Advertising Economic & Social Impacts

Advertising is applauded and criticized 1) By using advertising, businesses risk people’s criticism : •Attacks if their ads are controversial (offensive, unpleasant) •Product does not deliver promises 2) When a business advertises, it is safer to buy their product because they try harder to fulfill promises and

Controversi es

Controversies surrounding advertising
Economic Controversies: •How does it affect product value? •Does it affect product prices? •Does it promote or discourages competition? •Does it influence consumer choice/decision? •Does it impact the business cycle? Social controversies: •Does it make society more materialistic? •Does it make us compulsive, buying things we don’t need? •Does it reach us subliminally in ways we can’t control?

Questions on Responsibility and Control over Advertising:
•What’s the proper role for participants in the marketing process? •What limits do marketers have in the kinds of products/advertising? •What is the role of consumers and their responsibilities? •What’s the role of governments, protection laws and

Economic Imapct
•A country’s level of ad spending is proportional to its standard of living. •The economic effect of advertising is like the break shot in pool. The moment a company starts advertising

Effect on Product Value People prefer advertised products over other brands Why? Ads give brands added value Psychologist Earnest Ditcher: Product’s image created by Advertising is an inherent feature of the product. How does advertising give value to products?

How does advertising give value to products?
qPositive image implies good quality qMakes it desirable by making it better known
(this is why we pay more for advertised products)

qEducates consumer on usage and new usage
(Kleenex make up remover; disposable handkerchief)

qSatisfies self interest

Effect on Price
qEncouraging competition: Ad. Keeps prices down qCost of ad. Paid by consumer is small X product total cost qMass Ad. = mass distribution: Enables mass production of products bringing cost/unit lower qPrice as ad. Feature: keeps prices lower (exception: when promoting better quality) Government Deregulation: opens market

Effect on Competition
qIntense competition: Reduces No. of businesses in an industry qAd budget is important for industries that heavily depend on ad. (auto industry) qAd budget is usually small compared to product cost

Effect on Demand
Governed by complex set of factors: economic & social technological advances consumer educational level Population increase Income Lifestyle changes Ex., demand for CD, cell phones due to favorable market conditions demand for DVD v.s. Blueray

Primary Demand: Launching new products Ad. new products, giving complete information, In growing markets ad. competes for shares in growth Selective Demand: Advertising specific info. only (egx. Ad. price only when the only info needed is

Effect on Consumer’s choice
qFreedom to advertise promotes more sellers Gives consumers more Choices qCreates new products qImproves old products

Effect on Business Cycle
qhelp sustain employment & income qHelp maintain flow of consumer demand qCreate consumer preference for certain products qBusiness cycle up --- ad. Budget up, contributes qBusiness cycle down ---ad. Acts as a stabilizing force qCompanies that continue to ad. When business cycle dips protect and build market shares