the Value of Advertising

early advert for coca cola

an early advert for coca cola

The advertising industry, in most first world countries, accounts for almost 3% of annual Gross Domestic Product (GDP) in direct terms, but can be seen to have an enormous indirect effect on the GDP through its influence on consumption levels. If the macro-economy is indeed driven by consumption, then effective advertising can be seen to be integral to its proper functioning as one of commercial advertising’s primary goals is to encourage the consumption of products and services.

Advertising is more than attractively displaying products like a DVD box set, a bmw X5 for sale or a brochure selling the various hotels in Umhlanga: instead, an advertisement can be understood as a communication used to persuade an audience to embark on a specific course of action or to adopt a presented point of view. In this broad description of the art of advertisement, commercial, ideological, and political ends can be achieved. Modern advertising is dominated by commercial endeavours, and arose in the late 19th and 20th centuries along with the rapid increase in the scope and quality of mass production in the same time period.

Most definitions of advertising suggest that an advert is a concise and comprehensive communication of important information concerning either a product or service, or a political or ideological point of view, designed to persuade the viewer/interpreter to reach the decision desired by the advertiser. Adverts are non-personal (that is, they are not directly addressed to any one, specific individual, and are instead placed in areas that expose them to a mass audience), and paid for by an interested party that wants to sponsor a persuasive argument (whether the argument is in favour of a commercial or political end).

Effective advertisements not only tap into human desires, but are often understood to create those desires to enough of an extent to actually get a consumer to consciously make the decision to purchase a product. On this view, commercials aim at maintaining and increasing the consumption of a product or service through associating positive qualities with a brand through tools like repetition and brand awareness.

This brief introductory article will only mention two theories associated with advertising: the hierarchy of effects model and leverage points. The hierarchy of effects model seeks to describe, in six steps, the psychological process that a consumer/buyer undergoes when making a purchase. The six steps are as follows:

1. Awareness
2. Knowledge
3. Liking
4. Preference
5. Conviction
6. Purchase

The first step is awareness, where the specific product/service/etc. enters into the consumer’s consciousness. The next step is the gaining of knowledge, by the consumer, of the product/etc. on offer through the information contained within the advertisement itself. The third step in the process is where subjectivity enters into the fray: here the consumer develops a liking for the product as the qualities associated with the product/brand are favourable to the consumer, and with which the consumer can identify him/herself. Advertising’s role in the decision making process is acutely felt here, as well as in the fourth phase of the progression: that is, in the development of a preference. In terms of microeconomic theory, preferences are intimately linked to how much use/utility a consumer expects to receive from the purchase: the consumer will be asking him/herself if the opportunity cost of the product is worthwhile and if, in a price comparison, the product is competitive. Advertising can build value into the product by creating a sense of identity between the product and the consumer, and further by suggesting that the product will add value to the consumer’s life not only through practical utility, but through sign-exchange value (that is, through adding status to the purchaser).

The Leverage Points theory builds upon the above arguments, and can essentially be seen to be the attempt to link a product and its benefits with the consumer’s personal values. In so doing, the “subjective” utility of the product increases, perhaps to the point where expected total utility is equal to, or greater than, the product’s opportunity cost.