Download to read offline
Term paper on sm
- 1. TERM PAPER OF STRATEGIC MANAGEMENT TOPIC: Comparative Advertising as a Positioning Strategy Submitted By – Submitted To – AKHLESH KUMAR Mr. AJAY CHANDEL RR1903A54 (10907725) LSB (LPU) 1
- 2. Acknowledgement I am thankfulto Mr. Ajay Chandel for providing me the task of preparing the Term Paper on Comparative Advertising As A Positioning Strategy We at Lovely believe in taking challenges and the term paper provided me the opportunity to tackle a practical challenge in the subject of Strategic Management. This term paper tested my patience at every step of preparation but the courage provided by my teachers helped me to swim against the tide and move against the wind. I am also thankful to my friends and parents for providing me help at every step of preparation of the Term Paper. Last but not the least I want to extend my heartiest thanks to lovely professional university that has made me a small part of it. I am highly obliged to be a small part of India’s largest university. AKHLESH KUMAR 2
- 3. CONTENTS CHAPTER-I Introduction Page No ♦ Definition of the advertisement …………………………………………………..05 ♦ Characteristics of the advertisement……………………………………………….06 ♦ Role of Brand ……………………………………………………………………… 07 CHAPTER-II ♦ Objective of comparative advertisement ………………………………………… 07 ♦ Summary of Objectives ………………………………………….......................... . 08 ♦ Active participants in Comparative advertising …………………………………… 09 ♦ Comparative Advertising effectiveness …………………………………………… 09 ♦ Characteristics of the Compared-to-Brands ………………………………………..10 CHAPTER – III ♦ Literature Review …………………………………………………………………… 11 ♦ Objective of the Study ……………………………………………………………….13 ♦ Research Methodology ……………………………………………………………… 13 CHAPTER - IV ♦ Product attributes on which brands are compared ………………………………….15 3
- 4. ♦ Other message characteristics ……………………………………………………… 16 ♦ General issues pertaining to testing and methodology ……………………………...19 CHAPTER-V ♦ Interpretation and Recommendation ………………………………………………..20 ♦ Summary and Conclusions ………………………………………………………….21 Bibliography & Reference ……………..............................................................................22 INTRODUCTION Comparative advertising was illegal in many European countries until the late 1990s. By contrast, in the US comparative advertising has been encouraged by the Federal Trade Commission since the 1970's. A 1997 EU directive changed the situation in Europe by legalizing comparative advertising subject to the restriction that it should not be misleading. European Competition Authorities now tend to agree with their American counterparts in that comparative advertising is an important tool in promoting competition. Comparative advertising increases consumers' information about alternative products. It allows consumers to evaluate the performance of particular products against other products, thus enabling more informed purchasing decisions.1 Despite its importance there has been little economic analysis on comparative advertising. We will review this literature at the end of the introduction. In this paper we address the following questions. Is the content of comparative advertisement more truthful than the content of non-comparative advertisements? Are comparative ads more informative for consumers than non-comparative ads? Is the amount of advertising higher or lower under comparative or non-comparative advertising? Can the two advertising regimes be compared using welfare criteria? To answer these questions we consider a product with a horizontal and a vertical characteristic. We call the horizontal characteristic design and the vertical one quality. Consumers have deferent tastes concerning design but all consumers prefer higher to lower quality. 4
- 5. ADVERTISING The term advertisingoriginates from the Latin word advertise which means “to turn the mind towards”. The dictionary meaning of the term advertising is “to give public notices or to announce publicity”. This suggests that advertising acts as a marketing vehicle and is useful for drawing the attention of people towards a specific product/ service/ manufacturer. Advertising is an activity or a process while advertisement is a specific piece of communication appearing in press, radio or TV. Any paid form of non personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, televisions or radio by an identified sponsor. ( Kotler ) Advertising is mass, paid for communication which is used to transmit information, develop attitudes and induce some form of response from the audience 5
- 6. Characteristics of Advertising Non personal form of communication aimed at a target audience. Used by commercial and by not for profit organizations. Most advertising is concerned ultimately with selling. It is a major element in the promotional mix. Comparative Advertising Pepsi Vs Coke – The battles between Pepsi and Coke have been on and off, as one tries to gain at the expense of the other. In some ways, it might seem like pushing the limits of branding and advertising – after all, how much could a can of carbonated soft drink be hyped up in the consumers’ minds? Competition is fine, but hitting below the belt is what would seem a bit over board. 6
- 7. Complan Vs Horlicks– The two prominent health drinks in India, Complan and Horlicks, have been trading blows to each other for quite a while. Glaxo Simthkline’s Horlicks has been, to be sure, quite moderate of late in promoting its brand. Complan however was not a force that would keep shut and stick to the task. Complan’s ads deliberately bring Horlicks into the picture to smear the brand with derogatory advertising and indulge in mudslinging. Ultimately, both the companies have found each others’ comparative advertising denigrating and demeaning and have moved the courts of justice. Dixon Vs Harrods – The latest to join the club of comparative advertising are Dixons and Harrods. Dixons found it fit enough to draw the London luxury retailer into its advertising campaigns to communicate to the public that the cheapest electronics brands would be available online at Dixons ad then go online to buy the same products much cheaper at Dixons. Harrods has threatened to go legal with the case. Companies may deliberately use these tactics as part of their strategy to garner eyeballs and gain mileage out of the publicity that such competitors create. But do the companies really generate any goodwill by their activities? That is something for the companies to check with some realistic market research. ROLE OF BRAND: 7
- 8. Objectives of ComparativeAdvertising A Comparative advertising objective is a specific communication task to be achieved with a specific target audience during specified period of time. Like all objectives they should be SMART. In essence the main advertising objectives are: - To Inform: to provide information about a product - To Persuade: to persuade people to buy - To Remind: to remind people about a mature product In comparative communications they have to consider also those of the compared- to-brands as well as the dimensions of comparison (e.g., product attributes) to be used in the advertisement. Summary of Objectives 8
- 9. To createawareness To remind customers To reassure customers To support the sales force To persuade To promote Ideas/ Attitudes/ Causes To differentiate from rivals To build brand loyalty To change attitudes To support activities in the distribution chain 9
- 10. Active participants inComparative advertising: Advertising is a type of collective activity which needs the support and participation of certain individuals or organizations. They are called active participants in advertising. Such participants are called: 1) Advertisers 2) Advertising agency 3) Audience 4) Advertising media and finally 5) The government authorities 10
- 11. Developing an AdvertisingCampaign Set the advertising objectives. Define target market. Determine the advertising budget. Determine the key advertising message. Decide which media to use. Plan campaign timing. Evaluate the results of the campaign Comparative Advertising effectiveness • It is expressed in terms of its ability to meet objectives. • The effectiveness of comparative advertising may therefore depend on whether the advertised product provides primarily functional, utilitarian benefits or social/ psychological ones. • If sales increased profits and sales are the aims, then effectiveness is measured in terms of the return on investment in advertising spending. • If the competitive defense I the main aim it is measured in terms of the maintenance in indicators of competitive position (e.g. market share) • In evaluating the effectiveness of one type of message design versus another, such characteristics should be analyzed 11
- 12. REVIEW OF LITERATURE Ajitjoy(2010) – In this Ajitjoy shows the comparative advertisement between Dove and Pantene. As not long ago I had mentioned Audi – BMW fighting it out against each other with the help of giant billboards. Now we have HUL’s Dove and P&G’s Pantene. Enjoy the below billboard - Lakshmipathy Bhatt (2010) – This article states that The latest offensive from Rin – a TV commercial claiming to be better than Tide by not just naming but showing the competitive product, has brought the debate on comparative advertising back in focus. In his view, comparative advertising is permissible if it’s based on facts. Advertising Standards Council of India, has this to say about comparative advertising in its Code of Conduct In the Rin ad, the claim is limited to a whiter wash- ‘Tide se kahin behatar safedi de Rin’ (Rin gives better whiteness than Tide), without getting into specific, feature-to feature comparison. Almost all detergent ads promise a whiter wash – except that they used to refer to ‘ordinary detergents’ leaving the consumer to figure that they are talking about her brand. The only difference here is that a competitor has been named, and shown brazenly. According to an article carried out in Economic Times on March 1, 2010: ‘this claim is based on laboratory tests done through globally accepted protocols in independent third- party laboratories’. Ellett (2010) stated that in the early ’90s, while at Dell, I was involved in starting a price war in the PC category. The advertising that supported the strategy was an explicit comparison of similarly featured Dell and Compaq products along with their respective list prices. Dell cost usually 30% – 50% less and the campaign caused quite a stir in the industry. It also caught the attention of buyers and helped the company grow from $500 million to $3 billion in a few years. It worked for Dell and it seems to be working for Verizon. 12
- 13. Krish (2009) –states that Marketing is a function that witness cut throat competition. It’s all about market share as companies fight it out in their quest for market leadership. With every sector growing in competition and with market situation being the trend in most industries, companies want their brands to feature among the most sought after amidst all the noise and clutter. Naturally, it is tempting for those with clout in the industry to wield their power to push the nearest competitors as far as possible; sometimes, competition gets so fierce that it is corporate ethics that is being pushed out of sight. Surender (2008) – define that some examples have benchmarked the history of comparative advertising. And leading the fight club is the protagonist of this story, Pepsodent, which, in its advertisements, claimed, “New Pepsodent is 102% better than the leading toothpaste.” The ad showed two boys being asked the name of the toothpaste brand that they used. One happily exclaims Pepsodent, while the other’s disgruntled response, though muted, clearly points cynically towards Colgate (especially as a background jingle similar to the one in Colgate’s ads is used quite appropriately). Incidentally, at that time, Colgate toothpaste ruled the market with a massive 59% market share. Expectedly, Colgate took HLL (which owns Pepsodent) to court, and HLL had to withdraw its ads. As must be clear by now, comparative advertising should be used with extreme caution. Comparative advertising is most effective when it’s factual, and there are significant & meaningful points of differences that are highlighted. Gavrila (2007) – This article define the comparative advertisement by Olympus. While surfing Neogen (popular local website) I saw the ad below presenting OLYMPUS vs. SONY. The banner suggests that the SONY cameras are bad while OLYMPUS is the ones you should buy. I don’t know why Neogen allows this type of illegal advertising to run on their server but again, I’m not surprised and they should be aware of the risks. Now SONY has serious reasons to demand some answers. 13
- 14. OBJECTIVE OF THESTUDY To study the Comparative advertisement as positioning tool. To study the effectiveness and characteristics of comparative advertisement To study the Product attributes on which brands are compared RESEARCH METHODOLOGY Date source : Secondary Data Sources of secondary data: •Internet •News paper •Magazines 14
- 15. Characteristics of theAdvertised Brand Product Typology - A major rationale advanced in favor of comparative advertising is that naming names of specific brands to which the advertised brand is compared, provides the consumer with more factual information and consequently aids him in making more rational brand choices (c.f., Willkie and Farris, 1975). Consequently, comparative advertising is primarily applicable to messages which compare specific measurable product attributes such as weight, price, speed, etc., and therefore may be especially applicable for products which are primarily bought because of their functional attributes; namely, their performance along measurable dimensions, or their capacity to perform specific measurable tasks. A large number of products, however, are bought not because of their task-related capacities, but because of the psychological or social benefits which they promise. The ability of an ad to compare and contrast performance of different brands in providing elusive benefits is more restricted. While one can establish or claim with a reasonable degree of credibility (of course, the Substantiation Doctrine of 1972 would apply in this instance; FTC Report, 1972) that one automobile brand, for example, has a better gas mileage performance than another brand, it is difficult to extend the argument and claim that one auto confers more status to its user than another brand. 15
- 16. Product Life CycleStage - While some researchers used existing brands in their experiments, others relied on new (typically fictitious) brands as the advertised stimulus. The use of existing and well-known brands in an experiment raises the issue of subjects' prior experience with and current attitudes toward such brands. It is important to recognize that such predisposition information should be controlled for. In many cases, consumers have well established perceptions and opinions about specific brands which may have required prolonged promotional effort involving the encoding of numerous messages over substantial periods of time. Not controlling for such "contamination" would tend to complicate inferences drawn from an experimental study. Characteristics of The Compared-to-Brands Naming of Compared-to-Brands - As defined by Willkie and Farris (1975) a comparative advertisement must either specifically name the compared-to-brand(s) or refer to them in such a way as to leave no doubt regarding what they are. Additionally, the comparison must involve specific attributes of the brands. If we utilize Willkie and Farris' definition as a reference point, then any indirect comparison should be general so as to preclude consumer recognition of a specific comparison (e.g., Brand A lasts longer than other leading brands, as opposed to Brand A lasts longer than the leading seller). The so-called "supportive" or non-comparative ad may also be viewed, at the most general level, as a comparative advertisement. Even where there is absolutely no allusion to a competitive offering, where the message communicates only information about the promoted brand, is it not fair to say that the consumer is likely to mentally make a comparison with available and known alternatives? Thus, we have a continuum of message 16
- 17. approaches which includetruly comparative communications, Brand X ads, and supportive ads. Market Position of Compared-to-Brand(s) - The market position(s) of the compared-to- brand(s) are important to consider because such position(s) may affect the consumer's frame of reference as it relates to the evaluation of the brand promoted. One strategy commonly found is to compare the promoted brand to the leading brand in the pertinent generic product class though its superiority is far from established. Still other opinions reflect the belief that use of market leaders for comparison may be a futile exercise in increasing awareness. While a greater number of consumers might be attracted to the ad, these people may be much less prone to change their attitudes and purchase behavior patterns due to their brand loyalty; further, such brand loyal consumers may be more likely to disbelieve the message claims made by the "new" (or small, in terms of market share) brand. Perhaps, then, anchor brands should be other than the market leader. Similarity of Brands - In many generic product classes, sub groupings exist. For example, even though economy, luxury and sports cars belong to the same general product class of automobiles, consumers may use different evaluative criteria and hold different evoked sets in each group. Number of Brands Compared. Some comparative ads include only one compared-to-brand; others use several. On an a priori basis, there is little behavioral evidence to indicate which approach should be more effective, if any. However, it may be reasonable to expect that a substantial increase in the number of brands compared can add to communication noise (e.g., information overload), while a modest comparison set may improve the credibility of the message. PRODUCT ATTRIBUTES ON WHICH BRANDS ARE COMPARED Number of Attributes Presented Comparative ads found currently in the media reflect a diversity of approaches. While some restrict discussion to one product characteristic, many make comparisons on multiple dimensions, believing that more information lends additional credibility concerning the claim (or in order to be consistent perhaps with a particular positioning strategy which management wishes to invoke). The issue of course is to find out, other things being equal, the differential effects (if any) due to presentation of differing amounts of attribute information. If this argument is tenable, a comparative ad which uses one or a small number of attributes as comparison points may have more "positive" effects than similar appeals making a 17
- 18. greater number ofattribute comparisons; or, perhaps an intermediate amount of brand characteristic information would be "best". Salience of Brand Attributes The effectiveness of a comparison between two or more brands on a specific attribute dimension in terms of consumer evaluative response may depend very much on the relative importance (perception of salience) of the attribute for the targeted audience. If the discussed characteristics provide important benefits to the consumer, then the comparison may be interesting and informative, and likely to make a positive impact. Consumers who are only marginally interested in the brand attribute(s) discussed may not be influenced at all (or even negatively influenced). RESPONDENTS Type of Respondents Researchers studying effectiveness of comparative advertising have employed two distinct groups of subjects: students and female heads of households (housewives). Use of adult housewives has generally been lauded due to the ostensible increase in external validity of the study results. Furthermore, it may be likely that housewives are more concerned with product classes which have been utilized in the various studies, and consequently are more involved in the task presented them regarding assessment of ad and brand advertised. Still, 18
- 19. use of studentsas subjects may be entirely acceptable and consistent with improved external validity if product classes advertised are salient to them (i.e., they purchase and consumer brands from such product classes). Knowledge of the Product Class/Brands In order to derive evaluative conclusions from a message presented by a comparative communication (or any type of appeal, for that matter), the consumer will draw upon knowledge gained about the compared-to-brands. Certainly, lack of such knowledge will have some impact on the evaluation process; at the extreme, evaluations of the comparison claims may be meaningless to a particular viewer heretofore unknowledgeable about the product class and/or brands promoted and compared. Usage Rates - A useful surrogate for product knowledge, perhaps, is usage rate which details the extent to which the consumer has been buying or using various brands from the pertinent product class. Brand Loyalty- Related to usage is the notion of brand loyalty. Consumers who exhibit substantial brand loyalty to compared-to-brand(s) in comparative communications may be likely to resent the comparative claim(s), perhaps in response to cognitive dissonance. Whether or not, in principle, this cognitive response is general, the point remains that respondents should be measured on this basis to permit an examination of such effects. As with the above suggested measures, brand loyalty measurements permit increased control of error variation, and can be utilized in experimental designs via covariance analysis or directly in the form of a leveling variable. Personality Traits While we do not advocate use of general personality inventories (Kassarjian, 1971), we do feel that certain care- fully selected measures may shed additional light on consumer response to comparative vis-a-vis non-comparative communications. In particular, those traits which pertain to the ability and motivation of the consumer's processing of information varying in terms of uncertainty, ambiguity, etc., are of some interest. While none of the six authors incorporated personality trait measures in the external designs a couple can be mentioned here. OTHER MESSAGE CHARACTERISTICS Message characteristics which may affect cognitive, affective, or behavioral responses to communications include the issues of substantiation (factual or subjective claims), sidedness of the message, and the relative position of the comparative claims within the advertisement. 19
- 20. Substantiation Several critics ofcomparative advertising (Kershaw, 1976, Chevins, 1975) have suggested that when the comparisons include generalized, non-substantiated statements, the consumer may become misinformed as well as confused. Claims of superiority, for example, which are not supported by independent (or company) tests may reduce the credibility of the message. One-Sided versus Two-Sided Appeals From the managerial perspective, it may be the case that such communications are not only more believable, but that the overall image of the brand (and perhaps the company sponsoring it) is enhanced due to the "refreshing" glimpse at honesty. It is plausible to assume that most consumers would applaud an attempt at "telling it like it really is" rather than only mentioning positive benefits accruing to brand consumption. From the public policy point of view, such two-sided comparative ads may provide even more objective information upon which the consumer may make a brand choice. Operationally, of course, there is always the chance that such a communication problem may win an ad agency an Effie, but lose the company precious sales and market share Relative Positioning of the Claim(s) In rounding out this section, we mention that effectiveness of comparative advertising communications may depend, in part, on the positioning of the comparative claims (e.g., at the beginning, the middle or end of the ad). Also related to this "recency-primacy" issue is the question of whether the compared-to-brand(s) might be mentioned first or last in the message. GENERAL ISSUES PERTAINING TO TESTING AND METHODOLOGY 20
- 21. Independent Variables Manipulations ofmessage appeals require close attention to proper operationalizations. Accordingly, scrutinization of the isomorphism between concept and variable is imperative. Where correspondence is considerably less than 1 to 1, the researcher is not in a position to make conclusive inferences with respect to the response effects. Thus, it is important that the researcher fully understands what is meant by "comparative advertisement", "Brand X" ad, and "supportive" communication so that reasonable working definitions can be operational zed. The same is true whatever independent variable is selected for study. Dependent Variables Without getting into the debate as to what constitutes reasonable measures of advertising effectiveness, we can say that perhaps the majority of advertising academics and certainly practitioners are comfortable with some sort of hierarchy of effects model. In such models the consumer is viewed as responding to advertising stimuli according to a hierarchy such as "awareness", "comprehension", "interest", "liking", "intention'', and "behavior". Pretests and Manipulation Checks It is extremely important that the researcher verify that his/her manipulations are in fact being perceived in a manner which is consistent with his/her objectives. This is true of independent variable operationalizations as well as dependent measures (scales) administered and gathered. Thus, pre-tests/manipulation checks are crucial to ensure internal validity. While such checks can be made after the experiment is completed by using the same subjects, it may be more advisable to perform them before the experiment by using different subjects drawn randomly from the same population from which the experimental respondents will be selected. Another related point concerns the nature of the measurement level of the scales used to tap dependent responses. Unless such scales are thoroughly examined and pre-tested so as to permit an assumption that they are interval- scaled, it is difficult to argue in favor of parametric analytical techniques. 21
- 22. INTERPRETATION The recent growthin use of comparative advertising has led to increased efforts to measure its effectiveness. Empirical efforts in this area should address seven important research issues. This term paper identifies and expounds upon these issues and evaluates recent empirical studies of comparative advertising, particularly with respect to the way they have addressed these issues. RECOMMENDATION Advertiser should make new market strategy to tap the remaining market which is not covered yet. Need of providing other benefits with this strategy like on the spot purchasing Advertiser should provide better information to the customer in terms of price of the product. 22
- 23. SUMMARY AND CONCLUSIONS Thepurpose of this term paper has been to explore the various issues involved in assessing the communications effectiveness of comparative advertising. Using seven recent studies as reference points, we have endeavored to point out the complexities of comparative advertising research. No matter what the scope of an individual study, there are several crucial considerations necessary. These involve the advertised product class (brand) characteristics (e.g., product class, salience, life cycle stage), the characteristics of the compared-to-brand(s) (e.g., market position(s), number of brands compared), product class (brand) attributes on which comparisons are made (e.g., number of attributes and their salience), the subjects (e.g., type, usage rates, brand loyalty, personality traits), the advertisement design (e.g., media-vehicle utilized, frequency/intensity of ad exposure), other message characteristics (e.g., use of substantiation, sidedness of appeals), and methodology used (e.g., experimental designs, manipulation checks, covariates). While it is true that exploration of all research questions raised in this paper are beyond the scope of any individual study, we suggest that future research should address the specific issues presented. Careful attention to the identified issue areas should contribute to the development of body of knowledge which could then provide answers as to when, if, and how comparative advertising can be used. 23
- 24. REFERENCES • G. Chevins, "A Case for Comparative Advertising," Journal of Advertising, 4:2(1975), 31-36. • Federal Trade Commission Report. "Staff Report to the Federal Trade Commission on the Ad Substantiation Program Together with Supplementary Analysis of the Submissions and Advertisers' Comments," Committee on Commerce, U.S. Senate, Washington, D.C., July, 1972. • L. L. Golden, "Consumer Reactions to Comparative Advertising,'' in B. B. Anderson, Advances in Consumer Research, Volume III (Chicago: Association for Consumer Research, 1976), 63-67. • I. Hovland, A. A. Lumsdaine and F. D. Sheffield, Experiments on Mass Communication (Princeton: Princeton University Press, 1949). • J. Jacoby, D. E. Speller and C. A. Kohn, "Brand Choice Behavior As A Function of Information Load," Journal of Marketing Research, 11(1974), 63-69. • G. Kershaw and S. I. Tannenbaum, "For and Against Comparative Advertising," Advertising Age, (July 5, 1976), 25-28. • R. J. Lavidge and G. A. Steiner, "A Model for Predictive Measurements of Advertising Effectiveness," Journal of Marketing, (October, 1961), 59-62. • E. F. Lindquist, Design and Analysis of Experiments (Boston: Houghton Mifflin, 1956). • M. B. Mazis, "A Theoretical and Empirical Examination of Comparative Advertising," Unpublished paper, University of Florida, 1976. • G. H. G. McDougall, "Comparative Advertising: An Empirical Investigation of its Role in Consumer Information," Working Paper #167, School of Business Administration, The University of Western Ontario, London, Canada, December, 1976. • W. McGuire and D. Papageorgis, "The Relative Efficacy of Various Types of Prior Belief-Defenses in Producing Immunity Against Persuasion," Journal of Abnormal and Social Psychology, 62(May, 1961), 327-337. • Mehrabian and J. A. Russell, an Approach to Environmental Psychology (Cambridge: MIT Press, 1974). • Ogilvy and Mather. "The Effects of Comparative Television Advertising That Names Competing Brands," Research Report, 2 East 48th Street, New York, 1975. • V. K. Prasad, "Communications-Effectiveness of Comparative Advertising: A Laboratory Analysis," Journal of Marketing Research, 13(May, 1976), 128-137. • M. L. Ray and A. G. Sawyer, "A Laboratory Technique for Estimating the Repetition Function for Advertising Media Models," Journal of Marketing Research, 8(February, 1971), 20-29. • G. Sawyer, "The Effects of Repetition of Reputational and Supportive Advertising Appeals," Journal of Marketing Research, 10(February, 1973), 23-33. 24
- 25. • G. Sawyer, "Demand Artifacts in Laboratory Experiments in Consumer Research," Journal of Consumer Research, 1 (March, 1975), 20-30. • W. L. Willkie and P. W. Farris, "Comparison Advertising: Problems and Potential," Journal of Marketing, 39 (October, 1975), 7-15. 25