1. Advertising & Media Unit 1
How Advertising Works
Advertising & Media
Unit 1

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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