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The Role of Advertising in a Market Economy
Simply put, advertising is the way business talks to potential customers
about a product or service. Advertising is marketing's most visible form
of communication. Its purpose it to inform, to persuade, and to remind.
This is done by attempting to stimulate consumer interest in using a
product by presenting its benefits in an attention-getting and
memorable way. Television, radio, magazines, newspapers and direct mail
are most frequently used for consumer advertising.
There are many good products that compete in a free and open market.
Advertising helps bring the manufacturer's message to consumers in hopes
of influencing consumer choice. But advertising is not magic. While
it is the most effective and least expensive way of telling people
about a product, it cannot continue to sell the product to a disappointed
consumer. Manufacturers know very well that consumers can switch brands
very easily. Without repeat sales, a company stands to lose millions
of dollars. Manufacturers must "deliver" on their product claims or
they will lose the loyalty of consumers.
Read each of the following statements (in bold) and decide whether
they are true or false - then read the paragraph of explanation about
each.
- Advertising helps lower prices.
Since advertising can
help build consumer demand, manufacturers can sell higher quantities of
product. In this way companies can produce more with a lower production
per unit. To remain competitive, companies need to sell products at a
price consumers are willing to pay. Lower production costs usually
result in lower selling prices.
- Advertising makes people buy things they do not need.
The consumer decides whether or not to buy. Ads can inform and persuade, but
the consumer makes the final decision.
- Advertising reduces competition.
Actually, advertising tends to increase competition. As
advertising spreads the word and the demand for a product increases,
more producers will try to meet consumers' needs.
- Advertising can make up for poor product quality and therefore
keep a poor product in the market.
Advertising may be able to persuade a consumer to purchase a product one
time, but if the consumer is not satisfied, no amount of advertising
will encourage additional purchases.
- Advertising contributes to giving consumers more choices.
Since advertising increases competition, more products are sold in the
marketplace and consumers have a broader choice.
- Advertising is not based on facts about a product.
All claims about a product's performance must, by law, be based on
facts. Advertising from reputable companies reflects this.
- Advertising influences the quality of products.
Advertising tends to increase product quality. With so many competing
brands, it is easy for customers to switch. Competition forces
manufacturers to maintain and improve quality or lose repeat sales.
- Advertising helps consumers make wise choices.
Advertising informs consumers about a product and what it does.
Consumers can use this information to compare products and choose those
that meet their needs.
The key to any successful advertising effort is the product itself. No
matter how good an advertising campaign is, a product will fail in the
marketplace if it is 1) a product of poor quality, 2) a quality product
that does not interest consumers, or 3) a product that is priced too
high for potential consumers.
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