Business

Role of Advertising: An overview

1. Introduction:

Advertising in the present world is not only been used by business organizations but also by a large number of non-profit oriented organizations. Advertising has been a major communication tool, is highly pervasive and reaches to people through various mass media vehicles. Advertising influences everyone, like other important institutions in society, such as schools, marriage, and religion. Hence advertising has become an institution in itself. It is needless to say that advertising in this era of modernity has gained profound recognition and importance all over the world as an indispensable tool of business. On account of its role in the business, advertising has grown tremendously both qualitatively and quantitatively. Today advertising is omni present if not omni potent. Consumers are confronted with substantial daily doses of advertising in multiple media. Everyone seems to hold an opinion about various aspects of advertising ranging from negative to positive opinion. Advertising is not only the subject study of business practitioners, but also of economists, social thinkers, and anthropologists and public policy makers (Poolay 1986). Most of these people have made an attempt to study the communication impact of advertising on society and consequently raised many social issues arising due to advertising. Role of Advertising

Advertising has been both praised and criticized since quite a long time, therefore, there are two schools of thought, in this respect. The first school belongs to business people including managers, who argue that advertising helps the business by providing the relevant information and by persuading the consumers, thus it helps the business to flourish. This group feels that advertising is a marketing tool and therefore it should be used to promote the products and services. The protagonists of advertising claim that by informing prospective and current consumers about the various products and services, it helps them to make wise purchase decisions. On the other hand, those who criticize advertising, which include mostly non-business people such as economists, historians, sociologists, public policy makers, and politicians, think that advertising creates adverse influence on the people, particularly in terms of its social and economic impact (Poolay 1986).

Keeping in mind the controversial nature of advertising the present chapter makes an attempt to discuss the different roles — both positive and negative– advertising plays in the society in general and in the business in particular. This chapter is divided into four sections. The first section deals with the general role advertising plays in the business. This section looks at the various aspects of advertising and its role in helping the business in general and in developing the marketing strategies in particular. The second section deals with the role of advertising in the development of various marketing strategies. Here an attempt has been made to cover the influence of advertising on various marketing components. The third section deals with the criticisms leveled against advertising from various quarters, and discuss as various issues of advertising related to its regulations, competitiveness, ethical and social issues. Last section attempts to come out with the rationale and of the present study the statement of the research problem.

1.2. Role of Advertising in Business:

Of all the business and marketing activities advertising is the most visible and well known. There is no denying the fact that advertising plays an important role in the promotion of various products and services. Albert Lasker, who is generally regarded as the father of modem advertising defined it as “salesmanship in print, driven by a reason, why” (McDonough 1993). However, today advertising is carried out through different media and not confined only to the print media. In order to encompass the various dimensions of advertising the definition given by Arens (1996) is suitable for our purpose. According to this definition. “advertising is the non-personal communication usually paid for and usually persuasive in nature about products (goods and services) or ideas by an identified sponsor through various media. From this definition, we can say that advertising is directed to groups of people rather than to individuals and is therefore non-personal. These groups might be consumers, such as people who buy products for their personal use or they might be the business people who buy various products and services to run their business. Secondly, most advertising is paid for by sponsors. Here sponsors are the organizations or institutions who are behind the advertising. Thirdly, advertising is intended to be persuasive i.e., to convince people to purchase a product, service or idea. Some advertisements such as legal announcements are intended merely to inform not to persuade it.

Besides, promoting tangible goods, advertising also helps in promoting intangible services and advocates a wide variety of ideas. Advertising reaches the people through a channel of communication called media. In addition to the traditional mass media, advertising also uses some other media such as direct mail, brochures, shopping cards, and videocassettes, etc. With the advent of the Internet, today advertisers are increasingly promoting their products and services on it. Online advertising is gaining popularity day by day.

Proponents of advertising argue that it is the life-blood of business-it provides consumers with information about products and services and encourages them to improve their standard of living. They argue that advertising creates jobs and helps new firms enter the marketplace (Belch and Belch 2000).

People who use advertising for promoting their products and services know that advertising performs several functions. and its effects are profound. One of the foremost functions of advertising is to make a brand unique in the minds of the consumers and differentiate the brand from other available brands. Some of the important functions of advertising are:

1. To identify products and differentiate them from others.

2. To communicate information about the products, its features and its location of sale.

3. To induce consumers to try new products and to suggest its reuse.

4. To stimulate the distribution of a product.

5. To increase products use.

6. To build value, brand preference. and loyalty.

7. To lower the overall cost of sales.

1.2.1. The Economic Role of Advertising:

People who use advertising for promoting their products and services claim that it creates a positive economic impact, on society. It is to be noted that the level of advertising investment in a country is directly proportional to its standard of living. Developed countries spend more percent of their Gross Domestic Product (GDP) on advertising than less developed countries. The moment a company begins to advertise a chain reaction of economic events take place. Some of the common economic effects of advertising are discussed in the following pages.

A. Effect of advertising on the value of products: It is argued that advertising can add value to the brand in the consumer’s mind. However, some people do not agree with this statement. (Ditcher 1964) was of the opinion that a product’s image, produced partially by advertising and promotion, is an inherent feature of a product itself. Subsequent studies showed that while an advertisement may not speak directly about a product’s quality, the positive image conveyed by advertising may imply quality, make the product more desirable to the consumer, and thereby add value to the product (Kihlstrom and Riordan 1984). Advertising also creates added value by educating customers about new uses of a product.

B. Advertising effect on prices: This is a debatable issue i.e. whether advertising increases the cost of the products or not. Some people are of the opinion that advertising on account of high media cost increases the price of the products. However, many others hold the opinion that advertising on account of its persuasive qualities creates a positive impact on the overall demand of the advertised product. This increased demand leads to economies of scale in production. As a result of this, the average cost of production goes down. Ultimately, companies may reduce the prices of their products and services. Thus, one can say that advertising indirectly helps companies in reducing the prices of their products and services. However, the relationship between advertising and prices has not been proved empirically.

C. Effect of advertising on the competition: One opinion is that small company because of their limited resources are not able to compete with the large companies on account of their heavy advertising and eventually go out of business. They think advertising restricts smaller companies to compete effectively with the large companies because of their financial clout, which is manifested in their heavy spending on advertising. This may be true in some cases, but not in all. Intense competition tends to reduce the number of businesses in an industry. However, the firms eliminated by competition may be those who did not satisfy the consumers effectively. In many cases, advertising by big companies has only a limited effect on small businesses because no advertiser is large enough to dominate the entire industry. It is a well-known fact that regional companies compete very successfully with national companies on a regional and local level. However, sometimes it may happen that in industries characterized by heavy advertising expenditures, advertising does inhibit the entry of new competitors (Arens 1996).

D. Advertising effect on demand: The effect of advertising on consumer’s demand is important and studies have shown that advertising activity does affect aggregate consumption, but there is no agreement as far as the extent of this effect is concerned (Arens 1996). Many social and economic forces including technological advances, increase in the population and income, changes in the lifestyle and people’s educational level are some of the other factors, which influence the aggregate demand in addition to the advertising. It is to be noted that when those conditions are favorable advertising plays a positive role in the increase of consumption of certain products. At the same time, advertising will not be able to reverse the sales decline for those products, which are facing unfavorable market conditions.

Advertising can also help get new products accepted in the market by stimulating the demand for the product class in which the new product falls. But in declining markets, advertising can only slow the rate of decline.

E. Advertising effect on business cycle: The relationship between advertising and gross domestic product (GDP) has long been debated. Galbraith (1988), a perennial critic of advertising, concedes that, by helping to maintain the flow of consumer demand, advertising helps sustain employment and income. It is a common practice when business cycles dip, companies cut advertising expenditures. That may help immediate short-term profits, but studies prove that businesses that continue to invest in advertising during a recession period are better able to protect, and sometimes build market shares (Giacomotti 1994). However, no study has shown that if all companies keep advertising, the recessionary cycle will turn around (Arens 1996). From this one may conclude that when business cycles are up, advertising contributes to the increase. When business cycles are down, advertising may act as a stabilizing force or tries to stop the downtrend.

F. Advertising effect on consumer choice: Marketers who want to beat the competition, the best way is to make their products different and they have to create a unique position for their products and services vis-à-vis their competitors. This positioning is possible only through effective advertising. The freedom to advertise encourages businesses to create a new brand and improve old ones.

From the above discussion it is clear that advertising does influence business, sometimes this influence is marginal and sometimes it is substantial. In a nutshell, advertising adds value to the products, influences prices, creates a positive impact on competition, consumer demands, consumer choice, and the business cycle.

1.3. Role of Advertising in different components of Marketing:

As stated earlier advertising happens to be most visible, glamorous and elaborate of all the promotional tools used in the marketing of products and services by the companies. Advertising is an integral part of our social and economic systems has evolved into a vital communication system for both consumers and businesses. The ability of advertising to deliver carefully prepared messages to target audiences has given them a major role in the marketing programs of most organizations. Companies ranging from large multinational corporations to small retailers increasingly rely on advertising and other promotional tools to help marketing their products and services. In market-based economies, consumers have learned to rely on advertising and other forms of promotion for information they can use in making purchase decisions.

Because of the increasing importance of advertising, there has been tremendous growth in expenditures of advertising throughout the world. By 1996 the US has spent nearly $ 174 Billion on advertising alone (Beatty 1995). Advertising expenditure in international markets has also grown as well. Advertising expenses outside the United State increased from $55 Billion in 1980 to nearly $220 Billion Dollars by 1996 (Cohen 1996). This tremendous growth in expenditure on advertising reflects that companies all over the world consider it a very important marketing tool.

Keeping in mind the significant role played by advertising an attempt is made here to highlight its role in the various elements of the marketing program (mix). In the following, the researcher will consider each area of the marketing mix and see how advertising plays a positive and supportive role. In addition, the role of advertising in the development of various marketing strategies will also be discussed.

1.3.1. Advertising and Product Management:

Perhaps the most obvious effect of advertising is on product management in the marketing mix. Product Management is probably the area in which a company tries to build brands on a long-term basis. Advertising would at a significant competitive disadvantage without effective communication provide a brand. Specifically, advertising affects the brand management area in four important ways. These are:

i. Information and Persuasion: This is a fundamental role played by advertising in the marketing mix, and it relates most directly to managing the brand. Consumers learn about the brand’s features and benefits through the communications transmitted primarily by advertising and other promotional tools. No other variable in the marketing mix is designed to accomplish this communication.

ii. Introduction of new brand and brand extensions: Advertising is necessary when companies introduce a new brand or extensions of existing brands. When new brands or brand extensions are brought to the market, advertising is primarily responsible for attracting attention to the new market offering. It is also the role of advertising to communicate to the prospective consumers, the values of a new brand or the features a brand extension has to offer, typically through advertising.

iii. Building and maintaining brand loyalty among consumers: Loyalty to a brand is one of the most important assets a firm can have. Brand loyalty is the consumer’s conscious or unconscious decision expressed through intention or behavior to repurchase a brand continually (Peter and Olson 1990). It occurs because consumer perceives that a brand offers the right product features, image, quality or relationship at the right price. While the product itself is the most important influence on building and maintaining brand loyalty, advertising plays a key role in the process as well. Advertising reminds consumers of the values-tangible and intangible-of the brand and thus tries to reinforce brand loyalty and maintain market share (McDonald 1993). When a firm is able to create and maintains positive associations with the brand in the mind of the consumers, the firm has increased brand loyalty and developed brand equity (Keller 2004).

iv. Advertising and pricing decisions: Consumers look beyond the product and its features in making their product choices. They balance the price of the brands against those features. Advertising affects at the consumer level by offering an image that is commensurate with the price of the product. For example, if the product is of the high price the advertising may project an image of high quality, high reliability and associate the brand with those people who want exclusive products. In a similar way, advertising may associate low price with economy and affordability.

v. Advertising and distribution: The effect of advertising on the distribution variable of the marketing mix has mainly to do with securing distribution at the trade level. In this context, a company may use trade advertising to creates enthusiasm among wholesalers and retailers and motivate them to purchase its products for resale to their customers. Trade advertising usually appears in journals that serve a particular industry.

1.3.2. Advertising and Market Segmentation, Differentiation, and Positioning:

The second important market strategy that is affected by advertising activities has to do with some of the most basic brand strategies are market segmentation, product differentiation, and positioning. Advertising plays an important role in helping a firm effectively execute these marketing strategies. Advertising can be used to help differentiate a brand from competition by highlighting a distinctive brand feature in the minds of the consumers. The creation of this differentiation can be done through effective advertising. Product differentiation is one of the most critical of all marketing strategies. If a firm’s brand is not perceived as distinctive and attractive by consumers, consumers will have no reason to choose the advertised brand over one from the competition or to pay higher prices for the “better brand”. Advertising is the key to creating a difference, in the mind of the consumer, between a company’s brand and its competitor’s brands. An advertisement highlights a brand feature that is distinctive or it may create a difference with imagery and deep meaning for a brand (Trout 1999).


Original Reference Article:

  • Yarahmadi, F. (2006). Measuring the attitudes of consumers towards different facts of advertising a comparative study of India and Iran.
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Md. Ashikuzzaman

Work at North South University Library, Bangladesh.

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