EFFECTIVENESS OF COMPARATIVE ADVERTISMENT IN TELECOM INDUSTRY OF PAKISTAN

SYED ZEESHAN HASSAN 060515

RESEARCH SUPERVISOR: Sir, Qaiser Janjua

Final Project Approval Sheet

Topic of Research: Affects of Nutritional Facts on Consumer Purchase Decision in Processed Food

Names of Student: Khawaja Osman Ahmad

Registration No: 060493

Program: BBA-F-06-A-57

Approved by: Project Supervisor: ___________________________________

Internal Examiner::__________________________________

Internal Examiner: ___________________________________

Dean: _______________________________________________

CERTIFICATION OF COMPLETION OF RESEARCH

Mr. Khawaja Osman Ahmad, registration no 060493, semester BBA-F-06 has completed his research on June 24, 2010 under my supervision.

His topic is Effectiveness of Comparative Advertisement in Telecom Industry of Pakistan

This thesis has been examined by me and it has been found complete in all aspects and fit for presentation. The student is therefore allowed in the presentation/viva voce for defending it before the panel of examiners.

____________________ Qaiser Janjua (Supervisor)

ABSTARCT

This research is based upon how the Nutritional Facts affect the purchase decision of the consumers in the Pakistani market. When the consumers are making a purchase of processed food the factors which come under consideration are Healthiness, Education of the consumers and the Brand Name of the product. All these factors play a vital role in the purchase decision of the consumers when they opt for the processed food. There are many other aspects which fall in this category but in this research, the above mentioned three factors had been under study. It can be said that Pakistani consumers purchase decision is affected by the Nutritional Facts if they are health conscious, educated or brand conscious.

ACKNOWLEDGMENT

My modest appreciation to The Almighty who has been so kind in bestowing His blessings upon me and provide me the power, nerves and wisdom to discharge over responsibility and to successfully accomplish my task and enable me to complete this project.

I also extend my heartfelt thanks and deepest appreciation to Mr. Tariq Sohail for his guidance, coaching, teaching and support. He has been cordial in sharing both his time and vast wisdom willingly, explicitly and without hesitation. I pray that at least some portion of what I have learned from him is reflected on these pages.

I am also grateful to Mr. Farooq Rasheed, the research coordinator who helped me compile this project.

Last but certainly not the least, I pay my gratitude to my family members for their unconditional love and support, without which this task would not have been accomplished.

DEDICATION

To my Father, Mother, Brother and a brother like friend who all the way supported me in the completion of this project.

I thank you all from the core of my heart for all the love and support

TABLE OF CONTENTS

LIST OF TABLES

TABLE NUMBER PAGE NO.

CHAPTER 1 INTRODUCTION

1.1 BACKGROUND

The recent surge in the telecom industry of Pakistan gave way to the introduction of many new telecom companies. Including the likes of Mobilink as market leader, Telenor and Ufone as the challengers, and Warid and Zong as the followers the market seems saturated. With these companies fighting for the top spot in market share and profitability, one critical success factor for achieving that is to spend handsomely on advertising.

1.2 RATIONALE

Telecom industry has contributed a great deal to Pakistans economy and has called for great investments that lead to a new era of progress. Telecom sector is seeing extraordinary growth in Pakistan. With increasing levels of mobile penetration Pakistan is fast evolving as one of the telecom sector's key investment prospects. Continued market liberalization is reshaping the regulatory environment, creating a more investment friendly climate in telecom sector of Pakistan. The sector is said to be growing at a very fast pace on yearly basis. This growth rate of telecom sector is mainly because of the mobile phone service providers entry in the industry for the last few years. As of July 2009, the mobile phone subscribers are 95.54 million in Pakistan and, in fact, still Pakistan has the highest mobile phone penetration rate in the South Asian region. Hence, due to the huge potential in Pakistans mobile phone sector, the industry and customers are experiencing an intense competition, a battle for supremacy in the mobile phone industry, between all mobile phone service providers of Pakistan A trend of comparing one product with another and exploiting it on its weaknesses was already there but this now has crept into almost every ad made by the telecom companies. This comparison gave rise to a new type of advertising known as Comparative Advertisement. Comparative advertising, as a special form of advertising, is a sales promotion device that compares the products or services of one undertaking with those of another, or with those of other competitors. All comparative advertising is designed to highlight the advantages of the goods or services offered by the advertiser as compared to those of a competitor. In order to achieve this objective, the message of the advertisement must necessarily underline the differences between the goods or services compared by describing their main characteristics. The comparison made by the advertiser will necessarily flow from such a description. Comparative advertising should enable advertisers to objectively demonstrate the merits of their products. Comparative advertising improves the quality of information available to

consumers enabling them to make well-founded and more informed decisions relating to the choice between competing products/services by demonstrating the merits of various comparable products. Based on this information, consumers may make informed and therefore efficient choices. (These statements are true only if the comparative advertising is objective.) Comparative advertising which aims to objectively and truthfully inform the consumer promotes the transparency of the market. Market transparency is also deemed to benefit the public interest as the functioning of competition is improved resulting in keeping down prices and improving products. Comparative advertising can stimulate competition between suppliers of goods and services to the consumer's advantage. Comparisons between goods and services of different undertakings carry with them some significant risks. There is a danger that once undertakings address the merits and inadequacies of competing goods or services, they may be tempted to denigrate them or derive unfair advantages from such inaccurate comparisons. Just like traditional forms of advertising, comparative advertising seeks to both assist the development of the undertaking concerned and to inform consumers. Although both forms of advertising seek to attract customers, in case of comparative advertising, commercial relationships may be exposed to the constant threat of unfair practices. Comparative advertising allows a company to directly compare their product with the competition and also provides the company with an opportunity to highlight the areas in which it believes its product is superior.

7% 31%

19%

Mobilink Telenor Ufone Warid Z ong

21% 22%

Figure 1

PURPOSE OF RESEARCH As comparative advertising is a growing phenomenon in the world and is now regularly used in many ad campaigns. The purpose of my research is to find out the effectiveness of comparative advertisement in telecom industry of Pakistan.

RESEARCH PROBLEM This research is done to figure out whether comparative advertising is effective in maintaining the bonds with its target audience in the telecom sector of Pakistan. Almost all the companies are involved in this type of advertising but due to limited research on this topic its effectiveness is still not known. Advertising research commonly finds that a large percentage of the audience will believe that the competitor's product is the one being advertised in a comparative advertisement. It can be disastrous if a majority, or a large minority, believes this. An advertiser could potentially be spending money to promote a competitor's product. The easiest way to avoid this problem is to avoid comparative advertising entirely or if not avoid it then use it intelligently.

THEORETICAL FRAMEWORK Effective advertising is, almost always, persuasive advertising, and while not all advertising seeks to persuade, in a competitive situation those who best persuade are those most likely to win. For my research I picked up comparative advertising as a variable which might or might not be effective but certainly is here to stay. Almost all businesses are linked to this type of advertising in one way or the other. Comparative advertising allows a company to directly compare their product with the competition and also provides the company with an opportunity to highlight the areas in which it believes its product is superior. One difficulty with comparative advertising is that the intended buyers may perceive it as threatening their self-image because they view the comparison as an attack on their presently preferred brand. Comparative advertising is not illegal and there are no special rules to follow when creating comparative advertisements.

According to the research done earlier there were many variables which had an effect on comparative advertising and in my research I have used brand awareness, attitude, communication, quality, informative.

AWARENESS

POSITIVE ATTITUDE COMMUNICATION

COMPARATIVE ADVERTISING EFFECTIVENESS

PERSUASION QUALITY

INFORMATIVE

HYPOTHESIS Hypothesis 1 H: Comparative advertising does not lead to higher brand awareness and attention as compared to non comparative advertising H: Comparative advertising leads to higher brand awareness and attention as compared to non comparative advertising Hypothesis 2 H: Comparative advertising does not lead to positive attitudes towards a brand as compared to non comparative advertising. H: Comparative advertising leads to positive attitudes towards a brand as compared to non comparative advertising. Hypothesis 3 H: Comparative advertising is not effective in communicating the benefits of a new product/service. H: Comparative advertising is effective in communicating the benefits of a new product/service. Hypothesis 4 H: Comparative advertising is less persuasive than non comparative advertising. H: Comparative advertising is more persuasive than non comparative advertising. Hypothesis 5 H: Comparative advertising does not indicate higher quality of product/service in advertisements as compared to non-comparative advertising.

H: Comparative advertising indicates higher quality of product/service in advertisements as compared to non-comparative advertising. Hypothesis 6 H: Comparative advertising is more informative when there is not a direct comparison. H: Comparative advertising is more informative when there is a direct comparison.

DEFINITION OF TERMS

Comparative Advertising Comparative advertising is an advertisement in which a particular product, or service, specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it. Brand Awareness Brand awareness is a marketing concept that measures consumers' knowledge of a brand's existence. At the aggregate (brand) level, it refers to the proportion of consumers who know of the brand. Brand Perception Brand is essentially the sum of all experiences related to the product, service, and companies that make and deliver the product. Brand perceptions are shaped by functional experiences (i.e. speed, quality, reliability, ease of use) as well as emotional experiences (i.e. make me feel better, improve my performance, make my life/job more gratifying or easier) the customer associates with the product and company.

LITERATURE REVIEW Of the many possible approaches available when implementing advertising

communications, the relatively new but increasingly popular strategy referred to as comparative advertising offers marketers an opportunity to communicate specific advantages of their brands and at the same time demonstrate that competing products are less able to fulfill specified needs and benefits. The major attraction of comparative advertising is its intuitive appeal; here, one can provide consumers with explicit, direct information about the promoted brand and its competitors allowing the consumer to compare brand and identify explicitly the relative positioning of the promoted brand. Comparative advertising has also the presumed appeal of projecting an image of a hard hitting, competitive message; once and for all destroying the image of collusion, oligopolies and other non-competitive practices of which many heavily advertising firms such as automobile, drugs or processed foods have been often accused. Yet advertisers should proceed with caution when planning, designing and executing a comparative communicational campaign (Etgar & Goodwin, 1979). It is also argued that the effects of comparative advertising are situation specific (Murphy & Amundsen, 1981). Comparative advertising have failed to find a positive effect on brand attitudes, including those that have demonstrated other positive effects (Gorn & Weinberg, 1984; Sujan & Dekleva, 1987). A study by Putrevu & Lord (1994) found that comparative ads induce more positive brand attitudes for products which elicit cognitive and affective motivations simultaneously. Comparative ads were also shown to positively influence brand switchers and have a negative impact on consumers loyal to competing brands. A meta-analysis was done by Grewal, Kavanoor, Fern, Costley & Barnes (1997) showed that comparative ads are more effective than non-comparative ads in generating attention, message and brand awareness, levels of message processing, favorable sponsored brand

attitudes, and increased purchase intentions and purchase behaviors. However, comparative ads evoke lower source believability and a less favorable attitude toward the advertisement. Additional analyses of moderator variables find that market position (sponsor, comparison, and relative), enhanced credibility, message content, and type of dependent measure (relative versus non-relative) affect some of the relationships between advertising format and cognition, brand attitudes, and purchase intentions. New brands comparing them-selves to established brands appear to benefit most from comparative advertising. The issue of cross-country differences in comparative advertising effectiveness is very important. Donthu (1998) found that although recall of comparative ads was high, consumer attitudes toward comparative ads was not very positive, especially in countries where comparative ads are not widely used or rarely used. In recent years this new phenomenon has become pronounced in TV and print advertising. It compares one brand against one or more competitive brands through explicitly naming them in the same ad, on a variety of specific product or service attributes. There were infrequent attempts at comparison advertising in the past, but these comparisons were not as explicit as we find them currently. Today, one notices comparison ads being aired on all forms of goods and services. Since comparative advertising is a potentially growing phenomenon, it has a lot of impact on stimulating brand recall (Subhash & Hackleman, 1978). Comparative advertising is advocated as an effective method of communicating benefits of new brands (Droge & Darmon, 1987; Murphy & Amundsen, 1981). Although practitioners have shown increased interest in using comparative advertising (Phillips, 1983; Shimp & Dyer, 1978), empirical evidence concerning its impact is inconsistent and remains controversial (Ash & Wee, 1983; Belch, 1981; Demirdjain, 1983; Gorn & Weinberg, 1984). This inconsistency suggests the need to identify conditions where comparative advertising is likely to be more persuasive than non-comparative advertising (Shimp & Dyer, 1978) for new and/or unfamiliar brands. Researchers have also suggested that an evaluation of a comparative advertisement may require a higher hevel of involvement than may be present within many consumers (Wilson & Muderrisoglu, 1980).

The effectiveness of comparative advertising has been the focus of several empirical studies (Golden, 1976; Levine, 1976; McDougall, 1976, Prasad, 1976; Pride, Lamb, & Pletcher, 1977; Wilson, 1976). Although these studies have explored several important aspects of comparative advertising, a substantial number of problems of importance to advertising managers have not been researched (Etgar & Goodwin, 1977). Numerous academic and industry studies have investigated comparative advertising effectiveness with mixed results (Rogers & Williams, 1989; Barry, 1993). Some researchers have found comparative advertisements to be effective (Demirdjian, 1983; Earl & Pride, 1980), but others have found them to be no more effective than traditional noncomparative advertisements (Droge & Darmon, 1987; Goodwin & Etgar, 1980). Some researches have found non-comparative advertising demonstrably more effective than comparative advertising (Shimp & Dyer, 1978). A research was done to find whether or not comparative print advertisements are more informative than non comparative ones and whether variations in intensity and directionality affect the informativeness of comparative advertisements. It was later found that both comparative and non comparative ads were thought to be informative by the consumers (Pride, Lamb & Pletcher, 1979). The effectiveness of comparative advertising, according to the large body of extant empirical research, is equivocal. Some investigators conclude that comparative advertising provides advantages that are not associated with non-comparative advertising (Droge & Darmon, 1987; Miniard, 1993; Pechmann & Ratneshwar, 1991; Pechmann & Stewart 1990; Rose, 1993). Others report that comparative advertising produces undesirable outcomes (Belch, 1981; Golden, 1979; Goodwin & Etgar, 1980; Levine, 1976; Swinyard, 1981). These conflicting opinions do not seem to deter major consumer goods and service corporations from using comparative advertising in their promotional mix. Comparative ads generally elicit more attention to the ad, greater message and brand awareness, increased information processing, more favorable brand attitudes, and increased purchase intentions and increased purchase behaviors. Conversely, comparative ads evoke lower

source believability and less positive attitudes toward the ads (Garewal, Kavanoor, Edward, Carolyn & James, 1997). An early assumption was that comparative advertising would add information content to advertising and give the consumer a basis for evaluating the relative merits of rival brands (Schnabel, 1974-75). Wilkie & Farris (1975) proposed that comparative advertising should be more effective than non-comparative advertising in generating increased attention and recall, increased comprehension of claims, and greater yielding to claims. Of the studies investigating comparative advertising, however, only a few have found some benefits for it (Jain & Hackleman, 1978; Prasad, 1976). Most studies are not supportive. Pride, Lamb, & Pletcher, (1977) and Golden (1979) found claim acceptance no more effective for comparative advertising than for non-comparative advertising. Shimp & Dyer (1978) and Levine (1976) found comparative advertising to be inferior to non-comparative advertising. In past laboratory experiments, researchers have attempted to measure the effectiveness of comparative advertising under the explicit or implicit assumption that attitudes and purchase intentions are the appropriate dependent measures (Etgar & Goodwin, 1978-80; Golden, 1975; Ogilvy & Mather, 1975; Wilson, 1976). Based on this model the conclusion has been drawn that comparative advertising is as effective as non-comparative advertising (i.e., the conventional format). Relatively few studies have compared the effectiveness of direct and indirect comparative ads. As in the case of studies comparing direct and non-comparative ads, results have been mixed. Pride (1979) found that direct comparisons were perceived to be more informative than indirect comparisons, but Goodwin & Etgar (1980) found the opposite to be true. Similarly, Goodwin & Etgar (1980) found indirect comparisons to be marginally more effective in promoting positive affect toward the brand, whereas Prasad (1976) and Murphy & Amundsen (1981) found no effects on perceived competitive position. It was noted by Pechman & Stewart (1990) that market share of advertised brands may be an important variable: Indirect comparisons were more effective than direct comparisons in enhancing purchase intentions for moderate-share brands, and the opposite was true when lowshare brands were compared to high-share brands. In general, researchers have found no difference between direct and indirect comparative advertising in terms of being perceived as

reliable, helpful, or believable (Collins & Waters, 1986; McDougall, 1977; Murphy & Amundsen, 1981). In addition, researchers of implied superiority claims, a widely used form of indirect comparative advertising, have suggested that these indirect comparisons may neither be understood correctly nor have a significant effect on brand attitudes (Snyder, 1989; Wyckham, 1987). Direct-comparison ads can enhance a brands position either by differentiating it from competitive offerings or by causing it to be associated with an established, well liked comparison brand (Droge & Darmon, 1987; Gorn & Weinberg, 1984; Pechmann and Ratneshwar, 1991; Sujan & Dekleva, 1987; Walker, Swasy & Rethans, 1985). A number of studies have addressed the dimensionality of involvement construct (Kim, 1991; Kim & Lord, 1991; Laurent & Kapferer, 1985; McQuarrie and Munson, 1987; Mittel and Lee, 1989; Park & Young, 1986; Vaughn, 1980, Zaichkowsky, 1987). Though the various studies yield some differences with respect to the number and nature of dimensions identified, they have in common the demonstration of a cognitive (rational, thinking) and an affective (emotional, hedonic) aspect. Comparative advertising resembles comparison shopping since it is a message format that compares two or more brands of the same product or service class and makes such a comparison in terms of one or more product or service attributes (Wilkie and Farris, 1975). An advertising format that resembles comparison shopping benefits both advertisers and consumers (Scammon, 1978). From the advertisers perspective, comparative messages provide an explicit reason for buying the sponsors product rather than a competitors. Other reasons for endorsing comparative advertising are that it encourages competition, leads to selective attention due to the mention of competing brands, and helps users to generate support arguments (Scammon, 1978; Wilkie & Farris, 1975). Through a strategy of association with a dominant, well-known brand, a new (or lesser known) brand may be able to achieve fast and accurate positioning. The goal of an associative strategy is to engender perceived similarity (Lamb, Pride, & Pletcher 1978). The strategy may involve, for example, use of a brand name, package design, and advertising claims, and/or point of purchased displays that mimic those of the dominant brand and thus elicit the desired association in consumers' minds. In particular, advertising often has a crucial role because it

communicates the information on which the association is based. (Wilkie & Farris, 1975) were the first to hypothesize that comparative ads lead to increased brand comprehension because use of product attribute-based comparisons makes it easier to position a brand in relation to competitors. By pointing out how and to what extent brands are similar (or differ), comparative ads give consumers information in a format that provides increased potential for learning and clearer, focused perceptions. This fundamental research hypothesis, centering on cognitive brand-related responses, was one in a series that encompassed recall, ad-related responses, and the entire hierarchy of cognitive, affective, and cognitive effects relating to the brand itself. A number of different types of associations related to either performance or imagery may become linked to the brand. We can characterize the brand associations making up the brand image and meaning according to three important dimension-strength, favorability, and uniqueness that provide key to building brand equity and hence activation brand loyalty. (Keller, Strategic Brand Management, 3rd Edition). In context of the above research, effectiveness of comparative advertising is related to factors such as brand awareness, direct or indirect comparison or simply the timing of exposure to the advertisement etc. There are many other factors that influence the affectivity of comparative advertisement which requires more in depth analysis. Purpose of my research is exactly to find the same aspects which might or might not be affective while running the comparative advertising campaign. The area of my research is the telecom sector of Pakistan. Almost all the companies in this industry are using comparative advertising as a tool for their advertising campaigns. This is mainly done to better inform their customers about their product/services and to stand apart from the competition by punching them hard, but has it helped them so far is a big question mark.

2.1 Theoretical Framework

Effective advertising is, almost always, persuasive advertising, and while not all advertising seeks to persuade, in a competitive situation those who best persuade are those most likely to win. For my research I picked up comparative advertising as a variable which might or might not be effective but certainly is here to stay. Almost all businesses are linked to this type of advertising in one way or the other. Comparative advertising allows a company to directly compare their product with the competition and also provides the company with an opportunity to highlight the areas in which it believes its product is superior. One difficulty with comparative advertising is that the intended buyers may perceive it as threatening their self-image because they view the comparison as an attack on their presently preferred brand. Comparative advertising is not illegal and there are no special rules to follow when creating comparative advertisements.

According to the research done earlier there were many variables which had an effect on comparative advertising and in my research I have used brand awareness, attitude, communication, quality, informative.

RESEARCH METHODOLOGY The research methodology is descriptive in nature. Earlier work on this topic does not help the cause of Telecom industry of Pakistan. But the research done abroad is helpful to find the main reasons of the popularity of this type of advertising.

Data Collection
Data collection is mainly primary in nature. Because there is not much research done on this topic in Pakistan, therefore some of the secondary data is taken from books, electronic

journals, and other websites. It is ensured to carry out the research in an understandable manner and unbiased approach.

Instrument
The tool used for data collection is a self designed questionnaire. Questionnaires are a research instrument consisting of a series of questions and other prompts for the purpose of gathering information from respondents. Each question has been designed in order to gain information related to the main elements of the research paper.

Population
Population taken for the research is from Islamabad due its convenience and proximity. Due to time constraints the area of my research is restricted to only selected sectors and shopping areas inside Islamabad. The reason of selecting Islamabad as an area of my research was that it represents people of almost every origin and to keep the findings specific.

Sample
The total sample size is 200 respondents who use mobile phones regularly and have seen the ads by these mobile phone companies. The sample was taken from different sectors including: F-8, F-11, E-7, F-7, F-6, G-10, and G-11.