3. Users of both competitive brands and of our product.

4. Users of our product only

(a) Who have never used another brand.

(b) Who have used another brand.

Once you look at a market like this it becomes clear that the apparently simple task of using advertising to increase sales of our brand can be achieved by working against virtually any (or all) of the dozen or so different groups of people described. And to work against each of these groups the advertising may have to have a rather different effect: it can remind the brands’ users to buy it – or to use it; it can try to persuade users of competitive brands that our brand is as good as or better than the one that they are using at present; it can make aware the ignorant about our brand’s existence, and inform them about its virtues; it can conceivably, encourage non-users to use the product category.

	1977, %	1978, %
Chesebrough-Ponds Smith Kline Unilever Mars General Foods Seagram Fillsbury Kelloggs Philip Morris McDonalds Colgate-Palmolive Kraft Greyhound ITT	8.3 7.4 10.7 6.5 5.6 3.6 5.0 4.6 3.5 3.8 3.1 1.9 1.3 0.6	8.7 8.2 8.0 7.2 6.2 5.3 4.8 4.7 3.6 3.0 2.8 1.0 1.0 0.8

Fig. 2.1 A/S ratio of some top US advertising spenders.

3. The simplest method – and the commonest – is to take a standard percentage of sales revenue as the basis for the budget. This has its basis, clearly, in the way in which products are costed, since it is quite easy to decide – even if only arbitrarily – that, given a particular level of gross margin, a certain proportion of this can be devoted to advertising.

This method of setting the budget, or ‘appropriation’, as it is usually called, has the virtue of simplicity. It is, however, obviously fairly naive, since it has no obvious relation to what is happening in the rest of the market, in terms of either the market’s dynamics or competitive activity. In some cases, indeed, the budget is based on a set proportion of the previous year’s sales, rather than of the forecast sales for the year being budgeted. In any market where things are changing at all rapidly, this seems to be, to say the least, an odd way to plan.

The fact is that deciding on an advertising-to-sales ratio or ‘A/S ratio’ is far from easy, as it should depend both on the competitive character of the market and on the individual brand’s position in the market. Numerous studies have shown clearly that A/S ratios vary quite markedly between different companies, different markets and different brands within markets. Ad Age has published a regular series of estimates of A/S ratios for a wide range of US markets which shows a marked variation between markets and some quite large changes in the A/S ratios of some markets over time (see Fig.2.1)

Read through he text carefully, looking up anything you do not understand. Then answer the following questions:

1. What is the usual basic task of advertising?

2. What must advertising do in order to justify itself?

3. Does successful advertising necessarily mean a rise in sales?

4. Into what two main categories does the writer place potential customers?

5. What effect should good advertising have on the following sorts of people:

1. your own brand users?

1. users of competitive brands?

1. people who did not know that your brand existed?

1. people who do not use your sort of product?

Read the advertisement and comment on them