Menu
Home
Log in / Register
 
Home arrow Economics arrow Deciphering Economics: Timely Topics Explained
< Prev   CONTENTS   Next >

Advertising

Advertising is a paid announcement by a business designed to inform consumers about a good or service and to persuade them to buy the product. Advertising by business firms strives to differentiate between competing goods, accenting unique features or benefits of the advertised product. The features of a product represent its composition, design, ingredients, components, or other physical attributes. The benefits highlight what the product can do for the buyer, including ways to improve one's health, appearance, performance, comfort, and so on.

Advertising can be local, national, or international in scope. Manufacturers, retailers, and other businesses hire advertising agencies to create advertising campaigns to increase the demand for certain goods and services. Ad agencies use a number of advertising appeals and techniques to get the consumer's attention, create brand loyalties, and shape tastes and preferences. An advertising appeal represents the general direction of an advertisement or

Table 4.3 U.S. Advertising Spending, 2012 (measured media spending)

Rank

Industry

Spending ($ bil.)

Rank

Business Firm

Spending ($ bil.)

1

Retail

16.35

1

Procter & Gamble

2.81

2

Auto

14.84

2

Comcast

1.71

3

Local Services

8.98

3

General Motors

1.64

4

Telecom

8.66

4

AT&T

1.57

5

Financial Services

7.89

5

L'Oreal

1.46

Source: Kantar Media, “Kantar Media Reports U.S. Advertising Expenditures Increased by 3 Percent In 2012,”

Intelligence, March 11, 2013, 4, 6.

an ad campaign. Leading ad appeals include humor, sex appeal, rational appeal, and a variety of emotional appeals. Frequently used ad techniques include bandwagon, which asks consumers to join the crowd by purchasing a product; card stacking, which lists the positive features or benefits of a product; product comparison, which shows the superiority of one product over a substitute; and testimonial, which relies on a personal endorsement of a product.

Over the past century the growth of America's consumer society and the growth of advertising proceeded hand in hand. In 2012 U.S. advertising spending on different measured media was $140 billion. Traditionally, most measured media ad spending was on television and print media such as magazines and newspapers. Other categories of media include the Internet, radio, and outdoor ads. Billions more in ad spending was on unmeasured media such as telemarketing, catalog advertising, direct mailings, and other product promotion. Predictably, fierce competition among businesses in industries that produce consumer goods generated the most significant advertising spending, as shown in Table 4.3. About one-third of all advertising spending in the world occurred in the United States.[1]

There is still some debate about the degree to which advertisers are able to influence consumer buying decisions in the American economy. The theory of producer sovereignty, which was popularized in the 1950s and 1960s by economist John Kenneth Galbraith (The Affluent Society) and sociologist Vance Packard (The Hidden Persuaders), argued that producers skillfully manipulated consumer demand through advertising and marketing campaigns. Today, however, the theory of consumer sovereignty represents mainstream economic thought. This theory states that knowledgeable, discerning consumers have sufficient information to exercise their freedom of choice and to make rational buying decisions. In other words, consumers are aware of producers' sales strategies and will cast their dollar votes for products that best meet their needs. Proponents of consumer sovereignty also note that Adam Smith, the founder of modern economics, confidently proclaimed that self interest would steer people to make informed buying decisions. Finally, consumers are shielded from business abuses, such as false or misleading product claims, by consumer protection laws, government regulatory agencies, and private consumer organizations.

  • [1] Kantar Media, “Kantar Media Reports U.S. Advertising Expenditures Increased 3 Percent in 2012,” Intelligence, March 11, 2013, 1-6
 
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
 
Subjects
Accounting
Business & Finance
Communication
Computer Science
Economics
Education
Engineering
Environment
Geography
Health
History
Language & Literature
Law
Management
Marketing
Philosophy
Political science
Psychology
Religion
Sociology
Travel