by Byron Sharp
This is quite a different mechanism from the traditional view that advertising for a new product makes people aware of it and then hopefully wins them over (creates positive attitude) such that they either seek it out, or when in a choice situation evaluate it positively. Instead the sales effect is more due to the fact that the advertising ‘opens peoples eyes’, they now have a chance of seeing it in the store, or down the street, or on the webpage. Whereas without the advertising, they would go on noticing and buying their usual brands – they just would not see or recall the brand. Remember consumers don’t see most things in store, and its terribly difficult for new brands to be seen, let alone understood. Advertising’s crucial role is in shaping people’s brains so that the brand can be seen.
Advertising can sometimes persuade consumers
Some advertising creates an intention to purchase by generating a reaction like “I should buy that” or “That's interesting, I really must check that out”. Some persuasive messages are very dry and rational; for example, classified advertising, directory advertising, search advertising, new product advertising, newspapers and brochures. Typically, directory and search advertising is informative, concise and organised according to the interests of the audience. For example, plumber X guaranteeing a visit within the day to your area might be all the persuasion you need when your hot water system fails. However, to persuade consumers to buy a new product, the market needs to be informed of what is on offer. The excitement of something new provides a window of opportunity: there is enough inherent emotion that an ad (that provides rational information) may get noticed.
However, persuasive arguments are more powerful if they include explicit emotional appeals. For example, compare these two appeals:
•Goodyear tyres grip the road and this means that they reduce your stopping distance.
•Today your child's life may depend on your braking ability. Goodyear tyres reduce your stopping distance and keep your loved ones safe.
Persuasive advertising occurs less than advertising texts and models would have us believe 74. Even in political elections, where one would think that political parties really are trying to persuade voters that their policies and candidates are best, an extremely common advertisement shows nothing more than the name and face of the candidate along with party branding, and maybe a cunningly crafted message along the lines of “vote for X”.
Also, great sales effective advertising does not always need to persuade. In a series of Ehrenberg-bass Institute studies on the forms that advertisements take (FAT) (Mills et al 2000), where the general public, agency professionals and students assessed television and magazine ads, only 40-50% of the assessments thought the ads suggested or claimed that their brand was different or better, or provided helpful information. This suggests there is no simple basis on which these ads could successfully persuade. Others (e.g. Morgan et al 1995; Kay 1993) have also noted that most advertisements contain very little verbal or visual information about the advertised brand.
The persuasion mechanism does not explain most of the advertising in the world. Many brands are already successful. They do not have anything to say that the market does not already know, that a competitor could not say or is meaningful to their buyers. Yet it's commonly assumed that without persuasion advertising can’t cause sales, but this is not true. Memory structures, even if they don't result in intentions, still cause sales – decades of research (e.g. Juster 1960) shows that sales can mostly come from people who had no intention of buying. Intentions are memories too, and subject to faulty recall so they are only weakly motivational. A similar point can be made about brand preference or attitude. Some advertising generates a reaction like 'that's good' or 'that would suit me'. Again, it is commonly assumed that such persuasive advertising must be more effective in generating sales. Such attitudes are usually very weakly motivational. This is partly because they are not often recalled in buying situations and also because we often have a large number of brands we like (and that we buy).
So it is quite misplaced to conclude that advertising that affects intentions or attitudes works better. This fact undermines much academic research into advertising that has derived rules about effectiveness by examining the effect of advertising exposure on stated intentions (often in artificial laboratory settings with unrealistic lags and heightened attention). Similarly, advertising pre-tests (copy tests) that use intentions or intention shift are biased towards particular types of advertising content, and very often reach incorrect conclusions about the sales effectiveness of particular commercials.
Many companies are trapped in the intentions/preference paradigm. They brief their agencies and evaluate their advertising in line with this model (sometimes without even realising it). Consequently, they produce advertising containing persuasive arguments (often about trivial benefits) that are rejected, misunderstood or ignored by viewers. They also produce advertising that fails to refresh or build appropriate mental structures because management's attention is on the ad’s selling message. Such advertising fails to communicate consistently the distinctive aspects of a brand. Consequently, many firms produce campaign after campaign where each looks and feels different – as if each were for a different brand.
Somewhat ironically, companies that use this persuasion model of how advertising works will sometimes produce what they call 'image advertising' or 'awareness advertising', and they do not expect this to produce sales. Of course it should be expected to generate sales – that's what advertising is for.
Marketers need to understand the memory structures that have already been built for their brand. They need to use these, and ensure their advertising refreshes these structures. Then they need to research what other memory structures might be useful to the brand (i.e. factors driving purchase in the category) and then work to build these. Over decades, leading brands have done stellar jobs at building relevant memory structures. Coca-Cola is a great example. In the past, Coca-Cola was sold in US 'drug stores' and so it was associated with drug store visits in summer by teenagers. Today Coca-Cola is associated with a variety of memories: the beach and Coca-Cola, nightclubs and Coca-Cola, pizza and Coca-Cola, parties and Coca-Cola, cafes and Coca-Cola ('the original long black'), the Coca-Cola bottle, Coca-Cola red, Coca-Cola swirl and so on. These memories make it more likely that Coca-Cola will come to mind; they make it easier for people to notice Coca-Cola and to process Coca-Cola’s advertising.
As discussed, there are two main ways that advertising works: persuasion (changing opinions) and mental availability (refreshing and building memories). There are other mechanisms, but these are more subtle and are often secondary to salience and/or persuasion. These other mechanisms include bond, status signals and priming, which are discussed below.
The bond mechanism
Spending money on advertising signals that a company is financially secure and/or their products are good, which is particularly important for services. Corporate reputation advertising is a prime example. The practice of spending large amounts of money on employing top celebrities to appear in ads, or sponsoring large events like the Olympics, is explained by this mechanism. Some consumers infer, perhaps subconsciously, that an advertiser would not foolishly spend lots of money on advertising if it did not have confidence in its product and did not intend to be around for a long time. Also, consumers' experience has taught them that heavily advertised products and services tend to be good quality.
Economists have supported this idea by arguing that the amount spent on advertising often seems more important than the message in determining the commercial outcome (i.e. Nelson 1974; Telser 1964). This does not mean that advertising has no economic function or that viewers are irrational; rather, viewers respond to signals beyond the explicit messages. The economist John Kay (1993) asserts that most people are inherently cynical about truth in advertising and that they automatically discount claims about quality made in advertisements that cannot be objectively assessed. In this circumstan
ce, he argues (exaggerating somewhat), the only thing advertising can convey is the quality and quantity of the advertising itself.
Status signals
When we use some brands we signal to others, and even to ourselves, what sort of person we are. Advertising helps this signalling. Few people drive a Mercedes-Benz, but everyone knows this is an expensive car brand. Advertising tells us this, which means that people who drive Mercedes signal their wealth by driving this brand. This wouldn't work if the general population didn't know what a Mercedes looks like and know that it is an expensive brand.
However, marketers often over-estimate the effect of signalling. Some categories aren't very symbolic, and few consumers think a brand will change what their friends think of them. Also, much of the symbolic character of brands comes from usage, observation and word-of-mouth rather than from advertising.
The implication of this is not that a brand will benefit enormously from advertising that tries to make it cool amongst non-buyers. A more sensible implication is that symbolic brands and even super expensive luxury brands often need to advertise widely. Advertising for luxury watches is not just directed towards billionaires, partly because most people aren't billionaires and most people who buy luxury watches aren't billionaires.
Priming
It is a well established psychological phenomenon that people prefer objects and brands that they have seen more often. This is an 'exposure' effect. Recent research has shown that this effect can apply to exposures that consumers are barely aware of. Research has also revealed that recent exposures to associated cues can enhance the probability of purchase. For example, apparently college students returning to campus after Halloween rated orange brands more favourably and exposure to multiple pictures of dogs increased the probability of ‘choosing’ the Puma brand of sports shoes (because people associate dogs with cats) (Berger & Fitzsimons 2008). This unusual effect isn't well documented outside of experimental conditions, so it's unclear how reliable or strong this effect really is in the real world. It is also not clear how competing cues interact and possibly cancel each other out. It's possible that this exposure effect is simply a salience effect. It is however further evidence that advertising can, at least potentially, affect sales without making a sales pitch.
Effective advertising
A simple (but not easy) recipe for effective advertising is:
•reach all the category buyers
•don't have lapses in advertising
•get noticed, not screened out, by consumers
•use clear brand links – a brand's distinctive assets indirectly brand advertising; mentioning (verbally and/or visually) the brand name is crucial; showing the product and showing the product in use is important
•refresh and build memory structures that make a brand more likely to come to mind and be easier to notice
•if there is a piece of information that is genuinely persuasive, then say it, so long as it does not interfere with achieving the previous objectives.
Chapter 10:
What Price Promotions Really Do
John Dawes & John Scriven
Price promotions have an immediate and positive effect on sales. But the effect does not last; it ends when the price discount ends. This is because price promotions largely reward customers who have bought the discounted brand in the past (and who are lucky enough to find it on sale). Price promotions do not alter underlying propensities to buy in the future; they lack reach and usually fail to bring new customers to a brand.
Introduction
A book about the laws of marketing and buying behaviour would not be complete without discussing price. This chapter reveals the law-like patterns in how consumers react to price changes, particularly how temporary price discounts affect buying, sales and profits.
Price is not all-important
Price is a powerful variable in the marketing mix. It is arguably the easiest element of a product to change and it has the largest direct effect on sales. Price obviously matters to consumers, and is often thought to be the most important factor. Yet, brand leaders are almost never the cheapest. Not all buyers switch when a more expensive brand becomes cheaper. Therefore, price is not everything. So how do consumers react to price and to price changes and why do they behave as they do?
This chapter principally comments on what happens when the price of an established brand is changed temporarily, for example, in a price promotion. We will not be discussing the process of setting a price. However, it is important to bear in mind that each brand has a 'normal' price that reflects the quality of the brand (with some variation for how much is available (supply) and mental & physical availability (demand). Most categories have price/quality tiers: the cheap/basic, no-added-frills level; the mainstream level; and the level of higher priced products that have added luxury or functionality. Consumers are aware of this tier system, so considering context is important when evaluating the prices people are willing to pay. It is apparent that consumers will pay for quality: the prices for higher quality brands are higher than the prices for lower quality brands, and the higher quality brands do well year after year. We also see that, generally, the very best brands are considerably more expensive, and the very cheapest brands are often considerably lower quality – if you really want quality, you have to pay for it, and if you want a low price then you have to make other sacrifices.
We will now examine these questions: How do consumers behave in relation to price? Are there 'deal buyers' and 'premium buyers'? We will also outline the managerial motivation for running price promotions and reveal what actually happens when price promotions are run. The question of longer-term effects (good or bad) is also addressed. Finally, we will discuss the capacity of price promotions to actually reach buyers.
Consumers buy across a range of price levels
Marketers and researchers find it tempting to categorise shoppers according to the prices they pay. For example, it is thought that there are low-end shoppers, those who buy in the middle range and others who buy premium products. The notion of the 'deal-prone' shopper reinforces this view. However, research into actual buying behaviour shows that consumers do not confine themselves to one price category. Most consumers buy across a range of prices – over time they will buy the same brand at different prices and also buy brands that sit at different prices. This might be because of availability, promotions, something catching their eye, differing needs, mood swings, wanting a change, granny coming to visit and so on. These many random influences result in law-like patterns in cross-buying at different price levels. For example, Table 10.1 shows that in the instant coffee market in the UK about half (51%) of those buying in the cheapest price range (denoted as '- -') also bought in the most expensive price range ('+ +'). Similarly, of those buying in the below-average price range ('-'), 57% also bought in the most expensive price range, and so on. Overall, these patterns are dictated by the number of people who buy in each price range, much like the double jeopardy law for brand buying described in Chapter 2. That is, people who buy in any price tier will also buy in other price tiers, in line with how big those other price tiers are.
Table 10.1: Buying in different price tiers: instant coffee in a year
Percentage buying in other price tiers
Buyers of Share (%) - -- ++ +
Below average - 35 - 64 57 36
Cheap -- 31 69 - 51 30
Expensive ++ 27 66 55 - 39
Above average + 7 78 61 73 -
Average
25 71 60 60 35
Rows and columns are ordered by popularity of the price tier.
Buyers of any price tier also buy in other price tiers, about in line with the market share of those other price tiers
Source: Data courtesy of Kantar Worldpanel.
What this means is that if you manage a 'low price' brand, the people who buy it aren't dedicated to only purchasing lower priced brands; many of your sales actually come from people who normally buy mid-rang
e and premium brands, and who sometimes buy a cheap one. The same is true for premium brands – many sales actually come from the 'low price' buyers who occasionally buy a higher priced brand. So in any particular market, there are consumers who habitually buy a range of brands and pay a range of prices. It is therefore hard to successfully target an exclusively 'low price buyer' segment with price promotions, because such a segment doesn't usually exist.
Why do managers run price promotions?
According to marketing texts, brand managers should build and manage brands by following these steps:
1.assess customer needs and the competitive situation
2.construct an offering and brand positioning that will resonate with buyers
3.set a price that reflects the value of the brand to the buyer.
What happens in practice is that brands are routinely discounted below their normal price to generate a short-term increase in sales. Sometimes more than half a brand's sales are made at the discounted price. This raises the question of which of the two price levels is the normal price for the brand?
What is the purpose of generating these short-term sales spikes? In many cases they do not deliver extra profit, because the margin given away on sales would have been made anyway, at full price.