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
McCains 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
influential 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 Ps

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.
3.
4.
5.
6.
7.

Communicate information it
Induce consumers to try or reuse it
Stimulate distribution
Increase its use
Build value, preference, and loyalty
Lower the overall cost of sales
1-11

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
1-12

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
1-13

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
1-14