PRODUCT INNOVATION

Product Innovation takes place through the process of product planning and development.

Covers search for new products and innovations as well as the improvement of existing products.

INTERNAL DEVELOPMENT

Discovering and developing new products by the firm itself a desirable means.

LICENSING

Securing right to produce the product from a patent holder i.e. contractual arrangement e.g. coca cola.

ACQUISITION

Buying the firm that developed or patented the product- a costly means.

THE ADOPTION PROCESS

A process to bring about a change in buyer’s attitudes and perception. A consumer invariably undergoes the following steps in determining the feasibility of buying the new products

1. Awareness
2. Interest
3. Evaluation or mental trial
4. Trial- physical

Awareness:

A consumer learns about anew idea or a product and obtains limited information about its qualities, usefulness, performance through advertisements etc.

Interest:

Once the consumer develops an interest in the innovation, he demands detailed information about the new products, its utility, its performance, etc. He gets more information through jingles on radio or TV ads and teaches through sales- persons, opinion leaders, peers, friends etc.

Evaluation:

The consumer tries to weigh the value of the new product in relation to the benefits obtained from it i.e. conducts a mental trial of the new product.

Trial:

The consumer is now ready to put the idea into practice. Competent assistance may become necessary to put the innovation to use.

Adoption:

1. The consumer mow decides to adopt the new idea or a product for continued use.

2. Depending the post- purchase experience the consumer becomes a repeat buyer and consequently the advocate for the innovation.

Creating a Message

In our discussion of the communication process in Part 12: Marketing Communication, effective communication requires the message source to create (encoding) a message that can be interpreted (decoding) by the intended message receiver. In advertising, the act of creating a message is often considered the creative aspect of carrying out an advertising campaign. And because it is a creative process, the number of different ways a message can be generated is limited only by the imagination of those responsible for developing the message.

When creating an advertising message the marketer must consider such issues as:

• General Message Factors
• Message Structure
• Message Testing

General Message Factors

When developing the message the marketer must take into consideration several factors including:

• Characteristics of the Target Audience – The makeup of the target audience (e.g., age, location, attitudes, etc.) impacts what is conveyed in the message.
• Type of Media Used – The media outlet (e.g., television, print, Internet, etc.) used to deliver the message impacts the way a message will be created.
• Product Factors – Products that are highly complex require a different message than simpler products. Additionally, the target market’s familiarity with a product affects what is contained in a message. For instance, a new product attempting to gain awareness in the market will have a message that is much different than a product that is well-known.
• Overall Advertising Objective – As mentioned, the objective of the advertising campaign can affect the type of ad that is designed. For example, an advertisement with the objective of stimulating immediate sales for an existing product will be different than an advertisement that seeks to build initial awareness of a new product.

Message Structure

Most advertising messages share common components within the message including:

• The Appeal – This refers to the underlying idea that captures the attention of a message receiver. Appeals can fall into such categories as emotional, fearful, humorous, and sexual.
• Value Proposition – The advertising message often contains a reason for customers to be interested in the product which often means the ad will emphasize the benefits obtained from using the product.
• Slogan – To help position the product in customer’s mind and distinguish it from competitors’ offerings, advertisements will contain a word or phrase that is repeated across several different messages and different media outlets.

Message Testing

Before choosing a specific message marketers running large advertising campaigns will want to have confidence in their message by having potential members of the targeted audience provide feedback. The most popular method of testing advertising for the marketer (or their ad agency) is to conduct focus groups where several advertising messages are presented. On the Internet, advertising delivery technology allows for testing of ads by randomly exposing website visitors to different ads and then measuring their response.

Type of Media Outlets

While just a few years ago marketers needed to be aware of only a few media outlets, today’s marketers must be well-versed in a wide range of media options. The reason for the growing number of media outlets lies with advances in communication technology, in particular, the Internet. As we discussed in the Advertising Trends section in Part 13, the number of media outlets will continue to grow as new technologies emerge.

Next we provide an overview of 10 leading media outlets:

1. Television
2. Radio
3. Print Publications
4. Internet
5. DirectMail
6. Signage
7. Product Placement
8. MobileDevices
9. Sponsorships
10. Others

Television Advertising

Television advertising offers the benefit of reaching large numbers in a single exposure. Yet because it is a mass medium capable of being seen by nearly anyone, television lacks the ability to deliver an advertisement to highly targeted customers compared to other media outlets. Television networks are attempting to improve their targeting efforts. In particular, networks operating in the pay-to-access arena, such as those with channels on cable and satellite television, are introducing more narrowly themed programming (i.e., TV shows geared to specific interest groups) designed to appeal to selective audiences. However, television remains an option that is best for products that targeted to a broad market. The geographic scope of television advertising ranges from advertising within a localized geographic area using fee-based services, such as cable and fiber optic services, to national coverage using broadcast programming. Television advertising, once viewed as the pillar of advertising media outlets, is facing numerous challenges from alternative media (e.g., Internet) and the invasion of technology devices, such as digital video recorders (see more in the Advertising Trends section in Part 13: Advertising), that have empowered customers to be more selective on the advertisements they view. Additionally, television lacks effective response tracking which has led many marketers to investigate other media that offer stronger tracking options.

Radio Advertising

Promotion through radio has been a viable advertising option for over 80 years. Radio advertising is mostly local to the broadcast range of a radio station, however, at least three options exist that offer national and potentially international coverage. First, in many countries there are radio networks that use many geographically distinct stations to broadcast simultaneously. In the United States such networks as Disney (children’s programming) and ESPN (sports programming) broadcast nationally either through a group of company-owned stations or through a syndication arrangement (i.e., business agreement) with partner stations. Second, within the last few years the emergence of radio programming delivered via satellite has become an option for national advertising. Finally, the potential for national and international advertising may become more attractive as radio stations allow their signals to be broadcast over the Internet.

In many ways radio suffers the same problems as television, namely, a mass medium that is not highly targeted and offers little opportunity to track responses. But unlike television, radio presents the additional disadvantage of limiting advertisers to audio-only advertising. For some products advertising without visual support is not effective.

Print Publication Advertising

Print publications such as magazines, newspapers and Special Issue publications offer advertising opportunities at all geographic levels. Magazines, especially those that target specific niche or specialized interest areas, are more narrowly targeted compared to broadcast media. Additionally, magazines offer the option of allowing marketers to present their message using high quality imagery (e.g., full color) and can also offer touch and scent experiences (e.g., perfume). Newspapers have also incorporated color advertisements, though their main advantage rests with their ability to target local markets. Special Issue publications can offer very selective targeting since these often focus on an extremely narrow topics (e.g., auto buying guide, tour guides, college and university ratings, etc.).

Internet Advertising

The fastest growing media outlet for advertising is the Internet. Compared to spending in other media, the rate of spending for Internet advertising is experiencing tremendous growth. However, total spending for Internet advertising remains relatively small compared to other media. Yet, while Internet advertising is still a small player, its influence continues to expand and each year more major marketers shift a larger portion of their promotional budget to this medium. Two key reasons for this shift rest with the Internet’s ability to: 1) narrowly target an advertising message and, 2) track user response to the advertiser’s message. The Internet offers many advertising options with messages delivered through websites or by email.

·Website Advertising - Advertising tied to a user’s visit to a website accounts for the largest spending on Internet advertising. For marketers, website advertising offers many options in terms of:

• Creative Types – Internet advertising allows for a large variety of creative types including text-only, image-only, multimedia (e.g., video) and advanced interactive (e.g., advertisement in the form of online games).
• Size – In addition to a large number of creative types, Internet advertisements can be delivered in a number of different sizes (measured in screen pixels) ranging from full screen to small square ads that are only a few pixels in size. The most popular Internet ad sizes include banner ads (468 x 60 pixels), leaderboard (728 x 90 pixels) and skyscraper (160 x 600 pixels).
• Placement – The delivery of an Internet advertisement can occur in many ways including fixed placement in a certain website location (e.g., top of page), processed placement where the ad is delivered based on user characteristics (e.g., entry of words in a search box, recognition of user via Internet tracking cookies), or on a separate webpage where the user may not see the ad until they leave a site or close their browser (e.g., pop-under).

• Delivery – When it comes to placing advertisements on websites marketers can, in some cases, negotiate with websites directly to place an ad on the site or marketers can place ads via a third-party advertising network, which has agreements to place ads on a large number of partner websites.

·Email Advertising – Using email to deliver an advertisement affords marketers the advantage of low distribution cost and potentially high reach. In situations where the marketer possesses a highly targeted list, response rates to email advertisements may be quite high. This is especially true if those on the list have agreed to receive email, a process known as “opt-in” marketing. Email advertisement can take the form of a regular email message or be presented within the context of more detailed content, such as an electronic newsletter. Delivery to a user’s email address can be viewed as either plain text or can look more like a website using web coding (i.e., HTML). However, as most people are aware, there is significant downside to email advertising due to highly publicized issues related to abuse (i.e., spam).

Direct Mail

This method of advertising uses postal and other delivery services to ship advertising materials, including postcards, letters, brochures, catalogs and flyers, to a physical address of targeted customers. Direct mail is most effective when it is designed in a way that makes it appear to be special to the customer. For instance, a marketer using direct mail can personalize mailings by including a message recipient’s name on the address label or by inserting their name within the content of marketer’s message.

Direct mail can be a very cost-effective method of advertising, especially if mailings contain printed material. This is due to cost advantages obtained by printing in high volume since the majority of printing costs are realized when a printing machine is initially setup to run a print job and not the because of the quantity of material printed. Consequently, the total cost of printing 50,000 postcards is only slightly higher than printing 20,000 postcards but when the total cost is divided by the number of cards printed the cost per-card drops dramatically as more pieces are printed. Obviously there are other costs involved in direct mail, primarily postage expense.

While direct mail can be seen as offering the benefit of a low cost-per-contact, the actual cost-per-impression can be quite high as large numbers of customers may discard the mailing before reading. This has led many to refer to direct mail as“junk mail” and due to the name some marketers view the approach as ineffective.  However, direct mail, when well-targeted, can be an extremly effective promotional tool.

Signage and Billboards

The use of signs to communicate a marketer’s message places advertising in geographically identified areas in order to capture customer attention. The most obvious method of using signs is through billboards, which are generally located in high traffic areas. Outdoor billboards come in many sizes, though the most wellknown are large structures located near transportation points intending to attract the interest of people traveling on roads or public transportation. Indoor billboards are often smaller than outdoor billboards and are designed to attract the attention of foot traffic (i.e., those moving past the sign). For example, smaller signage in airports, train terminals and large commercial office space fit this category.

While billboards are the most obvious example of signage advertising, there are many other forms of signage advertising include: ·Sky writing where airplanes use special chemicals to form words ·Plane banners where large signs are pulled behind an airplane

1. Mobile billboards where signs are placed on vehicles, such as buses and cars, or even carried by people 
2. Plastic bags used to protect newspapers delivered to homes
3. Advertisements attached to grocery carts

Product Placement Advertising

Product placement is an advertising approach that intentionally inserts products into entertainment programs such as movies, TV programs and video games.

Placement can take several forms including:

1. ·visual imagery in which the product appears within the entertainment program
2. ·actual product use by an actor in the program
3. ·words spoken by an actor that include the product name

Product placement is gaining acceptance among a growing number of marketers for two main reasons. First, in most cases the placement is subtle so as not to divert significant attention from the main content of the program or media outlet. This approach may lead the audience to believe the product was selected for inclusion by program producers and not by the marketer. This may heighten the credibility of the product in the minds of the audience since their perception, whether accurate or not, is that product was selected by an unbiased third-party. Second, as we discuss in Part 13: Advertising, entertainment programming, such as television, is converging with other media, particularly the Internet. In the future a viewer of a television program may be able to easily request information for products that appear in a program by simply pointing to the product on the screen. With the information they may get the option to purchase the product. As this technology emerges it is expected that product placement opportunities will become a powerful promotional option for many marketers.

Mobile Device Advertising

Handheld devices, such as cellphones, personal digital assistants (PDAs) and other wireless devices, make up the growing mobile device market. Such devices allow customers to stay informed, gather information and communicate with others without being tied to a physical location. While the mobile device market is only beginning to become a viable advertising medium, it may soon offer significant opportunity for marketers to reach customers at anytime and anyplace.

Also, with geographic positioning features included in newer mobile devices, the medium has the potential to provide marketers with the ability to target customers based on their geographic location. Currently, the most popular advertising delivery method to mobile devices is through plain text messaging, however, over the next few years multimedia advertisements are expected to become the dominant message format.

Sponsorships

A subtle method of advertising is an approach in which marketers pay, or offer resources and services, for the purpose of being seen as a supporter of an organization’s event, program or product offering (e.g., section of a website). Sponsorships are intended not to be viewed a blatant advertisement and in this way may be appealing for marketers looking to establish credibility with a particular target market. However, many sponsorship options lack the ability to tie spending directly to customer response. Additionally, the visibility of the sponsorship may be limited to relatively small mentions especially if the marketer is sharing sponsorship with many other organizations.

Others

While the nine media outlets discussed above represent the overwhelming majority of advertising methods, there are several more including:

• advertising using telephone recordings (e.g., political candidate’s messages)
• advertising via fax machine (though there may be certain legal issues with this method)
• advertising through inserted material in product packaging (e.g., inside credit card bill)
• advertising imprinted on retail receipts (e.g., grocery store, cash machine)

Selecting Media Outlets

With an objective and a budget in place, the advertising campaign will next need to focus on developing the message. However, before effort is placed in developing a message the marketer must first determine which media outlets will be used to deliver their message since the choice of media outlets guides the type of message that can be created and how frequently the message will be delivered.

An advertising message can be delivered via a large number of media outlets. These range from traditional outlets, such as print publications, radio and television, to newly emerging outlets, such as the Internet and mobile devices. However, each media outlet possess different characteristics and, thus, offer marketers different advantages and disadvantages.

The characteristics by which different media outlets can be assessed include the following seven factors:

1. Creative Options
2. Creative Cost
3. Media Market Reach
4. Message Placement Cost
5. Length of Exposure
6. Advertising Clutter
7. Response Tracking

Creative Options

An advertisement has the potential to appeal to four senses – sight, sound, smell and touch. (It should be noted that promotion can also appeal to the sense of taste but generally these efforts generally fall under the category of sales promotion which we will discuss in a later tutorial.) However, not all advertising media have the ability to deliver multi-sensory messages. Traditional radio, for example, is limited to delivering audio messages while roadside billboards offer only visual appeal. Additionally, some media may place limits on when particular options can be used. For instance, some search engines or websites may only accept graphical-style ads, such as images, if these conform to certain large dimensions and limit small advertising to text-only ads.

Creative Cost

The media type chosen to deliver a marketer’s message also impacts the cost of creating the message. For media outlets that deliver a multi-sensory experience (e.g., television and Internet for sight and sound; print publications for sight, touch and smell) creative cost can be significantly higher than for media targeting a single sensory experience. But creative costs are also affected by the expectation of quality for the media that delivers the message. In fact, media outlets may set minimal production standards for advertisements and reject ads that do not meet these standards. Television networks, for example, may set high production quality levels for advertisements they deliver. Achieving these standards requires expensive equipment and high cost labor, which may not be feasible for small businesses. Conversely, creating a simple text only Internet advertisement requires very little cost that almost anyone is capable of creating.

Media Market Reach

The number of customers exposed to a single promotional effort within a target market is considered the reach of a promotion. Some forms of advertising, such as television advertising, offer an extensive reach, while a single roadside billboard on a lightly traveled road offers very limited reach.

Market reach can be measured along two dimensions: 1) channels served and, 2) geographic scope of a media outlet.

Channels Served - This dimension relates to whether a media outlet is effective in reaching the members within the marketer’s channel of distribution. Channels can be classified as:

• Consumer Channel – Does the media outlet reach the final consumer market targeted by the marketer?
• Trade Channel – Does the media outlet reach a marketer’s channel partners who help distribute their product?
• Business-to-Business – Does the media outlet reach customers in the business market targeted by the marketer? 

Geographic Scope – This dimension defines the geographic breadth of the channels served and includes:

• International – Does the media outlet have multi-country distribution?
• National – Does the media outlet cover an entire country?
• Regional – Does the media outlet have distribution across multiple geographic regions such as counties, states, provinces, territories, etc.?
• Local – Does the media outlet primarily serve a limited geographic area?
• Individual – Does the media outlet offer individual customer targeting?

Message Placement Cost

Creative development is one of two major spending considerations for advertising. The other cost is for media placement; the purchase of ad time, space or location with media outlets that deliver the message. Advertising placement costs vary widely from very small amounts for certain online advertisements to exorbitant fees for advertising on major television programs. For example, in the United States the highest cost for advertising placement occurs with television ads shown during the National Football League’s Super Bowl championship game where ad rates for a single 30-second advertisement exceed (US) $2.5 million. By contrast, ads placed through online search engines may cost less than (US) $1 dollar.

Media outlets set placement cost using several factors though the most important are determined by audience size, audience type and an advertisement’s production characteristics:

Audience Size – Refers to the number of people who experience the media outlet during a particular time period. For example, for television outlets audience size is measured in terms of number of program viewers, for print publications audience is measured by number of readers, and for websites audience is measured by number of visitors. In general, the more people experiencing a media outlet, the more the outlet can charge for ads. However, actual measurement of the popularity of media outlets is complicated by many factors to the point where the media outlets are rarely trusted to give accurate figures reflecting their audience. Today nearly all media outlets rely on third-party audit organizations to measure audiences and most marketers rely on these auditors to determine whether the cost of placement is justified given the audited audience size.

Audience Type – As we have discussed many times in the Principles of

Marketing tutorial, the key to marketing is aligning marketing decisions to satisfy the needs of a target market. A well-defined target market is critical to successful marketing and vital to a successful advertising campaign. When choosing a media outlet, selection is evaluated based on the outlet’s customer profile (i.e., viewers, readers, website visitors) and whether these match the characteristics sought by the marketer’s desired target market. The more selectively targeted the audience, the more valuable this audience is to advertisers since with targeted advertising promotional funds are being spent on those with the highest potential to respond to the advertiser’s message.

The result is that media outlets, whose audience shares very similar characteristics (e.g., age, education level, political views, etc.), are in a position to charge higher advertising rates than media outlets that do not appeal to such a targeted group.

Characteristics of the Advertisement – Media outlet also charge different rates based on creative characteristics of the message. Characteristics that create ad rate differences include:

• Run Time (e.g., length of television or radio ads )
• Size (e.g., print ads size, billboard size)
• Print Style (e.g., black-and-white vs. color)
• Location in Media (e.g., back magazine cover vs. inside pages)

Length of Exposure

Some products require customers be exposed to just a little bit of information in order to build customer interest. For example, the features and benefits of a new snack food can be explained in a short period of time using television or radio commercials. However, complicated products need to present more information for customers to fully understand the product. Consequently, advertisers of these products well seek media formats that allot more time to deliver the message. Media outlets vary in how much exposure they offer to their audience. Magazines and other publications provide opportunities for longer exposure times since these media types can be retained by the audience (i.e., keep old magazines) while exposure on television and radio are generally limited to the time the ad was broadcast.

Advertising Clutter

In order to increase revenue, media outlets often include a large number of ads within a certain time, space or location. For instance, television programs may contain many ads inserted during the scheduled run-time of a program. A large number of advertisements create an environment of advertising clutter, which makes it difficult for viewers to recognize and remember particular advertisements. To break through the clutter advertisers may be required to increase the frequency of their advertising efforts (i.e., run more ads). Yet greater advertising frequency increases advertising expense. Alternatively, advertisers may seek opportunities that offer less clutter where an ad has a better chance of standing out from others.

This can be seen with online downloads (e.g., podcasts) of sports and news programming where a 5-10 minute story will be presented with a single 30-60 second ad.

Response Tracking

As we noted in Part 13: Advertising, marketers are embracing new technologies that make it easier to track audience response to advertisements. Newer media developed using Internet technology offer effective methods for tracking audience response compared to traditional media. But Internet-media are not alone in providing response tracking. Other advertising outlets, such as advertising by mail and television infomercial programming, also provide useful measures of audience reaction.