Chapter 2The Big Picture:

The Evolution of IMC

William F. Arens Michael F. Weigold Christian ArensMcGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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Rees Howells (1879-1950)

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Chapter Overview

Explains the principles of free-market economics, the functions and effects of advertising, advertising as an economic tool, and the impact of advertising.

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Chapter Objectives

Explain the role of competition in free-market economics

Discuss the functions advertising performs in a free market

Identify milestones in advertising history

Discuss how the role of advertising has changed

Explore advertising’s impacts on society

Understand branding and its benefits

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Coke Polar Bear CommercialCoke Polar Bear Football Commercial

Coke Border CommercialCoke India Commercial

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Q. 1. What are four principles of Free-Market Economics?

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Assumptions of Free Market Economics

Self - Interest

Absence of Externalitie

s (Tata Nano)

Complete Information

Many Buyers & Sellers

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Q. 2. What are the various functions and effects of advertising

in a free economy?

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Functions & Effects of Advertising

Identify and differentiate products (branding)

Communicate product features and availability

Induce customers to try products and suggest reuse

Stimulate product distributionIncrease product useBuild value, brand preference, loyaltyLower overall cost of sales

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Personal Selling vs. Advertising

Face-to-Face Sales Call = $170.00To reach 15 million people = $2.55 Billion30-second TV spot = $500,000.00Cost of advertising to 15 million people =

$30.00

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Benefits of Strong Brands

Strong brands

Premium pricing

Price war protectio

n

Increases new

product success

Leverage for

negotiatingAttractive

to partners

Aid in dealing

with crisis

Recruit top talent

Garner customer

loyalty

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Q. 3. Outline the evolution of advertising.

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Evolution of Advertising

Preindustrial Industrializing Industrial Postindustrial

pre-1800 1800-1900 1900-1980 1980-present

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Preindustrial Age of Advertising

During this era, few could read

Then. . .

Chinese invented paper

Gutenberg invented the printing press

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Industrializing Age of Advertising

Producers needed mass consumption to match mass production

For the first time, it cost less to buy a product than to make it yourself

Transportation breakthroughs facilitated distributionIncreased need for mass marketing techniques

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Industrial Age of Advertising

• Fresh markets for new, inexpensive brands of luxury and convenience goods

• Consumer packaged goods

• Catalogs mailed to rural areas

• Radio provides new medium

• Advertising becomes a profession

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Golden Age of Advertising

Product differentiation

Market segmentation

Positioning Age of

Television

The Product Positioning EraPost WWII - 1970

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Postindustrial Age of Advertising

Consumers became aware of environmental sensitivity

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Marketing Warfare

Defensive

Offensive

Flanking

Guerilla

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Post Industrial Advertising

DemarketingCold War endsMultinational companies expandTraditional products agedAffluent baby boomersIncreased competition among agenciesThe Internet and Facebook

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Top Global Marketers

[Insert Exhibit 2-4 (p. 49) here

Position: 1.55” vertical, 0.5” horiz.

Size: 8” wide]

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Top Global Marketers

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Global/Interactive Age

Advertising becomes a world-wide enterprise

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Global Interactive Age

TV Remote ControlSatellite and CableTiVo

Personal computersSmart phonesThe Web—iTunes,

Hulu

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Q.4. What are the effects of ethics on advertising?

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Advertising as a Social Force

Improves standard of

living

Raises awareness of

product availability

Imbues products with personality

Enables us to communicate

about ourselves by the products

we buy

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Advertising Ethics and Effects

Ethical advertising can . . .

• Foster free press and nonprofits

• Foster understanding of social issues

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Advertising Ethics and Effects

On the other hand, advertising can be dishonest and unethical

• Puffery

• Advertising to children (vulnerable)

• Advertising legal but unhealthful products

• Encourage conformity

• Glorify Conspicuous consumption

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Effects of Unethical Advertising

Results in laws, regulations, and agencies

Pure Food and Drug ActFederal Trade Commission ActBetter Business BureauAssociation of National AdvertisersAmerican Advertising Federation

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Advertising Ethics and Effects

Public service ads can shape attitudes