MARKETING
Chemical Advertising Sharpens Its Aim Next year's ad budgets will be about the same as 1962's, but there'll be changes in how the money is spent The ever-changing face of chemical advertising is destined for more changes during 1963. Although ad managers in general expect to see little, if any, rise in the amount of money spent on advertising next year, the way it will be spent is probably more important, they say. Advertising has been accepted as a vital marketing tool, but evaluating it is much too subjective to suit ad managers. And chemical ad men are doing their best to change this. Advertising is changing from the top down. An ad manager for a large chemical company says the only way for an advertising department to be effective is to integrate it into over-all marketing planning. The degree of integration found in chemical companies varies greatly from practically none all the way to complete integration. The inorganic division of FMC Corp. has taken a big step in this direction. Earlier this year FMC's Becco, Chlor-Alkali, and mineral products divisions were grouped into the inorganic chemicals division. Previously, each had one individual who handled advertising as a part of his job. This was changed when Hugo Kotch was named advertising manager for inorganic chemicals. Now, the newly formed division also has a product manager and a technical service manager to make the integration more complete. Budgeting. Integration of this kind, says J. Walter Goetz, manager of promotion and advertising at Union Carbide Chemicals, is necessary for proper budget planning. Mr. Goetz points out that his advertising budget begins with discussions between advertising people and the marketing people. From these discussions, three types of objectives are set up for each product line—business area objectives, marketing objectives, and advertising and promotion objectives. Mr. Goetz says one business objective may be to attempt to make a certain 32
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impression on a segment of the market. The marketing objective would include a specific sales goal. The promotion and advertising objective might be to produce a certain number of inquiries—from good customer prospects. These prospects would be characterized in detail as to size of the company, potential consumption, and other pertinent characteristics. This analytical approach to budgeting comes down to setting specific, measurable goals and deciding how much money is needed to meet these goals. Finally, there must be a decision as to whether the goals justify the amount of money to be spent. Historically, ad budgets have been expressed as a percentage of sales. Today this is still essentially true, with typical basic chemical companies spending between 0.8 and 1% of their sales on advertising. But companies are continually trying to put ad budgets on a more scientific basis. Arnold Kiczales of Carbide's Linde Co. division shows how specific budget preparation can get. He says, "For
each product or product group, we must know some of these things: What is the market or markets? How large is each market? Where do we stand with reference to each market? What specific changes do we want to bring about to improve profitability? What and to whom must we communicate to improve profitability? What are the relative importances of the available media?" Market Research. U.S. Industrial Chemicals also wants a clear outline of a product's market before it budgets for the product. To begin with, says Phil Gisser, director of advertising at USI, a company needs to know its marketing situation. What are its sales in dollars and pounds? What is the total market and its share of the market? What are its gross profits on the product? From these questions, Mr. Gisser says, a company can progress to its marketing objectives. It may want to increase the market by a certain percentage while retaining some portion of the total market.
Next come sales and advertising objectives. For a sales objective, the company may want to create a certain number of inquiries for its sales force to follow up. Advertising objectives might include informing 80% of a certain market that it has a new prod uct available. Finally, Mr. Gisser says, the ad program or techniques to be used are selected. The company will specify how much to spend on space advertis ing and break this down to cover all the markets it wants to reach. This will also be true of the other adver tising techniques. When this has been done for various products and product groups, the company's ad budget becomes a total of the individual programs. Ad Research. Playing a small but very important part in the ad budget is the money set aside for research on the effectiveness of advertising. This item in the advertising budget is definitely on the increase. But, an ad manager of a leading chemical com pany says, "Although the amount I will be spending on research in 1963 has increased, it's still not enough." An advertising agency which handles about 18 chemical accounts says it has had to double its staff of research personnel to meet clients' demands. Such research can try to measure effectiveness of a particular ad cam paign or attempt to find out how well the company as a whole is recognized. Linde ran one such campaign to de termine the recognition of Linde as a. producer of industrial gases. The test was conducted by surveying the audience of a major business maga zine. Such questions were asked as: Who is the leading producer of in dustrial gases? Who is thoroughly versed in the technology of unusual gas «applications? By ranking the com panies in the industrial gas field ac cording to the replies to these ques tions, Linde got an idea of its standing in relation to its competitors and also of how effective its ad programs have been. Some ad executives freely admit that advertising research is far from purely analytical, yet they are quick to remark that it is better than no re search at all. Although the emphasis on research is growing, it still rates only a small portion of the total ad budget—about 2 % .
Trade Show Spending.
During
1963, the high cost of trade shows may cause some changes in ad budgets.
One chemical equipment maker esti- I mates that his company spends $10,000 simply to transport its exhibits to a show and get them set up. Trade shows also are getting closer scrutiny because of the difficulty in measuring the effectiveness of these shows. Enjay's advertising manager, Robert Par kin, says his company is taking a hard look at trade shows and has dropped out of some. Other ad men report similar actions. Chemical companies are trying to evaluate trade shows before they buy exhibit space. Union Carbide Chemi cals says it may send a few repre sentatives to a trade show to determine its potential value for the company. On the basis of this evaluation, the company may or may not enter the show. In addition, after taking part in a certain show, the company also checks on what was actually gained in exhibiting at the show in relation to the cost. Depending on the answer, the company may or may not go into the same show the following year. Increase in Direct Mail. Direct mail, which takes about 10% of an ad budget, is rated high by ad men as an effective means of communication. These campaigns are directed toward people who are known by name, po sition, and company. Amounts spent in this area are likely to increase. One ad man says direct mail is the only way to reach scattered, small markets. And its importance as an advertising tool is enhanced since its effectiveness can be measured quite accurately. FMC Corp. used direct mail to boost sales of ammonium persulfate for etching circuit boards. About 26% of the recipients of the mailings re sponded by requesting either a sales call or more technical data. Ulti mately, sales increased 3 3 % . Much of the increase could be attributed to the sales force following up leads re sulting from the mailing. Image Ads. Emphasis on direct mail and trade shows may be changing, but so is the emphasis on product lines. The commodity-type chemicals are receiving less promotion money. Advertising outlays for a new product may range from 2 to 10% of the prod uct's sales, and sometimes more, but promotion costs for commodity chemi cals such as formaldehyde, sulfuric acid, and caustic soda, range from 0 to 0.2% of sales. For this type of product, chemical ad men say, there is little difference between one com pany's product and another. Cus- |
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tomers are relatively few and most of them are well known. All sources for the products provide good material, give speedy delivery, have fine tech nical service groups, and sell for com parable prices. Without product dif ference what can be emphasized in an ad? The answer, which chemical ad men decided on years ago and have been using more and more, is corporate advertising. The goal of corporate advertising is to increase the over-all level of knowledge about a company and create a favorable attitude toward it. In so doing, ad men hope the commodity-type chemicals will be associated with the company and the company's image will prove to be the influential factor. The theory is fine, but ad men admit it is hard to prove that it works. End-Product Advertising. Another method of advertising which will con tinue to grow is advertising for cus tomers' customers—end-product adver tising. One example of this type of advertising is that for urethane foams. The Urethane Institute has been formed to plug end uses of these prod ucts. On the company level, Union Carbide Chemicals, for instance, plans a program involving space, direct mail, and publicity aimed at promoting end uses of urethane foams. In typical goal-setting fashion, the company sur veyed consumers to find out what they do and do not know about these prod ucts. After the promotion program, another survey will be carried out to judge the effectiveness of the program. A leading industrial agency execu tive says this is one of the most costly types of advertising, but it is hard to avoid. To create consumer interest, end products must be plugged, and once started, this type of advertising must be continued. He adds that this type of advertising is done mainly by large chemical companies and more can be expected next year. Advertising's changing face still falls short of an analytical approach. As USI's Phil Gisser says, "Industrial ad vertising is in a transition period be tween an art and science—at present being more art than science. But real progress is being made and there will be a day, perhaps 10 or 25 years from now, when we will know what the ad vertising level should be to maximize company profits. We are just be ginning to learn the many things we need to know before we reach this stage."
