Economic effects of advertising

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Economic effects of advertising

  1. 1. Economic Effects of Advertising     Lobby of public opinion considers expenditure on ads wasteful and increase in this exp is undesirable. Ad is closely linked with economic development in long term ( vital mktg input for new product introductions and mkt develmt.). Economic development is outcome of expansion in demand. It is useful function in the dissemination of technology.
  2. 2. Explicit Role of Advertising       Guide to prospective buyers Effects on primary & selective demand Product differentiation Propensity to consume and innovation Financial support to media. Indirect effects are seen in efficiency in distribution, lowering of prices, economic well being, improvement in product quality and contribution to national income.
  3. 3. Advertising as Guide to Prospective Buyers     It is an instrument of persuasion and information. Info about product, specifications, features, function and prices. Alternatives available. Helps in the decision making.
  4. 4. Primary and Selective Demand     Demand for the class of product as whole is primary demand Demand for the company’s individual product is secondary demand. Advertising can shift the demand for class of product Ad can help in shifting the demand curve for the product.
  5. 5. Product Differentiation     Influence consumers to develop brand preferences. Products with no differentiation will not be affected by advertisements. Help in widening the range of merchandise Producer go for variety of products under their brand names through continuous experimenting with different combinations
  6. 6. Encouraging Innovations    Economical way of informing potential buyers about new product. New product require extensive research, development expenditure and substantial investment in production facilities. Ads can help in recovery of these expenses.
  7. 7. Propensity to Consume      Consumer spending decline when advertising flow is cut off Advertising does affect aggregate spending Advtg affect long run propensity to consume Might affect short term propensity by informing consumers of bargains Rural counterpart try to imitate the urbans
  8. 8. Financial Support to Media    Major function of mass media is to provide education, information, entertainment. Revenue is from subscription alone. Availability of Ad revenue is pre requisite for growth of media for new vehicle.
  9. 9. Indirect Role of Advertising   Lowering of Prices: Due to reduction in cost of production, distribution (Pull effect) and expansion. Encouragement to mass consumption. Advertising & Competition: Ad has negative impact on rivals sales and share. Rivals advertising effort tend to conceal each other out. Best products & services are offered to customers.
  10. 10. Cont…   Effect on Product Quality: Differentiation and maintenance of quality as per claim Increase in economic activity and employment: More buying, people want more things, people work harder to earn more, increase level of production, acceptence of new products and ideas.
  11. 11. Criticism of Advertisement.    Product prolification: Multiplication of identical product. Inefficient manufacturers stay in the business Barriers to entry
  12. 12. Social Issues Deception: Is the claim testable? Is the competitive claim of superiority reasonable? Does the claim apply to all models or type of product? Can the message be misinterpreted by reasonable person? Does ads address itself to what customers wants to know? Ads must not create misleading impression Must not conceal of material cost Must be free from fraudulent traps 
  13. 13. Cont..   Manipulation: Freedom of choice of consumer is restricted by power of ads. Buyers can make decision against their will or interest. Ads use careful application of techniques for motivation ( Emotional appeals) Taste: Moral concerns about ads related to products (Alcohol and Cigarettes). Objections to occassions of exposure to ads (when children watching). Objections to over appeal.
  14. 14. Role of Ads in Marketing Mix        Personal Selling: Support system Product Planning: Better products and improvement in existing products Brand policy: Guarantee, assurance and accountability. Customer loyalty. Umbrella branding independent brands. Price: Premium pricing, Elasticity based. Packaging: Contains and Cntainers Distribution: Cost reduces due toPull effect Promotion and Displays; Sales Promotion

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