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

Chapter2The 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. 51HERE

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

Economics: The Growing Need for Advertising

Principles of free-market economics

Self-interest

Complete information

Many buyers & sellers

Absence of externalities

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

Communicate about a product, its features, and

its location of sale

Induce consumers to try new products & suggest reuse

Induce consumers to try new products & suggest reuse

Functions and Effects of Advertising in a Free Economy

Stimulate distribution

Stimulate distribution

Increase product use

Increase product use

Build value, brand preference, and

loyalty

Build value, brand preference, and

loyalty

Lower the overall cost of sales

Lower the overall cost of sales

Evolution of Advertising as an Economic Tool

Preindustrial age Industrializing age

Evolution of Advertising as an Economic Tool

Industrial age

Consumer package goods

Sales orientation

Product differentiation

Market segmentation

Positioning strategy

Evolution of Advertising as an Economic Tool

Postindustrial age

Demarketing

Megamergers

Marketing warfare

The Global Interactive Age: Looking at the Twenty-first

CenturyNon-U.S. WW ad

expenditures: $225 billionTechnology

Society and Ethics: The Effects of Advertising

Improving standards of living

Supporting free media

Publicizing issues and causes

Society and Ethics: The Effects of Advertising

Honesty and ethics

Cynicism and distrust

Puffery, unhealthy products, children