The chapter provides students with both the historical and economic contexts of advertising. They will learn the basic principles of free-market economics; the functions and effects of advertising in a free economy; the evolution of advertising as an economic tool; and advertising’s overall impact on the society in which it operates. These perspectives will help them understand why the practice of advertising has changed over the years and how it may change even more in the years to come.
After studying this chapter, your students will be able to:
Explain the important role of competition in free-market economics.
Discuss the various functions advertising performs in a free market.
Identify important milestones in the history of advertising.
Discuss how the role of advertising has changed in recent years.
Explore the impact of advertising on society yesterday, today and tomorrow.
We’ve revamped the discussion of assumptions of free-market economics to make the concepts clearer for students. The history section has also been revamped. The old distinction between the “industrializing age” and “industrial age” is now gone. Instead, greater emphasis is placed on the industrial age developments of the late 19th and early 20th centuries and their relation to the growth of an advertising industry. We’ve renamed the post-war period from 1946 thru the early 1970s as advertising’s “Golden Age.” This period of time in which America’s economy experienced enormous growth was marked the heyday of some of advertising’s greatest figures, including Bernbach, Ogilvy, Reeves, and Burnett. We’ve also updated the history section to include the economic slowdown that began in September of 2008. The “”My Ad Campaign” box in Chapter 2 provides students with over a dozen useful tools, most free and available on the Web, for working together on their campaign. Our “Ad Forum” exercise uses an advertiser prominently featured in the chapter, Coke. Students will do both an historical and international comparison of ads.
TEACHING TIPS AND STRATEGIES
Using the chapter opening vignette in the classroom
I like to emphasize the youth of advertising as a profession, and ask students why that is so. The earliest ads for Coca Cola date back to the nineteenth century, which is likely to seem very ancient to students. Yet even the oldest Coke ads are just a bit over a century old. The professions of medicine, law, and finance date back thousands of years. Prompting students in this fashion will likely lead them to consider the importance of several nineteenth and twentieth century developments for the creation of the modern ad industry. These include industrialization, literacy, urbanization, increases in the standard of living and wealth (especially in the U.S. and Europe), and the development of new mass media such as radio, television, and the Internet. Shaping the discussion in this way will lead students to a deeper appreciation of the role that advertising plays in modern life.
Today’s students, believe it or not, were not even born when “New Coke” was introduced. I always give a brief account of the New Coke fiasco as a way of differentiating the product (which consumers preferred in blind taste tests) from the brand (which consumers rejected hands down to the classic formula). For background on the discussion, see this site: http://www.msnbc.msn.com/id/7209828/. I find it also can be quite humbling to know that the one of today’s most effective and powerful marketers can still make a terrible mistake. If nothing else, the New Coke story helps students understand the difference between product attributes (such as blind taste or containers) and a brand.
Other tips and strategies
This chapter will explain to students the evolution of advertising. It is important for students to understand that although advertising started in the 1700s, it did not really become an everyday occurrence until the 1800s in America. Many people that I have discussed this with believe it is because Americans were as not focused on consumption then as they are now.
A great way to start the class is to go to Advertising Age’s timeline website (www.adage.com/century/timeline/index.html). This site has an excellent pictorial timeline of how advertising started in America. I recommend going over the timeline with students. Students seem to really get interested in this information. The timeline begins with the first ad was created in America and brings the students up to date on modern ads. There is also a timeline in the student text.
I like to delve into the last century of advertising with students. As you know, in the 1900s ads were very wordy. Back then, people read a lot more than they do today. This is because radios and television sets had not yet become standard possessions. Newspapers and magazines were consumers’ ways of catching up on the latest news. Advertisers used to make ads look like newspaper articles to help sell products or services.
One neat fact to share with students is that Coca-Cola helped to standardize the American Santa Claus in the 1930s through advertising. Before the standardization, I have been told that Santa was usually called St. Nicholas, and was plump in certain countries and skinny in others. Coke was trying to increase the market share of its product. They helped create the Santa we have today (think Christmas Coke). The red and white colors were used to mirror the red and white Coke logo. That is the power of a well-known brand. One website to show students is http://www.thecoca-colacompany.com/heritage/cokelore_santa.html, which explains the story of Santa in more detail.
I share with students how radio and television changed advertising forever. With the advent of radio came the live radio commercial. Now, instead of just reading about a product or service, people could hear celebrity spokespeople on the radio. Radio ads continue to this day.
I recommend going over the advent of television and how consumers could, for the first time, actually hear and see a product or service on television. This really helped to change advertising, and the resulting television commercials have helped to sell billions of dollars of products through the years. Television advertising has had its ups and downs in the last couple of decades.
Reviewing older ads with students is also both informative and entertaining. As you know, in the 1900s ads were very wordy. Back then, people read a lot more than they do today. This is because radios and television sets had not yet become standard possessions. Newspapers and magazines were consumers’ ways of catching up on the latest news. Advertisers used to make ads look like newspaper articles to help sell products or services.
You can find online copies of the ads and a great deal of background information about the spots at this great Web site: http://memory.loc.gov/ammem/ccmphtml/colahome.html. There is a wealth of information about how such great spots as the famous “Hillside singers” ad were developed.
Remind students that the advent of television allowed many consumers, for the first time, to actually hear and see a product or service. This really helped to change advertising, and the resulting television commercials have helped to sell billions of dollars of products through the years. I also try to encourage students to see the challenge faced by people working in agencies as they struggled to discover effective ways to write and produce for new media. This point can be amplified by showing early commercials from the 1950s and contrasting them with more current examples (I contrast old Coca Cola ads with their newer versions).
Resources:http://www.adage.com/century/timeline/index.html;; personal conversations with Dr. Tom Powers
AdGabber: A social network for people interested in advertising
Ad*Access: John W. Hartman Collection
AdFlip: Historical print ad archive
Ad Age: Advertising Century
Ad Lab 2–A: What Kills Bugs Dead?
Ethical Issue: Ethical Dilemma or Ethical Lapse?
Portfolio Review: The Modern History of Advertising
People behind the Ads: William Bernbach.
My Ad Campaign: Tools for Teamwork.
AdForum Exercise: History in a bottle—Changes in Coke ads through the decades.
I. Vignette: The Coca-Cola Story
The Coca-Cola Company has approached advertising in many different ways since its beginning in the late nineteenth century. Both Coke’s image and recipe have changed with the times, nearly breaking the company in the 1980s, and yet it remains the world’s favorite carbonated beverage today.
A free-market economy is based on competition. There are four fundamentals of a free-market economy:
1. Self-interest—People and organizations lookout for their own interests and we all have a natural desire to acquire. Competition between self-interested buyers and sellers creates a condition where there is more product availability and prices are more competitive.
2. Complete information—lets people know what products are available at what quality and for what prices.
3. Many buyers and sellers—Having a range of buyers insures that if one company is not providing the need to customers another company will take advantage of the situation and meet that customer need.
4. Absence of externalities (social costs)—government regulates the effects the transaction has on the society as a whole because the sale or consumption of products has a harmful effect (tobacco) or a helpful effect (crime prevention) on society.
B. Functions and Effects of Advertising in a Free Economy
1. Identify products and differentiate them from others-a function of branding
2. Communicate information about the product, its features, and its location of sale
3. Induce customers to try new products and to suggest reuse
4. Stimulate the distribution of a product
4. Increase product use
5. Build value, brand preference, and loyalty
7. Reduce the overall cost of sales
C. The Evolution of Advertising as an Economic Tool
As the marketplace grew larger and became more complex, the demand for products increased, and the need for advertising slowly developed.
1. Early Advertising, also known as the preindustrial age, extended from the beginning of recorded history through the middle nineteenth century.
Important developments leading to modern advertising include:
a. The Chinese invented paper around 150 b.c. Europe had its first paper mill by 1275.
b. In the 1440s, Johannes Gutenberg invented the printing press in Germany. The printing press is the most important development in the history of advertising because it changed the way people communicated, lived, and worked. Previously, people relied only on oral communication, and most were illiterate. People lived without substantiated, documented facts (due to their reliance on oral communication), and news rarely traveled more than 50 miles because of the difference in dialects from region to region.
c. New technology led to advertising in the form of posters, handbills, and signs, then eventually to the first mass-media newspapers.
d. 1472: First ad appeared in English, a handbill.
e. 1700s: The Western world’s population had grown and volume advertising became possible.
f. Advertising volume led to a new ad strategy to gain attention—puffery.
g. In the American colonies, the Boston Newsletter started carrying ads in 1704.
h. Twenty-five years later, Benjamin Franklin, the father of advertising art, made ads more readable by using large headlines and considerable white space. Franklin was the first American to use illustrations.
2. The Industrial Age began around the middle of the nineteenth century and lasted well into the twentieth.
a. Growth and maturation of country’s industrial base
b. Industry met the basic needs of most of the population.
c. Commodity markets became saturated.
d. New mass markets developed for new, inexpensive brands of consumer luxury and convenience goods or consumer packaged goods.
e. Nineteenth-century wholesalers controlled the marketing process for manufacturers’ unbranded commodity products.
f. Saturated markets led to competition between manufacturers.
g. Manufacturers worked to regain control by changing focus from production to sales strategy, leading to new product development.
1.) Radio was born, offering powerful immediacy, expanded audiences, and new types of ads.
j. 1929: Before the Great Depression, the stock market crashed, and so did advertising expenditures.
1.) Advertising focused on research to improve effectiveness to survive.
2.) Began studying consumer attitudes and preferences.
3.) Product differentiation began: quality, variety, and convenience.
k. 1942: introduction of the mass medium of television, which became the largest advertising medium in terms of revenues.
3. The Golden Age of advertising started after the second world war and continued through the 1970s.
a. In the prosperous late 1940s and early 1950s, consumers tried to climb in social status by buying more and more modern goods. Ads focused on product features, market segmentation, and positioning strategy.
b. When this wore out in the 1960s, strategy changed to market segmentation—a process whereby marketers search for unique groups of people whose needs can be addressed through more specialized products.
1.) Advertising strategy changed from product features to brand image or personality.
2.) Me-too images killed the market segmentation era.
1.) Increased competition = positioning era.
2.) Positioning strategy—how the brand ranks against the competition.
4. The Postindustrial Age began around 1980.
a. Consciousness of limited environmental resources led to calls for energy conservation; people were asked to not run clothes washers unnecessarily, waste water on their lawns, etc.
b. Demarketing refers to the method any company or organization uses advertising to request consumers to refrain from use of that product for a particular reason (e.g., products not considered energy efficient, tobacco, alcohol).
D. The Global InteractiveAge: Looking at the 21st Century
Recently the advertising industry experienced a period of retrenchment and reevaluation, but the future offers new opportunities for advertisers and agencies that can harness the interactive revolution and develop deep relationships with their customers.
III. Society and Ethics: The Effects of Advertising
A. Improves standard of living in the United States and elsewhere around the world.
B. Informs of availability of products.
C. Imbues products with personality.
D. Enables us to communicate information about ourselves through products we buy.
E. Financial support of advertising fosters the free press and the growth of nonprofit organizations.
F. Advertising has also been severely criticized over the years for its lack of honesty and ethics.
G. Customer movements sprang up to combat dishonesty.
H. Laws regulate the practice of advertising.
AD LAB 2–A What Kills Bugs Dead?
1. Now that you know a little about slogans, create one for yourself personally or for your (real or imagined) company. Which qualities and characteristics do you want your slogan to highlight? Share your slogan with your classmates and gauge their reactions.
Answers to this question will vary. The key is to make sure the student’s slogans sound compelling. This exercise will also help students realize that these slogans are not as easy to create as they might have thought.
2. Business cards serve a higher purpose than simply providing information for a Rolodex. They are mini-advertisements. Create a business card for yourself using your slogan.
This is a fun exercise to have students turn in. It always amazes me what students come up with.
1. Need help getting started on your slogan assignment? Adslogans.com has step-by-step instructions that lead you through the process (www.adslogans.co.uk/general/students.html). For more ideas, look at slogans and ad campaigns past and present at www.adflip.com.
ETHICAL ISSUE Ethical Dilemma or Ethical Lapse?
This is an interesting discussion to have with the class. Is it an ethical dilemma (which tends to look at how the law would interpret it) or is it an ethical lapse (not telling the truth or trying to deceive). Although Slick 50 created a great need for their start-up protection product Slick 50, they were not able to prove that any of the claims they made were true. This would be an indication of an ethical lapse. It is also interesting to discuss with students WorldCom, Enron, Tyco, etc. These are all instances of unethical corporate behavior.
I try to convey to the class that the goal of advertising is to position and sell products/services. Some people might interpret that as unethical, whereas others might interpret it as ethical. One of the dilemmas with ethics is that what I think is ethical, you might find unethical. Sometimes ethics are open to interpretation.
What are the four fundamental assumptions of free market economics?
(1) Self-interest; (2) complete information; (3) many sellers, many buyers; (4) absence of externalities (social costs)
2. What are the primary functions of advertising in a free economy? (Exhibit 2–2)
The primary functions of advertising in a free economy are: (1) to identify products and their sources and to differentiate them from others; (2) to communicate information about the product, its features, and its location of sale; (3) to induce customers to try new products and to suggest reuse, (4) to stimulate the distribution of a product; (5) to increase product use; (6) to build value, brand preference, and loyalty; and (7) to lower the overall cost of sales.
What has had the greatest impact on the way advertising has evolved?
The printing press, invented by Johannes Gutenberg in the 1440s, was the most important invention of the Preindustrial Age. The printing press revolutionized not only the system of communication, but also the way people lived and worked. In the Industrializing Age, the advent of industry was the most important invention, as it facilitated the mass production of products. This trend continued in the Industrial Age, which also saw the invention of broadcast media and greater sophistication in marketing techniques, including market segmentation. The most important things that happened in the Postindustrial Age is the realization of the limits of natural resources and the emergence of demarketing. The Internet is the greatest innovation of the Global Interactive Age.
How does advertising lower the cost of sales?
Advertising can lower the cost of sales by increasing the volume of sales, which in turn lowers the costs of manufacturing and distribution.
How would you differentiate the advertising used in the industrializing age from the industrial age?
During the industrializing age, manufacturers were more concerned about getting products out to the general public. Wholesalers used to advertise to the public to let them know they had a product or service. In the industrial age, society started changing to more of a consumer-centered process. The increased availability of competing brands led to a greater focus on differentiation, letting consumers know how and why a product was different from its competitors.
What has been the most important influence on advertising in the postindustrial age?
The fact that consumers started realizing that our resources were not infinite.
What are three examples of companies or organizations that use a demarketing strategy?
Three examples of companies/organizations that use the demarketing strategy are states trying to curtail smoking, utilities trying to get consumers to use less energy, and cities trying to get consumers to limit the waste they bring to the curb each week for pickup.
What companies can you think of that are engaged in marketing warfare?
A classic example is Coke and Pepsi. They have been at each other’s throats and as of this writing, it seems Pepsi is starting to edge ahead, especially with the purchase of Quaker Oats (which owns Gatorade). Today the biggest competitive advertising campaigns are those of the wireless phone companies.
As a consumer, are you likely to save money buying at a store that does not advertise? Explain.
This answer will vary. Sometimes a decision not to advertise is an indication of exclusivity. In such cases, shoppers will not likely save money but may still get value in the form of excellent service (think Nordstrom’s). But in other cases, a store that does not advertise might still save consumer money (think Dollar Stores). Often stores that advertise the prices of the items they sell are generally trying to call attention to low prices. Consumers will likely save money shopping at such outlets.
What effects do you believe advertising has had on society in general? Explain.
Advertising can help create trends and desires. For example: BMW introduced the Z3 convertible in a James Bond movie, which helped make that car a desired status symbol for many wealthy middle-aged men.
THE ADVERTISING EXPERIENCE
1. Ad Action: Demarketing
Identify a social problem at your school that has had an effect on your life in the past few months. Then create a print demarketing advertisement that addresses this problem. The ad should have a visual element as well as a slogan.
2. Economic Perspectives of Advertising
Visit the Web pages listed below and find the articles on the economics of advertising. After studying them, do you believe advertising primarily promotes monopoly or does it foster many buyers and sellers?
The Economics of Advertising, Introduction—a scholarly paper by George Bittlingmayer, http://www.econlib.org/library/Enc/Advertising.html
3. Advertising History
Go online and visit the sites listed below to see what else you can learn out about the early advertising efforts of companies here and abroad. Can you find some early ads for Kodak? Coca-Cola? Sunkist? Who are some of the other major advertisers listed? What specific characteristics in art and copy styles do you notice that make these ads different from advertising today?
a. “The Emergence of Advertising in America,” at Duke University’s John W. Hartman Center for Sales, Advertising, & Marketing History, http://scriptorium.lib.duke.edu/eaa
b. Archives of the History of Advertising Trust,
c. William F. Eisner Museum of Advertising and Design (Milwaukee, WI), www.eisnermuseum.org
d. The Museum of Broadcast Communications (Chicago, IL) , www.museum.tv/index.html
e. Harper’s Weekly magazine, http://advertising.harpweek.com
f. USATVADS—a large pay-site collection (more than one million examples) of American television commercials, www.usatvads.net
g. Advertising, Marketing, and Commercial Imagery Collections of the National Museum of American History at the Smithsonian, http://americanhistory.si.edu/archives/d-7.htm
4. Volkswagen’s advertising from the early 1960s was clearly quite different from that of its competitors—perhaps because of its decision to pair copywriters with art directors, a partnership that is now all but standard in the advertising industry. But did other automakers sit up and take notice? Find some examples of American auto advertising in the years since that could potentially have been influenced by DDB’s VW work.
Mini’s advertising relies on the characteristics that made Volkswagen’s early print work successful. Also, for more than twenty-five years Honda’s print ads have employed a consistent layout; sparse design; and modest, unassuming copy to speak to their audience.
5. Some Coca-Cola investors want the company to spend more on advertising products in growing categories, such as sports drinks, and less on trying to revive consumer interest in full-calorie soft drinks. How would you respond to these shareholders?
Students should consider the global domination of both the Coca-Cola brand and the Coca-Cola soft drink; the incredible growth of the energy drink market in the last five years; the current degree of saturation in the energy drink market and whether Coke would have the means and brand imperative to stand out from the quickly growing crowd; whether Coke needs to tap into this market to grow or whether doing so would dilute their brand, and whether the energy drink market has longevity or is just a fad.
6. After stirring up consumers’ emotions and shaking their faith in the company by introducing New Coke, company executives have been treading somewhat lightly for the last 20 years. Do you think their efforts to conserve and protect the brand have stifled the creativity of Coca-Cola advertising? Why or why not?
Students may consider the great success of the polar bear characters in Coke’s winter advertising; the number of new beverages Coke has introduced in recent times (including Coke Blak); and the variety of Pepsi ad strategies and the competitiveness with which Pepsi has pursued Coke.
ANCILLARY ACTIVITIES & EXERCISES
1. Have students find an advertising campaign online and explain specifically how the campaign has changed over the last twenty years. I find this type of exercise helps students to see how campaigns evolve just as people do. That is why advertising is constantly changing.
2. Break students into groups and have them change an existing advertising campaign to adjust it to the 1920s or 1950s. Students will feel challenged by this, yet it will help them to learn the different eras of advertising and the changes that occurred.
Ad Forum Exercise:
The Chapter 2 Playlist brings together American and International ads for beverage giant Coca Cola. One purpose of the playlist is to see some older Coke ads and to compare them with newer spots. A second purpose is to compare ads for Coke that air in the United States and compare these with spots from around the world.
1. Compare the following ads: Hilltop Reunion (1960s), Mean Joe Greene (1970s), Polar Bears–Christmas (1990s), Grand Theft Coke (2000s).
a. Has Coke’s basic promise to consumers changed over the years? If so, how?
b. What is that promise?
c. How important is cultural knowledge and understanding for the effectiveness of the ads? Do you know who Mean Joe Greene was? Did you know the Hilltop ad became so popular that the song was recorded for a nonadvertising use and became a staple on popular radio?
2. Compare the following ads: Burp (Denmark), Big Splash (Argentina), Illumina La Città Di Milano (Italy), 2008 Olympics (China case study), Arctic Beach Party (USA), Signs (USA), Black History (USA).
What changes about the way Coke is advertised when the message originates internationally rather than in the United States Which international ads, if run in the United States, would still be effective at convincing consumers to prefer Coke? Which U.S. ads would be effective in international markets? What distinguishes ads that you believe effectively transcend their country
from those you think would be less successful?
To access the chapter playlists go to www.mhhe.com/arens13e.