Every day, when we watch TV, listen to the radio, read newspapers, drive past billboards, or even endure those YouTube ads, we're surrounded by advertising. It's a powerful way for companies to talk to us, but it's more complicated than we might think. As more and more businesses compete globally, they spend a huge amount of money on advertising—around 800 billion dollars! This is because they want to stand out and make their products known, and they often do this by being smart with their ads instead of just relying on having a really new product.
Ads have different jobs—they can try to persuade us, like exciting movie trailers, or they can quietly tell us that a product is good quality. This is done by showing that the company has enough money for fancy ads and famous people, hinting that their product is top-notch. Ads also help us learn about a product's features.
From an economic standpoint, advertising strives to shift the demand curve outward, anticipating a correlation between increased ad expenditure and heightened product demand. The yardstick for advertising effectiveness often lies in the Advertising Elasticity of Demand (AED), which denotes the percentage change in quantity demanded per percentage change in ad spend.
Interestingly, the AED for beer registers at 0.00, indicating a seemingly inconsequential impact of ad spending on beer demand. For context, AED for wine is 0.04, and for cigarettes, it is 0.08. This prompts the question: Why invest in advertising if the AED for beer appears negligible? The answer lies in recognising advertising as a zero-sum game, where sales gained may come at the expense of competitors. Even with a low or zero AED, advertising proves crucial for maintaining brand recall, particularly among existing customers prone to brand switching.
In essence, advertising is a form of self-promotion. A news channel, for instance, may opt for self-promotion in its ad space instead of selling it to another brand, anticipating that the revenue generated through self-promotion surpasses what it would gain from external advertisements.
A parallel between advertising and politics reveals itself in the cutthroat nature of political rallies. Both operate as zero-sum games, where one candidate's gain translates into a loss for competitors. The analogy is clear: if a voter is not inclined towards Candidate A, they are likely to cast their vote for Candidate B. Same holds true for brands as well. Negative tactics or "badmouthing" become strategic tools in this high-stakes competition, echoing the adage, "If you can't say something good about yourself, at least say something bad about someone else." In the context of advertising, it is referred to as “attack ads”. Coca Cola Vs Pepsi and Apple Vs Samsung are prime examples that have used attack ads in the past. In both politics and advertising, influencing perceptions is as critical as promoting positive attributes.
But what about industries that have very limited or no competition?There's De Beers, a big diamond company with 90% of the market share! To compare, Apple has only 6% of the market share for smartphones in India. De Beers doesn't focus on promoting their company but on making more people want diamonds in general. Their ads would encourage you to Buy more diamonds but not specifically from them. This makes sense when you're almost like the only big player—it helps them make more money by getting more people to want diamonds overall.
In conclusion, much like a well-conducted symphony, advertising orchestrates brand perceptions, reaching far beyond the product itself. It's a grand opportunity to tell the world who you truly are. In a world where every pixel, every word, and every second counts, advertisers navigate the delicate balance between art and science. As we continue down this winding road of creativity, strategy, and market dynamics, one thing remains certain: advertising is not just a tool; it's an ever-evolving narrative that shapes and reflects the pulse of our consumer-driven world.
Vivan Pande
Disclaimer: The opinions expressed in this article are solely those of the author and are not intended to spread misinformation or manipulate anyone. The information provided is based on the author's knowledge to the best of their ability. Readers are advised to conduct their own research and seek professional advice as needed. The author takes no responsibility for any actions taken based on this article.