Advertising in the present world is used by business organizations and 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 omnipotent. 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, 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.
Advertising has been both praised and criticized for 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 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 should be used to promote 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 take wise purchase decisions. On the other hand, those who criticize advertising, which includes mostly non-business people such as economists, historians, sociologists, public policymakers, and politicians, think that advertising creates an adverse influence on 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 business in particular.
Role of Advertising in Business
Advertising is the most visible and well-known of all business and marketing activities. There is no denying that advertising plays an important role in promoting 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 business people who buy various products and services to run their businesses. Secondly, most advertising is paid for by the 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 people through a channel of communication called media. In addition to traditional mass media, advertising also uses some other media such as direct mail, brochures, shopping carts, video cassettes, 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 lifeblood 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 to promote 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:
- To identify products and differentiate them from others.
- To communicate information about the products, their features, and their location of sale.
- To induce consumers to try new products and to suggest their reuse.
- To stimulate the distribution of products.
- To increase product use.
- To build value, brand preference, and loyalty.
- To lower the overall cost of sales,
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 takes place. Some of the common economic effects of advertising are discussed in the following pages.
- Effect of advertising on the value of products: It is argued that advertising can add value to a 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 (KihIstrom and Riordan 1984). Advertising also creates added value by educating customers about new uses of products.
- 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 for 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, the 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 proven empirically.
- Effect of advertising on the competition: One opinion is that small companies 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 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 maybe 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 levels. However, sometimes it may happen that in industries characterized by heavy advertising expenditures, advertising does inhibit the entry of new competitors (Arens 1996).
- 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, increases in the population and income, changes in lifestyle, and people’s educational level are some of the other factors, which influence the aggregate demand in addition to 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 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.
- 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 and 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.
- Advertising effect on consumer choice: For 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 brands and improve old ones.
From the above discussion, it is clear that advertising does influence business; sometimes, this influence is marginal, and sometimes substantial. In a nutshell, advertising adds value to the products, influences prices, and positively impacts competition, consumer demands, consumer choice, and the business cycle.
For citing this article use:
- Yarahmadi, F. (2006). Measuring the attitudes of consumers towards different facts of advertising a comparative study of India and Iran.