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Transcript
How Advertising Works Advertising & Media Unit 1 Advertising and the Economy • The United States is a market economy – The amount and prices of goods and services are determined by market forces – Consumer demand is a major force in a market economy • Consumers can be individuals, households (groups of individuals), businesses or governments • anyone who uses products/services – Advertising is focused on increasing consumer spending • Can stimulate spending during an economic downturn Consumer Spending • Considered the engine of the US economy • The amount of money (in real dollars and as a percent of income) consumers spend has been increasing • If consumers overspend, the spend more money than they earn – Debt – Bankruptcy Why Do Consumer Spend? • Consumer behavior includes all activities completed by the consumer – No single theory to describe or predict consumer behavior • A Need is something necessary for survival (food, shelter, clothing) • A Want is everything else – Advertising focuses on creating consumer Wants Marketing and Advertising • Marketing is the promotion and distribution of a product • Advertising is a subset of marketing – Make the product standout against competition – Create new markets for product – Directs information to target market • Target market can be defined by advertisers or marketers Advertising and Prices • Advertising effects pricing in both directions • Advertising costs companies money – 1% of sales for auto and retail – 15% of sales for consumer products – Cost of advertising is passed along to consumer • Effective advertising makes companies money – Return on advertising dollars is increased sales – Companies may lower prices to consumers Why Are Ads Successful • An effective advertisement will demonstrate a benefit from the use of the product/service – Functional benefit – the same for everyone • Cleaner clothes, save time, whiter teeth – Emotional benefit – more difficult to measure • Sex appeal, satisfaction, pride, sense of belonging Benefits of Advertising • Educate consumers – Reduce search time – More informed choices • Product prices should drop • Supports a variety of mass media – Advertisers pay for television programs, radio spots, internet space, etc. – Keep subscription prices low Drawbacks of Advertising • Advertising is biased • Raises the standard of living for some, but widens the gap between rich and poor – Actually and by perception • Affects the type of information available • Can promote stereotypes How People are Portrayed • People in advertisements are usually attractive – To create a desire for inclusion • Stereotypes are used in advertising – Preconceived and generalized portrayal of a group of people