1. © 2004 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. Chapter 2 The 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. 51 HERE

3. 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

4. Economics: The Growing Need for Advertising Principles of free-market economics Self-interest Complete information Many buyers & sellers Absence of externalities

5. 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 Induce consumers to try new products & suggest reuse

6. Functions and Effects of Advertising in a Free Economy Stimulate distribution Increase product use Build value, brand preference, and loyalty Lower the overall cost of sales

7. Evolution of Advertising as an Economic Tool Preindustrial age Industrializing age

8. Evolution of Advertising as an Economic Tool Industrial age Consumer package goods Sales orientation Product differentiation Market segmentation Positioning strategy

9. Evolution of Advertising as an Economic Tool Postindustrial age Demarketing Megamergers Marketing warfare

10. The Global Interactive Age: Looking at the Twenty-first Century Non-U.S. WW ad expenditures: $225 billion Technology

11. Society and Ethics: The Effects of Advertising Improving standards of living Supporting free media Publicizing issues and causes

12. Society and Ethics: The Effects of Advertising Honesty and ethics Cynicism and distrust Puffery, unhealthy products, children