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
It is useful function in the dissemination of
Explicit Role of Advertising
Guide to prospective buyers
Effects on primary & selective demand
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.
Advertising as Guide to Prospective
It is an instrument of persuasion and
Info about product, specifications, features,
function and prices.
Helps in the decision making.
Primary and Selective Demand
Demand for the class of product as whole is
Demand for the company’s individual product
is secondary demand.
Advertising can shift the demand for class of
Ad can help in shifting the demand curve for
Influence consumers to develop brand
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
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.
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
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.
Indirect Role of Advertising
Lowering of Prices: Due to reduction in cost of
production, distribution (Pull effect) and
expansion. Encouragement to mass
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
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.
Criticism of Advertisement.
Product prolification: Multiplication of
Inefficient manufacturers stay in the business
Barriers to entry
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
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.
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
Price: Premium pricing, Elasticity based.
Packaging: Contains and Cntainers
Distribution: Cost reduces due toPull effect
Promotion and Displays; Sales Promotion