IV.

Methods of Advertising

To reach the consumer, advertisers employ a wide variety of media. In the United States, the most popular media, as measured by the amount of ad spending, are television, newspapers, direct mail, radio, Yellow Pages, magazines, the Internet, outdoor advertising, and a variety of other media, including transit ads, novelties, and point-of-purchase displays. (These rankings are measured each year by Advertising Age, an advertising trade magazine, and seldom vary, although Internet advertising continues to grow significantly. In the first half of 2005, ad spending on the Internet increased 26 percent, far greater than the 4.5 percent growth for the entire advertising market.)

In Canada, newspapers are the most popular advertising medium, followed by television, magazines, radio, and outdoor advertising. Canada is the ninth largest advertising market in the world.

Television attracts about 23 percent of the advertising dollars spent in the United States. Television is available to advertisers in two forms: broadcast and cable. Broadcast TV—television signals that are sent over the air rather than through cable wires—generates all of its revenue from advertising. Advertising accounts for about 60 percent of cable television revenues with the rest coming from subscriber fees.

To run commercials on television, advertisers buy units of time known as spots. The standard units of time are 15, 30, or 60 seconds in length. These spots are purchased either locally or from a national network. Because of the high cost of national network spots, ranging from hundreds of thousands of dollars to millions of dollars, only large national advertisers can afford to run network television spots. Advertisers wishing to reach a local audience can buy time from an individual station. But even these spots cost so much to produce and run that small and even many mid-sized companies cannot afford them.

Because television commercials combine sight, sound, and motion, they are more dramatic than any other form of advertising and lend excitement and appeal to ordinary products. Advertisers consider television an excellent medium to build a product's brand image or to create excitement around a particular event such as a year-end auto sale. But TV spots are too brief to provide much product information. As a result, television works best for products such as automobiles, fashion, food, beverages, and credit cards that viewers are familiar with and easily understand.

In the United States, newspapers are the second most popular advertising medium after television, receiving about 22 percent of all advertising dollars. Newspapers enable advertisers to reach readers of all age groups, ethnic backgrounds, and income levels. Two types of advertising appear in newspapers: classified advertising, such as the want ads, and display advertising. Display ads range in size from as large as a full page to as small as one column in width and less than one centimeter (less than one inch) in length. Display ads often contain illustrations or photographs and usually provide information about where the product or service being advertised can be purchased. Typically, advertising makes up about 65 percent of a newspaper's content and generates about 65 percent of a newspaper's revenue. About 88 percent of this revenue comes from local businesses.

Most advertisers believe that newspaper ads fail to convey the kind of emotional images that build brand image. As a result, most newspaper advertising is done by retailers who use newspaper ads to provide timely information that can lead to immediate sales. Newspapers are particularly well suited to this role because most are published daily. Readers can clip coupons from the newspaper and cash them in quickly at local stores. People also turn to newspapers for immediately useful information about product discounts, bank interest rates, restaurant specials, and entertainment.

Direct mail is the third largest advertising medium, attracting about 20 percent of all U.S. advertising dollars. Direct mail advertising, as the name implies, is advertising that is sent directly to people by mail, usually through the postal system. Increasingly, however, electronic mail (e-mail) is being used as a direct mail device. Direct mail can be as simple as a single letter or as involved as a catalog or an elaborate e-mail known as HTML mail that offers graphics and links to more information.

From the advertiser's point of view, the key to a successful direct mail program is the mailing list. The mailing list contains the names and addresses of people who share certain common characteristics that suggest they will be likely to buy a particular product or service. Because advertisers are speaking directly to those who are most likely to buy their product or service, many advertisers consider direct mail the most effective of all advertising media for generating immediate results. Direct mail through the U.S. postal system, however, is the most expensive form of advertising, costing about 14 times as much per exposure as most magazine and newspaper ads. But because of the results it produces, many advertisers believe the expense is justified.

Radio attracts about 8 percent of all U.S. advertising dollars, making it the fourth largest advertising medium. Although national advertisers can buy national network radio time, 90 percent of all radio advertising is local. Unlike television which reaches a broad audience, the specialized programming of radio stations enables advertisers to reach a narrow, highly specific audience such as people who like sports or urban teenagers who listen to the latest styles of popular music. Because many people listen to radio while in their cars, radio also enables advertisers to reach prospects just before they go shopping. But because people listen to the radio while doing something else such as driving or working, radio commercials can be easily misunderstood. As a result, radio ads work best when the messages are relatively simple ones for familiar, easily understood products.

Yellow Pages, the thick directories of telephone listings and display advertisements, represent the fifth most popular advertising medium, attracting about 6 percent of total advertising spending. Almost all advertising in the Yellow Pages is local advertising.

Magazines rank sixth in total U.S. ad spending, representing about 5 percent. Although newspapers reach all different kinds of readers, a magazine’s specialized editorial content generally reaches readers who have similar interests. The relatively specialized, narrow audience of a magazine enables an advertiser to speak to those most likely to buy a particular product. For example, a manufacturer of mascara who advertises to teenage girls could use a magazine with editorial content aimed especially at teenage girls to reach that audience exclusively.

A magazine's editorial environment can also lend a product credibility and prestige, and the magazine’s ability to reproduce beautiful color photographs can enhance a product's appearance. As a result, magazine advertising is an effective way to build a product's brand image. Because such advertising is expensive and because most magazines are distributed regionally or nationally, they generally feature national advertising rather than local advertising. Magazines generate 63 percent of their revenue from advertising.

In 2004 the Internet accounted for $9.6 billion in advertising spending in the United States, or 3.7 percent of total ad spending, an increase from 3 percent in 2003, according to data gathered by the accounting firm of PricewaterhouseCoopers LLP for the Interactive Advertising Bureau. About 96 percent of ad spending on the Internet goes to 50 Web companies, mostly to four sites maintained by Yahoo, Google, America Online, and the Microsoft Network.

Advertisements on the Internet often take the form of banners, buttons, pop-ups, and sponsorships. But the most important aspect of Internet marketing is that the World Wide Web allows advertisers to personalize their messages for individual customers. For example, when a customer visits a commercial Web site that person is often welcomed by name and is offered information about new products based on the type of products the person has purchased in the past. Moreover, the customer can then order the product immediately without venturing out to a store. By allowing advertisers to customize their advertising, the Internet enables them to build customer loyalty and generate stronger sales results. Google pioneered the technique of providing customized ads when someone enters a search term. Advertisers take part in an auction to have their ads placed next to relevant search results and pay only when someone clicks on the ad.

Outdoor advertising amounts to less than 1 percent of total ad spending in the United States. Outdoor advertising is an effective way to reach a highly mobile audience that spends a lot of time on the road—for example, in commuting to and from work or as part of their job. It offers the lowest cost per exposure of any major advertising medium, and it produces a major impact, because it is big, colorful, and hard to ignore. The messages on outdoor boards have to be very brief. So outdoor advertising primarily serves as a reminder medium and one that can trigger an impulse buy.

A wide variety of other advertising media make up the remainder of total ad spending. Transit advertising is mainly an urban advertising form that uses buses and taxi tops as well as posters placed in bus shelters, airports, and subway stations. Like outdoor boards, transit is a form of reminder advertising that helps advertisers place their name before a local audience. Finally, point-of-purchase advertising places attention-getting displays, streamers, banners, and price cards in the store near where the product is sold to explain product benefits and promote impulse buys.