The economic role of advertising

The question of the contribution of advertising to the economy as a whole has been and remains one of the most controversial. Some consider it a vital and extremely effective means of bringing new products to market and maintaining brand awareness. To communicate the economic benefits of advertising, it is necessary to approach them from the perspective of both sellers and buyers. As consumers, we want to know whether advertising provides truthful, relevant information so that we can differentiate products in meaningful ways (that is, differentiate them, which is what manufacturers want). Moreover, can advertising accomplish this task more effectively than other sources of consumer information?

The second point of view is the seller's point of view. This is not to say that the two positions are necessarily mutually exclusive, but obviously the motives of buyers and sellers are different. In a simplified form, they can be represented as follows: the seller strives to extract maximum profit, and while the buyer strives to obtain the maximum degree of satisfaction, most often coupled with the lowest costs. For example, one of the American Association of Advertising Agencies' initiative announcements states that it is "designed to develop and improve the process for setting and approving advertising budgets using performance metrics that are important to business CEOs and CFOs." Customer satisfaction can certainly be considered one of these indicators, but it is still inferior in importance to profitability, shareholder equity and other economic criteria.

Economic views on advertising

Arguments in support of advertising boil down to the following: 1. Advertising talks about quality, thereby stimulating the improvement of existing products and the development of new ones. Forced willy-nilly to match their competitors, companies offer products with even better properties. The product improvement spiral benefits consumers.

2. Advertising, by providing information about the latest products and developments, helps consumers make the right purchasing decisions. Mass advertising and promotion are the only means of informing consumers about the entire variety of goods in a dynamically developing economy.
3. Advertising revenue supports a free press system. They give people access to media that would be prohibitively expensive or non-existent without advertising. The availability of inexpensive media, part of the income of which comes from advertising, is economically beneficial to the population. The very presence of an accessible and democratic press system, free from control by individual organizations and the state, is important for society.
4. By promoting economies of scale, advertising actually reduces the price of goods to consumers. Although it is an additional cost item for manufacturers and traders, advertising forms a mass market for goods, thereby reducing the amount of costs passed on to the consumer.

Until recently, in the top search results you could find sites simply crammed with teaser advertising. In this regard, it seemed that the volume of advertising placed on one page did not harm the site in any way. But, as a designer, these advertising blocks always gave me the feeling that, to put it mildly, they go beyond the boundaries of taste, introducing a certain disharmony not only to the site, but to the Internet as a whole.

Approximately the same feeling arose in the era of primitive SEO, when website promotion was the craft of mass purchasing of links and generating texts reminiscent of a chessboard, where instead of black squares there were clumsily entered keywords in bold.

The same can be said about the HTML code, the purity of which I took care of when creating the mileage and optimizing the page layout.

That is, all this did not have any normal, in my opinion, aesthetic appearance, both inside and outside.

And now the time has come, gradually, when sheets with banal repetition of keywords, text design, compliance of the donor’s subject matter with the project being promoted, cumbersome and complex page structure, confusing navigation and unpleasant appearance of the site, all this began to be taken into account when ranking sites.

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Here I find a simple logic in the development of search algorithms: the site should not only be useful for people, but also have a look that would not be embarrassing to show it to millions of network users.

On January 26, 2014, Yandex warned that in the updated search results the positions for sites hosting teaser advertising blocks would be deliberately reduced. This is written in the section “Yandex for webmasters” //webmaster.ya.ru/replies.xml?item_no=17347. I will just quote the main points that you need to pay attention to and take into account when monetizing your site.

The specificity of non-price competition is that stimulating product sales becomes the most important functional task of the company. Therefore, among non-price factors of competition, one of the main places is given to advertising. Advertising can be carried out in a variety of ways (highlighting the properties of a product, forming an image of a product) and through a variety of channels (print media, radio and television, outdoor advertising). Whatever the form and means of advertising a product, its goal is always the same - to create consumer commitment to this brand. In this sense, advertising solves a dual problem. On the one hand, it makes it possible to reduce consumer sensitivity to price, and on the other hand, it makes it difficult for potential competitors to penetrate the market, thereby contributing to the growth of the firm's market power.

There are different points of view regarding advertising. Proponents of advertising consider it necessary because it stimulates product change, increases competition, weakens monopoly power, helps consumers become acquainted with new products, and also finances national communication systems - print, radio, television. Opponents of advertising rightly point out its negative aspects: bias (it misinforms rather than educates), high costs, which are reflected in the price paid by the consumer; creating financial barriers to entry into the industry; "clogging" of the media.

The ineffectiveness of advertising can be not only a consequence of poorly chosen forms and methods of its implementation - even with an impeccable advertising campaign from an organizational point of view, its results may turn out to be disappointing for the company that organized it. The thing is that advertising is usually accompanied by side effects. One of the most significant such effects is stimulating demand for the product as a whole. If a firm is unable to satisfy the increased demand for its product, it provokes consumers to replace it with the product of competing firms, which, by expanding production, help increase market supply, and therefore reduce the market price of the product.

Public assessment of the economic role of advertising is also ambiguous. From the standpoint of the traditional approach, advertising simply causes the consumer to switch from the product of one manufacturer to the product of another. In many ways, the assessment of the role of advertising will depend on what function it performs. It is not easy to answer this question.

If we rely on the traditional interpretation of market sequence, dating back to A. Smith, according to which economically independent consumers set the parameters of demand, and the activities of producers are limited only to meeting the needs of consumers, then the role of advertising should be assessed positively - in the sense that it, By promoting the dissemination of market information, it helps to save on information costs. At the same time, modern practice provides many facts that allow us to come to the conclusion about the reverse market sequence. As the American economist J.K. Galbraith, the modern market is characterized by the dominant role of supply: the manufacturer determines the most profitable products from the point of view of production, and then, using advertising, creates demand for them. From these positions, advertising seems to be a way of destroying the independence of the consumer and exercising the market power of the company, causing direct damage to public welfare. In this regard, it is appropriate to cite the expression that has become widely used among American consumers: “Advertising forces us to buy what we don’t need and for money we don’t have.”

Thus, it is quite difficult to give an unambiguous assessment of the role of advertising. In each individual case, advertising can play both a positive and negative role, and sometimes both at the same time. Meanwhile, we must not forget that any advertising is based on the asymmetry of information, that is, on its uneven distribution between the consumer and the manufacturer, and the latter, of course, always possesses the majority of it. In this regard, used as a market signal, advertising can become a tool for both increasing and decreasing social efficiency.

Both beauty salon managers and marketers are concerned about an important point - indicators for assessing the effectiveness of advertising, with the help of which you can monitor how money was spent and whether it generated income.

Launch a promotion

There is no exact answer to what impact an advertising campaign has on consumers. There are more than fifty models of advertising perception, and more than a dozen methods for assessing effectiveness. And this is not the end. Every time a new theory appears, and none of them is accepted as the only and final one.

But not all companies know about this and do not use such a tool in their business. They don't understand how advertising performance metrics can be useful. Let's try to answer this question. The most important thing is to realize that you will need a sufficient amount of money. To prevent them from going down the drain, it is important to plan every step.

Useful file

Monitoring the state of the market must be carried out in three stages: before, during and after the advertising campaign. Marketers must research and calculate the result at each interval.

Before launching advertising, you should clearly define your goals and develop a strategy. This includes an exploratory study that will determine the starting point in sales volume, loyalty to the company and the number of customers, as well as subsequent results in comparison with the first indicators, and an assessment of the quality of products manufactured for the campaign.
Carrying out intermediate checks during the advertising period.
Evaluation of advertising effectiveness based on campaign results.

In a situation where everything is good, the market is stable, sales are growing due to the expansion of the territory of influence, it will be more effective to achieve these goals. Advertising evaluation will not require large financial and time expenditures; it can be done approximately.

But if the overall level of sales decreases, you should seriously think about the possibility of investing significant funds in advertising to increase the overall performance of the entire business.

Advertising effectiveness assessment

The basic law is to keep records of the data obtained and collect statistics on the effectiveness of various methods. It is important to develop a rule that should always be followed when launching any advertising campaign. It is developing a strategy based on the numbers, goals and priorities of the organization. You need to turn to marketing professionals who are used to getting things done, not just using creative approaches.

Fact
Clear planning and evaluation of results are the main components of proper management of an advertising campaign.

There are seven main reasons why an advertising campaign for a beauty salon did not bring the expected effect.

There is no clear goal that you want to achieve with advertising.
A separate campaign stands out from the overall development plan of the enterprise and does not correspond to the main marketing objectives.
Incorrect definition of the target audience.
Making a mistake when selecting those information channels through which the audience learns about a specific product or service.
Marketers have not established feedback with customers.
During the advertising campaign, the employees and agency responsible for the events did not show proper professionalism, which is an indicator of their low qualifications.
Management and marketers did not develop an exact plan of action and did not develop a control scheme for the ongoing advertising campaign.

Goals when assessing advertising effectiveness

determining the degree of influence of the advertising message on consumers;
research into the overall effectiveness of advertising;
studying the relationship between a promotion and the subsequent purchase of a service or product.

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Now it’s worth understanding what tasks such an assessment sets for itself:

collect data on those goods that were purchased thanks to the promotion;
find out how much consumer loyalty to the company has increased after the end of the advertising campaign;
understand whether the action has affected the recognition of your brand;
study statistics on the implementation of the tasks set for the advertising campaign.

Assessing the communicative effectiveness of advertising

There are two ways to evaluate the effectiveness of advertising: communicative and commercial. To assess the communicative effectiveness of advertising, evaluative and analytical methods are distinguished.

The objectives of such an assessment are defined as follows:

desire to increase awareness of a company, brand or product;
an attempt to form a loyal attitude towards a company, product or service.

How much impact does advertising have on the audience? This question is answered by specialists in the field of assessing communication effectiveness. They collect statistics and draw conclusions about how effectively a certain advertising message conveys the necessary information to potential consumers and increases loyalty to a specific product or brand.

Marketers conduct this research twice: before they launch an advertising message, and after it is published and available to a potential audience. But you can also collect data three times: before, during and after the ad is released.

Experts use several types of techniques to evaluate the communicative effectiveness of advertising. These can be methods of observation, experimentation, surveys, and memorability assessment. Below we give examples of the most common of them.

Methods for assessing advertising effectiveness used before the start of an advertising campaign

Method for assessing psychological perception. The essence of this method is that a control group of buyers is selected, and they watch several different advertisements, making a psychological assessment of the effectiveness of the advertisement. For each of them there is a score, which is assigned by all participants in the experiment. Whichever ad gets the highest number on a ten-point scale will be the most effective.

Method for assessing memorability. To make a purchase, it is important that the brand is heard. It will also be an advantage if the buyer remembers the main message of the advertising message. The study involves typical representatives of the target audience, who are selected from ordinary people and invited to the office. They listen to or watch various video and audio advertisements. They also read the text ad. Then they tell you what they remember most (which product or brand of manufacturer).

The method of assessing memorability is based on the principle that a person will remember the advertisement and buy this particular product. Marketers choose the most easily remembered video or message.

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At the end of this method of measuring advertising effectiveness, a control group is surveyed to uncover a broader range of information. Participants are first asked to answer the questionnaire and then express their opinions during the discussion. They share their feelings about the advertisement they watched, what they liked and what they didn’t, whether the information was clearly conveyed, whether it was credible, and so on.

Method of expert assessments. There are several parameters by which you can choose the most optimal option for an advertising message. This method is designed to take into account the opinion of an expert commission that evaluates the effectiveness of a specific advertisement. Participants are given special questionnaires where they need to provide points.

To assess the extent of the advertising message, commission members answer questions such as: does the advertisement inspire confidence, does it attract attention, is it easy to remember what is heard and seen, etc. Next, all the points scored by each ad are added up to determine the winner.

Research through experiments. An experiment is an experiment conducted on an incomplete, truncated scale. It will provide an opportunity to check the effectiveness of the planned advertising campaign. At the development stage, an experiment is carried out, which is called piloting. His task is to find imperfections and correct them before launching a large-scale advertising campaign. For this purpose, only ten percent of the total future volume is produced. With the help of pilot studies, you can check how memorable an advertisement is, its degree of impact, and what results the selected advertising means bring.

During the experiment, you are allowed to change some factors and then look at the changes in the result. After the research as part of the pilot, a decision is made to release advertising products in the planned form or to send the project to refine those shortcomings that were identified during the experiment.

Focus group method. A focus group is determined, and with its help, the quality of the perceived message and the motives for purchasing are identified.

What advertising is the most effective? How necessary is it for small and large businesses? These and other questions arise for everyone who starts doing business and is faced with the fact that in order to grow sales and promote their own product, they need to talk about their business.

Types of advertising

Today you can present information about your activities in completely different ways. Before you start promoting your business, you need to familiarize yourself with the types of existing advertising and choose the most suitable one for yourself. This is required in order to understand what is the most effective advertising for a construction company, for example.

Most of the information messages we see are commercial advertising aimed at attracting buyers, but there are also social and political ones.

external - presented in the form of billboards, posters on public transport, signs, signs, etc.;
through the media - television, radio, newspapers and magazines;
internet banner, social networks, contextual advertising, hyperlinks.

The role of advertising in business

Advertising is not just a luxury. This tool is necessary for every entrepreneur to disseminate information about himself to the target audience and promote his name in the ranking of enterprises. This will help present you as a reliable, solvent and responsible company.

When using competent marketing, you can easily answer which advertising is the most effective for your business, and in addition create a positive image, emphasize the advantages and form a loyal attitude towards the company.

You should not assume that small businesses do not need advertising, that only word of mouth works here. This is wrong. In any case, advertising helps to tell potential buyers about the company and promote the company’s product on the market.

It is important to choose a type that will not affect your budget too much, but at the same time will help you promote yourself and increase recognition.

Small business: how to advertise it

Small businesses, like big ones, require advertising, which you shouldn’t refuse, even if you don’t have extra funds. You should know: the decisive period in the development of any activity is the first 2 years, when initial acquaintance, adaptation and recognition occur. During this period, promotion should be as intense and eventful as possible.

Before deciding on the method of promoting an enterprise, it is worth studying as much information as possible on the question: what advertising is the most effective? Statistics are a convincing thing and, with the help of specific data, will help you make your choice.

It is important to focus on specific offers and refuse to use template words such as “cheap”, “fast”, “with guarantee”, “profitable”, etc. If such methods once had a good effect on potential buyers, now it is does not attract, but even repels. People need specific numbers, an understanding of what they will pay for.

Methods to increase sales

There are several methods and types of advertising, each of which is aimed at increasing sales and making profits, but all these are not spontaneous actions, but a clearly thought-out strategy. Which advertising is the most effective for small businesses can be understood after some time, but it is a fact that any type is subject to a certain structure:

problem - if you are selling a product or service that can help with a solution, then when advertising you can use interrogative sentences: “Tired of waiting for prices to fall?”, “Are you tired of paying too much?” etc.;
solving the problem - after the question has been asked, you give the answer in advance that it is your company that is able to solve it and on favorable terms;
the offer is unique - many companies can provide assistance, but you must be different from them and offer something that will further attract the target audience;
limitations - people may be interested in your product and service, but they will think about purchasing later in order to think it over thoroughly. It’s worth introducing a time or availability limit so that people can make purchases faster;
call - after interest and desire to purchase appears, the buyer must immediately see where to call, how to order, how to pay.

How to attract consumers?

What advertising is the most effective? Statistics confirm that not every company can afford to talk about itself on television or radio, since it does not have a lot of money. Of course, before advertising on one or more sources, the owner studies data showing the most effective methods. But it’s worth remembering that each area of business has its own type of promotion and its own indicators that are effective.

According to statistical data using the example of plastic windows in the city of Ufa, the cost of one attracted client varies greatly in different ways. Advertising was given on the radio, in newspapers and magazines, outdoor advertising, in the help desk and on the Internet. The cheapest promotion was on the Internet, where 42 rubles were spent, and the most expensive on the radio was more than 15 thousand rubles. This suggests that on the Internet you can customize advertising specifically for your client, control the budget and determine the cost of the contact.

Budget advertising in small businesses

Telemarketing - calling potential clients can attract buyers, but they can also repel them. Advertising in this way must be correctly composed: the text must be short, but succinct and understandable. However, this method is ineffective and can repel people.
Sending messages to email addresses and on social networks - this type takes time, but does not require financial investment. It is also ineffective, but it can attract a certain percentage of buyers.
Leaflets. This type of advertising, of course, requires certain investments: it is necessary to print the material in a printing house, preferably in color, which will attract people more. This is a recognized marketing tool, but only if it is written correctly - good text, bright pictures, high-quality paper. It should be distributed on streets with high traffic.

How to evaluate effectiveness?

What is the most effective advertising method, and how to evaluate it? After this tool is launched, the owner will want to know how advertising affected sales, whether it is worth using it in the future or whether it is better to change something.

There are two measures of advertising effectiveness: communication (i.e., how well and accurately the message conveys information to the target audience) and financial. It is worth knowing that this indicator partly depends on the owner, who determines the budget, strategy, parameters, and partly does not depend, because there are uncontrollable factors: characteristics of the audience, advertising time, legal requirements.

But the assessment of efficiency depends on the specific market situation: how many similar firms are there, what methods were chosen and why? For small businesses, it is recommended to organize promotions using direct click methods, i.e. the result should be comparable: they launched an advertisement for ten rubles - they received thirty, which means it works. They launched it for five rubles - they received three, the method does not work and the company goes into the red.

A complex approach

It is impossible to give the same assessment of the effectiveness of advertising for each area of business and use the statistics of the results of one company to analyze another. This method will only waste your budget and will be of no use.