advertising

 

The advertising industry, as much as its own inventions. lives under the impression that it creates. Part of that impression used to be that advertising was a worthy profession based on much research into consumer behavior and even more understanding of it. Anybody who knows that women in New York use nearly 30times as much make-up as women in Vermont must surely know more about consumers than consumers know about themselves.

But the impression that the advertising industry has given in recent years has been rather different. It has appeared to be an industry obsessed with growth at almost any price and willing to follow any fad for a quick profit.

 

Keeping up is hard to do

 

Admittedly, the industry has had to cope with unprecedented pressures to perform. This has made it an enthusiastic follower of the fashion to  “go global”. When multinational clients, such as Unilever and Gillette, demanded that the same advertising agency serve them in all their markets, the agencies by end large obliged. Wherever Unilever has gone (which is just about everywhere) so has one of its main agencies, J. Walter Thompson. In Europe alone, JWT has offices in more than 15 countries.

At the same time, the agencies have been trying to come to grips with the death of the “mass market”, a sort of essential yeast extract on which they all grew up. early advertisements were designed to sell Singer sewing machines, Model T Fords, or whatever, in one way to everybody. The economies of scale that enabled companies such as Singer and Ford to produce for a mass market also worked in favor or their agencies. The high cost of creating their advertisements could be spread by using the same advertisements everywhere.

The principle carried into globalization; indeed, one of its main attractions for manufacturers and their agencies was the further economies of scale that it promised. If one advertisement could sell the same product to a housewife in Maine and to a black child in Lousiana, then it could also well the product to mothers in Paris, children in Prague and housewives in Hong Kong. Or so the argument went.

Although brand standardization continues in the 21st century – an example being Procter & Gamble’s skin-care range, previously called Oil of Ulay in the UK and Oil of Ulan in Australia, which is now known by its global name. Oil of Olay – the industry has been forced to revise is ideas about a global mass market. For it had discovered “segmentation”: the phenomenon of a post-mass-market era in which sophisticated production methods enabled the same product to be “tweaked” almost without limit. Thus it could be made to appeal to a large number of small market segments. A fairly uniform commodity – type product like Tylenol, a US over-the-counter drug for headaches, was suddenly extended to include 40 different varieties of the drug, each targeted at a slightly different consumer.

Even the Ford Escort car, rolling off production lines that had invented the mass market, became available in a wide range of models: souped-up models for aggressive make-believe rally driver; stylish cabriolets for those whose hair looked good in a high wind; and solid reliable models for drivers whose main outing was a weekly trip to collect their pension.

Segmentation was followed by “customisation”. Levi, for example, began to take customers measurements, put them into a computer and cut their cloth accordingly. The bespoke 501 was born. Likewise, it was said of one BMW model that no two cars were exactly the same, so numerous were the opportunities for customisation.

A natural result of segmentation and customisation has been the rise of direct marketing, with its data-driven relationship marketing techniques. Direct marketing agencies are now going head-to-head with traditional advertising agencies, offering more measurable and, some would argue, better-value communication with potential customers.

Customisation and segmentation were accompanied by another change that had a strong influence on the advertising industry: the shortening of products life cycles. For a while nothing was meant to last; all goods were fashion goods, designed to be thrown away as the seasons changed. Swatch turned the watch into a fashion item, and a Wall Street Journal headline declared, “IBM to start announcing its fall fine”.

 

Open skies

 

At the same time, the channels through which advertisers told the world about their products were changing. A new enthusiasm for deregulating the airwaves brought a host of new television and radio stations, especially in Europe where the state’s monopoly of broadcasting had been traditionally tight.

The new stations fought fiercely for advertising’s dollars, and they were fighting not only with each other but also with commercial radio. Setting up a radio station requires very little capital, and in some countries, it sometimes seems as if there are as many channels as there are listeners.

Advertisers trying to reach segmented markets favored media with narrow, identifiable audiences – black teenagers, women aged 35-45, and so on – and the media obliged. “Narrowcasting” grew at the expense of broadcasting. Television and pre-war movie channels. Radio could cast even more narrowly, reaching a few hundred jazz fans, or even the 33 people who had not liked any music since Elvis died.

In this “narrow” world, Levi’s could appear in Vogue as a high-fashion item for the richest people on earth at the same time as it was seen on city-center billboards as a garment for the urban underclass.

There is a new revolution taking shape that will take this to another level. Digital broadcasting, on both television and radio, is gaining momentum. It brings with it a new landscape for advertisers, filled with interactive potential. Because of its narrower bandwidths, digital technology will enable even greater proliferation of channels, particularly for radio, and the promise of programming closely tailored to individual tastes and requirements. The future of broadcast advertising has never looked more interesting or more challenging.

 

Media barony

 

While television and radio were being deregulated into more and more providers of services, the printed media were becoming more concentrated into ever bigger groups. Rupert Murdoch and Bertelsmann, for example, created vast media empires that were no respecters of any division between print and film.

These empires threatened the delicate balance of power between advertisers and the media. For as they used their muscle to push up their advertising rates, the agencies responded by pooling their “media-buying” divisions to gain economies of scale and to have more clout in bargaining with the media barons.

On top of all this came the Internet. Traditional agencies had a new media world to learn, and they were slow to react. Specialist web agencies grew quickly and claimed a significant slice of advertising budgets. Elsewhere, management consultancies such as McKinsey moved into brand development, an area where advertising agencies had traditionally held sway.

The agencies have rallied to combat this, broadening their offerings to include online and direct marketing disciplines, teaming up with specialist partners and buying or merging with companies offering complementary disciplines (or even headhunting their employees).

As if these pressures were not enough, clients are now taking a more cautious and accountable approach to remuneration. Payment-by-results (PBR) is becoming common practice in the United States and gaining credence in the UK. Many argue that Payment-by-results is inappropriate for advertising; certainly, it is difficult to measure advertising in the same way as direct marketing. The two sides of this debate are reflected by what is happening. For example orange, a mobile-phone company has set measurement criteria for its UK agency Lowe Lintas that couyld see ir earning up to 50% more than its basic fee, while Sony PlayStation has abandoned PBR altogether.

With economic uncertainty ahead and major changes afoot in broadcasting, these are interesting times for the advertising industry.

 

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