The Evolution of Advertising Chapter 01 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives LO1: Define advertising; distinguish it from other forms of marketing communications LO2: Explain the role advertising plays in business and marketing LO3: Illustrate the functions of advertising in a free market economy LO4: Discuss how advertising evolved LO5: Describe the impact of advertising on society 1-2

Obama 2008 Campaign position: change McCain’s maverick status neutralized Ad spending record: $310 million Online media raised cash to fund traditional media 1-3

What is Advertising? Advertising – A type of marketing communication – The structured, composed, nonpersonal communication of information, usually paid for and persuasive in nature, about products by identified sponsors through various media 1-4

Role of Advertising in Business Business typically organize along 3 broad divisions – Operations (production/manufacturing) – Finance/administration – Marketing Marketing alone has a primary role of bringing in revenue 1-5

What is Marketing? Marketing is a function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in a beneficial way 1-6

The 4 P’s Product Price Place Promotion 1-7

Advertising and the Marketing Process Advertising is one activity that falls under the promotion component of the marketing mix 1-8

Economics: The need for Advertising Free Market Principles – Competition guided by 4 principles Self-interest Complete information Many buyers and sellers Absence of externalities 1-9

Functions and Effects of Advertising in a Free Economy Advertising attempts to: 1.Identify products and their source It does this by differentiating the product from others This is often accomplished through branding 1-10

Functions and Effects of Advertising in a Free Economy For a given brand, advertising also strives to: 2.Communicate information it 3.Induce consumers to try or reuse it 4.Stimulate distribution 5.Increase its use 6.Build value, preference, and loyalty 7.Lower the overall cost of sales 1-11

Evolution of Advertising Preindustrial Age Industrializing Age Industrial Age Postindustrial Age Global Interactive Age 1-12

Society and Ethics: The Effects of Advertising Advertising stimulates sales – This encourages productivity – Raises worker standards of living – Matches the consumer with the product that best suits needs and aspirations 1-13

Society and Ethics: The Effects of Advertising Advertising serves other social needs as well – Free media rely on income from ads Independence from government promotes free speech – Public Service Announcements (PSAs) Promote social issues and causes 1-14

Society and Ethics: The Effects of Advertising But critics note that: – Truthfulness and ethics are a concern – Responses to misleading and deceptive practices: Government action – Pure Food and Drug Act – Federal Trade Commission Act Industry action – Association of National Advertisers – American Advertising Federation 1-15

But debates continue about Puffery Advertising to children Advertising unhealthful products Advertising ethics 1-16