Advertising Contd Economic
Advertising (cont�d)The economic claims made for advertising are not universally accepted by economists. The main one, that it is essential for the development of large-scale production and so reduces costs and prices, is difficult to support by evidence. Technical invention, improving transport and increasing education would have produced mass production in any event, although advertising may have accelerated the rate of development. Much advertising is wasteful because it misses the market, is unnecessarily extravagant or cancels out other advertising. Even if an effect on sales can be traced, the cost of advertising it may be higher than that of some alternative marketing method (commercial travellers, wholesalers, price reductions. etc.).
Advertising is claimed to increase production by stimulating demand, evening out fluctuations in it, guiding it into fewer channels, by displacing more costly methods of marketing and by sharpening competition. The power of advertising to increase demand is probably over-estimated; advertising cannot normally increase demand unless the basic social and environmental conditions (income, social habits, fashion, etc.) are favourable, although it can accelerate an expansion arising from favourable conditions and retard a decline arising from unfavourable conditions.
Although advertising can (at a cost) reduce fluctuations in demand (e.g. stimulate demand for ice-cream in the winter), it can equally amplify the fluctuations by being intensified when conditions are favourable and being discontinued when they are unfavourable because the cost of 'sailing against the wind' might be too high. Similarly, while advertising can be used to concentrate demand on a narrower range of varieties (as in chocolates, toothpaste or beer) it can also be used to multiply variety.
Advertising sharpens competition in the long run by helping to introduce new products, but in the short run it can be used to keep them out. It could stimulate excessive innovation and so divert factors of production from other uses which consumers might prefer. That people buy advertised goods in preference to unadvertised goods means that they have chosen the goods they know, not necessarily that they prefer them to the unknown. In the long run, however, a competitive market would throw up fresh choices, and advertising could not for long seriously distort demand for products in general.
The claim that advertising is a guarantee is generally true of quality, since a brand name is taken to indicate known ingredients, but not necessarily of value, unless it is supposed that if the consumer goes on buying A although it seems to be inferior, or dearer, than product B, he is nevertheless getting better 'value'.
Advertising is an incentive to increase effort and output to the extent that it encourages people to work for the products or services advertised. Even in the western countries, there is a long way to go before man enjoys all the material objects that would make life easier, or more pleasurable, or reduce labour or pain.
Many of the economic issues in advertising must remain unresolved because it is difficult to judge its effects. By its nature the information is difficult to assemble because many factors are affecting sales at the same time. The judgment must in many respects remain tentative.
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