Advertising

Economic & Social Impacts

 Controversi
es
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
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