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By Yadira Sankatsing Implications of media fragmentation for the advertising industry with special attention to the Philips account strategy of DDB By Yadira Sankatsing Implications of media fragmentation for the advertising industry with special attention to the Philips account strategy of DDB Final Thesis for the Business Administration Master of Science Program at the University of Twente Amsterdam, September 2007 By Yadira Sankatsing Final Thesis for the Business Administration Master of Science Program Track: International Management of Organisations School of Management and Governance, at The University of Twente By Yadira Sankatsing st# 0014281 Brouwersgracht 166-2 1013 HB, Amsterdam +31 0654330813 [email protected] University of Twente, September 2007 Principal: Kathy McLay, International Account Director, DDB AMSTERDAM Graduation Committee: - Ir. S.J. Maathuis - Prof. dr. ir. E.J. de Bruijn Executive Summary The world is undergoing a period of unprecedented accelerated technological innovation and these innovations have led to the demise of advertising as historically practised, and created a whole new way of communicating with potential consumers. This study forms an in-depth analysis into the future of advertising as a consequence of media fragmentation that rises from these rapidly evolving technological innovations by means of qualitative research. It synthesizes a vast body of theory in fields as diverse as advertising theory, consumer relationship models, competitive strategy, media development theories (including media fragmentation and media interaction) and new advertising techniques. Through a longitudinal analysis of the different individual media and of the evolving interaction between these media, it becomes possible to understand the mutual relations and development of the media from the very beginning and the consequent leaps in their evolution from an advertising perspective. This analysis of the individual media is fundamental to understand the current advertising world from the perspective of the individual media contributions as well as that of their integrated media effects. The findings of this study point towards two interrelated concepts: “consumer centrism” and “consumer engagement”. To companies it has become clear that fragmented media, clever and articulated consumers and the rise of freethinking and savvy audiences, are factors that have helped create an atmosphere in which advertising’s fundamental mission has switched from selling products and services to managing consumer experiences. Where once, advertisers bombarded their consumers with messages, recently they have changed this approach to that of crating value for people that extends beyond the immediate moment of consumption, through experience-based advertising. This new approach heralds the arrival of a new experience economy era, an age which requires a new philosophy of advertising that prioritizes the consumer’s experience of product brands. The focus of this study lies on actual cases and campaigns in order to keep the theory as close as possible to the reality, and culminates in the application of the findings to the specific strategy of the Worldwide Philips account of DDB. 1 of 56 Table of Contents Executive Summary...................................................................................................... 1 1. Introduction ............................................................................................................. 3 1.1 Context............................................................................................................... 3 1.2 The Challenge..................................................................................................... 3 1.3 Problem Definition & Research Questions......................................................... 4 1.4 Research Approach ............................................................................................ 4 1.5 Methodologies.................................................................................................... 5 1.6 Structure of the Study ....................................................................................... 5 2. The Advertising Industry ......................................................................................... 7 2.1 Advertising ......................................................................................................... 7 2.2 Advertising and the Media ................................................................................. 9 3. The Media Environment ......................................................................................... 11 3.1 Media Fragmentation....................................................................................... 11 3.2 The Media Interaction Cycle ............................................................................ 12 4. Individual Media Developments ............................................................................ 15 4.1 Radio ................................................................................................................ 15 4.1.1 Radio’s appeal as an advertising medium.........................................................16 4.1.2 What the future has in store for the radio ........................................................17 4.2 Video & Television............................................................................................ 18 4.2.1 Television and its advertising value .................................................................19 4.2.2 What the future has in store for Television advertising......................................20 4.3 Outdoor Ads ..................................................................................................... 23 4.3.1 The ad value of outdoor advertising ................................................................24 4.3.2 Predictions for the future of outdoor advertising...............................................24 4.4 Print.................................................................................................................. 25 4.4.1 Newspaper’s and magazines’ ad potential ........................................................25 4.4.2 Predictions for the future of print advertising ...................................................26 4.5 The Internet ..................................................................................................... 26 4.5.1 The ad potential of the Internet ......................................................................27 4.5.2 What the future holds for Internet advertising..................................................27 4.6 Other ................................................................................................................ 29 4.6.1 Event-Marketing.............................................................................................30 4.6.2 Viral Advertising.............................................................................................30 4.7 Implications ..................................................................................................... 32 4.7.1 Factoring in the Media Interaction Cycle ..........................................................32 4.7.2 Emerging trends ............................................................................................32 5. Experiential Advertising......................................................................................... 35 5.1 Understanding the Consumer .......................................................................... 35 5.2 Creating Experiences ....................................................................................... 36 5.3 What Has Been Done on the Experiential Arena ............................................. 37 6. Conclusions ............................................................................................................ 40 7. DDB Philips Account............................................................................................... 43 7.1 Relevance for Philips........................................................................................ 43 7.2 Strategy Proposal & Implementation.............................................................. 44 8. Discussion .............................................................................................................. 47 9. References.............................................................................................................. 50 10. Appendices ........................................................................................................... 54 2 of 56 1. Introduction “Rules are what the artist breaks, the memorable never emerged from a formula.” - Bill Bernbach, 1989. 1.1 Context Talk about changing times, the advertising world is changing at a breakneck pace and advertisers are having a hard time just keeping up, the boundless possibilities provided by the rapidly evolving media environment are as yet uncharted, and the rise of the modern demanding critical consumer has only made competing in this dynamic industry even more complicated. Every new media development is a double edged sword, as the advertising agencies realize yet again that they have to uncover all the potential of the new channel because if they fail to do so, or hesitate for an instant too long, this potential can turn against them. These dynamic developments raise a number of questions that need to be addressed urgently by the advertising industry.
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