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Systems approach to advertising control 1969

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SYSTEMS APPROACH TO ADVERTISING CONTROL by GARY GRAFTON B. A., University of V i c t o r i a , 1965 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION i n the Faculty of Commerce and Business Administration We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA June, 1969 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l m a k e i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d S t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may b e g r a n t e d b y t h e Head o f my D e p a r t m e n t o r b y h i s r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t b e a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department of Commerce and Business Administration The U n i v e r s i t y o f B r i t i s h C o l u m b i a V a n c o u v e r 8, C a n a d a Date June 25, 1969. ABSTRACT This paper was written to investigate whether or not systems theory could be usefully applied to the control of advertising programs i n business. A theoretical framework integrating systems, mass communication and adver- t i s i n g was developed and then applied to an existing real-estate marketing firm. It was concluded that the systems approach can be useful in a prac- t i c a l s i t u a t i o n but a great deal of work remains to be done in this area. The paper closes with a number of suggestions for future research. TABLE OF CONTENTS CHAPTER PAGE L i s t of Tables i i L i s t of Figures i i i Acknowledgement i v INTRODUCTION 1 I. GENERAL SYSTEMS THEORY 3 I I . COMMUNICATION THEORY 13 I I I . THE NATURE OF THE ADVERTISING SYSTEM 23 IV. ADVERTISING CONTROL 34 V. PRACTICAL APPLICATION OF CONTROL THEORY 54 VI. CONCLUSIONS AND SUGGESTIONS FOR FURTHER RESEARCH 74 BIBLIOGRAPHY 78 i i LIST OF TABLES TABLE PAGE I. General Systems Dimensions 9 I I . Information Received by The Company 65 i i i LIST OF FIGURES FIGURE PAGE 1 General Systems Module 9 2 Comparison of Models 13 3 Face to Face Communication Model 14 4 Expanded Face to Face Communication Model 15 5 Face to Face Communication System 16 6 Mass Communication System 20 7 Simplified Advertising System 24 8 Advertising System Structure 27 9 Advertising Control System 31 10 Control Model 35 11 Net Value of Information 43 12 Typical System Control Process 50 13 General Advertising Control Chart 52 14 The Company Organization Chart 58 15 The Company's Total System Level Control Process 64 16 The Company's Advertising Department Subsystem Control Process 69 17 The Company's Media Subsystem Control Process 70 18 The Company's Master Advertising Control Process 72 iv t ACKNOWLEDGEMENTS The author is indebted to a number of people who were of invaluable assistance i n the preparation of this thesis. Specific thanks are due to Dr. J . Sutherland who made his manuscript on systems theory available when i t was s t i l l i n draft form; to the Company management who w i l l i n g l y supplied the information necessary to apply the theory to practice; and to Mrs. J . Preston for the accurate but rapid preparation of the manuscript. To my thesis advisor, Dr. S. M. Oberg goes the major credit for this paper. Without the hours of his time spent i n discussions and constructive c r i t i c i s m , the process of writing this thesis would not have been kept so well under control. His a b i l i t y and willingness to keep my efforts directed toward the objective greatly aided i n the completion of this project. The paper i s dedicated to my wife Judy, who through her understanding and patience, provided the time for such a lengthy project. INTRODUCTION The topic of this thesis i s systems, mass communication and adver- t i s i n g . The task i t hopes to accomplish is the integration of these three areas into a framework which can be usefully applied i n a p r a c t i c a l s i t u a t i o n . The choice of the topic was the result of the author's desire to read in the f i e l d of advertising and mass communication and also a result of the sugges- ti o n of his thesis advisor that melding systems theory with the other.two areas might prove f r u i t f u l . The three subjects are under considerable scrutiny at the moment with Marshall McLuhan at the height of his popularity, Vance Packard s e l l i n g as well as usual and the marketing journals (King, 1969, p. 84; Stasch, 1969, p. 12) featuring numerous a r t i c l e s on systems analysis. One of the d i f f i c u l t i e s with w r i t i n g on such a subject i s that volumes have been written on each one yet l i t t l e has been done on the integration of the three. The res u l t of this scarcity is that one must take an e c l e c t i c approach and pick and choose without a thorough knowledge of what is a v a i l - able. It i s expected that not everyone w i l l agree to the choice of references but at least, where possible, they are current. The purpose of the paper is to see i f the theory could be applied in practice as: ...theory without factual content offers l i t t l e promise of p r a c t i c a l application. Accumulation of fact without theoretical structure i s an uncertain foundation for an advancing knowledge and mastery of a f i e l d . (Alderson, 1957, p. 7) The development of the paper moves through the general case of systems analy- s i s , then begins to apply the concepts to mass communication and f i n a l l y refines them to the case of advertising and the control system. The last - 2 - chapter presents a specific example of how the theory might be applied in business. The information employed there is the result of two days of interviews with company management regarding their advertising practices. This data was supplied quite freely as the author w i l l be employed with the company with i n i t i a l responsibil i ty for advertising and promotion. In the f inal paragraphs, some conclusions are drawn and some suggestions for future research are enumerated. The paper begins with a discussion of general systems theory. CHAPTER I GENERAL SYSTEMS THEORY The r e l a t i v e infancy of systems theory as a body of knowledge has resulted in terminology which is used by many and understood by few. Since much of this paper concerns communication, i t is appropriate that we establish some common meaning for various concepts. With this mutually understood shorthand we should be able to set up a general theoretical framework which can be expanded to apply to our particular case of adver- t i s i n g systems. One of the main problems of contemporary systems l i t e r a t u r e is that terms take on different meanings and emphasis depending on which d i s c i p l i n e the author is discussing. In many cases, individuals within the same d i s c i p l i n e do not always agree on what constitutes the "systems approach". On one hand, the exposition i s couched more i n the language of the physical sciences and emphasizes cybernetics and models such as servo-mechanisms, whereas at the other end of the scale, the s o c i a l s c i e n t i s t s stress group phenomena, ecology, status and role expectations. Other perspectives besides the physical or behavioural also e x i s t . The internal relationships of the system's parts are investigated or the r e l a t i o n of the system to i t s environment or both facets at once. In short: ...the system concept has emerged as a most democratic i n s t i t u t i o n which is used by a l l regardless of race, colour, creed, c r e d i b i l i t y ...Like so many things held in common i t is abused by a l l , maintained by none. A public horse gated to everyman by indiscriminacy the system concept has become docile but d u l l , tractable but thoroughly i n s i p i d . (Sutherland, 1969, p. 4) Having found everyone g u i l t y of bias and ecclecticism, we are about - 4 - to commit the same crime, but the message is t h i s ; the "systems approach" means many things to many people and, therefore, before one can employ the specialized terminology i t must be defined. The choice of definitions and point of emphasis may not be approved by a l l , but in order for the paper to be meaningful, a framework must be selected and adhered to as much as possible. To choose an approach, one central question must be answered. What dimensions are important for our a n a l y t i c a l purposes? Since we w i l l ultimately be concerned with the administration and control of an advertising program i n a marketing environment, an ideal viewpoint would be to concentrate on general systems i n terms of thei r managerial t r a c t a b i l i t y . Fortunately, such a c l a s s i f i c a t i o n e x i s t s . One socio-economist (Dr. J. Sutherland of U.B.C.) is currently (Spring, 1969) wr i t i n g a book e n t i t l e d Socio-Economic Systems Analyses which adopts the point of view of the administrator and the analyst. Much of the following discussion stems from his work. The central concept i n Sutherland's theory is his "prime dimension", r e f l e c t i n g system manage- a b i l i t y , ranging from the mechanistic (deterministic) system, which i s a simple, predictable, easily managed e n t i t y , to the gestalt ( p r o b a b i l i s t i c system) which i s a highly complex, uncertain administrative nightmare. This prime dimension i s in turn the resultant of three basic system ch a r a c t e r i s t i c s , i t s ecology, i t s domain, and i t s dynamics. Each of these w i l l be examined i n some d e t a i l . The ecological dimension of a system refers to how i t relates to i t s environment—the. "interfaces" of the system that we can see from observing i t from the outside. I t i s "...the external configuration of the system." (Sutherland, 1969, p. 13) If the system has l i t t l e or no interaction with - 5 - the environment then i t i s closed. I f there is a great deal of interaction with the surroundings the system is open. Since marketing, and consequen- t l y advertising, interact extensively with the environment, we w i l l concen- trate on these open systems, recognizing that the closed system has essen- t i a l l y the opposite c h a r a c t e r i s t i c s . If an entity i s to exchange resources, energy or information with i t s surroundings, interfaces or channels of communication must exist which carry this interchange. Through these interfaces, an open system communes with i t s environment and can, therefore, adapt to changing external condi- tions. If the external f i e l d is very stable and predictable, the ecological state of the system w i l l be r e l a t i v e l y steady. However, i f the system occupies space i n a highly complex, rapidly changing mili e u , prediction of the systems behaviour w i l l be extremely d i f f i c u l t as the "...cause and effect relationships are confounded by the positive probability that the o r i g i n or destination of actions which affect the system (or are effected by i t ) l i e outside..." (Sutherland, 1969, p. 25) the system i t s e l f . From the administrative or control point of view then, since i t is usually d i f f i c u l t or impossible to control the environment (eg. the s o c i a l a t t i - tudes of a firm's customers) administration and prediction of an open systems behaviour i s p r o b a b i l i s t i c at best. In summary, the ecological dimension.of a system can be scaled on a continuum ranging from closed at one extreme to open at the other. The open entity has three main charac- t e r i s t i c s : (1) i t exchanges resources with i t s environment, (2) i t adapts to i t s environment, (3) i t may be predictable to only a very low level of accuracy - 6 - depending on the s t a b i l i t y of the environment. (Sutherland, 1969, p. 27) With very l i t t l e e f f o r t , i t i s possible to see some of the implications these characteristics have for control and administration. These w i l l be investigated i n conjunction with developing an advertising control program, i n l a t e r pages. The second basic measurement in Sutherland's analysis i s the domain dimension. The domain is the space that the system occupies i n the environ- ment. If the environment i s outside the system, the domain describes a l l that i s w i t h i n — i t can be analogized to a map showing the area, or geog- raphical boundary as well as the location and the relationship of the systems elements. In an open system i t i s the feature which adapts to and changes with the surroundings. The domain dimension can be placed on a continuum from one in which i t is easy to analyze and identify s p a t i a l relationships, to the complex e n t i t y , where the nature of unobservable portions or elements must be inferred from that which can be empirically analyzed. For example, media audiences of advertising are not t o t a l l y observable by the analyst and their reactions must be inferred from a sample of those audiences--yet a l l the message receivers are part of the advertising system's domain. Because of cost, one hundred percent inspec- tion cannot be carried out on a l l parts of the system and the reactions of the whole must be inferred from the sample. To the extent that the elements in a system are homogeneous, (eg. one market segment) the probability of predicting the behaviour of the universe from the behaviour of the sample w i l l increase. Also, i f the elements in the domain are symmetrical (eg. reactions correlated to age) the predictive accuracy w i l l be improved. In - 7 - other words, from the point of view of the administrator, the more the domain is observable, homogeneous and symmetrical, the closer w i l l predic- ted behaviour approximate actual behaviour and conversely, the more un- observable, heterogeneous, and asymmetrical the domain, the greater w i l l be the discrepancy between forecast and actual behaviour. The domain of an advertising system would obviously l i e closest to the latter situation. The last major characteristic of a system is the dynamic dimension i which introduces a time factor into the theory. The dynamic analysis of a system is concerned with what happens between successive snap-shots of a given domain...the structural changes which have taken place between time - t ^ ' a n c* time _ t2» for a given system. (Sutherland, 1969, p. 43) If the interval between time - t ^ , and - t ^ is relatively short, yet the changes that have occurred are significant, then frequent measurements or analyses w i l l have to be undertaken i f the cause and effect relationships are to be understood. Knowledge on the manner in which the system changes over time is important as: ...the control task demands knowledge about when, where, and how to intervene in the systems dynamics so as to stimulate lagging operations, dampen accelerating operations, or otherwise regulate the subject system's actions and reactions. (Sutherland, 1969, p. 48) The changes in a system can come from its internal operation or from external sources. A system is a group of elements which behave in some manner to achieve a goal and in the course of this action there must be different system states. Presumably in a closed system there would be defined limits as to the amount and rate of change. In an open system however, there w i l l be changes caused by variations in the environment. Here the rate and mag- nitude of change is only limited by the systems a b i l i t y to adapt. For both internal and external causes of changes, any periodic - 8 - fluctuations or regular behaviour patterns w i l l make the system outputs easier to predict and consequently control. The dynamic dimension thus r e f l e c t s the nature of change, from the almost s t a t i c system, to one exhibiting rapid, random fluctuations. In summary, we have three scales measuring different system charac- t e r i s t i c s in terms of their administrative complexity (See Table I.) The basic or prime dimension i s r e a l l y a resultant of the three system charac- t e r i s t i c s . Clearly the closer a system can be represented by a mechanism, the easier i t w i l l be to control. The objective of most administrators then would be to move their system as close as possible towards the mechanis- t i c e n t i t y . The above analysis has been based almost exclusively on Sutherland's theoretical framework. My abbreviated paraphrase has hopefully pointed out some facets which are important i n terms of controlling and administering systems i n general and this background w i l l subsequently be used as a jumping off point for examining communication systems and advertising. Before we leave the general discussion of systems, several s p e c i f i c points should be c l a r i f i e d , i n p a r t i c u l a r , the various elements within a system, and the manner i n which subsystems can be related. Since we have already been discussing a systems environment we w i l l define i t "...as a set of a l l objects, within some s p e c i f i c l i m i t , that may conceivably have bearing upon the operation of the system." (Optner, 1965, p. 36) In des- cribing the domain of a system, we discussed the position of elements within the area and this relationship of the components to the whole and to each other constitutes the structure of the system. The components or elements of a system are the input, output, - 9 - TABLE I GENERAL SYSTEMS DIMENSIONS Mechanism (Deterministic) Gestalt ( P r o b a b i l i s t i c ) Ecological - closed system, no environ- - open system, adapts to mental exchange and exchanges with environment Domain Dynamic observable, homogeneous symmetrical very slow, predictable change p a r t i a l l y obscure s heterogeneous asymmetrical rapid, complex, irregular change processor, control and feedback (See Figure 1). The input function provides Fi g . 1.— General systems module Environmental Constraints Noise input Processor output- Administrator Control -feedback a means of getting into the system, for sta r t i n g i t going, i t s objective or i n i t i a l energy. . The output function represents the results of the systems operation—what i s produced, consumer reactions and so on. Through feedback, the nature of the systems output is communicated back to the input function which - 10 - digests the information and makes appropriate changes i n the inputs. The processor is the means whereby the inputs become outputs. "The processor element of the system under study must be deduced by observing the system output when known inputs have been injected." (Vest, 1966, p. 136) In studying a computer system, the computer i s the processor; i n studying a democratic government systems, the inputs i . e . the desires of the elec- . torate (theoretically) are processed by the Government to produce output-- l e g i s l a t i o n . In an advertising system the processor under study i s by d e f i n i t i o n advertising. The remaining element of systems i s the control function. In a completely deterministic or mechanistic system, such as a thermostat, the output i t s e l f acts as the control mechanism when output becomes input through feedback and any necessary adjustments are made automatically. However, i n a p r o b a b i l i s t i c system or gestalt "...one about which no pre- c i s e l y detailed prediction can be given", (Beer, 1960, p. 12) an additional control element must be imposed to make discretionary decisions based on a comparison of actual and desired r e s u l t s . The environment i s not an element of the system but i t can influence open systems i n two ways. The deterministic aspects of the milieu such as laws, ethics, and company f i n a n c i a l resources, constrain the behaviour of the processor and govern the way in which i t functions. If these factors change, the result is a new system. The p r o b a b i l i s t i c factors i n the environ- ment interfere with and d i s t o r t the behaviour of the system and are conse- quantly termed "noise". Both aspects of the environment can be sources of system malfunction. One major area remains to be mentioned--the d i v i s i o n of systems into various levels or subunits. The c l a s s i f i c a t i o n of an entity as a system or a subsystem depends on the perspective of the analyst. I f the universe is a system, the world is a subsystem. I f a business firm i s the system we are studying, then marketing is a subsystem as are production, finance and so on. In other words, the appellation depends on your point of view as subsystems are "...the component processes necessary to the operation of a t o t a l system...." (Optner, 1965, p. 36) There are various ways in which subsystems can be structured i n r e l a - t i o n to each other and to the " t o t a l " system. Alderson (1957, pp. 75-78) i d e n t i f i e s four interrelationships: s e r i a l i t y , p arallelism, c i r c u l a r i t y , and c e n t r a l i t y . In a s e r i a l l y structured system, the subsystems are arranged in a sequence so that the output of one becomes the input of the next. The p a r a l l e l structured system allows two separate subsystems to operate inde- pendently of each other, although in some way the inputs and outputs must be related. In the marketing system, the mass media advertising subsystem and the personal s e l l i n g subsystem would be examples of p a r a l l e l structure. The t h i r d possible structure i s c i r c u l a r i t y and refers to "...a sequence of steps arranged one after another, but i n such a way that the process f i n a l l y returns to the point from which i t started." (Alderson, 1957, p. 77) In- formation-feedback systems would f a l l into this category. The last concept c e n t r a l i t y implies systems meeting at a location and processing inputs i n or out from that point. In a complex system of course, a l l of these structures may exist simultaneously depending on the le v e l of analysis. Vest (1966, p. 37) has commented on the position of subsystems in r e l a t i o n to the t o t a l system rather than to each other and c l a s s i f i e d the relationships into centralized or decentralized systems. In a centralized - 12 - process, one major subsystem has a dominant role whereas i n a decentralized system a l l major subsystems are of approximately equal value. One further set of relationships i s useful i n examining subsystems. Optner (1965, p. 35) uses the following terms i n a s l i g h t l y different context but they can be b e n e f i c i a l l y applied to subsystem relationships. Subsystems may be (1) functionally necessary to each other (eg. product and pricin g subsystems) (2) complementary to each other (eg. advertising and personal s e l l i n g ) or (3) redundant, where two subsystems perform essent i a l l y the same function or contradictory, when two subsystems are pursuing mutually exclusive goals. The t h i r d set of relationships should be eliminated from any administrative system except perhaps for "breakdown" insurance i n the f i r s t instance and internal competition leading to overall system optimi- zation i n the second. This concludes our discussion of general systems theory. We have i d e n t i f i e d two extreme system conditions for administration, the mechanism ( i . e . deterministic system) and the gestalt ( i . e . p r o b a b i l i s t i c system). We defined the environment external to the system, the elements within, and concluded by postulating various relationships between subsystems and the t o t a l system. With this background, we w i l l now look at communication and advertising i n a systems context. CHAPTER I I COMMUNICATION THEORY How can mass communication be viewed as a system? Can advertising as a special form of mass communication be examined i n a similar l i g h t ? The answer to these questions is a de f i n i t e affirmative. To-reach this conclusion i t w i l l be easiest i f we start by looking at the simplest com- munication model. Borrowing heavily from Schramm's c l a s s i c work, (Schramm, 1961, pp. 3-26) we w i l l look i n i t i a l l y at the process of face to face communication, elaborate this to mass communication and then in the next chapter refine the concepts in terms of mass media advertising. In any communication there must be at least three major components, a sender, a receiver and a message. This i s the most basic model and i t has i t s systems p a r a l l e l with input, processor and output. The analogy is not d i r e c t , as the communication model refers to where to behaviour is taking place (eg. in the sender) and the systems terminology refers to what is taking place (eg. input). Figure 2 makes the relationship more e x p l i c i t . F i g . 2-- Comparison of models Communication (where) sender >- message ^ r e c e i v e r Systems (what) input *-processor ^-output Keeping this difference i n mind w i l l help i n understanding the following paragraphs as the communication framework i s elaborated. - 14 - To r e i t e r a t e , the basic communication model has a sender, a receiver and a message. For example, the husband who is cutting the grass feels the pangs of hunger--a physiological stimulus; this he translates or encodes into symbols i n the form of words i f he c a l l s to his wife that he desires lunch. I f she hears and translates or decodes his signals (words in this case), there has been communication. I f she does not hear him, nothing has been communicated. If she decodes his message incorrectly and brings him a glass of water instead of a snack, the communication has been fault y . This model can be elaborated however, because from the reaction of the receiver, the sender receives feedback or information about the manner i n which his message was decoded--it has not been interpreted as intended. The same feedback process i s available to the receiver, who by answering or acting becomes a sender of a message and also receives feedback. In human communication then, the individual alternates between being a sender when he is talk i n g and a receiver when he i s l i s t e n i n g . Diagramatically i t could be represented as in Figure 3. Fi g . 3-- Face to face communication model Individual One Sender/ Receiver (adapted from Schramm, 1961, p. 8) - 15 - Besides the feedback that the sender acquires from the destination, the sender or source also receives feedback from the message i t s e l f . When speaking to someone, you l i s t e n to ensure that you are talk i n g at the right volume l e v e l ; i f you mispronounce a word you correct i t . You, therefore, have two types of direct feedback--one from the message sent and one from the receiver. The previous diagram can be expanded as in Figure 4. Fig . 4.-- Expanded face to face communication model (adapted from Schramm, 1961, p. 9) This information provides us with the basic format necessary to superimpose the systems concept onto the analysis. Face to face communication may be analogized as two s e r i a l l y con- nected subsystems with interlocking feedback loops (see Figure 5) where the output of one subsystem (sender) is the input for the other (receiver). On the ecological dimension, we have an open system where inputs may come from external sources, such as environmental ( p r o b a b i l i s t i c ) cues or they may - 16 - F i g . 5.-- Face to face communication system SENDER RECEIVER Environmental environmental Noise Constraints Noise constraints 1 • - INPUT — PROCESSOR OUTPUT input >- processor *» output- t t 1 FEEDBACK-* 1 L •feedback• • FEEDBACK- come from within the system (eg. subsystem outputs). Whatever the stimulus, i t i s decoded as input i n the sender subsystem and then processed or inter- preted subject to the control mechanism. The information that has been interpreted i s encoded as output i n the form of a message. The receiver subsystem i s also open and, therefore, besides the output of the sender sub- system, i t may also receive input or noise from sources outside the communi- cation system. These decoded inputs are then processed or interpreted and a response or output i s encoded which is monitored as feedback for the t o t a l system. The individual feedback from each subsystem i s , of course, the resul t of monitoring the respective outputs. The variance between the message as encoded by the sender, and the resultant decoding by the receiver, can be caused by many factors. Since human communication i s an open system, outside interference of "noise" may cause d i s t o r t i o n . In addition, the environmental constraints on the pro- cessor may change, resulting i n a new system. On the other hand, internal factors have a major influence on this divergence. Encoding implies the process of translating concepts or impulses into signals or symbols. For - 17 - example the sender subsystem output that "This snow is cold", contains two basic symbols, standing i n one case for a physical entity—snow, and i n the other case for a physiological sensation—cold. For the message to be interpreted as intended, the symbols must have the same meaning for both the sender and the receiver. The word "cheap" may mean low-priced to a communicator but "worthless, shoddy" merchandise to his audience. Experience, culture and a host of other factors determine the relationship between symbols and their interpretation. The message must be encoded such that i t is under- stood by both sender and receiver. You must know the background of your audience. In systems terminology, the processor elements i n both subsystems must have been developed on common experience so that when the output of one becomes the input to the other, the manipulation of the symbols by the processor w i l l produce the correct output or response. In summary then, face to face communication can be regarded as two s e r i a l l y connected subsystems where the output of one is the input for the next. For the sender subsystem to produce the desired response in the receiver subsystem, the signal generated must have a common meaning to both e n t i t i e s . When does communication become mass communication? Certainly a large heterogeneous audience i s implied, but how large? A professor teaching a seminar group of four or f i v e i s involved i n face to face communication. He would be reasonably certain as to how or i f his message was accepted as he i s receiving direct feedback from each person i n the form of questions, comments, or yawns. However, that same professor lecturing to a class of two hundred is indulging i n mass communication and r e l i e s on indirect feed- back in the form of examinations and papers to judge the reception of his - 18 - message. One of the delineating factors between types of communication i s , therefore, the form of feedback. I f i t i s d i r e c t , the communication is personal. If i t is i n d i r e c t , the communication is l i k e l y to be mass. It i s d i f f i c u l t to pinpoint the differences between mass and face to face communication. Part of the problem stems from a confusion over struc- ture versus process. The structure of mass communication is usually employed in reference to the nature of the audience. The receiver subsystems are heterogeneous, s p a t i a l l y separated and, therefore, anonymous from the stand- point of the communicator. The process of mass communication is concerned with how the system behaves and what interrelationships exist between subsystems. The indirect nature of the feedback i s part of the processing aspect. Since the d i s t i n c - t i o n in communication forms is only meaningful i f i t implies different approaches to control, that the most s i g n i f i c a n t c h a r a c t e r i s t i c of "mass" communication is a very large audience. From this feature, both the pro- cessing and structural characteristics must follow. How else does the mass communication process d i f f e r from the face to face situation? "Mass communication may be characterized as public, rapid, and transient." (Wright, 1965, p. 14) The mechanics of the process make i t public as the senders output is aimed at a large heterogeneous audience which is personally unknown to the communicator. As a r e s u l t , the type of feedback that i s available i s usually indirect and measured by proxy variables. For example, i f a firm continually advertises that i t has the best product and the lowest price, yet sales steadily decline, this sales volume trend w i l l be taken as a sign that the communication is not producing the desired response (belief)--other things being equal. These types of - 19 - secondary feedback levels are r e l i e d upon since mass communication " . . . i s offered to an aggregation of individuals occupying a variety of positions with the society—persons of many ages, both sexes, many levels of education, from many geographic locations, and so on...." (Wright, 1965, p. 14) Thus direct feedback i s impossible or at the least p r o h i b i t i v e l y expensive. Therefore, i n advertising research for example, the responses of a few are used to infer the reaction of many. Two other major characteristics of mass communication are i t s tran- sient and rapid nature. F i r s t of a l l messages transmitted by mass media such as t e l e v i s i o n , radio, newspapers, billboards and so on usually only l a s t a r e l a t i v e l y short time. The radio s i g n a l , once broadcast, w i l l never be heard again unless i t i s repeated; the newspaper a r t i c l e , once read w i l l l i k e l y not last longer than to the next garbage disposal. In contrast, other forms of communication may l a s t centuries—plays by Shakespeare, art by Rembrandt, architecture by the Greeks and Romans and music by Mozart and Bach to name but a few. As to mass communications r a p i d i t y , t h i s r e a l l y refers to the speed with which a message can be transmitted to a large number of people. With contemporary technology i t i s possible to broadcast to millions simul- taneously, whereas to reach the same number of people e f f e c t i v e l y with face to face communication, would be almost impossible because of time r e s t r i c t i o n s , geographical b a r r i e r s , high costs and probability for human error. Mass communication is characterized by a large number of separate receiver subsystems, a l l processing the output of the sender ( i n s t i t u - t i o n a l i z e d communicator) at approximately the same time. The nature of - 20 - the feedback i s complicated by this m u l t i p l i c i t y of receiver subsystems and introduction of the dynamic or time dimension further complicates the analysis. As each subsystem processes the communicator's output, there i s feedback within the receiver subsystem (see Figure 6 - f , f^, f^) as to F i g . 6.-- Mass communication system Sender Subsystem Receiver Subsystems ec, - 21 - the re a c t i o n (output) each produced. If there are other people a v a i l a b l e for discussion who may or may not have received the same message, the responses may be compared and revised thus producing feedback between received subsystems (f . ). Eventually the aggregate reaction of the re c e i v e r ( s ) may be communicated i n some manner back to the sender subsystem i n the form of secondary or primary feedback (F f c ) . In t h i s o v e r s i m p l i f i e d diagram, the sender subsystem i s for the moment, the same--.as. i n face to face communication. In the case of a radio broadcaster, he may have a number of mechanical aids and the message may be h i s own or one typed out for him to say, but the s i t u a t i o n i s b a s i c a l l y the same. The receiver subsystems need some c l a r i f i c a t i o n . Above i t was men- tioned that the i n d i v i d u a l receivers acquire feedback from some of the other audience subsystems. This may be the case, but not necess a r i l y so. (There- fore the l i n e i s dotted) If an i n d i v i d u a l is alone when he.receives a message, he may act on i t immediately without any.feedback from other people; he may not react u n t i l he has heard the same message many times; or he may not react at a l l . These l a t t e r three p o s s i b i l i t i e s are a r e s u l t of the nature of the human audience and today's mass communication environment. We have previously suggested that a message must be formulated in terms that have meaning for the audience butVhere are several other c h a r a c t e r i s t i c s that a .communication must have to be e f f e c t i v e . Imagine yourself walking down the main street of a c i t y and consider a l l the messages that are being presented to you--names of s t r e e t s , t r a f f i c l i g h t s , neon signs, store d i s - plays, newspaper headlines, b i l l b o a r d s and so on for an almost endless l i s t . Even s i t t i n g i n your l i v i n g room, you have a choice between the radio, - 22 - t e l e v i s i o n , newspapers, magazines etc. Being more p a r t i c u l a r , in the newspaper you have a wide choice of a r t i c l e s or advertisements you can read. Some messages are received and some are not. For a s p e c i f i c sender's output to be processed in place of someone else's, the transmission should gain and hold the attention of the receiver. "The message must arouse personality needs i n the destination and suggest some ways to meet those needs." (Schramm, 1961, p. 13) Furthermore, the signal should suggest some way to s a t i s f y ' these needs which i s suitable to the i n d i v i d u a l . The recommended behaviour must be acceptable to his way of l i f e . Since there are far more messages being bombarded at man than he can possibly interpret, he exercises "selec- t i v e perception" and only reacts to those messages which relate to his needs or desires. Therefore, i n the formulation of the message, the nature of the audience must be known as e x p l i c i t l y as possible. An additional p e c u l i a r i t y of the human audience is that one message may not be s u f f i c i e n t to cause a d e f i n i t e r e a c t i o n — i t i s below the " a c t i v i t y threshold". This means that i t may be the cumulative effect of processing a similar of i d e n t i c a l series of messages which produces a response rather than just one particular transmission. To r e i t e r a t e some of the previous discussion, mass communication d i f f e r s from face to face communication i n the size of the audience and by the use of mass media which makes i t public, rapid and transient and the feedback received is, i n d i r e c t . It can be viewed as a sender subsystem with a number of simultaneous, p a r a l l e l receiver subsystems with interlocking feedback loops within and between systems. Because of the multitude of communication vying for the attention of the receiver(s), the message should relate to the personality of the destination i f i t i s to be processed and i t must be presented often enough to exceed the individuals " a c t i v i t y threshold". CHAPTER I I I THE NATURE OF THE ADVERTISING SYSTEM Advertising i s a s p e c i f i c type of mass communication as are propa- ganda, entertainment, education and so on. They d i f f e r from each other mainly i n terms of the i n s t i t u t i o n s involved and the objective of the messages. In marketing, advertising has been variously defined as: (1) ...the function responsible for persuasive communication. (Engel, Wales and Warshaw, 1967, p. 98) (2) Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an i d e n t i f i e d sponsor. (Kotler, 1967, p. 451) (3) ...a communication force. It should be assigned a communication task. Its job i s to deliver a sales message--not just expose a message to people but to deliver a sales message that stimu- lates or ultimately leads to action. (Colley, 1965, p. 7) (4) ...mass communication of information intended to persuade buyers so as to maximize dol l a r p r o f i t s . (Kirkpatrick, 1964, p. 33) From these def i n i t i o n s of advertising, some of the characteristics of the system can be deduced. The goal is persuasive communication, paid for by an identified-sponsor with the ultimate objective of increasing p r o f i t s . In other words, there i s a cost associated with not achieving the objective, implying that information which helps control the system's behaviour i s of some benefit. In the following paragraphs we w i l l examine advertising i n r e l a t i o n to the general systems theory. For the sake of c l a r i t y , an oversimplified system consisting of four major subsystems w i l l be used (see Figure 7). - 24 - F i g . 7 . - - Simplified advertising system Advertising Department Media Audience Administrator — feedback —< We are looking at the system from the viewpoint of the manufacturer who employs his own advertising department. The advertising director of the company i s the control subsystem or the administrator and his function i s to receive information on the audience reaction to the system's output, compare i t with the desired output and make the decision as to whether the inputs should be changed. The advertising department processes the admini- strator's decisions into advertising scheduling and copy, which i n turn is passed on to the media which transmits the commercials which are received and reacted to by the audience. As stated, this system is extremely oversimplified. We w i l l begin to relax some of the myriad assumptions as we examine the system's three basic dimensions--its ecology, domain, the dynamics. Beginning with the system's relationship to i t s environment (the ecological measurement) i t i s obvious that advertising as a whole i s not a closed system, although i t i s i n i t i a l l y shown that way i n Figure 7 . Furthermore, each of the four subsystems i s open to i t s milieu. The ex- ternal influences on media for example, may be i n the form of deterministic constraints such as the legal limitations on copy, areas of broadcast, or even products advertised. Other external factors may be p r o b a b i l i s t i c - - such as thunderstorms, competing media changes, or the mood that the announcer may be i n at the time he broadcasts the message. These l a t t e r - 25 - p r o b a b i l i s t i c disturbances are what we c a l l "noise", as they are a source of d i s t o r t i o n i n the message. Not only the media subsystem i s subject to these external interferences. Our perspective views advertising as the t o t a l system, but from the viewpoint of marketing or the company as a whole, the advertising i s a subsystem, subject to bombardment from com- peting demands, from other areas of the company. Achievement of the goals as seen by the advertising department may be i n c o n f l i c t with the goals of the company as a whole. The processing of the inputs into the department may be distorted because one of the members hopes to have his g i r l f r i e n d do the commercial even though she may not have the proper "image". Once again, some of these factors would be deterministic and some p r o b a b i l i s t i c . The audience is the most open subsystem of a l l . M i l l i o n s of messages vie for attention with one another. A multitude of media choices are a v a i l - able and children, wives, mowing the grass, f i n i s h i n g the o f f i c e report and playing golf a l l compete for the time and attention of these receiver sub- systems . . The administrator i s subject to many of these same influences. In an open system such as advertising, i t i s interesting to note the control subsystem must be open to environmental information i f any of the other subsystems are open. This statement assumes a time dimension, such that as the environment changes, the system must adapt i f i t is to remain a viable e n t i t y . Also, since the output of an open system may be the resu l t of factors which are external to the system ( i . e . not just subsystem outputs), the control mechanism must be very f l e x i b l e to account for an i n f i n i t e num- ber of reasons of system malfunction. It i s this m u l t i p l i c i t y of possible causes of output, that makes the open system so d i f f i c u l t to control. In a - 26 - thermostat, where (barring mechanical f a i l u r e ) the only cause of faulty operation can be too l i t t l e or too much heat, the control subsystem can be simple and closed because there i s only a binary decision of heat on or off to bring the system back to i t s objective. A given output can have only an extremely limited number of correct responses. However, i n an open system, a given output—e.g. a decline in "awareness", can be the result of new competition, weather, media d i f f i c u l t i e s , faulty encoding of the message and so on. This i s why i n a system at the open end of the ecological dimension, a "black box" approach i s inadequate. This i s i n c o n f l i c t with some opinions in cybernetics where one feeling i s that: ...the methods we should use to handle exceedingly complex systems are those of input-manipulation, o u t p u t - c l a s s i f i c a t i o n ; they are not those of "cause-and-effect" analysis. (Beer, 1960, p. 52) In the context of advertising i n todays highly competitive environment and m i l l i o n dollar advertising budgets, one doubts that executives would be w i l l i n g to "manipulate the inputs" without some attempt at understanding what goes on in the "black-box". A doctor who has a patient complaining of a pain i n her stomach would do well to attempt some cause-and-effeet analysis before removing the appendix, and part of the stomach and kidneys, only to find that loosening the woman's gir d l e removed the discomfort! This c r i t i - cism may be s l i g h t l y unfair where i t is impossible to deduce any cause and effect r e l a t i o n s h i p , or i f the costs of the trial-and-error method are r e l a t i v e l y small, but in many cases the "black box" approach i s surely just a f i r s t step to cause-and-effect-analysis. In summary, when the system i s on the open end of the ecological continuum, an open, control subsystem is necessary (assuming the environment i s not s t a t i c ) . The function of this subsystem is to take outputs and compare them to some desired r e s u l t s . On - 27 - the basis of this comparison, some analysis, either formal or informal, w i l l be undertaken and a decision made as to the appropriate inputs for the present system state. This i s in contrast to the closed mechanistic system where a separate control subsystem i s not r e a l l y a necessity as the output of the system i s also the input, and the processor acts as the control. Advertising, as an open communications system needs this separate control subsystem i n the form of an administrator. In terms of the domain dimension of the advertising system—what i t looks l i k e , the space i t occupies, the position of the various elements or subsystems—the relationships between subsystems are probably the most important. Consider the structure i n Figure 8. F i g . 8.-- Advertising system structure Administrator • feedback - 28 - The manufacturer uses a number of p a r a l l e l subsystems to project his message to potential customers, namely the various mass media. Each medium i n turn i s transmitting to an audience or a number of receiver subsystems. When a duration of time is. introduced, the audiences for each of the media sub- systems may overlap--resulting i n the same receiver subsystem decoding the message from four or fi v e different media. One of the advertising research's major goals i s to equate the marginal returns of each of the media, and i t i s easy to see from the diagram why i t i s an extremely d i f f i c u l t task. Looking at Figure 8, the complexity of the system's domain can be visua- l i z e d , especially i f an agency subsystem were added along with separate geographic areas, with branch offices doing l o c a l advertising and possibly with commercials for 20 or 30 different products. When one also considers the absolute size of the mass audience and their anonymity and physical removal from the sender, the task of cont r o l l i n g such a system seems hor- rendous . Two of the domain characteristics mentioned in Chapter I are employed to a l l e v i a t e this complexity where possible. Any symmetry discovered in the systems domain is used to simplify analysis. For example, i f i t were known that usage of a certain product varied as a direct function of age, the response of a given audience to a purchase appeal may be inferred and inputs may be made or revised on th i s basis. Another possible domain chara c t e r i s t i c which i s employed to simplify prediction of the system's behaviour i s homogeneity. In advertising, mar- ket segmentation by response behaviour is a perfect example. If id e n t i - f i a b l e groups can be found to have similar characteristics which may be exploited in terms of appeals, then this audience homogeneity w i l l be - 29 - capitalized upon. In spite of these two ways of attempting to improve the p r e d i c t a b i l i t y of the system's behaviour, the sheer number of receiver elements and the pos- s i b i l i t i e s for d i s t o r t i o n of the message at any stage, make an analysis of the t o t a l system output necessary. S t a t i s t i c a l sampling procedures are usually employed because of the size of the audience, and the reaction of a l l the receiver subsystems to the message i s inferred from the sample. Sutherland's l a s t dimension also has important implications for advertising systems. The dynamic or time dimension introduces the pos- s i b i l i t y for changing environmental and system states over time. We have shown that advertising i s an open system, interacting with i t s environment and adapting to changes in the milieu. The dynamic nature of a particular advertising system w i l l , therefore, depend largely on the industry--the competitive s i t u a t i o n , ease of entry, nature of the product and the product's stage i n the l i f e cycle. For example, i f a firm has almost a l l the market for a product with no close substitutes, then i t i s unlikely that i t s adver- t i s i n g program w i l l be seriously affected by competitive environmental chan- ges. In a similar manner, advertising for a product in the maturity phase of i t s l i f e cycle w i l l probably be a more stable system than the program for a completely new product. Even a well established commodity can be subject to a f a i r degree of fluctuation and competition which could have a major affect on advertising plans and objectives. A very current (Spring '69) example has been the introduction of the Ford Maverick into the small car market. With the announcement of the pending introduction of such a vehicle, the advertising plans of the automobile companies must have undergone inten- sive revisions. In other words, the s t a b i l i t y of an open system over time - 30 - r e a l l y depends on the nature of the environment. The way i n which the environment varies also has implications for the nature of the advertising system—especially the nature of the control subsystem. Regular, predictable, variations i n the surroundings can be accounted for in the setting of plans and objectives. In the opposite s i t u a t i o n , where the environmental fluctuations are irregular and unpre- dictable, a number of alternative strategies must be developed for various possible environmental states and even the objectives themselves might be subject to change. I f the goal of an advertising program were to increase the number of people aware of a brand from 25 percent to 45 percent and the cost of media exposure suddenly doubled, the target may have to be changed. The speed and amount by which the milieu fluctuates affects the con- t r o l subsystem i n terms of the frequency of monitoring. If serious d i f f i c u l - t i e s cannot arise from period - t T _ > t o - t 2 t n e n more frequent measurement of the systems response does not add to the control of the system. For some advertising systems, the measurement time periods may be days or weeks (eg. detergent market) whereas i n other cases i t may be years. (eg. jumbo j e t s ) . Obviously then, the rate of change i s important i n the system as long as the magnitude of the change is s u f f i c i e n t to warrant revision of plans and objectives. In the l i g h t of the foregoing discussion of the advertising system, we should now be able to revise our si m p l i f i e d advertising model (Figure 7) i n a manner which should come a l i t t l e closer to r e a l i t y (see Figure 9). Having discussed the nature of the advertising communication system, we can now see,why the f i n a l audience reaction i s not the only monitoring used for control. I f i t were, this would be akin to assuming that the - 31 - Fig . 9.-- Advertising control system Noise Advertising Department Noise Media Noise Audience • » Administrator < 1 , j < 1 i _ _ j ^ £n \/1 r o n rn i: n / _ cws-fr~G~'si - no <je J that the subsystems were completely deterministic and only reacted to the inputs from the preceding subsystem. In a mechanistic system this assump- ti o n would be j u s t i f i e d . The most r e l i a b l e control method i s , after a l l , direct coupling--which can be used i n the absence of natural v a r i a t i o n (noise) i n what i s connected. In the p r o b a b i l i s t i c category, however, feedback offers the only r e a l l y e f f e c t i v e mechanism for con t r o l l i n g endemic v a r i a t i o n . (Beer, 1960, p. 31) In Figure 9, each box represents a subsystem,, processing inputs within the environmental constraints. In two cases i t appears that we are monitoring inputs to the media and audience. Actually what i s being measured i s the output of "sub-subsystems" which act as links between the advertising depart- ment and the media i n one case and the mechanical transmission operation i n the other. This multiple monitoring is performed because of the changing environment which may impinge on the message transmission at any stage i n the system. I t also is done because the cost of sending the message usually is f a i r l y substantial and advertisers would l i k e t h e i r communication to - 32 - achieve its objective as inexpensively as possible. In addition to the general nature of the advertising system, the overall elements of the system should be briefly examined in terms of input, output, processor, feedback and control. The latter element w i l l be examined in detail in the following chapter. The inputs are i n i t i a l l y the results of an analysis as to where the company is now and where i t wants to go. Advertising research data on present attitudes and opinions, nature of the product, available funds, and fi n a l l y management objectives are fed into the system. Once the process has been set in motion, the feedback loop provides input information by monitoring the results of the systems or subsystems' operation. The system output optimistically w i l l be the achievement of the objective—a favourable reaction (either overt or covert) from the desired audience. Between the input and output lies the processor in the system; adver- t i s i n g — t h e means by which the system achieves its objective. Included here are many factors, from the formulation of the commercials, encompassing artwork, copy, scheduling etc., to the physical transmission of the symbols. One can see that the processor usually implies a number of subsystems and an understanding of its operation can surely f a c i l i t a t e the creation of objectives and other input data. Advertising system feedback was mentioned previously and is simply information on the nature of the system output. Acquisition of this i n t e l - ligence may be d i f f i c u l t and expensive with the result that compromize information is accepted as a substitute in indicating the acceptability of the system output. These substitute or proxy variables are discussed in - 33 - the next chapter. One further factor affecting the system's behaviour is the environ- ment. The goals of the system are achieved through the processing of inputs but the environment l imits or constrains the conduct of the processor ele- ment. For example, the advertising system's goal of favourable audience response cannot be achieved through unlimited means; government legis lat ion prohibits the use of force or threat; social attitudes, mores, taboos and so on l imit the symbols that can be transmitted. Within the company, management pol ic ies , f inancial conditions, and human resources act as l i m i - ting agents on the system operation. The environment sets the boundaries of behaviour in which the system is free to operate. Advertising, as one of the controllable variables of marketing, is obviously a highly complex entity and one cannot help but wonder how and what is real ly being controlled. This question is the subject of the next chapter. CHAPTER IV ADVERTISING CONTROL Control of a system implies that i t s behaviour can be directed towards a s p e c i f i c goal i n a premeditated manner. The e f f i c i e n t achieve- ment of objectives demands that resources be allocated i n a p r o f i t maxi- mizing manner and this can only be done i f the behaviour of the system i s subjected to the w i l l of the administrator. Also, from the standpoint of the firm, advertising i s only one variable i n the marketing mix and there- fore i t s control must be co-ordinated with the other functions to avoid suboptimization. For example: Advertising schedules improperly related to market and production conditions can produce disasterous s h i f t s in the timing of sales without increasing long-run sales; or can produce peaks and valleys in the sales pattern which do nothing but increase factory and d i s t r i b u t i o n costs. (Forrester, 1959, p. 101) This indicates that not only must system goals be compatible with each other, but also the means of reaching them should be co-ordinated. Control i s , therefore, extremely important i n maintaining a viable position i n the market place. In this chapter we are dealing primarily with the regulatory sub- system of advertising. In Figure 9, this was represented by the adminis- t r a t o r . In this control subsystem the information or input is compared to desired results (processed) and a decision (output) is transmitted to the next subsystem. The control problem can be generalized as in Figure 10. The elements necessary for control are apparent from the diagram. F i r s t l y , the duration of the campaign must be determined and an objective - 35 - established for that time period. Advertising i s a continuous process i n any on-going business with the consequence that the goal of an advertising system is a dynamic e n t i t y . The ̂ objective w i l l , therefore, depend heavily on the time period chosen and thus point C i s the target for a given unit of time. The trajectory which the system traverses to reach point C i s the o r e t i c a l l y the result of dividing the campaign into an i n f i n i t e number of time units and establishing objectives for each u n i t . The resulting points would represent the curve. Developing an i n f i n i t e number of objectives is hardly feasible and consequently only a limited number of intermediate objectives (eg. A and B) are established. The trajectory or intermediate objectives are a result of formulating the plan or the s p e c i f i c actions necessary to achieve the goal. Once the plans, objectives and trajectory have been established, the system must be set i n motion and the actual out- put measured and compared to the trajectory. I f the two coincide s u f f i c i e n t l y , i n the opinion of the administrator, then the plan w i l l be continued u n t i l - 36 - the next measurement period. But, i f there i s a divergence between the desired and actual results which i s outside acceptable l i m i t s (either quantified or i n t u i t i v e ) then contingency plans w i l l be implemented either to bring actual results into l i n e or to revise the trajectory. The choice depends on the administrator's analysis as to the cause of the deviation. Each stage in this control process involves a great deal of time, e f f o r t , and resources . The above discussion took the perspective of cont r o l l i n g the adver- t i s i n g system as a whole, but the complexity of the task becomes apparent when i s is realized that for rigorous regulation of an open system, these steps must be taken for each subsystem. In Figure 9 we included an adver- t i s i n g department, the media, and the audience. In addition, we monitored media and audience input. This means fi v e sets of plans, objectives and measurements and this i s a simplified system! Obviously there is a very substantial cost associated with control as well as undisputed benefits. More w i l l be said of this factor l a t e r . Each of the stages of developing a control subsystem w i l l be examined in turn. After many years, the question as to what constitutes proper adver- t i s i n g objectives s t i l l remains unsettled. The problem is a serious one, as the effectiveness of advertising can only be judged i f s p e c i f i c objectives are set. In other words, effective at what?--in reaching the objectives. The argument centres around the question of whether the measures should be sales or communication objectives. At this stage we have a bias towards communication goals such as awareness, b e l i e f , understanding and favourable attitudes, but there are many reasons for this besides the subject matter of this paper. Those who argue in favour of sales indicators, make the - 37 - measurement of effectiveness extremely d i f f i c u l t as "...advertising is only one of several marketing forces that lead to the ultimate objectives of a sale." (Colley, 1965, p. 10) To determine how much of a sale is due to advertising i s almost impossible. This is not to say because i t i s d i f - f i c u l t i t i s wrong but: At most, i t (advertising) i s considered to have done i t s job by "bringing the buyer to water." But whether he drinks depends upon the product, the price, the packaging, the personal s e l l i n g , the services, the financing, and other aspects of the marketing process. (Kotler, 1967, p. 456) In this discussion therefore, we take the viewpoint that the goal of adver- t i s i n g i s persuasive communication. However, i t should be noted that "per- suasive communication" is d i f f i c u l t to define i n operational terms. As a r e s u l t , "proxy", surrogate or substitute variables are often accepted as indicators on the assumption that there is a high correlation between desired outputs and the proxy measures. If the correlation can be s t a t i s - t i c a l l y validated or at least, l o g i c a l l y j u s t i f i e d , then control through these surrogate measures may be most e f f i c i e n t . Attitude changes and increases in brand or product awareness can be quantified (Lucas and B r i t t , 1963) but i t i s a highly expensive and time consuming task which in many cases could not be j u s t i f i e d on a short-run continuing basis. The aim of "persuasive communication" must, therefore, be translated into more objective terms i f i t is to f a c i l i t a t e measurement for "...defining goals is the key requirement for effective advertising planning and the measurement of r e s u l t s . " (Kotler, 1967, p. 451) In essence, we are attem- pting to quantify what part of the marketing mix advertising is expected to play. For example, i f the objective i s to improve the favourable attitude toward a particular brand, then a "favourable attitude" must be operationally defined. In addition, to go from A to B, one must know the position of A, - 38 - i e . the present state of the audience. Knowledge of the potential state and the associated cost of achieving this potential i s often very d i f f i c u l t to obtain. With a new product and a new advertising program, what is the most favourable attitude possible and the cost of obtaining i t ? Past programs and similar products may provide some guidelines but they w i l l be approximations at best. To summarize the characteristics of a good objec- t i v e , i t should be: (1) Set in r e l a t i o n to a s p e c i f i c time period. (2) Set i n r e l a t i o n to a s p e c i f i c budget. (3) Set i n r e l a t i o n to a s p e c i f i c plan of action. (4) Optimally integrated into the firm as a t o t a l system. (5) Quantified as far as possible. (6) Capable of being measured d i r e c t l y i f possible or i n d i r e c t l y by l o g i c a l , highly correlated proxy variables. In terms of the system control task, quantifying the f i n a l desired output of the system i s not the only d i f f i c u l t y . We saw that advertising is composed of a number of open subsystems. If these subsystems were coupled d i r e c t l y to each other i n such a manner that there could be no dis- t o r t i o n except at the i n i t i a l system input and f i n a l output, then objectives and performance measurements could.be developed for the terminal stage. To make such an assumption in advertising would be naive. At the other extreme, i t i s possible to set objectives for each sub-sub-subsystem, to the point where the major task of the enterprize is setting objectives for the system. The "Best" path of course l i e s somewhere in between, for i f goals are to be useful, actual results must be measured and the comparisons used as a basis for decision making. Whether this is worthwhile or not w i l l depend on the - 39 - information economics. These w i l l be looked at i n conjunction with measuring actual r e s u l t s . The formulation of plans and the establishing of objectives w i l l in most cases take place simultaneously, because any objective has a cost associated with i t s achievement. If the plan i s too expensive, the goal w i l l have to be revised. Planning involves d e t a i l i n g the s p e c i f i c steps f e l t necessary to reach a goal. It implies a dynamic dimension as scarce resources are allocated over time and intermediate objectives are estab- l i s h e d . Setting the trajectory r e a l l y means scheduling a series of events in such a manner as to reach the objective with a minimum of e f f o r t . If a r e t a i l store wants a 20 percent increase i n customer t r a f f i c by the end of s i x months, how much of an increase should there be at the end of one, three and f i v e months? Should the plan be a saturate the market i n i t i a l l y and then taper off? Is the audience reaction a lag function of advertising expenditures or i s i t immediate? The so-called optimum path may be very d i f f i c u l t to establish and track. Based on subjective opinion and h i s t o r i c a l experience, a r e a l i s t i c route w i l l have to be established, while r e a l i z i n g that the ideal time-action p r o f i l e could be considerably at variance. Some obvious factors that could be taken into account, include seasonality i n areas such as product use, media habits, personnel resources and so on. Much of the above information would be supplied in the way of background research to an advertising campaign. Volumes have been written on advertising programs and here only some of the basic steps w i l l be mentioned as they have implications for the i n - puts and outputs of the various subsystems. In our basic advertising system (see Figure 9), we had three agents--the advertising department, the media - 40 - and the audience--and one control subsystem--the administrator. If control is to be maintained at these various subsystem levels a number of decisions must be made. Having established i n i t i a l objectives and given an approxi- mate budget, the advertising department must produce the creative side of the message. This would include choosing the campaign's theme, doing the art work and wri t i n g any necessary copy. At the same time, the department w i l l have selected the media mix to be used i n the campaign. How much of the e f f o r t should be channelled through t e l e v i s i o n , radio, newspapers and so on? The nature of the product, message, and audience w i l l a l l affect the f i n a l media strategy. The media strategy also involves the problem of scheduling. We mentioned previously the issues inherent i n co-ordinating the advertising e f f o r t with other parts of the marketing mix (setting interim objectives e t c . ) , but there are additional constraints in that the use of some of the major media such as t e l e v i s i o n may require a year's lead time. Newspapers and radio on the other hand may only require two or three days. If commitments must be made a year i n advance, careful preplanning i s essential as costs are very high. Pretesting the campaign on a small scale i s probably ideal but not always possible because competitors may r e t a l i a t e by launching p a r a l l e l programs which reduce the campaign's im- pact. Large corporations often refine their advertising efforts by intro- ducing programs sequentially into different geographic areas. Standard O i l of New Jersey unleashed the tiger i n the United States and then in Canada and other countries. Before the media schedules can be confirmed, the advertising budget must be f i n a l i z e d . In theory, the budget should be expanded to the point where the marginal return from a dollar spent on advertising should be equal - 41 - to the marginal return from a do l l a r spent on other company functions. The problem then is one of equating the marginal returns of subsystems within systems--ie. optimization. The details of this procedure have been elabora- ted by A l l i s o n (1961). Some prior evaluation of the program is possible i f the campaign is pretested, but i n general, judging effectiveness entails the after-the-fact measurement of actual results to see i f the campaign objectives were achieved. Rather than running the complete campaign and then doing some research and finding the objectives weren't achieved, i n this paper we are attempting to see how and i f the program can be controlled and measured on a semi-continuous basis. Where, how and when do you a l t e r your basic plans and even more impor- tant, what information (short of a f u l l market study) can you get and how r e l i a b l e i s i t ? This brings us to the t h i r d stage necessary for control, and that i s measuring the actual r e s u l t s . The technique of measurement w i l l not r e a l l y concern us (see Lucas and B r i t t , 1963) as we are more interested i n what should be measured and when--a problem of information economics. The question as to what measurements should be taken to control a sys- tem i s r e a l l y a task i n designing information systems. The challenge is to design a company information system where the value of information i s maximized for a given expenditure or the cost i s minimized to achieve a given mix of information. (Kotler, 1967, p. 569) Before proceeding, we should note that this involves deciding what information should be produced, the form i n which i t w i l l be produced and f i n a l l y who w i l l receive i t . We w i l l primarily be concerned with examining what should be monitored, as the form w i l l depend on s p e c i f i c cases and we have set up our general model so that the information is processed by the administrator. In dealing with information systems, several authors (Thayer, 1968; - 42 - McDonough, 1963; and Churchman, 1968) make a d i s t i n c t i o n between data and information. There seems to be general agreement that data refers to the sensory input whereas information i s the meaning taken from these sensory inputs. "Information i s used here as the label for evaluated data i n a sp e c i f i c s i t u a t i o n . " (McDonough, 1963, p. 71) The d i s t i n c t i o n is important for our purposes as: Information, not data, i s the raw material for thinking, decisioning, problem-solving, attitude development, learning and a l l of the speci- f i c a l l y human a c t i v i t i e s that concern us.... (Thayer, 1968, p. 29) Gathering this information involves the expenditure of ef f o r t and time and some decision rule i s necessary to allocate these scarce resources. In theory, the information should be gathered and processed i f the cost (C) of acquiring i t i s less than the benefits (B) derived from i t , thus giving i t a positive value (V). Algebraicly: V = B-C (Value equals benefit minus cost) and i f V>0 then the information should be produced or s i m i l a r l y i f B/C > 1.0. The d i f f i c u l t y in applying the rule l i e s in evaluation of the respective costs and benefits. One author (McDonough, 1963) has adapted the economist's supply and demand approach to the analysis of information i n r e l a t i o n to the solving of s p e c i f i c problems, which i n our case would be the control of an advertising program. In doing this he refines our concept, as now: Information i s the measure of the net value obtained from the process of matching the elements of a present problem with appropriate elements of data.... (McDonough, 1963, p. 76) The interpretation of this statement i s f a c i l i t a t e d by examining Figure 11. The objective i s to find the point where the maximum net value of information - 43 - F i g . 11.-- Net value of information $ \/a loe jf> cos l1 s cos/ of )aforma.fton Vo tote of tnforma. J~ IOU A the. mo, *i mourn /Jer Va. Iu. e o f fnpor ma-fto n -ft/ne. ~fa s/«,ô  problem Net value... at point where decision i s made that problem d e f i n i t i o n i s adequate and that enough information has been obtained to make a decision, (adapted from McDonough, 1963, p. 82) w i l l be obtained. This i s not easy as the shape of the "Value of information" curve w i l l depend on the individual's u t i l i t y function and the consequences of making an incorrect decision. If our administrator i s a risk-seeker he w i l l be s a t i s f i e d with less information i n making his decision. The r i s k - averter w i l l have the opposite characteristics of wanting more information to solve the same problem. Since only the: administrator can judge his per- sonal u t i l i t y function, i d e a l l y he should design the information system. The value of information w i l l also depend on the problem to be solved. If the task i s to decide whether audience reaction to your commercials i s favourable or unfavourable, there i s a high value in answering the question. If the general reaction i s extremely unfavourable, there would be a very low - 44 - value in knowing which s p e c i f i c advertisement was l i k e d the least. In summary, the value of information depends on the nature of the administrator and the problem. Information costs have a s i g n i f i c a n t effect on the nature of the moni- toring of system and subsystem outputs. The e f f o r t needed to get various indications of advertising progress affect the amount, kind, and frequency of the information. We have seen that information can be expensive r e l a t i v e to the problem to be solved, but i t may also be expensive i n absolute terms. Companies have limited resources and consequently they are constrained i n the amount of information they can acquire. Knowing the e x p l i c i t adver- t i s i n g plans of competitors may be worthwhile i n that the cost-benefit r a t i o i s greater than one, but i f the firm cannot finance the cost, the information w i l l not be acquired (ignoring legal implications). The kind of feedback is also affected by cost. We argued that the objective of advertising should be persuasive communication and, therefore, changes i n audience attitude, or awareness would be t y p i c a l measures of effectiveness. This type of measurement i s expensive. It involves consider- able e f f o r t in formulating a r e l i a b l e , v a l i d questionnaire; i f possible, testing a control and an experimental group before, during and after a cam- paign; and f i n a l l y analyzing and acting on the r e s u l t s . The procedure entails considerable time and specialized personnel. If i t were a cross- Canada campaign, running for a year i n a highly v o l a t i l e industry, control might necessitate monthly surveys with a re s u l t i n g prohibitive expense. In such a s i t u a t i o n , the firm may be w i l l i n g to accept the previously mentioned indirect measures of effectiveness during the campaign and do detailed sur- veys only at the end. These substitute or "proxy" variables should be - 45 - recognized as a compromise between accuracy and cost. Sales volume and market share are probably the two most commonly used, as the former i s always available as part of the accounting system and the l a t t e r i s often supplied by the provincial and federal governments. If advertising i s a major component of the marketing mix, these measures may be f a i r l y v a l i d , but i f personal s e l l i n g or other elements play the major r o l e , then reliance on these indicators is not warranted. Many other surrogate variables can and are used to indicate advertising effectiveness. The Imperial O i l "Tiger i n the Tank" campaign is i l l u s t r a t i v e of many unique forms. At the start of the program tiger t a i l s were f i r s t given away and then eventually sold along with i n f l a t a b l e t i g e r s , tiger pyjama bags and other tiger toys. The volume of these products ordered by dealers was one measure used to indicate the program's effectiveness. R e t a i l sales of gasoline and provin- c i a l market shares were also employed. More subjective information was also gathered. For example, competitors put up signs that read "Our gas eats t i g e r s " ; newspapers published tiger jokes; and the campaign was commented on by acqua'ntances of employees. Obviously, these proxy variables are not a l l of equal benefit (or equal cost) i n indicating the effectiveness of the communications, but they do i l l u s t r a t e the m u l t i p l i c i t y of possible i n d i - cators . The frequency with which information i s produced i s also affected by cost. This was i l l u s t r a t e d above as the reason for using proxy variables, but oftentimes even proxy variables w i l l not be used. If a firm i s using market share as an indicator of advertising progress, i t may wish the infor- mation was provided on a weekly basis. But, since most firms could not afford to generate this feedback, they w i l l s e t t l e for a monthly figure provided by - 46 - the government, thereby making the i m p l i c i t assumptions that there w i l l be no s i g n i f i c a n t controllable changes between reports. A l l these influences must be taken onto account when developing the information system for adver- t i s i n g . One additional factor which affects the feedback chosen i s the s e r i a l structure of the subsystems in advertising. In this sequential arrangement, the output of one subsystem primarily determines the output of the next. I t also seems l o g i c a l to assume that the amount of d i s t o r t i o n i n the f i n a l out- put w i l l increase as a direct function of the number of subsystems through which the message i s processed. As an example, i f the advertising department output i s faulty and i s passed on to the-media subsystem, the open nature of the media subsystem w i l l cause i t to be distorted s t i l l further and this w i l l be additionally amplified by the receiver subsystems. However, i f the advertising department and the media have processed the inputs correctly, there should be much less d i s t o r t i o n at the receiver end of the system. I t i s therefore, essential i n a sequentially structured system that the i n i t i a l inputs be as established by the administrator i e . the objectives must be c l e a r l y defined. If the administrator i s prepared to assume that his inputs to the system w i l l be processed exactly as desired, then monitoring the f i n a l r e s u l t w i l l be used to control the system. With the complexity of advertising t h i s assumption is unwarranted and generally each subsystem should be moni- tored, at least occasionally. When actual results have been measured and compared to the objectives, some plans must be made to reduce any differences. As with the gathering of information, the number and kinds of contingency plans developed w i l l depend on a cost-benefit analysis. I f there are unlimited alternative environmental - 47 - states with equal importance and equal p r o b a b i l i t i e s of occurrence, then, i t i s unlikely that contingency plans w i l l be made. An environment i n which only two or three major system states are possible w i l l result i n the development of alternatives for these situations. The importance of the p o s s i b i l i t i e s w i l l depend on the effect they could have on the program and depend also on the time necessary to take compensating action. This i s just r e i t e r a t i n g the fact that i n an open system, the s t a b i l i t y of the environment affects the nature of the control. It is worthwhile at this stage to r e a l i z e that the comparison of actual with desired results may lead to i n i t i a t i o n of contingency plans or the revision of the objectives or both. The objectives were developed under a set of assumptions and i f these assumptions do not materialize, i t may be necessary to revise the goals of the system. In open systems, there i s a dilemma i n the decision making process when actual and desired results diverge. It arises because: In the open-loop system, the executive (administrator) makes the comparison between outputs and standards and uses his discretion whether any action i s required and, i f so, what kind. (Kotler, 1967, p. 570) This discretionary decision process exists i n a gestalt or open complex system because the output can be the res u l t of a great many causes. This produces the dilemma. If the response to the actual-desired variance i s automatic or based on some decision r u l e , speed i s gained at the l i k e l y expense of accuracy. Conversely, i f a detailed analysis of the causes of variance i s undertaken, then the desired response may be too late to be e f f e c t i v e . The task then becomes one of deciding which decisions can be handled mechanically and which ones w i l l take experience, judgment and analysis. This choice would have to be made in r e l a t i o n to a par t i c u l a r - 48 - program i n a part i c u l a r industry by an experienced administrator. The nature of the objectives of the system affect the choice of points at which the process i s controlled i n the long run. In a system composed of s e r i a l l y connected subsystems, i f the f i n a l output i s s a t i s - factory, i t w i l l usually mean that the output of the intervening subsystems i s also satisfactory- and hence the process deemed under control. Thus i f f i n a l output can be measured just as e a s i l y , frequently and accurately as subsystem output, the end resul t would be the most e f f i c i e n t entity to monitor. However, in the short run often i t w i l l be more feasible to monitor subsystem outputs—but the pr i n c i p l e remains that the closer the system can be monitored to the end r e s u l t , the more effective control w i l l be. In most cases, where measurement of end results requires expensive attitude surveys or similar measurements, short run control w i l l be maintained through moni- toring subsystems and long term control w i l l be achieved through the end re s u l t . When the process i s controlled at the intermediate subsystem l e v e l , an i m p l i c i t assumption is being made that there is a good correlation between the subsystem output and the t o t a l system output. For example, i f the manu- facturer i s prepared to accept that i f his radio commercials have been broad- cast as planned, that they w i l l be processed by the audience as intended, then control could be maintained by comparing the desired radio output to the actual broadcasting log. But, eventually the f i n a l output must be used to evaluate the program's effectiveness. In conclusion, the system, there- fore, can be monitored at the lev e l of (1) subsystem output, (2) t o t a l system output or (3) both at once. Control may be achieved through the use of (1) proxy or substitute measures of performance, (2) direct measures of results (or output) as defined by the objectives of the system, or (3) both. - 49 -• A point form summary of some of the preceding comments may be i n order. I f we assume that a s o l i d advertising research base has been pro- vided, then to develop a control system one must: 1. Analyze the t o t a l system into subsystems. 2. Establish objectives for the system and subsystems. 3. Develop plans for reaching the objectives. 4. Determine the kind, frequency, and amount of information to be produced (cost-benefit analysis). 5. Formulate contingency plans for major alternatives. 6. Decide which decisions w i l l be automatic and which w i l l be discretionary. These s i x steps are not meant to imply sequential development as many of them, such as the objectives and the information to be produced, have to be evaluated concurrently. Having established the control parameters, we are now i n a position to launch the campaign and formulate a search procedure to control the prog- ram. A general model i n the form of a flowchart w i l l be developed which i s es s e n t i a l l y nothing more than a map through the mental maze. F i r s t of a l l , l e t us look at a s i m p l i f i e d s i t u a t i o n where there is only one system and examine what questions would be asked to decide whether i t i s under control. In Figure 12, the steps have been diagrammed and are as follows: 1. Is the system output as desired? ( i e . within established l i m i t s of objective) — i f Yes wait u n t i l the next time period and measure again. 2. I f not, are the inputs as desired?--if not correct the inputs and recycle. 3. I f Yes, i s the system environment as expected?—if not i n i t i a t e contingency plans and devise new systems. 4. If Yes, there i s a processor malfunction and sub-subsystems w i l l have to be analyzed so we exit this system. - 50 - F i g . 1 2 . — Typical system control process PROCESSOR MALFUNCTION ANALYZE SUBSYSTEM EXIT - 51 - These steps are the basic cycle which appears i n the elaborated Figure 13. One assumption should be made clear and that i s we are assuming that the administrator has the "correct" inputs for given environmental assumptions. Since this i s r e a l l y a function of the a b i l i t y of the individual adminis- t r a t o r , i t has not been e x p l i c i t l y mentioned here. However, i f the pre- ceding four steps did not uncover a problem, then the conclusion would have to be that the matching of programs with the environment was incorrect. In Figure 13, a general model has been diagrammed which expands the search procedure in Figure 12, to include control of subsystems and major and minor control cycles. The model i s s t i l l s i m p l i f i e d , as i . maintains our structure of the advertising department, media, audience and adminis- trator subsystems. R e a l i s t i c a l l y , the media subsystem should be subdivided into the various mass media such as t e l e v i s i o n , newspapers, radio, billboards and so on, but while the diagram would be more complex, the logi c and steps would remain the same. For c l a r i t y we are assuming that the system i s u t i l i - z ing only one med ium. The major and minor cycles should be elaborated. Mention was made e a r l i e r that the economic f e a s i b i l i t y of gathering certain types of infor- mation influenced the frequency of major surveys of f i n a l audience subsystem output. In this context, we have made the assumption that advertising depart- ment and media output are easier to acquire and, therefore, monitored more frequently. This i s done by following the minor cycle. The measurement of the f i n a l output would be performed at less frequent intervals by following the major cycle. In some systems where measuring t o t a l system output i s just as easy as measuring subsystem output, there w i l l be no minor cycle. In Figure 13, the f i r s t question i s whether one is dealing with a •£, J -75 - - 53 - major or a minor cycle. The former path i s represented by the dotted l i n e s , the minor by s o l i d l i n e s . Travelling the minor cycle, the output of the subsystem nearest the audience (media) i n our sequential chain i s compared to the objectives and i f the variance i s within tolerable l i m i t s of the trajectory, then the process is recycled to wait for the next time period. I f the output i s not accept- able, then the subsystem output closest to the beginning of the system (adver- t i s i n g department) i s examined. I f i t s output i s acceptable the next sub- system output i s examined and this i s continued u n t i l one output i s found to be f a u l t y . When the d i f f i c u l t y has been localized to one subsystem, then steps two, three, and four on page 49 are i n i t i a t e d . The procedure to be followed i n the major cycle i s the same with the exception that allowance has been made for the p o s s i b i l i t y that a l l subsystems may be processing inputs correctly except the audience, in which case the encoding of the message has been faulty and major program revisions are necessary and the system grinds to a h a l t . This has been a rather lengthy chapter i n which control and inf o r - mation systems have been discussed in theoretical terms. The result of the discussion was a general control model which i n the next chapter we w i l l attempt to apply to a sp e c i f i c firm i n a s p e c i f i c industry. CHAPTER V PRACTICAL APPLICATION OF CONTROL THEORY The discussion to this point has been presented i n theoretical terms. In this chapter, an attempt w i l l be made to i l l u s t r a t e how the concepts and general a n a l y t i c a l framework can be applied to a p r a c t i c a l s i t u a t i o n . The following example is not meant to be a case study, although i t does deal with an existing construction-real estate company with which the author w i l l be employed. The information used was obtained from the management at their head o f f i c e . In addition, some of the l i t e r a t u r e on rea l estate advertising practices has been scrutinized but in most cases found to be outdated or very s u p e r f i c i a l . This lack of theory and the opportunity of a future chance to test the ideas in practice prompted the choice of a rea l estate marketing firm for p r a c t i c a l application. The chapter begins with a b r i e f look at the system environment or the industry as a whole and then focuses on the particular system and subsystems within the s p e c i f i c company. The control system is then examined with respect to objectives, plans, measurements and malfunction and f i n a l l y some conclu- sions are reached as to the value of the systems approach to the analyses of advertising control and suggestions are made as to further research. The housebuilding-real estate industry i s characterized by a large number of small builders and r e a l t o r s . For example, i n 1968 there were 1,763 builders constructing dwellings financed by the National Housing Association (N.H.A.) and 1,555 of these contractors financed 25 dwellings or less while only 34 builders financed over 100 houses per year. (C.M.H.C., 1969, p. 62) - 55 - This i s not a direct r e f l e c t i o n of company sizes as there are other means of financing besides the N.H.A., but i t does indicate that there are a great number of small builders and only a few large ones. In most of the small companies, the construction and the marketing of homes is separated as the contractor builds the house and then l i s t s i t with a rea l estate firm. By contrast some of the larger companies--including our example--are inte- grated to the extent that they construct and market their own homes. The s t a b i l i t y of the industry depends on a number of factors. The volume of building can fluctuate widely from year to year while the product and the advertising practices have changed very slowly. In 1951 dwelling starts were 81,000 dropping to 73,000 i n 1952 and jumping to 97,000 i n 1953. In 1963 the figure was 128,000 but climbed to 151,000 in 1964. (C.M.H.C., 1969, p. 1) These fluctuations are caused primarily by economic conditions as reflected i n employment and the mortgage funds available from lending i n s t i t u t i o n s . In addition, population growth provides a b u i l t in stimulus to demand and C.M.H.C. comments that the "...major source of future housing demand i s net family formation which i s expected to increase from the current (1968) rate of 118,000 per year to 145,000 by 1976." (C.M.H.C, 1969, p. x i i ) The s t a b i l i t y of the demand for housing then, depends primarily on the above factors which can be predicted with a "reasonable" degree of accuracy using standard forecasting methods (see Ferber and Verdoon, 1962). The nature of the product or the house i t s e l f does not change very rapidly. Styles become popular and then fade away but i n general most of the changes involve adaptations to new complementary products such as b u i l t - i n - ovens, dishwashers, garburetors and other luxury innovations such as extra bathrooms. It is very unlikely that a new invention w i l l a l l of a sudden - 56 - render a housebuilders product obsolete. The advertising environment in the real estate industry i s also f a i r l y stable as the large number of small firms means that in most cases no one company can afford to put on a campaign of s u f f i c i e n t magnitude to seriously affect another company's advertising program. However, an extremely good campaign in terms of quality and creativeness by one company can affect the plans of others. The media practices of firms are also r e l a t i v e l y stable in t o t a l although the v a r i a t i o n between individual firms may be s i g n i f i c a n t . For example, in 1951 realtors remarked that the " . . . c l a s s i f i e d columns of daily newspapers or weekly publications usually draw the best response for the amount of money expended" (McMichael, 1951, p. 262), and i n 1967 "...while realtors can use every known form of advertising, both t r a d i t i o n a l l y and l o g i c a l l y newspapers are th e i r primary medium of communication with the public." (National Institute of Real Estate Brokers, 1967, p. 11) This heavy use of the c l a s s i f i e d and display newspaper advertising has been supported by a number of studies such as that done by the Chicago Tribune Research Division (1966) who surveyed people searching for new accommodation and found that newspapers were the primary and i n i t i a l source of information in the search for dwellings. In addition to newspapers, the other mass media are used in varying proportions by different firms. Outdoor signs are employed extensively, while radio and t e l e v i s i o n are used somewhat less because of the higher cost: On the advertising menu, radio i s T-bone steak and t e l e v i s i o n i s f i l e t mignon.... Therefore they (realtors) o r d i n a r i l y earmark most of their advertising money for signs, newspaper advertising and direct mail, reserving radio and t e l e v i s i o n for special e f f o r t s . (National Institute of Real Estate Brokers, 1967, p. 55) - 57 - In summary, the market for new homes is r e l a t i v e l y stable or at least reasonably predictable as are the advertising practices of r e a l estate firms. Individual competitive campaigns however, can d e f i n i t e l y affect short term sales volume. An overview of our i l l u s t r a t i v e company w i l l help c l a r i f y some of the characteristics which would influence our particular advertising program. The firm has been engaged i n building and s e l l i n g new houses for the last 17 years and now operates i n three geographically dispersed areas. Sales volume is approximately 800 units per year with sales revenue of $15,000,000 per year. As mentioned previously, the company builds the houses i t s e l l s and the volume of construction enables some of the product to be mass pro- duced in a plant. The result of this method of construction, is that produc- tion f a c i l i t i e s could be a l i m i t i n g factor on sales volume as could land, labour or mortgage money. Any advertising program must, of course, be co- ordinated with the supply of a l l three commodities. This i s especially true because the company maintains i t s own sales force that operates out of model homes and i s paid on a commission basis. I f an advertising campaign were so successful as to s e l l houses faster than they could be produced, as soon as no products were l e f t to s e l l , the salesmen would leave. Coordination to maintain continuity i s , therefore, of the utmost importance. In the s i t u a - t i o n where there is excess plant capacity and land and financing are a v a i l - able, coordination becomes less c r u c i a l and the task becomes one of contacting potential customers. Before examining the subsystems within the firm, i t should be pointed out that two braod types of campaigns could be undertaken i n the industry. The f i r s t is an i n s t i t u t i o n a l program designed to promote goodwill towards - 58 - the company and to keep i t s name i n public view. The benefits expected under this plan would be long range so that the individual looking for a home three years hence would automatically think of the XYZ company. The second type of program and the one that w i l l concern us here, is aimed at stimulating an immediate action by people who are w i l l i n g and able to buy now. For most r e a l estate companies, the major portion of their advertising funds are spent on this endeavour. Returning to our schematic advertising system with the advertising department, media, audience and administrator subsystems, i t i s possible to show that these f i t conveniently into our company organization which i s i l l u s t r a t e d in chart form i n Figure 14. Fig . 14.-- The company organization chart Region Manager Asst. Region Manager Sales Manager Sales Manager Production Finance Salesmen Salesmen If we deal with only one of the geographic areas, then the assistant region manager has the position of the administrator or the control subsystem. It - 59 - is his r e s p o n s i b i l i t y to develop the company objectives and oversee the plans and expedition of the program. The feedback on the results of the campaign would be routed through him for decisions. The advertising department is represented by the managers of two sales divisions and the s t a f f of salesmen. As i n many r e a l estate com- panies, the salesmen write their own c l a s s i f i e d advertisements under super v i s i o n , but display advertising and bil l b o a r d s , radio and t e l e v i s i o n are the r e s p o n s i b i l i t y of the sales managers.with the aid of people employed by the respective media. The media subsystem of The Company has been developed through h i s - t o r i c a l experience so that the advertising dollar for the mass media is s p l i t as follows: (1) Newspaper-classified 50% (2) Newspaper-display 10% (3) Billboards 10% (4) Radio and t e l e v i s i o n 20% The remaining 10 percent i s spent on miscellaneous promotion such as small signs, direct mail and point-of-purchase handouts. In general, the t o t a l budget i s determined as a percentage of projected sales volume and i s nor- mally between one and two percent of sales revenue. The audience subsystem consists of those people who are potential customers for new homes i n a given geographic area. Although the company operating in three d i s t i n c t areas, we w i l l only develop the program and control system in terms of one. The same procedures would apply for a l l areas, but the quantity of information generated would increase. The company's advertising system i s therefore composed of four - 60 - subsystems as discussed above. Ecologically, the subsystems are subject to "noise" as the audience may ignore or d i s t o r t the message i f interest rates or unemployment are high. S i m i l a r l y , the advertising department subsystem behaviour can be influenced i f the sales managers are afraid that sales at a faster rate than production w i l l result i n the loss of their sales force. The media subsystems are also influenced by "noise" as different firms are vying for preferred time and space while the media people are trying to keep a l l their c l i e n t s s a t i s f i e d . F i n a l l y , the administrator w i l l also be an open subsystem, as he must be able to adapt the advertising program to changing economic and demographic conditions. He must also be cognizant of the competing systems within the firm and attempt to optimize the operation of the firm as a whole and not just the advertising system. In the following development of The Company control parameters and the information system, the major assumption i s made that the goals being pursued in the advertising communications system are optimal for the company as a whole. In other words, the advertising program subsystem has been integrated into the system of the firm i n the most e f f i c i e n t manner. This qualifying assumption enables the discussion to concentrate on the communication system only, while recognizing that there is a need for research on the problem of how to avoid suboptimization. In the given environment and existing subsystems how would the control process be arranged? Referring back to Chapter IV, Figure 10, we need to establish objectives for the system and subsystems, develop plans for reach- ing the objectives, decide on the information to be produced, formulate contingency plans for the major alternatives and f i n a l l y decide which deci- sions w i l l be automatic and which w i l l be discretionary. These factors - 6 1 - w i l l be examined i n terms of the t o t a l system, the media subsystem and the advertising subsystem and some comments made as to the assumptions i m p l i c i t i n c o n t r o l l i n g at the subsystem l e v e l . The objective of the advertising system output i s to convince people that before they buy a new house they should see what The Company has to o f f e r . The goal i s not to s e l l the house even before the customer sees i t for: Advertising alone can neither complete a l i s t i n g agreement nor negotiate a sale. It i s only a means of attracting enquiries. Its .success depends f i r s t on the quantity and quality of enquiries received, and second on the s k i l l displayed by sales personnel i n dealing with the owners or prospective buyers who reply. (National Institute of Real Estate Brokers, 1 9 6 7 , p. 8 ) In other words, i t is hoped that the communications w i l l "lead the horse to water" and then the sale depends on the t o t a l product and the salesmen. The direct measure of the audiences' processing of the message could be a before and after survey asking people to rank the building firms as to the ones that they would contact before buying a new home. If other things are equal, then a s h i f t i n the positive d i r e c t i o n would be taken as an indication that the communication was processed as intended. This "d i r e c t " measure however, might be considered too expensive and time consuming. As a r e s u l t , a proxy v a r i a b l e — t h e number of enquiries received—might be employed under the assumption that the two measures are p o s i t i v e l y correlated. The indirect measure would be used i f i t i s less expensive to acquire. It should be noted here that there are no bonafide " d i r e c t " measures of advertising effectiveness. From our discussion of the communication pro- cess, i t w i l l be recalled that the message or symbols are decoded, processed and then a reply encoded. The essence of what i s wanted to indicate effec- tiveness i s an analysis of the processing, but what is i n fact being - 62 - monitored is the encoding of the reply--a proxy or indirect measurement. To a degree, this i s an i n s i g n i f i c a n t point, as the executive w i l l not l i k e l y be concerned whether he controls at the direct l e v e l of cerebral a c t i v i t y or the indirect l e v e l of speech or action, as long as he controls! In the following discussions, direct and indirect w i l l be used i n a r e l a t i v e manner implying a ranking along a subjective continuum of "directness". Returning to our surrogate variable of number of contacts, either personal or by telephone, i t should be emphasized that the quality of enquir- ies received is especially important. For example, i n some model v i l l a g e s : ...throngs of potential customers s t i l l surge through the developments. But the salesmen waiting behind desks i n the model house garages are glum. Says one, "They're not buyers. They're t i r e - k i c k e r s . " (McQuade, 1967, p. 153) One way to monitor this quality factor i s to see i f the rate of sales per party contacted remains the same as the contact volume increases. For example, The Company has found that on the average four out of every one hundred parties contacted purchase a home. If the advertising program re- sults i n double the usual number of contacts; but the sales per contact rate i s cut i n h a l f , then there has not been an increase i n advertising e f f e c t i v e - ness (other things being equal). For this reason, the analysis of advertising results must go further than just monitoring the number of contacts. To develop the objectives, The Company would make an industry forecast of area housing demand and then i n coordination with the resources of land, labour, plant f a c i l i t i e s and financing, would determine The Company's desired market share i n terms of housing u n i t s . If last years sales volume was 300 units and this years desired volume was 400 units with a sales per contact rate of four percent then 2,500 additional parties, or a year end objective of 10,000 parties i n t o t a l , would have to be contacted with a - 63 - corresponding increase i n cost. The plans for reaching such an objective would be primarily based on past experience. They would include decisions as to the amount of money that would be budgeted for the campaign; the information and general company image that should be projected; the duration of the program; and f i n a l l y the s p e c i f i c increase in the number of contacts expected by a specified date. Contingency plans would be developed for the p o s s i b i l i t y that the campaign was successful to an unanticipated degree or conversely, i f i t turned out to be a f a i l u r e . In addition, s p e c i f i c interim objectives would be estab- lished and the general form and frequency of feedback outlined. At this t o t a l system or macro l e v e l , how would a system malfunction be analyzed? In Chapter IV a general search procedure was outlined i n flowchart form (page50) and this is translated into the s p e c i f i c example in Figure 15. The analysis follows the same general search procedure as in Figure 12 using the proxy variables, number of contacts and sales per contact rate (S.P.C.R.) If the system outputs deviated from the objective, then the inputs or administrator's objectives would be examined to see i f they had been properly transmitted to the sales managers and salesmen. If they appeared to understand the objectives, then the competitive environ- ment would be examined to see i f other r e a l estate firms had launched new campaigns or other forms of "noise". If the environment matched the o r i g i n a l assumptions, then the processing of inputs must have been faulty and the media and the advertising department ( i e . sales manager and salesmen) sub- systems' behaviour should be analyzed. Some supplementary surrogate measures of effectiveness would be used to validate the conclusions drawn from the number of parties contacted. - 6 4 - F i g . 15.— The Company's t o t a l system le v e l control process START RECYCLE RECYCLE ->< EXIT - sales per contact rate - 65 - The rea l estate industry i s in the fortunate position of having a number of government agencies gathering s t a t i s t i c s . The Dominion Bureau of S t a t i s - t i c s , (D.B.S.) the Central Mortgage and Housing Corporation (C.M.H.C), prov i n c i a l and municipal governments a l l c o l l e c t and publish figures on the h&using industry. When this information i s combined with s t a t i s t i c s genera- ted within the company the result is more information than can be used (see Table I I ) . TABLE I I INFORMATION RECEIVED BY THE COMPANY Informat ion Frequency Parties contacted weekly Sales vs competition (informal source) weekly N.H.A. mortgage applications monthly Housing starts monthly Housing completions monthly L i s t of building permits issued weekly The information is l i s t e d i n the order ranked by company management as to the r e l a t i v e value for indicating advertising effectiveness. The information on number of contacts i s presently gathered by company reports although i t is not formally u t i l i z e d in the above manner. The salesmen turn in weekly s t a t i s t i c s showing the number of parties contacted by telephone and i n per- son while the o f f i c e s t a f f also reports telephone c a l l s . This information - 66 - i s considered by company management to be 100 percent correct, 80 percent of the time. It w i l l be r e c a l l e d , that the closer a systems output could be measured to the end r e s u l t , the more e f f i c i e n t control would be. In this case, the f i n a l result i s easier to monitor than either the media or advertising depart- ment output and consequently, this should be the st a r t i n g point for analysis. The information would be examined as i n Figure 15. I f the va r i a t i o n was explainable and s l i g h t then the control would automatically wait for the next measurement period. I f the deviation was large, then the administrator or assistant manager would go through the procedure i l l u s t r a t e d and use his discretion to decide on the appropriate action. Although The Company advertising system could be controlled at the f i n a l output l e v e l , i t could also be controlled at the subsystem le v e l of the media output or the advertising department output. High correlations between the various sequentially linked subsystems make i t plausible to assume that i f the salesmen wrote satisfactory c l a s s i f i e d advertisements, then there i s a high probability that the audience would process them as intended. As another example, i f the media employed delivered the messages to the audience, then there i s a strong li k e l i h o o d that they would be correctly processed. The empirical measurement of these correlations could become f a i r l y complex. For instance, an investigator would have to deter- mine the correlation between the " d i r e c t " measurement and the proxy measure- ment of the t o t a l system output. From there, subsystem outputs, which i n many cases are themselves surrogate measurements, would have to be correla- ted to the proxy measures of the t o t a l system output! Much work remains to be done in this area. For the present i t is accepted that a subjective - 67 - l o g i c a l relationship is s u f f i c i e n t j u s t i f i c a t i o n for con t r o l l i n g at the subsystem l e v e l . In addition to controlling the system through subsystem output, feedback on their output is also necessary to analyze the system i f there i s a malfunction. To l o c a l i z e the problem to one subsystem, the inputs and outputs would have to be monitored. This procedure w i l l be elaborated as the media and advertising department subsystems are examined. What are the objectives of the sales managers and salesmen i n terms of advertising output? Their goals would be to take the objectives and plans for the ov e r a l l campaign and process them so that the output is a finished advertisement. In other words, the subsystem goal would be the encoding or production of the actual message. They must perform t h i s task i n r e l a - t i o n to the given budget i n the given time. There i s therefore a direct as wel l as an indirect dimension to thei r output. Taking the l a t t e r f i r s t , a direct measure of the number of commercials produced i n a given time period could be compared to the objective and control of this facet of the adver- t i s i n g department output maintained in this manner. The creative nature of the commercials would have to be evaluated i n d i r e c t l y by the administrator's subjective opinion. The plans for the advertising department subsystem would e n t a i l deci- ding on the means of scheduling the commercials, producing the messages and transmitting the encoding to the different media, and arranging time or space in each medium. A malfunction in this subsystem would be analyzed in much the same manner as in Figure 15. F i r s t l y , the outputs would be checked, then the inputs and the environment and f i n a l l y , i f necessary, the processor element - 68 - would be examined. The flowchart (see Figure 16) diagrams the s p e c i f i c steps that would be followed. If the inputs and environment are as expec- ted then thei r must be a lack of s k i l l or trai n i n g i n the sales force producing the advertising, and therefore sub-subsystems i n the form of individuals would have to be examined. Objectives and plans would also have to be formulated for the media subsystem. I f the advertising department produces the creative side of the commercials, then the media subsystem objectives would be in terms of the mechanics of transmitting the message and i n terms of the quantity of messages broadcast. This would cause control to be maintained by a com- parison of the number of messages actually sent, to a corresponding o b j e c t i v e — a direct measure. The mechanics would involve indirect measures, the adminis,- trafeor's subjective judgment as to the "correctness" of quality of trans- mission. For example, c l a s s i f i e d newspaper advertisements may be misspelled or printed with the wrong phone number; the message may appear on a bi l l b o a r d i n the wrong location; or a t e l e v i s i o n announcer or model may appear sloppily dressed. It i s this kind of indirect information which should' be combined with the more eas i l y quantified volume measure in order to control the media subsystem. The plans for this subsystem would be primarily concerned with schedu- l i n g or placing the commercials for each medium. Selection of these channels would have been done by the advertising department so that the role of the media would be simply to present the message. Figure 17 indicates the steps that would be followed i n locating a system malfunction with the usual check on the inputs and the environment. A processor malfunction i n this subsystem would probably imply that the service provided by the medium was poor or that - 69 - Fig . 16.— The Company's advertising subsystem control process START PROCESSOR MALFUNCTION ANALYZE ABILITY OF PERSONNEL - 70 - Fig . 17.-- The Company's media subsystem control process START PROCESSOR MALFUNCTION ANALYZE MEDIA SERVICE - 71 - the management was i n e f f i c i e n t . If alternate newspapers, outdoor adver- t i s i n g companies, radio or t e l e v i s i o n stations could be substituted for the faulty medium, then this p o s s i b i l i t y should be considered. Each Company subsystem has been examined separately to see how i t s behaviour would be controlled and i t i s now time to integrate the pieces into a master plan for regulating The firm's advertising e f f o r t s . The pro- cedures would follow the major loop outlined i n the general flowchart i n Figure 13 (page52). The diagram applicable s p e c i f i c a l l y to The Company (see Figure 18) traces the steps that would be considered and i s b a s i c a l l y just an assembly of the three separate control procedures with a few minor varia- tions i n the order the steps are taken. The questions we would be asking are: (1) Is the process under control? (2) I f not, can the problem be localized to one subsystem? (3) What i s the problem within the subsystem? The answers to these questions enable the administrator to make a decision on the appropriate action. Of the many decisions that are required to keep the process under control, which ones w i l l be automatic and which ones w i l l be discretionary? On the basis of h i s t o r i c a l experience, i t may be possible to develop upper and lower control l i m i t s for the quantitative measures. For example, i f the volume'of contacts i s between plus and minus f i v e percent, then the process is deemed under control and the administrator need not become involved i n the decision making. Furthermore, i f the cause of a malfunction can be quickly traced and easily corrected, then again the administrator need not become enmeshed in the detailed procedures. He must however play an active  - 73 - role when either the cause of the problem cannot be traced or the correction of the error involves a major decision or a revision in plans. Thus, with a defined search procedure and a small number of decision rules the adminis- trator is in a position to control The Company's advertising program. CHAPTER VI CONCLUSIONS AND SUGGESTIONS FOR FUTURE RESEARCH This ends the journey embarked on at the beginning of this paper with the exception of some conclusions, some evaluation of the worth of the project, and some suggestions for further research. The i m p l i c i t hypothesis investigated was that the systems approach to advertising control could be developed i n such a manner that i t could be applied i n a p r a c t i c a l s i t u a t i o n . Has the discussion supported the hypothesis? One would probably conclude yes, with the q u a l i f i c a t i o n that a great deal of work remains to be done in this area i n both the conceptual and quantitative spheres. Forrester states that "...systems engineering i s a formal awareness of the interactions between the parts of a system." (1965, p. 5) This summarizes the major benefit of the systems approach. I t emphasizes behaviour rather than just structure. What the advertising department does, affects the media which i n turn affects the manner i n which the message i s processed by the audience. Each unit i s dependent on the other and the whole i s only as effective as i t s weakest l i n k . In addition, the approach provides a framework for analysis, planning and control by emphasizing where and what objectives are needed. It also indicates many of the causes of system malfunction and provides a l o g i c a l , e f f i c i e n t method for locating d i f f i c u l t i e s . Many questions have arisen during the paper that indicate areas for future research. Some of these concern theoretical questions while others arise in attempting the p r a c t i c a l applications. For example, what subsystem - 75 - structures are most suitable for optimizing safety, speed, p r o f i t and per- haps delegation of authority? Are s e r i a l structures more e f f i c i e n t for quick decisions? Do p a r a l l e l subsystem structures make delegation of author- i t y easier? One would suspect that the " i d e a l " structure would vary with the goals of the system. Another area already mentioned for research i s the integration of the advertising system into the t o t a l system of the firm. What affects do changes i n the advertising system have on changes in other systems? For- rester (1959) investigated this issue through computer simulation models-- which raises another area of study. How can the control process be simulated or at least automated? We have developed the beginnings of a conceptual model but a great deal of empirical study must precede i t s rigorous quan- t i t a t i v e application. Some of the empirical studies could involve in-depth case studies of advertising programs designed and executed under the systems approach. Another alternative i s to study a number of firms in different industries and take a cross-sectional survey of th e i r advertising programs. This would uncover a number of p r a c t i c a l problems peculiar to s p e c i f i c industries. More study is needed on the automatic versus discretionary decisions i n control. The e f f i c i e n t use of executive time would suggest that the more decisions that are automatic (yet correct) the better w i l l be the management of the company as more e f f o r t can be allocated to judgment decisions. The quantification of information cost-benefit analysis also needs more research to quantify u t i l i t y functions and the intangible costs of information. This subject of measurement needs considerable attention as the essence of maintaining control i s a measurement of actual versus desired - 76 - outputs. The d e f i n i t i o n of o b j e c t i v e s and the u n i t s of measurement to be employed i n monitoring output need to be studied i n order to understand the r e l a t i o n s h i p s between the d i r e c t and i n d i r e c t i n d i c a t o r s . The use of proxy measures introduces a degree of r i s k that the d i r e c t measurement could i n d i c a t e d i f f e r e n t system behaviour than i s i n d i c a t e d by an i n d i r e c t measure. In g e n e r a l , the systems approach can be a p p l i e d to a d v e r t i s i n g but at the f i r s t subsystem l e v e l of a n a l y s i s employed throughout t h i s paper, some s i m p l i f y i n g assumptions are necessary. In the framework a p p l i e d to The Company, i t was assumed that the v a r i o u s subsystems produced t h e i r r e s - p e c t i v e outputs, without drawing on resources outside that subsystem. For example, i n p r a c t i c e , i t i s u n l i k e l y that The Company a d v e r t i s i n g department would produce the a r t work f o r b i l l b o a r d s . I t would e i t h e r be subcontracted to a commercial a r t i s t or the help of the outdoor a d v e r t i s i n g company would be u t i l i z e d . To overcome t h i s s i m p l i f i c a t i o n , an a d d i t i o n a l l e v e l of analy- s i s would have to be introduced, eg. the commercial a r t i s t "sub-subsystem." Other s i m p l i f y i n g assumptions made i n applying the theory to the example were (1) The Company was only a d v e r t i s i n g i n one geographic area and (2) only an immediate a c t i o n a d v e r t i s i n g program was being executed-- which e l i m i n a t e d the problem of co n c u r r e n t l y c o n t r o l l i n g an i n s t i t u t i o n a l campaign as a p a r a l l e l set of subsystems. These s i m p l i f y i n g assumptions do not weaken the a p p l i c a t i o n of the theory as the assumptions can be removed by adding more subsystems. The a n a l y t i c a l steps remain the same although the number of them increase c o n s i d e r a b l y . Because of the complexity of many a d v e r t i s i n g systems, methods of handling analyses of l a r g e numbers of sub- systems need to be developed. I f the conceptual problems inherent i n the s o c i a l sciences can be overcome, then computers could provide the data handling capacity. One additional interesting research question concerns the behaviour of different systems when d i s t o r t i o n i s introduced. Does the amplitude of the d i s t o r t i o n actually increase as i t is transmitted through additional subsystems; does i t remain constant; or does i t decrease and i f so why? 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