John Philip Jones – Advertising Seeking Buyers, And Buyers Seeking Advertising

John Philip Jones, Emeritus Professor of Advertising, Syracuse University

The advertising business has always been slow to change, and I have more than once published the view that it is as conservative as the Roman Catholic Church, if not more so.  This exaggerates to make a point.  Changes do gradually happen, but they catch everybody unawares and their importance is only apparent years after they have actually taken place.

During the past quarter-century, two important things have happened to the business.  First, the majority of large advertising agencies have been bundled into an oligopoly of conglomerate companies run by financiers.  Second, advertising agencies themselves have splintered.  Formerly full-service organizations have given way to media planning/buying agencies, creative operations that vary greatly in size and style, strategy consultants, promotional specialists, and digital advertising agencies. These are all in addition to the more traditional firms that specialize in public relations, package design, and other peripheral activities.

These two changes have harmed advertising.  They were implemented with the aim of improving efficiency, i.e. reducing costs and increasing profit.  But this has damaged the business’s traditional ethos, which was concerned exclusively with creating and nurturing the clients’ brands in a competitive market place.  Agencies were once protected and rewarded for their dedication by being employed by their clients for years and sometimes decades.  While this remains substantially true of the relationship between clients and media agencies, it is emphatically not true of that between clients and creative agencies. Buying advertising à la carte means that clients choose their campaigns as if they were selecting neckties (in the unlikely circumstances that they still wear neckties!)  And the division of advertising work into sub-specialties has inevitably led to a loss of focus, cohesion, and synergy.

There is no way in which these organizational changes will be reversed within any foreseeable period.  But will other sorts of change be possible?

For instance, what will happen to the total volume of advertising?  Not much increase is likely.  Budgets are determined by the clients who spend the money.  They pay modest attention to their specialist agency suppliers, to what the media have to say, and to the pronouncements of market researchers.  But essentially, budgets are determined by the clients’ sales volumes and earnings.  Aggregating all firms, any increase in advertising overall is determined by growth in the Gross Domestic Product (GDP).  Economists are unanimous in their belief that the annual growth in GDP between 2012 and 2020 will be small:  only a little ahead of population increase.  This is true of the United States and the important advertising markets of Western Europe and Japan.  Even China and India, which have large populations although these countries are low in the advertising league table, are experiencing a significant deceleration in GDP growth.

Within a relatively stagnant total advertising market, are any major internal shifts to be expected?   The critical distinction that governs the style of advertising and the selection of media is that between advertised brands characterized as ‘low involvement’ or ‘high involvement’.

‘Low involvement’ describes the buying of low-price and high-volume goods and services that are purchased repeatedly.  They have to be advertised with a high degree of continuity, which means that they need large advertising budgets. Consumers buy their chosen brands from a repertoire of brands on their regular shopping lists, which usually include two or three different brands in any category.  Advertising is generally not aggressive, but more concerned with reinforcing the preferences of buyers and defending the franchise.  It is easy to list major low-involvement campaigns. Here are a dozen:  Budweiser, Campbell’s, Charmin, Cheerios, Coca-Cola, Dove, Frito-Lay, McDonald’s, Pampers, Tide, Tylenol, Wendy’s. These are all likely to be big spenders in 2020.

Communication with consumers of ‘low-involvement’ goods and services is sometimes described as ‘advertising seeking buyers’: a process in which waste is inevitable. This is because target groups are large and diffuse, and cover regular users, occasional users, and non-users of the advertised brand. These groups added together make up the population as a whole, but the relative emphasis placed on each varies brand-by-brand.  This means that certain demographic groups are of special importance. For brands like those listed in the last paragraph, the numbers of targeted consumers are in the tens of millions.  These are well covered by the main advertising media. But the selection of television day parts and magazine titles to get to particularly important demographic groups is at best approximate. The result is that the population is peppered with scattershot advertising.

‘High involvement’ describes the buying of infrequently purchased goods and services, whose prices are higher and target groups smaller than with ‘low involvement’.  A very important point is that the content of the advertising usually conveys information to help the consumer make rational choices:  a process often described as ‘buyers seeking advertising’.  The advertising is fired at a bullseye representing the relatively small number of potential buyers who are in the market. A good deal is known about the users of digital media, and by clustering groups of this audience it is relatively easy to hit this bullseye.

Despite the fact that ‘high-involvement’ goods and services are more expensive than ‘low-involvement’ ones, there is more ‘low-involvement’ advertising because it has to be run at a heavy rate for long periods of time, to attract repeat buyers.  As a general rule, ‘low-involvement’ brands devote about six percent of net sales value to media advertising. This percentage applied to the vast sales of a substantial brand produces a very large advertising budget.  But because of the relatively inefficient targeting of such a brand – inevitable because the consumer group is so large and ill-defined – advertising media only make economic sense if the cost per contact is extremely low, often a tenth of a cent. This is a level that only applies to the traditional main advertising media.  ‘Low-involvement’ advertisers do not make extensive use of digital, for reasons of cost-efficiency, although most have experimented extensively for many years in their search for ways of employing these media economically.   Their statements, quoted in the trade press, have consistently displayed optimism about the great potential of digital media (although their actual media spending has never reflected this optimism).

I believe that the style of advertising and media choices for ‘low-involvement’ campaigns will continue on their present paths. By 2020, the largest single advertising medium by far will still be television, with a total expenditure (based on a projection of Kantar data) of more than seventy billion dollars.  Magazines will probably decline slightly, although new magazine titles are evidence of the resilience of this medium.  Radio will also probably decline modestly, although radio has great regional strength. However, the travails of newspapers will continue.  Newspapers are vulnerable for a number of reasons, in particular their flagging popularity and aging readership.  Readers are also getting access to newspaper stories electronically, which has meant a sacrifice of income to the newspaper industry.  Newspapers in general have been devastated by the loss of classified advertising to the Internet, and the end is not in sight.

The advertising budget per unit of a ‘high-involvement’ product can be one hundred times as high as that for a ‘low-involvement’ one, because of its greatly higher consumer price and marginally higher advertising ratio. And a consumer buys a ‘high-involvement’ product only once, not repeatedly.  This enables a substantial advertising investment to be directed at each member of the target group. It aims for immediate sales generated directly by the advertising. The campaigns can afford the high cost per contact of digital media, which is rarely less than a dollar (i.e. one thousand times as high as a contact on unselective network television); and can occasionally be as high as twenty-five dollars for a tightly targeted contact on Google.  Such high figures do not make these media attractive enough to take all business away from competitive media, and although the advertising business has had twenty years’ experience of Internet advertising, this has grown at a surprisingly slow rate. It only became an important medium when it was shown to be highly efficient for direct (rather than general) advertising.

What then is the future for the advertising of ‘high-involvement’ goods and services?  The markets for such products, especially those based on the amazing advances in electronic technology, will continue to be buoyant.  They are generally suitable for advertising in digital media, which can be a rich source of information. Digital media will continue their steady growth, and it is a reasonable guess (again based on Kantar data) that their 2020 advertising volume will be about fifty percent of that on television. Digital, which will be the third most important medium for advertising after television and direct mail, will grow as a result of innovation in the markets for electronic devices (‘natural’ products for digital advertising). They will also continue to take business from classified advertising in newspapers, and direct mail:  the most important targeted media before the introduction of digital.

Whether or not my modest predictions will actually come to pass depends on whether the clients decide to spend the money as I believe they might.  Future advertising is governed by the success or otherwise of existing campaigns, and one of the remarkable characteristics of clients is that they evaluate the results of their advertising in a remarkably rough-and-ready (and often emotional) way. The best contribution that my readers could make to prepare for 2020 would be to add some science to the clients’ deliberations.

John Philip Jones is an Emeritus Professor at the Newhouse School at Syracuse University.  He graduated in economics from Cambridge University, with a BA with Honors and MA.  He spent twenty-seven years in the advertising agency business, mainly in senior positions in European branches of J. Walter Thompson. He then taught at Syracuse for another twenty-seven years.  He has published widely on the measurement of advertising effects, and is the author of fifteen books and more than seventy papers in professional and academic journals.  His books have appeared in ten foreign languages, and he has been employed as a consultant by more than a hundred clients in forty different countries.  He has also received a number of awards and recognitions.