Advertising Cont'd

Advertising Cont'd

Advertising (cont'd) Since the advent of large-scale industry, economists have been interested in advertising for its effects on costs and prices. They have divided advertising broadly into 'informative' (or 'constructive') and 'persuasive' (or 'combative') advertising. The former, they argued, gives consumers information about commodities and services, helps them to choose better between the alternatives offered, keeps suppliers and sellers on their toes and so makes markets more 'perfect'. The latter 'differentiates' products, varieties or single brands from one another by emphasizing (or exaggerating) differences between them, creates consumer loyalty for each product, variety or brand, establishes an 'institutional' or 'reputation' monopoly for it which enables its producer or seller to raise its price beyond the competitive level, and thus makes markets less 'perfect'.

This distinction has recently been questioned. Some economists argue that the purpose of all advertising is persuasive, but that the method is to use information to a larger or lesser extent according to the consumers aimed at, the kind of buying appeal employed and so on. Information, which must necessarily be limited to the main facts it is to convey in a newspaper or on a television screen, may be less useful to the consumer than a personal trial of a product or service, which he may be induced to make by having his attention drawn to it by 'persuasive' advertising. The more 'persuasive' an advertisement, the more 'informative' it may be ultimately, because it replaces description by personal experience. Consumers may prefer to act on the advice of a retailer or the reputation of a manufacturer; if the retailer's advice or the manufacturer's advertising is misleading, there are laws to give the victim redress, information services to advise him and competition to enable him to avoid making a mistake twice. These laws could be strengthened, the information services extended and competition made more effective.

Advertising can be used to create monopoly for an individual supplier if applied to products whose intrinsic worth is difficult to judge, particularly in the short run. In the long run few products can maintain an appreciable hold on the consumer by deceptive advertising because new competitors will invade the market: the larger the deception the larger the inducement to a new producer to enter the market or to a competing producer to develop demand for a new product. They can use advertising to do so. While advertising can create partial or sectional monopolies in the short run, it can help to break them down in the long run.

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