Chapter I

INTRODUCTION

Advertising is one of the facets of mass

communication. It is the largest component of any

promotion activity. It is the structured and composed

non-personal communication of information, usually paid

for and commonly persuasive in nature, about the products

through various media by identifying sponsors (Perrault

and McCarthy, 2000)1. Advertising is the mode of

informing and influencing the consumers to buy products

or services through visual or oral messages. It helps to

create demand, promote marketing and boost economic

growth. Thus advertising forms the basis of marketing.

Russel Colley (1961)2 observes “...Advertising succeeds

or fails depending on how well it communicates the

desired information and attitudes to right people at the

right time at the right cost”.

1 Perrault, William D., Jr., and McCarthy, E. Jerome, (2000), “Basic

Marketing: A Global Approach”, Richard D. Irwin Company, New
York.
2 Colley, Russell H.(1961), “Defining Advertising Goals for Measured
Advertising Results”, New York, NY, Association of National
Advertisers.
 The role of advertising is to make consumers, more

informed about the brand and more favourable to it.

Advertisement should make consumers think differently

about the brand after being exposed to successful

advertising by bringing about some sort of mental change

in consumers and ultimately make the consumer purchase it

(Weilbacher, 2001)1. As Colley (1961)2 puts it,

“Advertising’s job purely and simply is to communicate,

to a defined audience, information and a frame-of-mind

that stimulate action. Advertising succeeds or fails

depending on how well it communicates the desired

information”.

Advertising is a key way to ouster competition.

Companies need to continuously keep a watch on their

marketing mix ahead, in order to ensure market

leadership.

1 Weilbacher, William M.(2001), “Does Advertising Cause a ‘Hierarchy

of Effects’?”, Journal of Advertising Research, 41, 6, pp. 19-
26.
2 Colley, Russell H.(1961), “Defining Advertising Goals for Measured
Advertising Results”, New York, NY, Association of National
Advertisers.

2
 Advertising is the primary means by which firms

inform consumers about new or improved products. Business

firms usually advertise in order to protect their market

share against competition. Firms try all sorts of

gimmicks to reach the consumers. To achieve results, the

advertisement campaign must have a creative edge in

comparison with its competition. Undoubtedly, advertising

can help to speedup the initial adoption of a new product

by creating awareness and indirectly by gaining retail

distribution and display.

With great diversity of products and services

available, it is getting more and more difficult, and

challenging for marketing messages to reach the target

audience. The major challenge being clutter of Ads

abound the market place. Capturing the large ‘share of

mind of consumers’ is becoming a real task for business

firms and hence to capture a major chunk of consumers.

The ultimate goal of any marketer is to ensure an

increased consumer brand preference translating into

sales.

3
 To quote Andrew Ehrenberg (1997)1 “...the main aim

of Advertising is growth in sales and brand

building....The more realistic goal is brand

maintenance”. Thus, brand preference amongst consumers

through advertising is translated into sales.

Advertising that works in the short term and results

in increased sales is what interests majority of

marketers. Franzen (1994)2 observes that, few advertisers

solely aim at long-term effects. Jones (1997)3 has

empirically proved that advertising is capable of sharp

immediate effects on sales. The best commercials are

usually the ones which have both short and long term

effects and which are able to combine the communication

of a relevant product message with the development of

positive emotional associations with the brand. In the

short-term, Jones (1997)1, states that advertising is

demonstrably capable of generating a powerful effect on

1 Ehrenberg, Andrew S.C. (1997), “Justifying Our Advertising Budget-

A Very Different View” In Transcript Proceedings of Monitoring
Advertising Performance: Making Sure Advertising Works and Is
Accountable. London: Admap and The Advertising Association.
2 Franzen, Giep (1994), “Advertising Effectiveness: findings from
empirical research”, Admap Publication, UK.
3 Jones, John Philip (1997), “Is Advertising Still Salesmanship?”,
Journal of Advertising Research, May/June, pp. 9-15.

4
consumer purchasing. To be effective in the short-run,

the content of advertising must be substantial enough to

stand-up to the competition. On the other hand, the long-

term effectiveness of advertising is gradual. This is

reflected through repeat purchase made by consumers which

in turn is reflected through the powerful attachment

between the brand and the consumers’ loyalty towards a

particular brand.

Business enterprises all over the world are spending

huge amounts on building brands through Advertising.

They choose brand as a weapon of choice in the battle for

survival in the competitive market. These business firms

have also realized that a brand, ignited by a core idea,

managed with imagination and driven with passion and

focus, can drive the firms’ transformation and face the

challenges posed ahead. These call for new ways of

attracting new consumers and new ways for old consumers

to maintain the competitive edge. The key to infuse an

old brand with new life is to provide the consumer with

new information about the brand. This is made possible

through advertising.

5
 Over the years, there is a great diversity in

advertising media. There is traditional Television

broadcast and print media which continue to retain a

major share. World Wide Web popularly called the

‘Internet’ or simply the ‘Net’ and cable TV on the other

hand are gaining importance, and have made enormous

inroads on network advertising. Advertising subsidizes

the free flow of information and entertainment to

consumers through these media. Therefore, advertisers are

rushing to capitalize through these media.

The economic scenario of the countries all over the

world, and India in particular, has also seen a sea

change due to globalization process. This has a profound

impact on the industries’ media buying activities, too.

These days, industries’ media buying is increasingly

becoming a more scientific exercise and channel time is

bought in a very scientific way. Companies spend

anywhere between 5% and 20% of their sales revenues on

buying media time or space. There has also been an

increase in the popularity of the suitable media for

increasing the effectiveness of advertising.

6
 Truly effective advertising involves not only

thirty-second TV Ads, but also branding, packaging,

celebrity spokespeople, sponsorships, publicity, customer

service, point of purchase and point of sale Ads. The

information found in Ads can be divided into two

categories, namely, direct and indirect. Direct

information is factual and usually includes such things

as feature, price, locations, where to make the product

purchase and the like. Indirect information, on the

other hand, is obtained by the consumer who makes

inferences based on his/her perception. The wealth of

indirect information as well as the Ad’s ability to

persuade, are often based on who is presenting the

information.

The practice of using celebrities to endorse

products is not new to advertising either in the US or

elsewhere in the world. About 20 years ago, almost one in

three television commercial used celebrity endorsements

(Business Week, 1978)1. Celebrity endorsement is not

cheap and prices for celebrities continue to escalate

1 Business Week ( 1978), “The Big new Celebrity Boom”, Industrial

Edition, 2535, 22nd May, pp. 77 and 80.

7
(Ohanian, 1991)1. Use of celebrities in advertising is

expensive, but firms all over the world are willing to

spend huge money on popular personalities whose name,

face, and/or voice can draw considerable attention of

consumers. Agarwal and Kamakura (1995)2 estimate that

approximately, 20% of all advertisement use some form of

celebrity endorsement to inform and persuade consumers.

By understanding what consumers perceive, how they store

information and how they attribute the traits of

endorsers to the products they endorse, one can gain a

better understanding of the impact of Schemas.

Theory and practice prove that the use of superstars

in advertising generates a lot of publicity and attention

from public (Ohanian, 1991)1. Female athlete Venus

Williams, tennis player and Wimbledon championship winner

in 2002, for example had signed a 5 year $ 40 Million

contract with sports wear manufacturer Reebok

1 Ohanian, Roobina(1991), “The Impact of Celebrity Spokespersons’

Perceived Image on Consumer’s Intension to Purchase”, Journal
of Advertising Research, February/March, pp. 46-54.
2 Agrawal, Jagdish and Kamakura, Wagner A (1995), “The economic
worth of celebrity endorsers: An event study analysis”,
Journal of Marketing, Chicago, 59, 3, pp.56-63.

8
International Inc1. The soft drinks industry in India is

one such industry known for its high decibel use of

celebrity endorsers. This is evinced in the following

pages where the celebrity endorsers appear in the popular

soft drink Ads’.

Figure 1.1 Some of the Popular Soft Drink Ads in India

Source – Collected by the researcher from the internal source of The Coca-
Cola Company.

1
Visit [Link]

9
1.1 Soft Drinks Industry

The Indian Soft Drinks industry, in the recent past,

witnessed a commotion of Ads, which have received

international acclaim and have won many prestigious

awards. One such case is the series of awards won by the

Coca-Cola Company that are noteworthy. These are

presented in Figure – 1.2 and Figure 1.3 in the next

section.

It is imperative to know and understand whether

these highly creative Ads are communicating the right

messages to consumers and help in translating the Ad

liking to purchase intent. Advertising can have an

impact on various mental processes. Earlier research

conducted by Broadbent (1975)1 and Jones (1995)2, suggests

that consumers are often loyal to three or more national

brands, over which their preference shifts over time.

Individual brands attempt to increase their market share

at the expense of other brands by increased advertising

in conjunction with other promotional activities.

1 Broadbent, Simon (1975), “Spending Advertising Money-An

introduction to Media Planning ; Media Buying and the Uses of
Media Research”, London, Business Books Ltd.,.
2 Jones, John Philip (1995), “When Ads Work-New Proof that
Advertising Triggers Sales”, New York, NY: Lexington Book.

10
 Figure 1.2 Award winning Ads of Coca-Cola

Source – Collected by the researcher from the internal communication source

of The Coca-Cola Company.

Figure 1.3 Awards won by The Coca-Cola Company

Source – Collected by the researcher from the internal communication source

of The Coca-Cola Company.

11
 The market survey of Indian industry by the

Blackstone Agency1 reveals that out of the overall

expenditure on advertising and promotions by the

industrial sector, Fast Moving Consumer Goods (FMCG)

companies spend about 70% of the total expenditure. A

bulk of this was on the mainstream media and the rest on

below-the-line promotional activity. Of this, the soft

drinks industry alone spends more than 8% of the total

advertisement expenditure in India.

This evinces the role of advertising in Indian Soft

Drink Industry. To understand how advertising has worked

in this industry, it is necessary to explore the

possibilities people have for thinking, feeling and

behaving towards various products and services in their

lives. This is not easy because, all individuals are

capable of being logical and illogical, objective and

subjective, obvious and subtle, simultaneously.

The extensive literature survey done by the

researcher evinces the fact that little attention has

1 Black Stone Survey Report, Brand Equity, Economic Times, 3rd July
2002.

12
been given by the Indian Soft Drinks industry to

understand the effectiveness of advertising in this

sector with the above said perspective. Hence, an attempt

has been made in the present study to understand the

various modes of product advertisements and promotional

activities adopted by Soft Drink companies in India, in

general and in the city of Bangalore, in particular.

The soft drinks market in India is dominated by two

of the worlds’ leading beverage companies, namely, Coca-

cola and Pepsi. Market reports indicate that 97% of the

soft drinks market in India is held by these two

multinational companies, rest being held by marginal

local manufacturers. The rivalry between the two

multinational giants for the market pie is classical and

historical. It is manifesting in huge expenditure on Ads

and, their aggressiveness to outwit each other is evident

in their Ads.

Marketing research has established that Coca-cola

and Pepsi score very high on brand awareness. These

brands have been built over a long period of time by a

continuous marketing innovation, by capturing the

13
imagination of consumers and through actual consumption

experience by consumers. The battle, here, is not to

create brand awareness, rather the battle is to hog the

share of minds and thereby, corner a major share of

throat. The battle is to steal market share through

competition. Their focus is on building brand

association, developing brand favourability and igniting

brand purchase intent. This has resulted in a significant

impact on the soft drink industry, as a whole.

The soft drinks industry in India constitutes of

industries manufacturing two types of soft drink

categories, namely, Carbonated Soft Drinks (CSD) and

juices and powder drinks. CSD dominates the soft drinks

market with 85% share and the remaining 15% is held by

juices and powder drinks. It is because of this dominant

role played by CSD in the soft drinks industry in India,

there is a need to understand the CSD category.

14
1.1.1 CSD Category

Consumption of Carbonated Soft Drinks in India has

increased from 75 million cases in 1993 to 450 million1

in 2005 and estimated to grow at a CAGR2 of 21%3. This

factor makes the CSD category a promising area for

analyzing the determinants of their advertising

intensity. Hence, CSD is still one of the leading sectors

in FMCG sector that has been growing consistently.

Tollison, Kaplan and Higgins (1991)4, observe that

consumers prefer various beverages differently on

different occasions. Advertisement plays a significant

role in the competition with the other beverages by

accentuating benefits that appeal to different

demographic and lifestyle segments. Given the inter

sector competition with other types of drinks and the

intense rivalry among several soft drink brands, the CSD

market’s total national advertising expenditure is

1 Sourced from The Coca-Cola Company internal sources.

2 Cumulative Annual Growth Rate.
3 Sourced from the Coca-Cola Company internal sources
4 Tollison, Robert D., David P. Kaplan and Richard S. Higgins
(1991), “The Economics of the Carbonated Soft Drink Industry”,
New York, NY: Lexington Books.

15
relatively high. To add to the complexities of the

industry has been the presence of large number of local

soft drink manufacturers1 in Rajasthan, Gujarat, Kerala,

Tamil Nadu and Goa.

Of late, the CSD category is on the decline due to

consumers moving from beverages to health drinks. The

category is also dogged by negative media coverage as

having unhealthy and higher levels of pesticides.

Despite this, the potential in this category is

undisputed. Hence, this is the appropriate time to

understand the dynamics of consumer preference and find

ways to draw consumer attention and interest towards Soft

Drinks category, in general and CSD, in particular.

A fact about advertising and marketing of any brand

or store is that customers have very limited attention

span, devote little time or effort to processing

information about brand or stores; and they have access,

desire or ability to easily retrieve only a few bits of

information about brands or stores included in their

1 Local soft drinks makers who make unbranded soft drinks like
crush soda.

16
long-term memories (Kassarjian, 19811; Olshavsky and

Granbois, 19792). A consumer’s top of mind brand or store

name associations with a few bits of information, such as

‘most reliable”, ‘lowest overall prices’ are simply

related to his or her shopping and buying behaviour. This

is more relevant to Indian Soft Drinks Industry in

particular.

The broad concern of the present study is to find

out the effectiveness of Ads and to give insights into

consumer behaviour. The study is envisaged to enable

marketers to arrive at the right mix of strategies for

soft drinks industry on one hand and reduce advertising

wastage on the other. The research study sets out to

address some of the concerns of the industry, namely,

effectiveness of Celebrity endorsements on brand

preference and purchase intent, linkage between visual

attention to brands and recall of these brands at the

point of purchase.

1 Kassarjian, Harold H. (1981), “Low Involvement: A Second Look.” In

Advances in Consumer Research, Vol. 8, Kent B. Monroe, ed. Ann
Arbor, Michigan: Association for Consumer Research.
2 Olshavsky, Richard W., and Donald H. Granbois, “Consumer Decision-
Making-Fact or Fiction?”, Journal of Consumer Research, 6, 3,
pp. 93-100.

17
1.2 Need and Significance of the Study

Any study on effectiveness of advertising without

understanding consumer behaviour would be incomplete.

Hence, there is a need to understand the effectiveness of

Ads on Consumer Behaviour.

Review of literature in this area of study evinces

the fact that a number of studies have been made on

effectiveness of Ads, brand preference and brand recall,

in general. Not much work has been done on the

effectiveness of Ads in Soft Drinks industry, in

particular, and especially in India. Most of the studies

on effectiveness of advertising have been conducted in

the Western countries. India, being a future market

(along with China) for the world business community, the

scope for studies of this kind is very vast. Due to

globalization, there is an impact on the consumer culture

also, because of high use of Celebrity endorsements in

Ads in the Indian context. Further, effectiveness of

celebrity endorsements on brand preference is an

important area, which is construed to be highly effective

and taken at face value. It is very critical to

18
understand the impact of celebrity endorsement in the

Soft Drinks industry. This made the researcher to choose

this subject for the present study.

Another area of concern is to understand the linkage

of visual attention to brands at the point of purchase

and buying behavior. Point of purchase advertising comes

as a boon as it performs the dual role of inducing sales

and achieving communication objectives of the company.

A look at the Indian retail industry would reveal

that there is a retail revolution happening and the whole

industry is experiencing a paradigm shift. Added to

this, the revolution in advertising would result in a

major impact on retail business. Fernandes [Link] (2000)1

in the McKinsey’s report estimate, that if retailing

industry continues to grow at its present rate, it would

touch 300 billion dollars by the year 2010. The whole of

retail landscape is changing. These changes are being

driven by the entry of large business houses in retail

spearheaded by stores like Reliance, Pantaloons, Life

1
Fernandes M, Gadi C, Khanna A, Mitra P and Naryanswami S (2000),
“Retailing Comes of Age”, The McKinsey Quarterly, No. 4, pp.
95-102.

19
style, Shoppers’ Stop, Food world, Crossword and Planet

M. There are perceptible changes in the retail format,

product lines and the extent and type of communication to

induce consumers.

Despite all these, smaller retailers have continued

to grow and have shown absolute in adapting to the

changing retail landscape. Companies cannot ignore these

conventional ‘kirana’1 outlets, as they constitute more

than 70% of the retail space. The small sized outlets on

one side, and the large ‘mega mall’ outlets on the other

side, pose a major challenge to the marketers in terms of

reaching the consumers.

Hence, the current study is envisaged to throw light

on the role of Point of Purchase Ads in inducing impulse

behavior and resulting in consumption of the brand

advertised.

Besides the theoretical contribution, the study aims

to have a high managerial relevance. It offers a good

1
Kirana outlets are small grocery shops found in lanes and by-lanes
of Indian cities.

20
understanding of consumer perceptions and help managers

and marketers to get the best return on investment on

Ads. The empirical results provide managerial insights

into how ads can contribute effectively to gain market

share, become a category leader and sustain leadership

position.

The researcher’s interest in the subject stems from

the fact that he is working for the industry and is

observing the developments very closely. The contribution

of the study to enhance the professional knowledge is of

paramount importance to the researcher and his company

and in turn, to the industry.

The present study is aimed at accomplishing certain

specific objectives that are discussed in the subsequent

sections of this chapter.

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1.3 Objectives of the Study

The effectiveness of ads and challenges faced

by the soft drinks industry in reaching to consumer needs

to be analyzed and empirically resolved. The present

study aims at answering some of the questions relating to

effectiveness of ads, celebrity endorsements and ad

effectiveness, visual attention to ads at the point of

purchase and purchase behavior. Hence, the major

questions posed in the present study are:

Q1: Do Point of Purchase Ads have any significant

influence on attitude towards advertisement, towards

brand and purchase intent?

Q2: Do Ads with Celebrity cue have any significant

influence on attitude towards advertisement, towards

brand and purchase intent?

Q3: Do Trade Channel, Age, Store Category, Gender and

Income of the location have any significant

moderating influence on attitude towards

advertisement, towards brand and purchase intent?

22
 In order to answer the above questions, soft drinks

industry has been chosen as the industry for current

research work entitled, “Effectiveness of Advertisement-

A study of Soft Drinks in Bangalore City”.

Specific objectives, which are critical to the

present study, are the effectiveness of Celebrity

endorsement on brand preference and purchase intent, and

to study the linkage between point of purchase

advertisement and impulsive purchase behavior.

1.4 Hypotheses of the Study

In order to accomplish the above objectives, a

research framework was formed and the study set a few

hypotheses based on the findings of earlier studies and

researcher’s experience in soft drinks industry. The

hypotheses set for the present study are mentioned below:

H1: There exists a significant relationship between

Advertisements with Celebrity cue and Attitude
towards Brand advertised.

23
H2: There exists a significant relationship between
Advertisements with Celebrity cue and Attitude
towards Advertisement.

H3: There exists a significant relationship between

Advertisements with Celebrity cue and Purchase
Intent.

H4: There exists a significant relationship between

Point of Purchase Ads and Attitude towards Brand
advertised.

H5: There exists a significant relationship between

Point of Purchase Ads and Attitude towards
Advertisement.

H6: There exists a significant relationship between

Point of Purchase Ads and Purchase Intent.

H7: There exists a significant difference among

Moderating elements towards Outcome elements.

Testing of hypotheses called for collating Primary

and Secondary data. Primary data was collated through

in-store observation and subsequent personal interviews

on the basis of a tested questionnaire.

24
1.5 Locale of the Study

The sample data was collected from different

clusters of Bangalore during various periods to cover

seasonality. The study was limited to the city of

Bangalore for two reasons:

1. Bangalore is one of the fastest developing

cities in Asia, tipped to be a city of the

future. It is truly cosmopolitan in nature as

one can find consumers from all walks of life,

with different life styles and culture.

2. Being a cosmopolitan city, Bangalore has a

large scope for field experiments.

A total of 305 consumers at 15 Outlets were chosen

from five different geographical areas of Bangalore for

observation and field experiment as required by the

present study.

25
1.6 Chapter Scheme

The Thesis is presented in six chapters. The first

chapter ‘Introduction’ examines the rationale of

advertising to highlight the role of advertisement in the

Soft Drink industry in India, in general and Carbonated

Soft Drink category in particular. It enumerates the

need for current study and a clear framework of the study

is spelt out, to understand the overall implication of

the study.

The second chapter titled ‘Review of Literature’

highlights the objectives and findings of past studies

conducted in the related areas of Advertising and

Consumer Behaviour. A detailed examination of both

theoretical and empirical studies is presented in this

chapter. This has helped the researcher in building a

strong conceptual framework for the present study.

The third chapter titled ‘Conceptual Framework’

explains the propositions made, the major factors

influencing effectiveness of advertising, the key

variables, and the hypotheses set for the present study.

26
 The fourth chapter namely ‘Research Methodology’

describes the statistical tools used in the thesis for

primary data collection.

The fifth chapter titled ‘Data Analysis and

Interpretation’ presents a detailed account of

statistical analysis. The results are discussed vis-à-

vis the hypotheses formed at the beginning of the study

and meaningful inferences have been drawn from the

results.

The sixth chapter is a concluding chapter titled

‘Conclusion and Recommendations’. This chapter brings out

the interpretations made based on the results of previous

chapters and includes a concluding part of the present

study.

Bibliography has been presented after the last

chapter of the Thesis followed by a copy of the

Questionnaire which has been presented at the end of the

Thesis in Annexure – I.

27