© 2004 the mcgraw-hill companies, inc. all rights reserved. mcgraw-hill/irwin
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© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Chapter2The Evolution of Advertising
Shows how economics has affected the growth of advertising and the evolution of advertising as an economic tool. Examines advertising’s overall impact on society
Insert Nature Conservancy
p. 51HERE
Objectives
Explain the important role of competition in free-
market economics
Discuss the various functions advertising
performs in a free market
Identify important milestones in the history
of advertising
Discuss how the role of advertising has changed
in recent years
Explore the impact of advertising on society yesterday, today, and
tomorrow
Economics: The Growing Need for Advertising
Principles of free-market economics
Self-interest
Complete information
Many buyers & sellers
Absence of externalities
Functions and Effects of Advertising in a Free Economy
Branding
Identify products and their source
Differentiate products from others
Communicate about a product, its features, and
its location of sale
Communicate about a product, its features, and
its location of sale
Induce consumers to try new products & suggest reuse
Induce consumers to try new products & suggest reuse
Functions and Effects of Advertising in a Free Economy
Stimulate distribution
Stimulate distribution
Increase product use
Increase product use
Build value, brand preference, and
loyalty
Build value, brand preference, and
loyalty
Lower the overall cost of sales
Lower the overall cost of sales
Evolution of Advertising as an Economic Tool
Preindustrial age Industrializing age
Evolution of Advertising as an Economic Tool
Industrial age
Consumer package goods
Sales orientation
Product differentiation
Market segmentation
Positioning strategy
Evolution of Advertising as an Economic Tool
Postindustrial age
Demarketing
Megamergers
Marketing warfare
The Global Interactive Age: Looking at the Twenty-first
CenturyNon-U.S. WW ad
expenditures: $225 billionTechnology
Society and Ethics: The Effects of Advertising
Improving standards of living
Supporting free media
Publicizing issues and causes
Society and Ethics: The Effects of Advertising
Honesty and ethics
Cynicism and distrust
Puffery, unhealthy products, children