Thesis Chapter 2 - The Role of the Internet Advertisements to the Buying Behavior of Hong Kong Consumers

Chapter 2. Literature Review

 

2.1 Chapter Overview

The wide ranges of literatures related to marketing specifically on marketing communications as well as various phenomena affecting its entirety are extensive. Given with this fact, this chapter goes over the related literatures conducted on the area of study.  By boarding on such exploration, the research may be guided accordingly by initially discovering where the research is coming from, what and how much have been studied regarding the topic, and what it is yet to tackle.  Besides providing background to the study, this chapter provides the necessary backbone and support in order for the research to stand credible.

By surveying the past publications and researches related to the study, a historical perspective may take place. The researcher also gained an idea on how such venture has been explored in the past.  In this manner, this study may be able to reflect, compare itself, learn from setbacks and produce a stronger and more efficient study. The literature review also provides the research a rich source of data, both new and old, that will enhance and enrich the study (and the direction it will plan to undertake) even the more. References from this segment of the paper are a product of broad researching and information retrieval.

2.2 Advertising + Internet = Internet Advertising

Advertising is among the most popular technique that every global company uses in order to be made known by the international markets and consumers (Onkvisit & Shaw 1999). Advertising is viewed as a tool that facilitates a consumer’s decision-making by making available information that will provide a buyer a line of choices from which he will pick those products and commodities that will satisfy his need state (Tuerck, 1978). Furthermore, advertising also helps promote market competition which, in turn, widens the range of product options and brands that are brought to the attention of the consumers. This, according to Tuerck advertising minimizes, if not eradicates, the possibility of one marketer to gain sole control and domination over one market segment. There has been extensive collection of media studies and literature that proved the enormous benefits of advertising not only to the communication aspect but as also in the business sector. With the identified changes in the business communication trends, the popular advertising theories and practices are also changing.

Advertising is bringing the company’s products and services to the mindset of the target market (McNamara 1999; Allen & Gale 2001;and Goddard 2002) using different mediums like broadcast (TV and radio) print (newspapers and magazines) and new media (internet and the web. It refers to the paid promotion of goods and services through a sponsoring organization using statements and slogans that are appealing to the target people. This kind of advertisement is also considered as a myth about myth (Wernick 1994). The process has been recognized as a “major vehicle of social communication in modern Western society (p.122).” There are commonly three main objectives of advertisements: first, conveying relevant information regarding a particular product or service; second, persuading consumers to purchase the advertised product; and third, keep the company under the watchful eyes of the public (Hancock et al. 2002). Meanwhile, Barnard and colleagues (2002) identified several very different tasks of advertising that sometimes more or less simultaneously done namely: to promote a new brand; to entice additional recruits to an established brand; to encourage that brand's existing clientele to stay; to tempt these existing customers to buy it more; and to encourage buyers to pay more. In a general sense, advertising is being utilized to be able to impart to the consumers the availability of a particular product. In a way, it is also able to provide critical information regarding the product. When an advertising campaign is achieved effectively, this can lead to an increased demand for the product.

In using global advertising, companies hope to create consistent brand images worldwide, spend less marketing resources in producing unified appeals, and use only one or a few international agencies to handle the company's entire advertising (Harris 1994). Corporate brand refers to the overall characteristic of the organization, which provides: marks denoting ownership; image-building devices; symbols associated with key values; means by which to construct individual identities; and a conduit by which pleasurable experiences may be consumed (Balmer & Gray 2003). It communicates the brand’s values, afford a means of differentiation from their competitors, and enhance the esteem and loyalty in which the organization is held by its stakeholder groups (Balmer 2001). Today, multinational companies as well as local ones employ both global and local advertising methods (Friedman 1999). On the contrary, most advertisements nowadays are either perceived as merely stating opinions or portraying a product or service in a totally distorted idea away from reality (Saunders 2001). It is this alarming situation regarding the true objectives of advertising that have led to an increase in the responsibilities that companies and advertising firms face (Gertler & Gilchrist 2004).

Meanwhile, marketing communications and sales strategies are dependent to the strengths or weaknesses of the corporate brands (Balmer 2001 and De Pelsmacker & Kitchen 2004). If the positive attributes of the corporate brand are successfully publicized, then marketing and sales strategies can use that good promotion to the corporation’s advantage. For instance, the advertisements of the Pepsi-Cola may include information regarding their reputation as a company that helps maintains a healthy environment for everyone. Because this is the company’s way of showing responsibility to the community, the elements related to those traits are likely to be shown in advertisements. However, this type of relationship between reputation and marketing and sales strategies is not widely researched. In connection, advertising is always directed to convey the brand’s message to the consumers and effectively established its market position.

It is recognized that most business people prefer practical rather than theoretical model or application (Kover 1995). There are only occasional circumstances that a crossover between theory and practice occurs. In this case, the marketing communications of an organization holds an amalgamation of both. Formal theories of communication and marketing are studied and then applied afterwards. In advertising theories and consumers, almost all authors acknowledge the difficulty of devising theory on how advertising works and how to measure its effectiveness. This is because there are divergent factors to be considered in doing such. Aside from internal and external considerations, other dimensions are also undertaken so as to provide the most valid or relatively acceptable generalization.

In terms of evaluating the effectiveness of advertising programmes, organizations and companies like HKTB can use the RAM theory. The Relevance-Accessibility Model of Advertising Effectiveness (RAM) presumes that the primary purpose of advertising is to present information that will give the brand a relative advantage over competing brands at the time of brand choice (Mitchell 1993). The RAM has two assumptions: firstly, elements of the advertising message must be accessible at the time of brand choice to be effective; and secondly, advertising information must be relevant to be effective. The RAM establishes guidelines for picking the most effective advertising message strategy from a menu of strategic options. More specifically, because the ultimate measure of advertising effectiveness is brand choice, the RAM is concerned with predicting when a given message strategy is most and least likely to influence brand choice (Mitchell 1993).

Advertising impressions may be visual, verbal, or emotional. The RAM views brand attitudes, judgments, or preferences formed at the time of advertising exposure as potential mediators of brand choice (Mitchell 1993).  There is what is called the “pure effect” – a level that refers to "free-floating" feelings and emotional responses that are consciously unlinked to any specific brand attributes, benefits, and past promotional (e.g., advertising) or usage experiences, at least at the time of brand choice. Such affect provides no real evidence of either absolute or relative product quality, but consumers may interpret it as such. When individuals make decisions based on pure affect, they are reacting solely to a feeling, not on the information that led to that feeling (Mitchell 1993). Positive feelings intrinsically motivate approach behavior; negative feelings motivate avoidance behavior. Thus, the RAM theory includes the essential role of consumer behaviors.

Today, the traditional means of advertising products and service through mainstream media such as broadcast and print are considered quite obsolete. The emergence of various new technologies like the internet somewhat changed the theory and practice of advertising. Also, the varying consumer demands and their increasing knowledge about products and services prompted every organization to re-evaluate their existing marketing communications strategies. Thus, there is a need for senior managers to understand the underlying mechanisms on the concept of advertising. The need to understand the essential facts of advertising leads to improved application and implementation of marketing communications strategy.

Meanwhile, the cyberspace now touches all lives.  True enough, the cyberspace and its related mechanisms are rapidly transforming and enhancing many aspects of contemporary society and living. Accordingly, cyberspace is synonymously referred to the Internet or the World Wide Web (WWW) (Sterling 1992). It is primarily and quickly becoming the mainstream media because of the many positive effects that it has on the way that users communicate, receive and disseminate information, or how people use it to gratify their needs. With the perceived efficiency of cyberspace, there are also existent drawbacks that deviates its potential goodness. Because of its powerful prospective, the cyberspace certainly changes how people live and view the society (Turkle 1995).

As stated, today’s businesses are obliged to go with the trends brought about by modernization and globalization (Kim 2001). Among the important contributors to world confederacy and the global economy are the advances in computerization, telecommunications, and other forms of information technology. A shift of focus and interest from the local market to the international setting has demanded innovation not just in corporate leadership as new information, forms of communication, and technology. These are being offered to be utilized in encouraging and reinforcing interaction among individuals and the operating enterprise. The existence of these useful mechanisms in the business contributes to the eventual growth and achievement of company’s strategic objectives. Further, the use of communications, Information Systems (IS) and Internet technologies provides countless of benefits. Aside from increasing the operational efficiency of the business, there are other advantages. Examples are providing opportunities for development; letting the business achieve its objectives, making the business accessible, being able to cater variety of clients, doing different types of transaction, record keeping, security of data, organizing different essential and confidential information.

In his book, Steinbock (2000) documented the birth of internet marketing communications. The first years in which include home pages to websites and portal notes. Accordingly, the launch of the World Wide Web (WWW), Mosaic, and an insistent Internet upstart called Netscape, in less than a year, would change the advertising as well as marketing industry composition that had virtually guaranteed mass marketers' effectiveness for the past four decades. Then, here comes relationship marketing and business-to-business marketing (B2B). Consumer marketing on the web becomes a part of the modern day culture. Ad banners and online communities were established. The World Wide Web (WWW) was used into global marketing and global marketer emerged.

The Internet, as one of the most popular form of new mass communication technology, has long been of full use and advantage to all sorts of businesses especially those who are in need of efficient and wide market reach on which to channel their promotional messages (Kameya, & Zmija, 2002). Business, information and entertainment have been communicated with ease through such technological revolutions. The Internet is changing the way we do business, whether it’s finding new streams of revenue, acquiring new customers, or managing a business supply chain (Kameya, & Zmija, 2002). E-commerce removes the geographical separation between regions, and made dealing with foreign trade a snap . As such, the arrival of broadband Internet means that more and more people will shop online – suggesting there is plenty of room in the market for the convenience store and its competitors. Service differences are likely to smooth out, making it more likely that people will choose on the basis of price and brand loyalty. Moreover, e-marketing is a powerful tool that could be exhausted by the organizations in achieving marketing its objectives through the use of available and up-to-date electronic communications technologies.

2.3 Online Advertisements in Hong Kong

According to the Nielsen’s Quarterly AdRelevance report in 2008, spending on online advertisement in Hong Kong had reached HK$ 172 million in the first quarter of 2008. The Computers and Electrical sector has the biggest share with a total of HK$ 30 million investments on online advertisement. More than 1,000 advertisers in Hong Kong promoted their products and services online in the said quarter of the year, with more than 2,800 campaigns and 5.5 billion advertisement impressions. Table 1 shows the summary of online advertisement activities in Hong Kong based on the result of the study of Nielsen (Nielsen, 2008.

Table 1 – Hong Kong Online Advertising Activity

Number of advertisers	1,080
Number of campaigns	2,896
Average number of campaigns/advertisers	2.6
Number of banners	6,019
Average number of banners/advertiser	2
Total impressions	Over 5.5 billion
Total advertisement expenditure	Over HK$172 million

Source: (Nielsen, 2008)

 

 

2.4 Internet Advertisement

Internet or online advertising is a type of promotion which uses the Internet or the World Wide Web in order to express purpose of delivering marketing messages in order to attract customers. The online advertising industry is expected to maintain its stability and continue to grow until 2011. During the period of 2007 to 2011 the compound annual growth rate of Internet advertisement is expected to increase by 17.4%, which will touch the $197.11 billion mark. As a result, it is expected that the online advertising spending will overtake the TV advertising market. This is because of the increasing number of active Internet users, increasing awareness, growing rate of broadband subscription and the growth of e-commerce.

Due to this popularity, the effectiveness of online advertising and its influence over the overall behavior of the consumers has gained popularity in terms of marketing field. Since the Internet had opened up to the general public way back mid of 1990s, a database which consists of repeated customers who visit to a certain website, together with the individual advertising exposures can be obtained via cookies in order to track users (Kim, Kwon and Chang, 2010).

2.5 Impact of Advertisements on Customer Behaviors

Prior researches supported that attitude of the customers toward advertising directly or indirectly influence their purchasing or buying behavior (Mitchell and Olson, 1981). According to the study of Mehta (2000), consumers with a more favorable attitude or perspective about advertising are more possibly to recall the brand and be persuaded or motivated by the advertising. In addition, the study of Nedungadi, Mitchell and Berger (1993) explained that the attitude of the people towards advertising influence their motivation in seeking for further information regarding the brand, the product or the service. The said impact is particularly strong in the context of online or Internet advertising. Consequently, a more favorable attitude toward advertising is commonly connected to a more positive advertising evaluation – such as being informative, fun, and acceptable. As a result, it can help to increase advertisement recalls and higher interest of the customers in buying or purchasing (Bauer and Greyser, 1968; Mehta and Purvis, 1995).