Some things about Advertising

Well, first of all Advertising tells people about the products and services.  Advertising informs consumers about the existence and benefits of products and services, and attempts to persuade them to buy them. The best form of advertising is probably word-of-mouth advertising, which occurs when people tell their friends about the benefits of products or services that they have purchased. Yet virtually no providers of goods or services rely on this alone, but use paid advertising instead. Indeed, many organizations also use institutional or prestige advertising, which is designed to build up their reputation rather than to sell particular products.

In this context let me remind you that a wise man once said, "The person who saves money by not advertising is like the man who stops the clock to save time." In today's fast-paced, high-tech age, businesses have to use some form of advertising to make prospects aware of their products and services.

It a matter of common knowledge, that even a famous company like Coca-Cola continually spends money on advertising to support recognition of their products. In 1986 Coca-Cola spent over $100 million to keep its name at the first page of public's eye. So the question isn't whether or not you can afford to advertise, you simply must if you want your business to succeed. Advertising is an investment in your business's future. And like any investment, it's important to find out as much as you can before you make a decision.

Although large companies could easily set up their own advertising departments, write their own advertisements, and buy media space themselves, they tend to use the services of large advertising agencies. These are likely to have more resources, and more knowledge about all aspects of advertising and advertising media than a single company. The most talented advertising people generally prefer to work for agencies rather then individual companies as this gives them the chance to work on a variety of advertising accounts (contracts to advertise products or services). It is also easier for a dissatisfied company to give its account to another agency than it would be to fire its own advertising staff.

The client company generally gives the advertising agency an agreed budget; a statement of the objectives of the advertising campaign, known as a brief; and an overall advertising strategy concerning the message to be communicated to the target customers. The agency creates advertisements and develops a media plan specifying which media - newspapers, magazines, radio, television, cinema, posters, mail, a sandwich board man (the cheapest one), any kind of sponsorship & etc. - will be used and in which proportions. (On television and radio, ads are often known as commercials.)

The agency's media planners have to decide what percentage of the target market they want to reach (how many people will be exposed to the ads) and the number of times they are likely to see them. Advertising people talk about frequency or 'OTS' (opportunities to see) and the threshold effect - the point at which advertising becomes effective. The choice of advertising media is generally strongly influenced by the comparative cost of reaching 1,000 members of the target audience, the cost per thousand (often abbreviated to CPM, using the Roman numeral for 1,000). The timing of advertising campaigns depends on factors such as purchasing frequency and buyer turnover (new buyers entering the market).

How advertising differs from other outside purchases. It is intended to add value to the product after manufacture, by increasing the consumer's perception of its value.

It cannot be equated with the raw materials that go into a product. There is a great difference between them:

Buying specification – In Adv. it is broad and subjective; Raw Mat. – detailed and objective.

Correct amount to buy – In Adv. it is not known; Raw materials – exactly known.

Now I feel like saying about advertising expenditure. Advertising is a much more important cost ingredient in some markets than in others. Based on numbers from the USA, which accounts for over 50% of world advertising expenditure, toys have the highest ratio of advertising spending to sales, followed by cosmetics and pharmaceuticals. Car and office-equipment manufacturers both spend quite large absolute sums of money on advertising.

“I know that half of my advertising budget is wasted, but I am not sure which half” -  is a comment that was made many years ago and has now passed into advertising folklore. Accountants particularly enjoy repeating it.

1. How much to spend on advertising is always problematic. Some companies use the comparative-parity method - they simply match their competitors' spending, thereby avoiding advertising wars. Others set their ad budget at a certain percentage of current sales   revenue. But both these methods disregard the fact that increased ad spending can increase current sales. On the other hand, excessive advertising is counter-productive because after too many exposures people tend to stop noticing ads or begin to find them irritating.

As soon as every company, which aim is to get successes on the market spends a certain amount of money on advertising, it has come under the watchful eye of many critics. Most of their dis­approval centers around several complaints, which have, in some cases, lead to reg­ulation.

1. One common complaint concerns the high cost of-advertising, which many believe causes higher product prices. Many critics overlook the fact that advertising helps develop a mass market for products, which in turn reduces the unit price.
2. Another common complaint is that much advertising is offensive or in poor taste. For example, many people find it offensive to hear commercials about per­sonal problems.
3. Many critics accuse advertising of sometimes being false and misleading. Most people agree that advertising should be allowed a certain degree of puffery or le­gitimate artistic license.
4. Finally, some critics charge that advertising programs people to buy the things they don’t need at all, to purchase merchandise they cannot afford and often really do not need. True but only to a degree. As Abraham Maslow claimed, our wants and needs are never completely fulfilled. Thus, it is human nature to work harder for the money to purchase those things that make life more comfortable.

The criticism that has been leveled at advertising through the years has led to regulation for the industry. There are two types of regulation in advertising: self-reg­ulation and government regulation.

Self-regulation is a healthy attempt by the advertising industry to keep its act clean and to avoid further government regula­tion.

Government regulation of the advertising industry is controlled by the Federal Trade Commission (FTC). Its re­sponsibility is to protect consumers from unfair and deceptive advertising prac­tices.