Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

16. Advertising and Sales
    Promotion

Text © The McGraw−Hill

Companies, 2002

452 Chapter 16

Throughout this chapter we’ll consider a number of these international promo-

tion issues, but we’ll focus on the array of choices available in the U.S. and other

advanced, market-directed economies.^2

As an economy grows, advertising becomes more important—because more con-

sumers have income and advertising can get results. But good advertising results cost

money. And spending on advertising is significant. In 1946, U.S. advertising spend-

ing was slightly more than $3 billion. By 1986, it was $102 billion—and by 2001

$250 billion.

During the last decade, the rate of advertising spending in many parts of the

world has increased even more rapidly than in the United States. However, total

advertising spending in other countries is much lower than in the U.S. Although

exact figures aren’t available for all nations, advertising in the U.S. accounts for

roughly half of worldwide ad spending. Europe accounts for 23 percent, and Asia

about 22 percent. For most countries in other regions, advertising spending has

traditionally been quite low.^3

While total spending on advertising seems high, especially in the United States,

it represents a small portion of what people pay for the goods and services they buy.

U.S. corporations spend an average of only about 2.5 percent of their sales dollar

on advertising. Worldwide, the percentage is even smaller.

Exhibit 16-2 shows, however, that advertising spending as a percent of sales dol-

lars varies significantly across product categories. Producers of consumer products

generally spend a larger percent than firms that produce business products. For

example, U.S. malt beverage companies spend 8.6 percent, and companies that

make perfume and cosmetics spend a whopping 12.8 percent. At the other extreme,

companies that sell plastics to manufacturers spend only about 1.8 percent on adver-

tising. Some business products companies—those that depend on e-commerce or

personal selling—may spend less than^1 ⁄ 10 of 1 percent.

In general, the percent is smaller for retailers and wholesalers than for produc-

ers. Large chains like Kmart and JCPenney spend about 3 percent, but many retailers

and wholesalers spend 1 percent or less. Individual firms may spend more or less

than others in the industry—depending on the role of advertising in their promo-

tion blend and marketing mix.

Traditional media choices are
more limited in some international
markets, so marketers must be
creative to communicate their
messages. In North Africa and
the Middle East, Coke uses
hot-air balloons. The 12-stories-
tall Ariel shirt was mounted on a
building in China.

Total spending is
big—and growing
internationally

Most advertisers aren’t
really spending that
much