AD CAMP: - Quiz One Review!

The Only constant is change! Some changes are: * Technology * Agency Structure (media channel; ad skipping/ clutter; target) * Client Demands * Consumer Control

Advertising Campaign: - A series of connected, but different, actions designed to bring about a result. * Series – multiple actions; one exposure is not enough; need repetition; build on previous exposures * Connected – Related/ part of a family; continuity * Different – variation * A result – single goal

Ways to achieve CONTINUITY:

Same Physical | Same Psychological | Slogan/ tagline | Theme | Spokesperson (Maxwell Pig) | Tone | Trade Character | Attitude | Music | | Type Face | | Layout Style | | Colors | |

How to achieve variation (DIFFERENCE) * Different media * Different benefits * Different characters/ actors * Different Settings

Elements of effective Campaign Strategy

Market Research
(Industry; competitors; product; consumer)

Problem/Opp. Identification

Target I.D.

Objectives

Budget

Creative Strategy Advertising Media Strategy Promo

SITUATION ANALYSIS OBECTIVE STRATEGY EXECUTION: The Ads

Why a written plan and NOT Verbal? 1. Encourages logical thinking 2. Offers a factual basis for decision making 3. Provides a complete guide for everyone working on account; it is a proposal before approval Guide during implementation phase 4. Provides a written record or benchmark of performance PG 3a Planning System: 1. Where are we now? – Situation analysis 2. Why are we there? – Problem Identification 3. Where could we be? – Opportunity Identification, then turn it into a statement of objectives 4. How do we get there? - Advertising strategy and tactics 5. Are we getting there? – Ad Evaluation STRATEGY – Where are we now? TargetObjectiveanticipate Opponentan Action! First know where you going (ENDS) to determine how you get there (MEANS) Necessary Condition i) Spokes must radiate from the hub (center) ii) Spokes must be connected (consistent)

Internal Plan of action for achieving an objective External * competition * economy * target/nature of consumers * regulation (gov) * culture we live in * financial * human resources * quality of product line * access to raw materials * culture

External and Internal are constraints So start with External Industry Analysis Industry Definition: A distinct brand of trade, which uses labor and capital Define by using product base and market based definition

Product based Definition: Emphasis on the existing product being produced or manufactured; short coming, narrow definition Marketing Myopia (Shortsightedness): Over emphasis on existing product and failure to define industry broadly enough to encompass customer needs. Eg. Rail Road – don’t think of other modes of transportation as competition

Marketing based Definition: Considers – Customer needs; customer groups; technology used TRENDS: Possible categories: Product Consumer Economic Regulatory Cultural PG 4a PORTER - # of key players in industry; have to understand all key players Potential Entrants
Potential Entrants

Rivalry among existing firms
Rivalry among existing firms
Substitute Products
Substitute Products
Suppliers
Suppliers
Buyers
Buyers

Not all forces will be equally powerful
Eg. Maturity – try steal consumer so plenty rivalry, probably not a lot of potential entrants
There also may be an overlap of some forces – eg. Sugar

RIVALRY – act of competing; inevitably present

Continuum of: FriendlyCutthroat

(-) Price Wars – very damaging competitors have to lower prices profit suffer
(+) Sharing Technology
(+) Cooperative Advertising – eg. Got Milk or Slim Peanut, get people to buy more category

3 Questions to ask: 1. How much rivalry 2. Why rivalry 3. Give Example eg. Size of ad budget

SIGNALS of Rivalry i. Balance and Size – Equal resources, easy to overcome the other, can have rivalry at bottom and top. eg. Balance: Coke vs. Pepsi; Visa vs. Mastercard ii. Slowed growth – industry growth, maturity stage. Eg. Beer iii. Lack of product differentiation – compete on the basis of price, service; psychology differentiation – heavy advertising to stand out eg. Insurance iv. High Fixed Cost – hard to determine; e.g. seed industry, bulk product * Diverse market needs * High transportation cost * Seed deterioration * High carrying cost to next season; absorb fix cost and get rid of excess inventory v. Diverse competitors (foreign competitors) * e.g. Harley Davidson and others like Japanese Yamaha * Product teardown/reverse engineering * Pursue different strategies * Accept a lower profit margin * Player by a different set of rules vi. Presence of exit barriers – keep people from exiting even when no longer profitable * Specialized assets * High fixed cost – had contracts/ service agreement * Emotional Ties – for 100 years they run the industry
Eg. International Harvesters

SUBSTITUTE PRODUCTS: any product that performs the same function as the industry product

Creative Destruction: Allowing the existing product to become obsolete and moving in the direction of substitutes
Eg. KODAK did not do that

The law of mortality: a brand that stands for something obsolete has no value

Biggest Threats: 1. Substitutes improving in price/ performance 2. Industries earning high profits

In analyzing substitutes, consider: 1. Functions/ needs met 2. Advantages and disadvantages of each substitutes
e.g. Coffee industry, don’t need to know brand
* needs coffee satisfy
* Product to satisfy
* Advantages and disadvantages of each

Coffee nips (subby) * Taste * Caffeine * Socialization * Keep warm

Threat from potential entrants
They bring: * Desire to succeed – motivated*** * Capital – use resources * Capacity – not enough supply to support

Analyze barriers to entry

Entry could come through Acquisition
e.g. Miller Lite was #7 and jump to #2 because they created lite beer

Barriers to entry: 1. Product differentiation – Lack diff = Rivalry; Diff presence = Barrier
Insulates (isolates) brand from competitors
Based on physical or psychological differences (loyalty) e.g. beer

2. Need for financial resources * might need to build inventory or increase credit

3. Access to distribution channels – pay slotting fees, give free goods for supermarket products * if they say no, then come up with another way (e.g. online)

4. Switching Cost – one-time cost facing buyer for switching from one supplier’s product to another; e.g. cable or phone contracts

5. Government policies – e.g. Harley Davidson protected by gov. with tariffs.

6. Economies of scale – Decline in per-unit cost of a product (or operation) as the volume increases per period; if enter with large scale, the risk is that you may not sell

7. Experience curve – as a firm gains cumulative experience in producing a product, unit cost decline. * differ from economies of scale as this can be overcome by hiring managers/employees who have experience

Economies of scale * always a barrier * per period (durative) effect

Experience Curve * Sometimes * Cumulative

| EXIT BARRIERS | ENTRY BARRIERS | | LOW | HIGH | | LOW | Low Returns | | HIGH | High Returns |

| EXIT BARRIERS | ENTRY BARRIERS | | LOW | HIGH | | LOW | Stable | Risky | | HIGH | | |

Suppliers Industry Manufactures Buyers * Consumers * Industrial * Commercial * Government

* Consumers * Industrial * Commercial * Government

* Raw material * Labor * Credit Capital * Raw material * Labor * Credit Capital
(Power) (power)

INDUSTRY REVOLUTION

Industries are not constant in their structure
Usually have to change strategies

* What stage of revolution * Why that stage

Product life cycle theory

IntroGrowthMaturityDecline

* Introduction & Growth are being compressed because of ease of spread * Maturity is longer – there are 3 phases of maturity i) Growth Maturity: industry sales still grow but rate of growth slows (lagers and late adaptors) ii) Stable Maturity: stagnant iii) Decaying Maturity: Starting to decline

CHALLENGES a) Stage isn’t always clear
Have to look at it over time; usually stages are marked constant over several years pronounced and stable

b) Sales pattern is not always S-Shaped

build on itself e.g. nylon: parachutes, clothes

Continuous – innovation find new uses Fad

Cycle recycle – a lot of fashions Growth/ slump/maturity

To know stage of maturity, you look at: 1. History of Industry 2. Industry Growth Rate over time

Why do industries evolve? Demand changes… but WHY demand changes??? i) Product Innovation – more people will buy; e.g. tide improved 55 times ii) Change in demographics of users – e.g. age, education iii) Change in lifestyle – hobbies; e.g. of product: water iv) Cost/ quality of substitute products v) Cost/ Quality of complimentary products – used in conjunction with industry products

GROWTH = Newly formed OR Re-formed (because of change in consumer needs

If average annual growth in sales is ≥ 10%, industry is in growth phase (double digits)

There are Uncertainties in growth industries [growth is really in the eye of the beholder]

PG 6c – characteristics in growth industries

Saturation:
Actual sales = Potential sales

Key is to define POTENTIAL

VOLUME = # of Brand users X Usage rate per user * More frequent uses * Uses more at a time * New users * More frequent uses * Uses more at a time * New users * Convert nonusers * Enter new segments * Win competitor’s customers * Convert nonusers * Enter new segments * Win competitor’s customers

Declining Industries: Those experiencing an absolute decline in unit sales over a sustained period

SIGNS: 1. Shrinking profit margins 2. Pruning product lines 3. Falling R&D and advertising**** 4. Excess capacity 5. Dwindling number of competitors

Degree of concentration; you must know: i) Number of competitors in industry ii) Size of competitors

Concentration Ratios
Top 2 = CR2
Top 4 = CR4
Top 8 = CR8

If CR4 ≤35%, industry has elements of FRAGMENTATION; vice versa, elements of CONCENTRATION (pree hand out)

PG 7h

Loose Oligopoly = combo of oligopoly and monopoly competition; eg. Jeans

Tight Oligopoly = Classic definition, only a few firms; eg. Cereal

Examples of fragmented industries: * kitchen cabinets * upholstery * book publishing * typesetting * signage * caskets * many services
WHATs COMMON? – PG 11 a * low overall entry barriers * absence of economies of scale or experience curve * high transportation cost * High inventory cost * Diseconomies of scale in some areas * Diverse market needs * Exit Barriers * Local regulation * Newness

Agglomerate
Ubiquitous
enumeration