Sunday, March 6, 2011

Does Advertising Help or Break Society in the context of Price?

Basically, advertising has three main purposes:
  • to inform,
  • to persuade, and
  • to remind the customers of the company and its products.
Information drive helps customers come up with informed buying decision. Oftentimes, consumers buy products after seeing the advertisement. On the firm's perspective, this is very challenging because informing customers of the product's existence is a crucial step towards getting a sale.

Amidst competition, firms need to convince consumers to buy the particular brand. Tactics would include hiring celebrity endorsers. Such increases the probability that company's product will be bought.

Moreover, because of customer's selective retention, companies need to reinforce their promotional efforts by constantly advertising their products. This is evident when advertisements appear frequently. Specialty advertising is another example in which items like mugs, t-shirts, buttons, etc. are marked with the company's brand. This allows continuous circulation of the company's promotion. (Any of the purposes is not exclusive of its impact to customers because it may be simultaneous and it depends on the level of consumer's awareness and exposure to advertisement.)

All these activities entail cost. Good management involves planning how much will be allocated to promotional expenses. It could be a percentage of total projected sales or a portion of the product's price. Indeed, price will be affected but still, the society benefits from the fact that they are made informed of what's new. It might be the product they've been looking for. With due fairness to entrepreneurs, they deserve a profit after doing everything to satisfy customers.

Furthermore, it doesn't necessarily follow that if a firm won't engage into advertising, price will be lower because there are various costs incurred in Research and Development, complex distribution process and the discount given to wholesalers and retailers. If price is the only determinant why people buy products, then one must realize that it is more costly to be uninformed because you might readily buy what is available at a higher price only to find out there is a lower priced product. Some things are just made easy for customers because of advertising .

Hence, advertising should not be disregarded just to lower down the price of the product. Nevertheless, marketing managers should consider ethical issues in the process of doing it.

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