What is Advertising?

An advertisement is a message - printed in newspaper or magazine, broadcast on radio, televisions or internets, send to individuals though the mails, or disseminated in some other fashion - that attempts to persuade readers or listeners to buy a particular product, favor a particular organization, or agree with a particular idea. It is paid for by the advertiser and may be prepared either by the advertiser or, more commonly, by a professional advertising agency.

National advertising, which promotes the products or the identity of a firm that markets nationwide, is the dominant form of advertising. Retail and other business advertising is a second in importance. Other types include trade advertising, which addresses retailers, asking them to stock and promote the advertised brand; industrial advertising, which sells goods from one producer to another; and professional advertising, from producers to professionals, such as doctors, who influence consumer purchases.

Supplementing the print and broadcast media of mass communication, direct mail is used by advertisers to mail advertisements to the persons appearing on lists of names that they are chosen for particular characteristics, such as age or income.

The Advertising Industry

Essentially the industry is a triad consisting of advertisers, the media, and the advertising agencies who create and place most national and many retail ads. In 1992 an estimated $131 billion was append in the United States by about 250,000 national advertisers and 1,750,000 local advertisers, a figure that was almost 4 percent higher than 1991's $126.4 billion. About one-quarter of the total each year is spent by the 100 top national advertisers, led in the early 1990's by Procter and Gamble, Philip Morris, General Motors, and Ford. Others in the top ten include the Chrysler Corporation, Pepsico, Sears Roebuck, Toyota, General Mills, and Unilever. Much of the money append by these firms is on national network and television. (Spot ads are those which appear on selected network stations and are used to target local markets.) Advertisers spent a total of $29.5 billion on Television advertising in 1992.

Despite the vast sums spent on national television advertising. However, the print media
newspapers, magazines, and direct mail continue to earn over half of total adverting expenditures, with local newspapers gaining the largest share. Direct-response (or DIRECT MAIL) advertising is probably the fastest growing segment of the industry, largely because computerized list of names and addresses which can be broken down by location, income, age, and so on have allowed advertisers to pinpoint their potential customers.

The industries that advertise most heavily are automobile manufacturers (who spent $3.6 billion in 1992); retailers ($2.9 billion); the food industry ($1.78 billion); ($1.3 billion); restaurants ($1.3 billion); the entertainment industry ($1.1 billion); the telephone industry ($733 million); finance ($552 million); alcoholic beverages ($552 million); the toiletries industry ($537 million); and proprietary medicines ($525 million).

The 1980s saw a rash of agency mergers, resulting in the creation of huge "mega-agencies" that offer their clients integrated advertising, marketing, and relations services in business centers around the world. In 1986, after acquiring 12 companies in ten years, the British firm of Saatchi and Saatchi became the world's largest advertising agency. By 1992, however, it had been outranked by the London-based WPP group (worldwide gross income: $2.8 billion) and two other international agency holding companies. The largest single U.S. agency is Chicago's Leo Burnett Co.

The United States spends more on advertising than any other nation. Japan, Great Britain, Germany, and Brazil also have large advertising industries.

The Advertising Agency

Agencies save theirs clients with a variety of experts. The account executive acts liaison between advertiser-client and agency, meeting with the client to determine objectives and budgets. The agency's copy-writer's and art directors take their assignments from the account executive, who brings their work back to the client for approval or modification. When decisions on content are completed often after research studies to determine consumer response, the production department prepares the finished ads with the aid of typographers, engravers, printer and radio or television commercial production companies. The media department, meanwhile, has prepared a comprehensive media plan that will involve the purchase of space in a newspaper or magazine or time on radio or television. After the completed printing pales, tapes or films are shipped to the appropriate media, the account executive checks media performance for proper scheduling and adequate reproduction.

Close related marketing activities, such as PUBLIC RELATIONS and sales promotion, are handled by the agency, by other outside organizations or by the advertiser. Advertising must be coordinated with these other activities and with the companies overall objectives.

The Advertising Media

A magazine, television program, or any other advertising medium is judged by an advertiser according to "exposure opportunity," the number of people who might see the ad, and "message opportunity," the way in which a particular medium allows the ad to communicate.

In considering exposure, advertisers speak of "reach" the number of people who see the ad at least once and "frequency" the average number of times each person is reached. An ad's total impact is indicated by its number of gross impressions: reach X frequency. A further aspect of exposure is cost, usually stated as cost per thousand gross impressions (CPM). Another is target reach, the number of people within a specific audience who have seen the ad. Often advertisers want to reach only woman, only teenagers, or Presbyterians, or residents of Chicago, and so on.

The media vary in these characteristics. Television provides high exposure and low CPM nationwide but is not efficient for specific targets. Newspapers have much lower absolute exposure but reach a higher percentage of the areas they cover; they are excellent for geographic targeting. Radio is good for targeting to various geographic, age, and interest groups; its CPM is very low. Magazines provide less exposure nationally than television but are highly selective on audience interest. Direct mail is not cheap but is the most selective of all, because the advertiser uses mailing list containing only one person within the selected audience.

Because television supplies sound, pictures, and movement, it offers the most complete message opportunity; it cannot distribute coupons as can print, however. Television and radio messages disappear after running, but print can be saved for future reference. Radio, offering nothing but sound, is the most limited medium. Magazines can reproduce more attractively than newspapers, but newspapers are printed more often. Direct mail can offer lightly messages but may be discarded without being examined.

Newspapers earn the highest proportion of advertising expenditures, 23 percent of the total (of which about 85 percent comes from local and advertisers). Television earns 22 percent (74 percent supplied by national advertisers); direct mail, 19 percent; magazines, 5.3 percent; and radio, 6.6 percent. Farm, trade, and business publications, the yellow pages of telephone directories make up the remainder of advertising expenditures.

Advertising Goals

The most common advertising goal is to influence consumer choice of a particular brand. Marketing, or motivation, research can determine which types of consumers are most likely to buy the advertised product, and it can also test the features, benefits, images, or other appeals to which consumers might respond. The advertising will then associate the brand with those appeals.

Different ads focus on different immediate goals. A sign at a bar advertising a beer is aimed at producing immediate purchase, but it may not be effective without previous ads that produce public familiarity with the name, associate appeals with the brand, and create favourable beliefs and attitudes.

Restraints on Advertising

The U.S. government and most states prohibit deceptive or unfair ads. The criterion is whether the consumer is harmed, not whether the ad is technically false. Some true claims may deceive by omitting important facts. For example, "This cat food contains more phosphorus" may be a true statement, but cats do not need phosphorus. On the other hand, some false claims may be unharmful because they are obviously false ("In brand-name auto you'll feel like you're flying"). Violators are ordered to "cease and desist" from running harmful ads. There are no fines or other criminal penalties for violations unless the advertiser persists beyond the order date.

Although in the early 1980s regulatory pressures decreased, many developments from the 1960s and 1970s remain. In addition to with drawing their ads advertisers may be asked to run "corrective advertising," in which they restate earlier claims accurately, or to offer substantiation for their claims.

U.S. advertisers are also controlled by their own self-regulatory body, the National Advertising Review Board, as well as by the media, which often refuse ads they consider unfit in their editorial or programming context. Advertisers have also felt compelled to respond to organized public pressure, as when Action for Children's Television attacked the advertising aimed at children that was presented by some of the popular hosts of children's programs.

Economic Effects of Advertising

Critics claim that advertising cost consumer money; advertisers assert that it saves consumers money. Certainly a low CPM makes advertising more efficient than the personal selling it replaces and allows it to supply most efficiently the consumer information that can create a mass market, with its associated economies of scale.

Much of today's advertising, however, wastes money because competitors cancel out one another's efforts. If two companies producing similar soft drinks spend great sums to increase their market shares, with the result that neither gains, then the money has been spent with no benefit to either producers or consumers. If neither company advertised it could avoid such waste, but no company can stop while its competition continues, for fear or losing market share. Thus the money must be spent, and the extra expense will be passed on consumers. Nor do consumers receive any informational benefit, because the product category is an established familiar one, and the information conveyed by advertising amounts only to artificial brand distinctions based on images.

Even when advertising reduces marketing cost, producers may not pass the savings on to consumers and may actually raise prices when the artificial brand distinctions produced by advertising leads to consumer brand loyalty and a willingness to pay more. Thus a mass market may be created for a product category, but if advertising pulls much of the market share to one particular brand, the result may be lower producer costs and higher consumer prices simultaneously.

The Social Impact of Advertising

Advertising has been accused of ruining from the environment (billboards blocking scenic views) to the English language ("Nobody doesn't like Sara Lee"). It has been charge with making people buy things they do not really need or want, often by invoking negative motivations such as guilt anxiety of fears of inferiority. It is said to encourage people to regard purchasing and consuming as the major activities of their lives and to create false images-depicting the average citizen, for instance, as young, attractive, wealthy, and leisured. There have been strong criticisms of the stereotypical images of woman and minorities in many advertisements.

In defense, advertisers argue that consumers are well able to make up their own minds and will not buy things they do not make up their own minds and will not buy things they do not want. The public, they claim, is very tolerant of mass persuasion and has generally not raised serious objections to advertising content.

Advertisers have sometimes created new social impacts by the heavy use of advocacy ads, which persuade the public not about products but about public issues over which companies wish to influence opinion. Critics say that such ads are unfairly one-sided; advertisers say that the mass media have been equally one-sided in failing to report company views.

Another important social impact stems from advertising's financial support of the mass media; it provides about two-thirds of print revenue and virtually all broadcast revenue. Media operators thus see the public not as their primary audience, but as mere bait for attracting advertisers; media content, by and large, is designed to attract those whose spending power is greatest.

Advertising and Politics

Perhaps the most controversial of advertising effects is in politics, where heavy media campaigns have been common since 1952 presidential candidacy of Dwight D. Eisenhower. Unlike competing brands, political candidates are not usually similar, yet their campaign ads often hide important differences behind smokescreens of smiles and empty slogans. Political claims are not subject to regulation as are product claims, and no law prohibits lies. Objections to political advertising center on the issue of money, however. Most of the money gathered for political campaigns is used for advertising. Wealthy candidates thus gain an unfair advantage and third-party candidates cannot match the campaign funds available to nominees of the two major parties.

Of the three major types of political advertising-television, print, and direct mail television is by far the most costly and, in the judgment of most campaign experts the most effective; but heavy television ad expenditures do not guarantee votes. Carefully targeted direct mail campaign using computer created mailing lists sorted by individual income, interests, education, and any of a thousand other politically significant qualities have also produced positive results.

Although the industry experienced a serious recession in the late 1980s, by the mid-1990s, U.S. advertising expenditures had risen substantially. Changes in the technologies of communications, however-which, in the past have always meant increased prosperity for advertising - threaten to upset the future industry structure. The online media, combining entertainment with advertising, sales promotion, and interactive marketing will fragment today's mass audiences, creating smaller but more sharply targeted markets and utterly changing the way advertising is created and sold.


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