consumers that they need to return their product for repair of refunding (e.g. safety implications). Advertising may also have a corrective function, which is used when consumers have misconceptions of the product or when its reputation is bad.

Informing consumers may sometimes backfire or be ineffective in changing misconceptions. In that case, you need persuasive appeals. These are intended to change consumer responses (e.g. McDonald’s stating that their burger were made of 100% pure beef after the rumor that they used worms to produce their foods). The function of advertising is to aid in the marketing or products and services, and the key function of marketing is to facilitate the exchange of value between manufacturers and consumers. It is the persuasion brought by advertising that should result in buying/using the product. In all PLC stages persuasion strategies will flank information appeals in order to increase the odds of consumers responding positively to the product.

Advertisers can use two strategies to achieve the goal of persuasion:

1. Alpha strategies: By directly increasing the attractiveness of the offer or the message these strategies serve to increase the tendency to move toward the advocated position, and influence a consumer’s approach motivation.

2. Omega strategies: By reducing consumer reluctance to accept the position these strategies can persuade because they reduce/minimize the tendency to move away from the position, and influence a consumer’s avoidance motivation.

Alpha strategies include the use of strong, compelling arguments that justify accepting the message position, or communication scarcity. Omega strategies reduce resistance by directly counter arguing consumer concerns; distracting consumers to interfere with their concerns regarding the message position; reframing the message so that it does not appear to be a blatant persuasive attack; or using negative emotions.

What are the contemporary perspectives on the effectiveness of advertising?

• The naive approach states that advertising simply must be effective because it is so omnipresent and expenditures are vast and ever increasing.

• The economic approach correlates advertising expenditures with changes in sales volume in order to address the effects.

• The media approach suggests that effectiveness is conceptualized in terms of the number of individuals in a target population who have been exposed to a message, thereby looking at the ‘reach’ of the message. The problem is that it cannot inform on the impact of the exposure.

• The creative approach states that a message is effective to the extent that is it well-made and creative.

• The psychological approach – the perspective adopted by this book – aims at identifying advertising effects at the individual level. Specific advertising stimuli are related to specific and individual consumer responses. It also seeks to articulate the intrapersonal, interpersonal, or group-level psychological processes that are responsible for the relationship between ad stimuli and consumer responses.

What are the consumer responses to advertising on an individual level?

Cognitive consumer responses are beliefs and thoughts about brands, products, and services that consumer generate in response to advertising. They include brand awareness, recall and recognition, but also associations, attitudes and preferences.

Affective responses are various more or less transient emotions and moods that can occur as a function of an exposure. They differ in valence and intensity, for example; warmth, irritation, fear, pride.

Behavioral responses reflects the intention and actual behavior in response to advertising, like buying the product, choosing a brand, product trial, brand switching, and discarding a product.

Assessing advertising effects on consumer responses

Relationships can be correlational or causal.

A correlation is an observed change in one variable is associated with a change in the other (increase-increase is a positive correlation; increase-decrease is a negative correlation. Zero correlation means no relationship). Correlation is a necessary, but insufficient condition for causality. To infer that A causes B, three conditions must be met:

1. The antecedent A must precede the consequence B;

2. Changes in A must be associated with changes B;

3. No other explanation for the change in B must be present than the change in A.

An experiment is particularly suited to establish causality. It involves manipulating one or more antecedents (independent variable) and assessing their impact on the consequence (dependent variable).

Random assignment ensures that the effects can be reliably attributed to the independent variables. In case two or more variables are manipulated within the same design, we speak of a factorial experiment.

Mediation analysis attempts to identify the intermediary psychological processes that are responsible for the effect of an independent on the dependent variable. There is mediation if:

• The independent variable A has an impact on the assumed mediator C;

• The variations in C significantly account for variation in the dependent variable B;

• The controlling for C significantly reduces or eliminates the impact of A on B.

A moderator is an individual difference that strengthens or changes the direction of the effect of the independent on the dependent variable. The effect of A on B is different for various levels of C.

Advertising effects can be best understood as joint or interaction effects between situational and person variables. An advertising message may have a larger impact on one consumer group than on another, or the direction of the effect may differ. Situational variables are external, environmental variables that act as independent/moderator variables that affect some consumer outcome (e.g. the promotional mix). Person variables are internal dimensions to a specific individual which typically act as moderators (e.g. consumer involvement or knowledge). Individual difference variables include personality traits like need for recognition and need for cognitive closure.

What does advertising and its variables in source and message entail?

Sources of advertising messages can be individuals, organizations or brands behind the product or service. A direct source is a spokesperson delivering a message or demonstrating a product. An indirect source is only associated with the product/service.

Source credibility

Credibility includes the dimensions of source expertise and trustworthiness. It mainly influences message processing and persuasion when recipients are not very motivated to process the message. Trustworthiness can be conveyed by stressing that the message source does not have a vested interest in delivering the message.

Source attractiveness

Many products are sold by appealing to sexual attraction and beauty. Attractiveness frequently functions as a halo: what is beautiful is good. The attractiveness halo-effect can easily extend beyond the model itself to positively affect the products with which he/she is associated.

Argument quality and message structure

Two extensively studies message variables are argument quality and message structure. Argument quality refers to what is communicated about the product. An argument is strong when a desirable product attribute is highlighted, coupled with the certainty that it will be delivered with the product.

Message structure refers to how product information is communicated. Presenting arguments first may increase consumer attention and processing intensity, while presenting them last may benefit them because they are most recently activated in memory. Other relevant message variables are message sidedness and argument-based versus affect-based appeals.

Message sidedness

A one-sided message is classic, biased ad with arguments supporting a conclusion favorable to the advertised brand. Two-sided advertisements include both positive and negative, or supporting and counterarguments. One-sided messages are more persuasive when recipients are favorably disposed to the message issue, while two-sided messages are more effective when the issue is unfamiliar/unfavorable to consumers.

Argument-based and affect-based appeals

Argument-based advertisements appeal to reason and use arguments, while affect-based advertisements use emotions and feelings. Experiential products lend themselves well to affect-based appeals. These appeals are also useful in low-involvement purchases. Fear-arousing communications try to scare the consumer into action by referring to risks that the consumer can either prevent or reduce by (not) buying the product. Risks can be:

• Physical: risk of bodily harm;

• Social: risk of being socially rejected;

• Performance: risk that competitive products will not perform as expected;

• Financial: risk of losing a lot of money/spending too much on an inferior product;

• Opportunity: the risk of missing an opportunity because of short supply.

What do advertising and its context entail?

Source and message variables are the first class in advertising. Second class of situational variables that may affect consumer responses are the communication tools that make up the promotional mix. This includes direct marketing, interactive marketing, sales promotion, PR, and personal selling. Integrated Marketing Communication refers to coordinating the elements in the promotion mix to create synergy between them. Advertising can no longer be viewed as invariably non-personal communication, but manifests itself in hybrid forms, including elements from other tools in the promotion mix.

Direct marketing

In direct marketing the firm directly and individually communicates with a potential customer, with the objective of generating a behavioral response. It includes database management, telemarketing, and direct response advertising. Word-of-mouth (WOM) marketing takes place when a product user tries to convince others to try the product as well.

In event marketing, events are used to get in touch with potential customers, often through sponsorship. Direct mail is a personalized form where consumers are typically addressed by their names.

Interactive marketing

In interactive marketing one uses the potential of the internet for marketing products and services. Advantages of the internet are that it is fast, that consumers can control timing and pacing of information, and that consumers may have more control of content than with traditional media. However, perceived social presence is lower online.

Sales promotion

Sales promotion is focused on generating an immediate behavioral response from the consumer. It is a form of ‘action communication’. It uses price-cuts and other forms of temporary incentives to generate sales on an ad hoc basis. Its five basic functions are: (1) to increase market size by directly stimulating sales; (2) to reward loyal customers; (3) to make existing customers more loyal; (4) to stimulate trial by new customers; and (5) to support other communications tools.

Negative effects may occur as sales promotion actions by competitors result in ever-increasing promotion costs for similar sales revenues. Sales promotions may affect the reference price and make consumers reject the offer when the promotion has ended. Price becomes the most salient product attribute in the consumer’s mind, corroding perceptions based on other features.

Public relations

Public relations (PR) refers to a communication instrument that is used to promote favorable perceptions about the organization as a whole. It includes sponsoring of events, communication with media gatekeepers, political stakeholders, pressure groups, government bodies and internal employees. It is a form of communication creating a mutual understanding between organizations and their publics. There are two types of PR: financial PR and marketing PR. Financial PR is aimed at informing and persuading the financial audiences with are essential for the long-term money-raising potential of the company, such as shareholders and investors. Marketing PR refers to the promotion of new products and services through free publicity.

Personal setting

Personal selling is a two-way, face-to-face form of communication to inform and persuade prospective buyers with the aim of yielding a behavioral response from them. An agent tries to foster compliance from a target.

Persuasion involves changing consumer beliefs and evaluative responses, while compliance is focused solely on overt behavior and compliance following a request. A key advantage is it has a higher overall impact on buyer behavior than many of the other tools, since a sales person can probe symptoms of consumer resistance and try to break through them. The product can be demonstrated and there can be negotiated on the sales terms. There is no waste in reaching audience members that are not part of the target group. Personal selling is relatively expensive and has a limited reach and frequency. There is also a high risk of message inconsistency.

What are the classic and contemporary approaches to conceptualizing the effectiveness of advertising?

Two approaches to conceptualize the impact of advertising: the modeling approach and the behavioral approach. The modeling approach focuses on the aggregate level; entire markets/market segments are the primary unit of measurement. The behavioral paradigm focuses on individual consumer responses as a function of specific advertising input variables (variables as independent variables, and consumer responses as dependent variables). The level of specificity is high in the behavioral paradigm such that the effects of individual ad characteristics on specific individual consumer responses are assessed by employing experimental research methods.

Sales-response models

Sales-response models aim to relate advertising inputs such as expenditures to aggregated output measures like sales and market share, in order to gain insight in the aggregated advertising effects as a function of aggregated advertising input. Two basic shapes are the concave sales-response model and the S-shaped model. According to the concave sales-response model sales follow the law of diminishing returns: the incremental impact of advertising on sales diminishes with increasing the communication budget. Once the entire population of non-buyers has been reached, additional ad expenditures will not add much in terms of impact. The

S-shaped model states that initial impact of advertising as a function of communication budget is low. After this phase, sales will start to increase exponentially with increasing expenditures, up to a saturation point where the impact of advertising will level off. After this phase, added investments may even lead to adverse results.

Disadvantages of an aggregate level of analysis are that advertising may not be the only causal factor, variables may interact, and factors outside the realm of the company may be responsible for aggregated effects. Response modeling is based on input-output representations without regard for the underlying processes that are responsible for the occurrence of a relationship between advertising input and sales output. Sales output is a behavioral measure and thus a behavioral approach is needed to complement the modeling approach in understanding advertising effects.

Early models of individual responses to advertising: hierarchy-of-effects models

Hierarchy-of-effects models propose several intermediate steps instead of assuming a direct link between ad message and consumer response. It is assumed that some form of consumer learning takes place following exposure to advertising.

There are three learning stages:

1. Cognitive stage: in this stage consumers engage in directing conscious attention to the target ad and thinking about its content.

2. Affective stage: here thinking gives way to emotional responses and the formation of attitudes or preferences associated with the advertised brand takes place.

3. Conative stage: includes behavior that might arise from exposure to advertising, including (re)purchase and (re)use.

The oldest hierarchy known is the AIDA model (1898). This model proposes that advertising reaches its impact on consumer behavior through the sequence of Attention (cognitive stage), Interest, Desire (affective stage), and Action (conative stage). The two basic functions of advertising are to inform and to persuade. Several modifications to this model have been proposed:

• AIDCA: Attention, Interest, Desire, Conviction, Action.

• AIETA: Awareness, Interest, Evaluation, Trial, Adoption.

• AKLPCP: Awareness, Knowledge, Liking, Preference, Conviction, Purchase.

None of the models provide a valid description of how advertising works. Other weaknesses are that in many situations the model will not hold because the fixed sequence of processes presupposes a high level of consumer involvement, while this is rather an exception than the rule.

The FCB grid proposes that advertising can be modeled along two key variables: the extent of thinking versus feeling and the extent of consumer involvement (low versus high). This can best be put in a planning grid with four cells. Each cell represents a combination of the extent of consumer thought and consumer involvement. All products and brands can be places in one of these four cells, based on their functional or emotional needs. They will also vary in the extent of involvement, since the personal relevance of these products will vary for each consumer. Finally, each quadrant also differs in sequence including the three components – think, feel and do – which are thought to account for the consumer decision-making process and the processing of advertisement about these products.

The FCB grid suffers from the same shortcoming as the previous mentioned models. The Rossiter et al. planning grid is a variant of the FCB grid. In this model high and low involvement product types are crossed with two classes of consumer motives. Positive motivations are transformational motivations and include sensory gratification, intellectual stimulation, and social approval (a consumer who craves milk because he likes the taste). Negative purchase motivations are informational motives and include problem removal, problem avoidance and normal depletion (a consumer who notices he has run out of milk and wants to buy a new bottle).

A weakness of both the FCB grid and the Rossiter et al. grid is that they link certain levels of involvement and motivation to certain products, and thus disregard the possibility that the same product may function in a different role for different individuals. Involvement and motivation refer to person variables, not to invariant attributes of a product/advertising stimulus.

Different from other models is DAGMAR, which is more explicit with regard to the specific communication objectives that advertising may have in each stage. It highlights a basic distinction in evaluative versus non-evaluative consumer responses to advertising.

Non-evaluative responses are: (1) creating category need; (2) brand awareness; and (3) increasing brand knowledge and comprehension.

Evaluative responses are: (1) brand attitude; (2) purchase intention; (3) purchase facilitation; (4) purchase; (5) satisfaction; and (6) brand loyalty
However, DAGMAR holds the same problem as the other models: there is no evidence that advertising affects the consumer in the sequence posited by the model.

Problems with all the hierarchy-of-effects models mentioned above:

• They are only concerned with the effects of advertising ad discrete media messages, whereas in reality, effects often come about in interaction with various other marketing factors;

• They represent a simplistic view of human behavior and response processes, with advertising as the stimulus and overt consumer behavior as the ultimate response without any regard for underlying processes and moderating conditions;

• They are inflexible, since they assume that all ads have the same specific effects;

• Especially the models that related specific effects with ways to measure them (DAGMAR) suggest that the postulated sequence of effects is valid, since its constituent components can be measured.

Consumer behavior and psychology in general are too complex to be captured in a single model.

Cognitive response approach

The cognitive response model shares with the various hierarchy-of-effects model the assumption that learning takes place in response to exposure to a persuasive message. However, it emphasizes the mediating role of idiosyncratic thoughts/cognitive responses that people generate when being exposed. Once a receiver is exposed to a persuasive message, he may actively add to and elaborate upon message content. Cognitive responding may lead to persuasion, active resistance, or a neutral, unchanged position. Major shortcoming: its failure to account for the processes that occur when ability and/or motivation are low, other than that the extent and valence of thoughts are less consequential for persuasion.

Dual process models

According to the dual process approach, information processing, judgment and decision-making must be viewed on a continuum. At one end of this continuum, information processing is characterized by controlled, slow, explicit, conscious, and analytic, bottom-up processing and judgment. People spend time scrutinizing the advertising message and construct meaning, beliefs, attitudes, judgment, and behavioral decisions. This mode of processing is engaged when the issue in a message is highly involving for the consumer. The quality of information becomes an important determinant of persuasion. Strong, compelling arguments evoke mostly favorable thoughts which will increase persuasion.

On the other end of the continuum, information processing involves relatively automatic, fast, impulsive, top-down processing and judgment. Consumers use prior knowledge, simple decision rules (heuristics), stereotypes and other quick guidelines to effortlessly and mindlessly arrive at a decision.

Attitudes formed/changed this way are less persistent, do not predict behavior very well, and are vulnerable to counter-persuasion. Intermediate forms are highly likely. Both modes complement each other and may even interact.

Unconscious processes in consumer behavior

• Activating a concept in consumer memory (priming) can directly affect overt behavior without the participant being consciously aware that the activation procedure has any influence on the subsequent behavioral response. Subliminal priming occurs when people are not even consciously aware of the stimulus, but still show even complex behavior as a function of the stimulus that is largely involuntary and automatic. Because of the low-involvement nature of most advertising, implicit processes are the rule rather than the exception when it comes to understanding the psychology of advertising.