Q1) Explain effect of advertising on consumer demand? 8 marks

A1)

Advertising is an effective way to build brand awareness and to tell consumers about the benefits of the product or service. Businesses can increase demand for their offerings by creating targeted advertising campaigns. If an advertising campaign is unsuccessful, it can also reduce the demand for the products or services. It’s important to understand how advertising works and the ways it can change the demand for the product.

Understanding advertising and promotion

Advertising is a fundamental aspect of marketing. It involves paying for a promotional space to encourage consumers to purchase a product or service. Advertising have several goals, and they depend on where the advertising takes place and who it is targeting.

Advertising is most successful when it is targets a specific segment of an audience. In a number of ways businesses can segment their audience, including demographic characteristics such as age, gender and income or behavioral characteristics such as purchasing history and social causes.

It’s important to pick an advertising location that consumers will see, in order to successfully reach their audience segment. Advertising tools include TV, radio, magazines, newspapers, billboards, websites and more. It’s critical to establish goals for the advertising campaign and to pick the medium accordingly. For example, if a business wants to build brand awareness, then TV or radio advertising might work best as it reaches a large and varied audience. If promoting a particular product sale, advertising in niche magazines or websites might be the right option.

Effects of advertising on consumer demands

Advertising plays an important role in increasing and decreasing demand for a product or service. It’s a way to educate and engage consumers about the business, product or service and results. The effects on demand will likely be positive, if the advertising is targeting the audience segment correctly. However, if the advertising do not reach the audience correctly, the effects on the business can be devastating. Advertising can affect both the demand for a particular product or service, and the demand within a particular audience segment.

Increase demand for a product or services

In order to increase demand for a particular product of service, it’s important to create messaging that define the problem consumers are facing, and offer the product as the solution. This kind of effective advertising influences demand by setting the product apart from competitors and educating consumers about the results they will achieve.

For example, if a business is selling children’s backpacks, the best time to increase demand for the product may be in the late summer before schools reopen.

In order to increase demand, the business needs to show consumers why their backpacks are better than any other backpacks on the market. The business can increase demand for their product by carefully selecting the timing and venue for advertising, and showing them apart from the competition.

Increase demand within an audience segment

Through advertising another way to increase demand is to target a particular audience segment. The effects of advertisement on consumer demand are linked to brand awareness and brand loyalty. If an audience segment doesn’t know about the product or service, they have no way of affecting the demand. That’s why it’s important for businesses to understand their consumers and target them effectively.

Advertising aimed at creating consumer awareness for a product needs to carefully consider who the audience segments are. There are often multiple audience segments for a specific product. Those different segments may have different needs and problems, but the same product may fill those needs and solve those problems.

For example, while the main target audience for the business that sells backpacks are parents and their school-aged kids, they may also have a secondary audience of new moms who use the backpacks as diaper bags. To increase demand for that particular audience segment, the business could advertise in local online mommy groups. This way, they can raise brand awareness and build demand in a new audience segment.

Decreasing demand for a product or services

The demand for a product or service can be decreased if an advertising campaign is unsuccessful. For example, if the ad misrepresents the product or sets unrealistic expectations, the campaign can have negative results on the business. It’s critical for advertising to be truthful about what kinds of benefits the product or service provides. This helps to build trust and loyalty with consumers, which can increase demand.

Decreasing Demand within an Audience Segment

A successful advertising campaign would likely raise demand within a specific audience segment. However, if the business doesn’t correctly target the market, then the campaign can fail. This is why it’s imperative for businesses to thoroughly research their audience. Through market research and competitor research, businesses can learn more about who they serve. They need to know their demographic and behavioral attributes to know how to appeal to them through advertising.

Advertising effects on consumer demand

Advertising can have a range of impacts on consumer demand for a product or service. An advertising campaign can have different influences on demand, depending on its target audience. Effective advertising aims at influencing customers to purchase the advertised brand.

For example, the Tea Board may advertise to consume more tea by highlighting the benefits of tea. In competitive markets, advertisers can create selective demand, i.e., demand for a particular brand. To increase selective demand, advertisers may highlight special features of their brand. For instance, Tata Tea advertises to increase demand for Tata Tea brands.

2.  Evolving Experiences: Effective advertising creates an emotional experience for the consumers that induce them to increase demand for the advertised brand. For instance, a health drink ad which dramatizes fit and fine or healthy people may induce existing consumers (occasional users) to increase the demand for that health drink. The ad may also induce non-users to buy the advertised product.

3.  Social Media and Demand: Social media may also help the advertisers to increase the demand for their products. Online audiences have a more direct and interactive experience with marketers.

Social networks such as Facebook, LinkedIn, Twitter, Whatsapp, etc., can help to increase demand for goods. People may provide review or comments of the products which they have purchased and used. If the reviews or comments are very positive and convincing, other people may also go for purchase of such product. Therefore, it is vital for the advertisers to create a favourable impression on the minds of the people so that they comment favourable on the social media.

4.  Professional Advertising: Some business firms depend largely on professional people to increase the demand for their products. Therefore, advertisers must undertake professional advertising or influence the professionals by personally approaching them for their recommendations.

The professional advertising is undertaken to influence the professionals like doctors, engineers, professors, architects, and others. If the professionals are convinced, they may prescribe or recommend the brand. Such recommendations help to increase the demand for the brand.

5.   Creativity in Advertising and Demand: Advertisers need to come up with creative ads to influence and induce people to buy the products. Creativity is an on-going process. For instance, Amul Butter comes up with creative ads based on current events. Such ads act as a reminder to existing buyers to continue using the brand, and on the non-users, the creative ads create ‘top of mind’ awareness, which may influence the demand for the brand from non-users.

6.   Effect of Advertising on Competition and Demand: Advertising may stimulate increase in competitive activities. Advertising makes competitors active and alive. Due to stiff competition, the competitors may come up with sales promotion techniques such as special discounts, free samples, gifts, extended warranties. The competitors may be forced to come up with new brands with innovative features, and improve the quality of existing brands.

7.   Demand from Market Segments: Demand can be increased from certain segments of the markets by creating a new ad campaign that suits or influences the specific type of market segment. For instance, young adults are influenced by pop music, and therefore, the advertiser may use pop music in the ads to influence the young adults. If the advertisers want to influence senior citizens, who may be influenced by classical music, the advertiser may use classical music in the ads to influence them to make a buy decision.

8.   Temporary Increase in Demand: Advertising may help to increase the demand temporarily. For instance, if a firm wants quick infusion of cash or wants to quickly liquidate old stock to make room for new stock, advertising can come to the rescue of the firm. The firm may advertise for special time-bound incentives, such as special discounts. The ad may state the last date on which the incentive offer ends to create a sense of urgency amount the buyers. The buyers may take advantage of the offer, thereby, increasing the demand for the firm’s brand temporarily.

9.   Increase in Specific Product’s Demand: A firm having abroad product line and usually advertises the business in general, rather than specific goods or services; the firm can increase the demand for a specific brand through specific brand’s advertising. For example, if a firm wants to increase the demand for a specific brand of toilet soap, it may focus its advertising effort on only that specific brand. In such a case advertising may be able to increase the demand for that specific brand.

10.   Advertising and Decrease in Demand; Advertising may lead to decrease in demand or sales. If advertising gets backfired, the firm may lose the demand in the market. For instance, controversial ads may lead to decrease in demand. Also, if the brand ambassador does something of disrepute, the sales of the endorsed brand may decrease. Poor brand extension may also affect the demand for the flagship brand of the Company.

Q2) Explain effect of advertising on monopoly and competition? 5 marks

A2)

ECONOMIC IMPACT OF ADVERTISING

Advertising does have impact on various economic issues. It affects the value of the products, the price of goods and services, the competition in the market, the business cycle and the consumer choice. The economic impact of advertising is explained as follows:

1. Effect on the Value of Products: In Consumer’s mind advertising can give added value to the brand. By making the product better known, advertising can make the product more desirable by the consumer. That is why people have more faith and confidence in advertise brands.

2. Effect on Profits: Advertising may lead to higher demand. Higher demand leads to large scale production and distribution. The large-scale production and distribution bring economies of scale. Therefore, the profits of the firm may increase on account of economies of scale.

3. Effect on Prices: Some advertised products do cost more than unadvertised products, but the opposite is equally true. This is because; when advertising leads to increase in demand, producers go for large scale production and distribution. As such, they get economies of large-scale. These economies are passed on partly to the consumers in form of reduced prices.

4. Effect on Product Life Cycle: Advertising may extend product life cycle. For instance, due to heavy advertising, the growth stage may get extended. For instance, Colgate Palmolive with its heavy advertising have extended the growth stage of its toothpaste brand in India.

5. Effect on Production Costs: Advertising has an indirect effect on production costs. Due to advertising, the firm may get higher demand, which may lead to economies of large scale production. Thus, the cost of production per unit may decline.

6. Effect on Distribution Costs: Advertising has a direct effect on distribution costs. Advertising generates demand, which leads to increase in production, and consequently increase in distribution. The increase in distribution may lead to economies of large scale distribution. Thus, the distribution cost per unit may decline.

7. Effect on Consumer Demand: It is true that the promotional activities including advertising g affects consumer demand. But, it is also true that many social and economic forces like  technological advances, increase in educational level, changes in lifestyles etc., are equally significant to affect consumer demand.

8. Effect on Competition: Some critics are of the view that advertising restricts competition, because small firms or newcomers find it difficult to compete with the huge advertising budgets of large firms. However, advertising by big companies often has only a limited effect on small business firms, because a single advertiser is rarely large enough to dominate the whole market.

9. Expansion of Markets: Advertising helps to expand the markets. For instance, a local advertiser may expand to regional markets and from regional to national and international markets. For instance, Rohit Surfactants Limited, a Kanpur based Company that started in 1987 on regional basis, now sells in national markets its famous brand of washing powder ‘Ghari’ – now market leader in India.

10. Effect on Economic Growth: Advertising increases economic growth of a nation. Effective advertising may lead to higher demand. Increase in demand leads to higher production of goods and services. Increase in production leads to higher GDP or economic growth of a nation.

11. Effects on Standard of Living: Advertising may lead to higher standard of living of the Society, which is stated as follows: (a) Effective advertising generates higher demand for products. (b) Increase in demand leads to higher production. (c) Higher production increases employment opportunities. (d)Increase in employment results in increase in purchasing power. (e) Increase in purchasing power enables people to increase consumption of new and better goods and services. (f) Consumption of new and better goods leads to higher standard of living.

12. Effects on Brand Image: Advertising creates impact on brand image. Due to heavy advertising, customers’ perception about the brand changes. Customers develop a favourable perception or brand image of the brand that are frequently advertised.

13. Effect on Brand Loyalty: Advertising also leads to brand loyalty. The repetitive advertising creates ‘top of mind’ awareness, which initially leads to trial purchase in the case of FMCG products. If the customer are satisfied, they may go for repeat purchases and may even recommend the brand to others.

14. Effect on Consumer Choice: Advertising generates competition in the market. To compete effectively, business firms come up with new brands and modify and improve the existing ones. Therefore, one comes across several competing brands of varied products in the market. Therefore, it can be concluded that advertising gives consumers wider choices.

Effect of advertising on monopoly and competition

Monopoly means a complete or a very substantial hold over a market in respect of one or more products by one seller. Critics, often claim that advertising contributes and strengthens brand monopolies by reducing the opportunity for new products to enter the market, whereas, supporters of advertising assert that advertising helps to face competition.

Critics of Advertising:

Some even claim that big advertisers drive out small-scale advertisers by achieving economies of large scale. They cite the examples of those very large advertisers who have the strongest positions in the market.

The large company has the power of the large purse, which enables it to spend substantial sums on advertising, particularly to implement varying degrees of product differentiation which enables a company to pre-empt part of a market.

Advertising thus creates a barrier to new firms entering an industry or a product market.

The result is high economic concentration.

Because of their protected position and because of product differentiation these firms can charge monopolistic prices which are too high. Moreover, they can recover the cost of the advertising by charging higher prices.

Thus, it can be concluded that advertising need not develop monopolies, but it can be used creatively to generate competition in the market, and that huge advertising by existing firms need not act as an entry barrier for new players in the market.

Q3) Explain effect of advertising on price? 5 marks

A3)
Effect of advertising on consumer price

The Consumer price is the final price which the consumers pay for goods and services.

The consumer price is comprised of:

Advertising may help to reduce the production cost and the distribution cost per unit produced due to large scale production and distribution on account of increase in demand on account of advertising. The consumer price can decrease provided the seller passes on the benefits of large scale production and distribution (either partly or wholly) to the consumers, without increasing the profit margin.

Impact of Advertising on Production Costs

The cost of production is comprised of three basic costs-

(a) Material Cost;

(b) Labour Cost; and

(c) Overhead Costs

Advertising is a selling and distribution cost and it does not form part of production cost. As such it will not add to the cost of production and hence, it will never increase the cost of production.

However, advertising may indirectly reduce or bring down the cost of production per unit produced (assuming that the firm is operating below optimum production capacity). This is possible, provided advertising generates demand upto the firm’s optimum production capacity.

Impact of Advertising on Distribution Costs

Selling and Distribution costs generally includes –

(a) Advertising;

(b) Sales Expenses;

(c) Other Distribution Costs, etc.

Since advertising is a part of selling and distribution costs, it will naturally add to the total selling and distribution costs. However, advertising may reduce the cost per unit distributed, provided the benefit of large scale selling (due to advertising) is more than the amount spent on advertising.

The above claim i.e. advertising can reduce the cost per unit distributed may be justified from the fact that the sales force required may remain the same, since advertising does the additional job of sales promotion. However, it may be noted that incentives of the sales force and other selling expenses may increase to some extent.

It is to be noted that distribution cost per unit sold will go up when the advertising costs are more than the benefits of large scale distribution.

Impact of Advertising on Consumer Price

It is observed from the above two tables that advertising brings in economies of large scale production and distribution to the manufacturer-advertiser.

In case the advertiser transfers these benefits to the consumer either in part or in full, then the consumer stands to gain as he has to pay a lower price than otherwise.

It is also to be noted that large scale production enables the manufacturer to go for Research & Development, which not only brings in new and improved products but also production takes place at reduced costs.

The seller partly transfers the benefits of economies of scale to the consumer.

It is to be noted that there will be no effect on consumer price, if the advertiser does not pass on the benefit of large scale production and distribution to the consumers.

The consumer price will also increase, if the advertiser increases the profit margin, apart from enjoying the total benefit of large scale production and distribution.

Q4) Explain ethical and social issue in advertising? 8 marks

A4)

Ethical and social issues in advertising

Social aspects of advertising

Culture is a way of life of a particular society. It is a combination of tangible aspects and intangible aspects of a Society. The tangible aspects include music, architecture, buildings, literature, clothing, etc., and the intangible aspects include ideas, knowledge, skills, morals, laws and customs.

Critics of Advertising

The critics of advertising point out that advertising degrade cultural values. They cite the following instances to support their point of view:

Ethical issue in advertising

Ethics in advertising is important, because by acting ethically with their advertising, a company is being responsible towards the needs of the customer. Ethical advertising helps the consumer by giving them the information they need to make an informed decision on what products to buy and how these products will enhance their lives--whether they need the product or they just want that product.

When ads are not ethical

Forms of untruthful advertising

10.   Claims of Winning Awards: Advertisers make claims that they have won international awards for their excellence in quality. They may have won such awards, but many a-times, the awards may be consolation ones. Again, the quality that they have presented may be far superior than what they sell in the local market.

11.   Unhealthy Brand Companies: Now-a-days, advertisers are engaged in unhealth brand comparisons with the help of advertising. Such comparisons create problems and confusion for the right choice of products as far as audience is concerned. Examples can be cited that of Colgate toothpaste, and Pepsodent toothpaste.

12.   Surrogate Advertising: Some marketers who are not allowed to advertise their products in certain media undertake surrogate or back-door advertising. You must have come across ads for packaged water, music CDs, club glasses, cards etc., bearing the names of alcoholic drinks and cigarettes. However, there is debate on this aspect, as supporters of advertising claim that there should be no restriction to advertise products like alcoholic drinks, provided they are done in a good taste.

13.   Advertising to Children: Advertisers try to exploit the young kids by advertising products which are not conducive to their health. This includes the ads of chocolates, soft-drinks, etc. Quite often such products lack nutritional value. However, they make believe the kids that such products are healthy for their mind and body, and as such the kids demand such products from their parents. There are cases where ads created inferiority complex if they do not use the advertised products.

Importance of truth in advertising

Truth refers to facts, complete facts and actual facts. In law, truth refers to truth, the whole truth and nothing but the truth.Truth in advertising may have a narrow connotation, for the advertisers are supposed to tell the truth – the facts, features, merits of the product, but no advertiser will advertise – what the product cannot do or what it does not have.

The importance of truth in advertising is stated as follows:

Q5) Explain positive and negative influence of advertising on Indian values and culture? 8 marks

A5)

Advertising can be defined as the process of effectively notifying the target audience of a business or a company regarding its products and services. According to various experts, there are different key components of advertising. And some of those key components of advertising are

There are two different types of advertising as follows

2.   Negative advertising - Negative advertising is the advertisements which work by warning the consumers about the negative consequences of some habit or behavior. A good example of negative advertising could be smoking advertisements.

Positive effects on advertising

2.   Economic benefits - According to research, advertisements can make companies and businesses compete to provide higher quality products and services. This ensures that more high-quality products and services are available in the markets which are able to meet the needs and requirements of all customers. This is a very important positive effect of advertisement.

3.   Free entertainment - Another important effect of advertisement is that it provides all viewers with a free form of entertainment without getting anything back as a guarantee.

4.   Mass communication - The most important effect of advertisement is that it has enabled the various forms of mass media to exist in the form which it does today.

Negative effects on advertising

Critics raise certain issues relating to negative economic and social effects of advertising on the society such as:

Critics also raise certain issues relating to the social effects of advertising such as:

3.   Misrepresentation - All advertisements tend to display the products and services in the best possible light. And many advertisements often tend to representing false information about the product or the service. There are many government organization which charges huge fines for misrepresentation.

4.   False image - Advertisements tend to invade all possible spheres and because of that one can often develop a false image. This false image make an individual feel bad about himself or herself. This is also one of the negative effects of advertising to children.

5.   Unrealistic expectation - This negative effect is common in case products which tend to exaggerate regarding its effectiveness. It sets unrealistic expectations which are hard to meet.

Q6) Explain pro bono advertising? 5 marks

A6)

Pro Bono Advertising

Social advertising is also called as Pro Bono advertising. Pro Bono is a shortened version of Latin Phrase – Pro Bono Publico –which means ‘For the Good of Public’.

Social advertising is also referred to as Public Service Advertising. Any advertising done for the social welfare of the society can be considered as social advertising.

Aspects of Pro Bono Advertising:

1. Purpose: The social advertising is undertaken to create awareness among the masses in respect of various social issues and concerns that affect the welfare of the society. The social campaigns make an attempt to educate the public about the negative effects of certain issues. It makes an attempt to highlight the ways and means to overcome the negative tendencies prevailing in the society, which in turn may lead to welfare of the society.

2. Area Coverage: The pro bono advertising can be done through the nation. It can be also done in a particular region or area depending on the nature of the campaign.

3. Target Audience: The prop bono campaigns are targeted to the masses. The social advertising campaigns can be targeted to all members of the society belonging to different age groups, gender, income, occupation, cultures, etc.

4. Type of Copy: Mostly hard sell copy is used to convey the social message to the audience. The ad may highlight the negative aspects of certain customs, traditions, or practices. For instance, an anti-noise pollution campaign can highlight the negative aspects of noise on the society and on the environment.

5. Personalities: The advertisers may use personalities or celebrities to create a better impact on the audience. For instance, the Govt. Of India selected Mr. Amitabh Bachchan for the ‘Pulse Polio Campaign’.

6. Sponsors of Social Advertising: Anyone who has the funds and the inclination towards social good can undertake social advertising. Normally, large business firms like the Tata Group of Companies undertake social advertising. Also NGOs and Govt. Organisations undertake public service advertising campaigns.

7. Media Used: Any media can be used that can reach the target audience. For instance, a campaign on “Don’t Drink & Drive” can be placed in any possible media such as radio, newspapers, magazines, TV, outdoor, etc. The media-mix depends on the availability of funds with the sponsor.

8. Types of Advertising: The social advertising can be classified into two groups as follows:

(a) Public Service Campaigns: Public service advertising deals with social and cultural issues. Such issues are dealt with the intention of improving public welfare. Examples of such public welfare campaigns include:

(b) Social cause Advertising: Advertising facilitates cause-marketing. Cause marketing attempts to link a company to some social or charitable cause. Advertising can help to promote the cause-marketing efforts. For example, a business firm may be concerned with the development of education in tribal area, and a part of its profits may be spent on such development. Advertising can promote the cause-marketing by highlighting that a part of its profits will be utilised for such social cause activity.

MGNREGA – Mahatma Gandhi National Rural Employment Guarantee Act is an Indian job guarantee scheme enacted by legislation on August 25, 2005. The scheme aims all enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage-employment in a financial year to rural household whose adult members volunteer to do unskilled manual work.

Q7) Explain Social Advertising by Indian Government through Directorate of Advertising and Visual Publicity (DAVP)? 5 marks

A7)

Directorate of Advertising and Visual Publicity (DAVP) is the nodal agency of the Government of India for advertising by various Ministries and Organisations of Government of India including public sector undertakings and autonomous bodies.

Vision of DAVP

To communicate important social advertising messages in an effective manner, to empower the lives of the country’s citizens, and the one-step agency for the advertising needs of all Central Government bodies all over the country, be it print, audio-visual, outdoor or emerging media, and to provide services in a professional, responsive and quality-driven manner, at media-buying rates which are the most competitive in the market.

Role of DAVP

At DAVP, we provide solution for the paid publicity requirements of all Central Government organizations, PSUs or Government Societies. Depending on the Client’s target audience, and his budget, a range of media are used, ranging from the conventional, like newspapers, TV and radio channels, or Outdoor publicity options such as hoardings, messages on Railway Platforms, etc.

DAVP undertakes various social awareness campaigns under the series titled as “Bharat Nirman”. The various campaigns focused on the following aspects:

Benefits of DAVP Campaigns:

The DAVP campaigns bring certain benefits to the member of the society:

1. Awareness: The DAVP campaigns create awareness of the various facilities provided by the Government to the public such as drinking water facilities, employment facilities under MGNREGA etc. They also highlight certain issues or concerns which the society needs to pay attention.

2. Social Development: The DAVP campaigns can bring about social development in the country. For instance, the campaigns on health and education can improve literacy rate, life expectancy and also result in family welfare. Education and life expectancy are the two main indicators of social development.

3. Empowerment of Weaker Sections: The DAVP campaigns may highlight the special facilities and benefits available to the weaker sections such as scheduled castes, scheduled tribes and others. Therefore, these campaigns bring out social empowerment of the weaker sections.

4. Standard of Living: DAVP campaigns highlight the employment facilities available under MGNREGA and other schemes. Therefore, people in villages and in semi-urban areas get employment. Increase in employments result in increase in income level. The increase in income leads to higher purchasing power. The higher purchasing power facilitates higher consumption of goods and services, which in turn results in improvement in standard of living.

Q8) Explain Self-Regulatory body - ASCI? 8 MARKS

A8)

Self regulation laws

Self regulations laws refer to standards and / or codes that provide guidelines for ethical and professional conduct of advertising.

The codes / standards have been laid down by various authorities such as:

The Standards or Codes have been adopted in order to guide the following:

Main highlights of self regulation laws:

Role of ASCI

The Advertising Standards Council of India (ASCI), established in 1985. The ASCI was formed with the support of all four sectors connected with Advertising. The ASCI is not a Government body, but it is a voluntary self-regulatory council, registered as a not-for-profit Company under section 25 of the India Companies Act. Its main objective is to promote responsible advertising; thus enhancing the public’s confidence in Advertising. ASCI thus aims to achieve its overarching goal i.e., to maintain and enhance the public’s confidence in advertising.

The ASCI was set up to perform the following tasks:

3.   Safeguards Against Indiscriminate Use of Advertising: The ASCI safeguards against indiscriminate use of advertising in situations or for the promotion of products, which are regarded as hazardous to Society or to individuals. The ASCI code clearly states: 

4.   Fairness in Competition: The ASCI ensures fairness in competition. The ASCI ensures that the consumers are informed on the choices at the market place. IT also ensures that business firms follow the canons of generally accepted competitive behaviour and not adopt unfair practices.

5.   Responsibility of the Advertisers: The ASCI has fixed responsibility of advertisers to observe its code. As the advertiser initiates the advertising brief and sanctioned its placement in the media, the advertiser carries full responsibility for the observance of the ASCI Code. The advertiser is responsible for the entire content of the ad. Therefore, the ASCI performs an important role to ensure that the advertisers are held responsible if anything is misleading or unethical in their ads.

6.   Responsibility of the AD agencies: The ASCI has fixed responsibility of the ad agencies to observe its code. Ad agencies are made responsible to ensure the observance of ASCI Code in as much as the facts are know to them, i.e., to advise their clients in accordance with the code.

7.   Responsibility of Media Owners: ASCI has fixed responsibility of the media owners to observe its code. Media owners must view each ad offered to them for publication from the viewpoint of the code. IF any ad is considered by the media owners to be in contravention of the code, the media owner shall refer the matter to CCC of ASCI. Ads found by the CCC to be in violation of the code shall be refused for publication by media owners.

8.   Responsibility of Celebrities: The Advertising Standards Council of India (ASCI) issued a series of sweeping guidelines in April 2017 on celebrity advertising. The guidelines are aimed to finally claim down on random or exaggerated claims made by celebrity advertising. The guidelines must be strictly followed by actors, sports people, doctors, authors, activists and educationists.

Q9) Explain role of ASCI.

A9)

Self regulations laws refer to standards and / or codes that provide guidelines for ethical and professional conduct of advertising.

The codes / standards have been laid down by various authorities such as:

The Standards or Codes have been adopted in order to guide the following:

Main highlights of self regulation laws:

Role of ASCI

The Advertising Standards Council of India (ASCI), established in 1985. The ASCI was formed with the support of all four sectors connected with Advertising. The ASCI is not a Government body, but it is a voluntary self-regulatory council, registered as a not-for-profit Company under section 25 of the India Companies Act. Its main objective is to promote responsible advertising; thus enhancing the public’s confidence in Advertising. ASCI thus aims to achieve its overarching goal i.e., to maintain and enhance the public’s confidence in advertising.

The ASCI was set up to perform the following tasks:

4.   Fairness in Competition: The ASCI ensures fairness in competition. The ASCI ensures that the consumers are informed on the choices at the market place. IT also ensures that business firms follow the canons of generally accepted competitive behaviour and not adopt unfair practices.

5.   Responsibility of the Advertisers: The ASCI has fixed responsibility of advertisers to observe its code. As the advertiser initiates the advertising brief and sanctioned its placement in the media, the advertiser carries full responsibility for the observance of the ASCI Code. The advertiser is responsible for the entire content of the ad. Therefore, the ASCI performs an important role to ensure that the advertisers are held responsible if anything is misleading or unethical in their ads.

6.   Responsibility of the AD agencies: The ASCI has fixed responsibility of the ad agencies to observe its code. Ad agencies are made responsible to ensure the observance of ASCI Code in as much as the facts are know to them, i.e., to advise their clients in accordance with the code.

7.   Responsibility of Media Owners: ASCI has fixed responsibility of the media owners to observe its code. Media owners must view each ad offered to them for publication from the viewpoint of the code. IF any ad is considered by the media owners to be in contravention of the code, the media owner shall refer the matter to CCC of ASCI. Ads found by the CCC to be in violation of the code shall be refused for publication by media owners.

8.   Responsibility of Celebrities: The Advertising Standards Council of India (ASCI) issued a series of sweeping guidelines in April 2017 on celebrity advertising. The guidelines are aimed to finally claim down on random or exaggerated claims made by celebrity advertising. The guidelines must be strictly followed by actors, sports people, doctors, authors, activists and educationists.

Q10) Explain Effect of advertising on consumer demand, monopoly and competition, Price.

A10) Effect of advertising on consumer demand

Advertising can have a range of impacts on consumer demand for a product or service. An advertising campaign can have different influences on demand, depending on its target audience. Effective advertising aims at influencing customers to purchase the advertised brand.

For example, the Tea Board may advertise to consume more tea by highlighting the benefits of tea. In competitive markets, advertisers can create selective demand, i.e., demand for a particular brand. To increase selective demand, advertisers may highlight special features of their brand. For instance, Tata Tea advertises to increase demand for Tata Tea brands.

2.  Evolving Experiences: Effective advertising creates an emotional experience for the consumers that induce them to increase demand for the advertised brand. For instance, a health drink ad which dramatizes fit and fine or healthy people may induce existing consumers (occasional users) to increase the demand for that health drink. The ad may also induce non-users to buy the advertised product.

3.  Social Media and Demand: Social media may also help the advertisers to increase the demand for their products. Online audiences have a more direct and interactive experience with marketers.

Social networks such as Facebook, LinkedIn, Twitter, Whatsapp, etc., can help to increase demand for goods. People may provide review or comments of the products which they have purchased and used. If the reviews or comments are very positive and convincing, other people may also go for purchase of such product. Therefore, it is vital for the advertisers to create a favourable impression on the minds of the people so that they comment favourable on the social media.

4.  Professional Advertising: Some business firms depend largely on professional people to increase the demand for their products. Therefore, advertisers must undertake professional advertising or influence the professionals by personally approaching them for their recommendations.

The professional advertising is undertaken to influence the professionals like doctors, engineers, professors, architects, and others. If the professionals are convinced, they may prescribe or recommend the brand. Such recommendations help to increase the demand for the brand.

5.   Creativity in Advertising and Demand: Advertisers need to come up with creative ads to influence and induce people to buy the products. Creativity is an on-going process. For instance, Amul Butter comes up with creative ads based on current events. Such ads act as a reminder to existing buyers to continue using the brand, and on the non-users, the creative ads create ‘top of mind’ awareness, which may influence the demand for the brand from non-users.

6.   Effect of Advertising on Competition and Demand: Advertising may stimulate increase in competitive activities. Advertising makes competitors active and alive. Due to stiff competition, the competitors may come up with sales promotion techniques such as special discounts, free samples, gifts, extended warranties. The competitors may be forced to come up with new brands with innovative features, and improve the quality of existing brands.

7.   Demand from Market Segments: Demand can be increased from certain segments of the markets by creating a new ad campaign that suits or influences the specific type of market segment. For instance, young adults are influenced by pop music, and therefore, the advertiser may use pop music in the ads to influence the young adults. If the advertisers want to influence senior citizens, who may be influenced by classical music, the advertiser may use classical music in the ads to influence them to make a buy decision.

8.   Temporary Increase in Demand: Advertising may help to increase the demand temporarily. For instance, if a firm wants quick infusion of cash or wants to quickly liquidate old stock to make room for new stock, advertising can come to the rescue of the firm. The firm may advertise for special time-bound incentives, such as special discounts. The ad may state the last date on which the incentive offer ends to create a sense of urgency amount the buyers. The buyers may take advantage of the offer, thereby, increasing the demand for the firm’s brand temporarily.

9.   Increase in Specific Product’s Demand: A firm having abroad product line and usually advertises the business in general, rather than specific goods or services; the firm can increase the demand for a specific brand through specific brand’s advertising. For example, if a firm wants to increase the demand for a specific brand of toilet soap, it may focus its advertising effort on only that specific brand. In such a case advertising may be able to increase the demand for that specific brand.

10.   Advertising and Decrease in Demand; Advertising may lead to decrease in demand or sales. If advertising gets backfired, the firm may lose the demand in the market. For instance, controversial ads may lead to decrease in demand. Also, if the brand ambassador does something of disrepute, the sales of the endorsed brand may decrease. Poor brand extension may also affect the demand for the flagship brand of the Company.

Effect of advertising on monopoly and competition

Monopoly means a complete or a very substantial hold over a market in respect of one or more products by one seller. Critics, often claim that advertising contributes and strengthens brand monopolies by reducing the opportunity for new products to enter the market, whereas, supporters of advertising assert that advertising helps to face competition.

Critics of Advertising:

Some even claim that big advertisers drive out small-scale advertisers by achieving economies of large scale. They cite the examples of those very large advertisers who have the strongest positions in the market.

Thus, it can be concluded that advertising need not develop monopolies, but it can be used creatively to generate competition in the market, and that huge advertising by existing firms need not act as an entry barrier for new players in the market.

Effect of advertising on consumer price

The Consumer price is the final price which the consumers pay for goods and services.

The consumer price is comprised of:

Advertising may help to reduce the production cost and the distribution cost per unit produced due to large scale production and distribution on account of increase in demand on account of advertising. The consumer price can decrease provided the seller passes on the benefits of large scale production and distribution (either partly or wholly) to the consumers, without increasing the profit margin.

Impact of Advertising on Production Costs

The cost of production is comprised of three basic costs-

(a) Material Cost;

(b) Labour Cost; and

(c) Overhead Costs

Advertising is a selling and distribution cost and it does not form part of production cost. As such it will not add to the cost of production and hence, it will never increase the cost of production.

However, advertising may indirectly reduce or bring down the cost of production per unit produced (assuming that the firm is operating below optimum production capacity). This is possible, provided advertising generates demand upto the firm’s optimum production capacity.

Impact of Advertising on Distribution Costs

Selling and Distribution costs generally includes –

(a) Advertising;

(b) Sales Expenses;

(c) Other Distribution Costs, etc.

Since advertising is a part of selling and distribution costs, it will naturally add to the total selling and distribution costs. However, advertising may reduce the cost per unit distributed, provided the benefit of large scale selling (due to advertising) is more than the amount spent on advertising.

The above claim i.e. advertising can reduce the cost per unit distributed may be justified from the fact that the sales force required may remain the same, since advertising does the additional job of sales promotion. However, it may be noted that incentives of the sales force and other selling expenses may increase to some extent.

It is to be noted that distribution cost per unit sold will go up when the advertising costs are more than the benefits of large scale distribution.

Impact of Advertising on Consumer Price

It is observed from the above two tables that advertising brings in economies of large scale production and distribution to the manufacturer-advertiser.

In case the advertiser transfers these benefits to the consumer either in part or in full, then the consumer stands to gain as he has to pay a lower price than otherwise.

It is also to be noted that large scale production enables the manufacturer to go for Research & Development, which not only brings in new and improved products but also production takes place at reduced costs.

The seller partly transfers the benefits of economies of scale to the consumer.

It is to be noted that there will be no effect on consumer price, if the advertiser does not pass on the benefit of large scale production and distribution to the consumers.

The consumer price will also increase, if the advertiser increases the profit margin, apart from enjoying the total benefit of large scale production and distribution.

Q11) Explain economic impact on advertisement? 5 marks

A11)

ECONOMIC IMPACT OF ADVERTISING

Advertising does have impact on various economic issues. It affects the value of the products, the price of goods and services, the competition in the market, the business cycle and the consumer choice. The economic impact of advertising is explained as follows:

1. Effect on the Value of Products: In Consumer’s mind advertising can give added value to the brand. By making the product better known, advertising can make the product more desirable by the consumer. That is why people have more faith and confidence in advertise brands.

2. Effect on Profits: Advertising may lead to higher demand. Higher demand leads to large scale production and distribution. The large-scale production and distribution bring economies of scale. Therefore, the profits of the firm may increase on account of economies of scale.

3. Effect on Prices: Some advertised products do cost more than unadvertised products, but the opposite is equally true. This is because; when advertising leads to increase in demand, producers go for large scale production and distribution. As such, they get economies of large-scale. These economies are passed on partly to the consumers in form of reduced prices.

4. Effect on Product Life Cycle: Advertising may extend product life cycle. For instance, due to heavy advertising, the growth stage may get extended. For instance, Colgate Palmolive with its heavy advertising have extended the growth stage of its toothpaste brand in India.

5. Effect on Production Costs: Advertising has an indirect effect on production costs. Due to advertising, the firm may get higher demand, which may lead to economies of large scale production. Thus, the cost of production per unit may decline.

6. Effect on Distribution Costs: Advertising has a direct effect on distribution costs. Advertising generates demand, which leads to increase in production, and consequently increase in distribution. The increase in distribution may lead to economies of large scale distribution. Thus, the distribution cost per unit may decline.

7. Effect on Consumer Demand: It is true that the promotional activities including advertising g affects consumer demand. But, it is also true that many social and economic forces like  technological advances, increase in educational level, changes in lifestyles etc., are equally significant to affect consumer demand.

8. Effect on Competition: Some critics are of the view that advertising restricts competition, because small firms or newcomers find it difficult to compete with the huge advertising budgets of large firms. However, advertising by big companies often has only a limited effect on small business firms, because a single advertiser is rarely large enough to dominate the whole market.

9. Expansion of Markets: Advertising helps to expand the markets. For instance, a local advertiser may expand to regional markets and from regional to national and international markets. For instance, Rohit Surfactants Limited, a Kanpur based Company that started in 1987 on regional basis, now sells in national markets its famous brand of washing powder ‘Ghari’ – now market leader in India.

10. Effect on Economic Growth: Advertising increases economic growth of a nation. Effective advertising may lead to higher demand. Increase in demand leads to higher production of goods and services. Increase in production leads to higher GDP or economic growth of a nation.

11. Effects on Standard of Living: Advertising may lead to higher standard of living of the Society, which is stated as follows: (a) Effective advertising generates higher demand for products. (b) Increase in demand leads to higher production. (c) Higher production increases employment opportunities. (d)Increase in employment results in increase in purchasing power. (e) Increase in purchasing power enables people to increase consumption of new and better goods and services. (f) Consumption of new and better goods leads to higher standard of living.

12. Effects on Brand Image: Advertising creates impact on brand image. Due to heavy advertising, customers’ perception about the brand changes. Customers develop a favourable perception or brand image of the brand that are frequently advertised.

13. Effect on Brand Loyalty: Advertising also leads to brand loyalty. The repetitive advertising creates ‘top of mind’ awareness, which initially leads to trial purchase in the case of FMCG products. If the customer are satisfied, they may go for repeat purchases and may even recommend the brand to others.

14. Effect on Consumer Choice: Advertising generates competition in the market. To compete effectively, business firms come up with new brands and modify and improve the existing ones. Therefore, one comes across several competing brands of varied products in the market. Therefore, it can be concluded that advertising gives consumers wider choices.

Q12) Explain social aspects of advertising? 8 marks

A12)

Social aspects of advertising

Culture is a way of life of a particular society. It is a combination of tangible aspects and intangible aspects of a Society. The tangible aspects include music, architecture, buildings, literature, clothing, etc., and the intangible aspects include ideas, knowledge, skills, morals, laws and customs.

Critics of Advertising

The critics of advertising point out that advertising degrade cultural values. They cite the following instances to support their point of view:

Supporters of advertising

The supporters of advertising claim that advertising is not responsible to degrade cultural values, but it upholds and improves cultural values. They cite the examples of the following instances:

Advertising as a part of firm’s marketing effort operates in the society. It has to therefore follow the social norms. There are some positive and negative aspects on the social grounds. They are as follows-

4. Offensiveness – Some ads are so offensive that they are not acceptable by the buyers. The ads which are irrelevant to the products are not acceptable. But there are some ads which are educative and now accepted by the people such as birth control pill was considered offensive and are now considered educative and important.

Q13) Explain ethical issue in advertising? 8 marks

A13)

Ethics in advertising is important, because by acting ethically with their advertising, a company is being responsible towards the needs of the customer. Ethical advertising helps the consumer by giving them the information they need to make an informed decision on what products to buy and how these products will enhance their lives--whether they need the product or they just want that product.

When ads are not ethical

Forms of untruthful advertising

Importance of truth in advertising

Truth refers to facts, complete facts and actual facts. In law, truth refers to truth, the whole truth and nothing but the truth.Truth in advertising may have a narrow connotation, for the advertisers are supposed to tell the truth – the facts, features, merits of the product, but no advertiser will advertise – what the product cannot do or what it does not have.

The importance of truth in advertising is stated as follows:

Q14) Write about DAVP and ASCI? 12 marks 

A14) Social Advertising by Indian Government through Directorate of Advertising and Visual Publicity (DAVP)

Directorate of Advertising and Visual Publicity (DAVP) is the nodal agency of the Government of India for advertising by various Ministries and Organisations of Government of India including public sector undertakings and autonomous bodies.

Vision of DAVP

To communicate important social advertising messages in an effective manner, to empower the lives of the country’s citizens, and the one-step agency for the advertising needs of all Central Government bodies all over the country, be it print, audio-visual, outdoor or emerging media, and to provide services in a professional, responsive and quality-driven manner, at media-buying rates which are the most competitive in the market.

Role of DAVP

At DAVP, we provide solution for the paid publicity requirements of all Central Government organizations, PSUs or Government Societies. Depending on the Client’s target audience, and his budget, a range of media are used, ranging from the conventional, like newspapers, TV and radio channels, or Outdoor publicity options such as hoardings, messages on Railway Platforms, etc.

DAVP undertakes various social awareness campaigns under the series titled as “Bharat Nirman”. The various campaigns focused on the following aspects:

Benefits of DAVP Campaigns:

The DAVP campaigns bring certain benefits to the member of the society:

1. Awareness: The DAVP campaigns create awareness of the various facilities provided by the Government to the public such as drinking water facilities, employment facilities under MGNREGA etc. They also highlight certain issues or concerns which the society needs to pay attention.

2. Social Development: The DAVP campaigns can bring about social development in the country. For instance, the campaigns on health and education can improve literacy rate, life expectancy and also result in family welfare. Education and life expectancy are the two main indicators of social development.

3. Empowerment of Weaker Sections: The DAVP campaigns may highlight the special facilities and benefits available to the weaker sections such as scheduled castes, scheduled tribes and others. Therefore, these campaigns bring out social empowerment of the weaker sections.

4. Standard of Living: DAVP campaigns highlight the employment facilities available under MGNREGA and other schemes. Therefore, people in villages and in semi-urban areas get employment. Increase in employments result in increase in income level. The increase in income leads to higher purchasing power. The higher purchasing power facilitates higher consumption of goods and services, which in turn results in improvement in standard of living.

Self-Regulatory body- Role of ASCI (Advertising Standard Council of India)

Self regulation laws

Self regulations laws refer to standards and / or codes that provide guidelines for ethical and professional conduct of advertising.

The codes / standards have been laid down by various authorities such as:

The Standards or Codes have been adopted in order to guide the following:

Main highlights of self regulation laws:

Role of ASCI

The Advertising Standards Council of India (ASCI), established in 1985. The ASCI was formed with the support of all four sectors connected with Advertising. The ASCI is not a Government body, but it is a voluntary self-regulatory council, registered as a not-for-profit Company under section 25 of the India Companies Act. Its main objective is to promote responsible advertising; thus enhancing the public’s confidence in Advertising. ASCI thus aims to achieve its overarching goal i.e., to maintain and enhance the public’s confidence in advertising.

The ASCI was set up to perform the following tasks:

4.   Fairness in Competition: The ASCI ensures fairness in competition. The ASCI ensures that the consumers are informed on the choices at the market place. IT also ensures that business firms follow the canons of generally accepted competitive behaviour and not adopt unfair practices.

5.   Responsibility of the Advertisers: The ASCI has fixed responsibility of advertisers to observe its code. As the advertiser initiates the advertising brief and sanctioned its placement in the media, the advertiser carries full responsibility for the observance of the ASCI Code. The advertiser is responsible for the entire content of the ad. Therefore, the ASCI performs an important role to ensure that the advertisers are held responsible if anything is misleading or unethical in their ads.

6.   Responsibility of the AD agencies: The ASCI has fixed responsibility of the ad agencies to observe its code. Ad agencies are made responsible to ensure the observance of ASCI Code in as much as the facts are know to them, i.e., to advise their clients in accordance with the code.

7.   Responsibility of Media Owners: ASCI has fixed responsibility of the media owners to observe its code. Media owners must view each ad offered to them for publication from the viewpoint of the code. IF any ad is considered by the media owners to be in contravention of the code, the media owner shall refer the matter to CCC of ASCI. Ads found by the CCC to be in violation of the code shall be refused for publication by media owners.

8.   Responsibility of Celebrities: The Advertising Standards Council of India (ASCI) issued a series of sweeping guidelines in April 2017 on celebrity advertising. The guidelines are aimed to finally claim down on random or exaggerated claims made by celebrity advertising. The guidelines must be strictly followed by actors, sports people, doctors, authors, activists and educationists.

Q15) Explain effect of advertising on consumer demand, monopoly and competition, Price? 12 marks

A15)

Effect of advertising on consumer demand

Advertising is an effective way to build brand awareness and to tell consumers about the benefits of the product or service. Businesses can increase demand for their offerings by creating targeted advertising campaigns. If an advertising campaign is unsuccessful, it can also reduce the demand for the products or services. It’s important to understand how advertising works and the ways it can change the demand for the product.

Understanding advertising and promotion

Advertising is a fundamental aspect of marketing. It involves paying for a promotional space to encourage consumers to purchase a product or service. Advertising have several goals, and they depend on where the advertising takes place and who it is targeting.

Advertising is most successful when it is targets a specific segment of an audience. In a number of ways businesses can segment their audience, including demographic characteristics such as age, gender and income or behavioral characteristics such as purchasing history and social causes.

It’s important to pick an advertising location that consumers will see, in order to successfully reach their audience segment. Advertising tools include TV, radio, magazines, newspapers, billboards, websites and more. It’s critical to establish goals for the advertising campaign and to pick the medium accordingly. For example, if a business wants to build brand awareness, then TV or radio advertising might work best as it reaches a large and varied audience. If promoting a particular product sale, advertising in niche magazines or websites might be the right option.

Effects of advertising on consumer demands

Advertising plays an important role in increasing and decreasing demand for a product or service. It’s a way to educate and engage consumers about the business, product or service and results. The effects on demand will likely be positive, if the advertising is targeting the audience segment correctly. However, if the advertising do not reach the audience correctly, the effects on the business can be devastating. Advertising can affect both the demand for a particular product or service, and the demand within a particular audience segment.

Increase demand for a product or services

In order to increase demand for a particular product of service, it’s important to create messaging that define the problem consumers are facing, and offer the product as the solution. This kind of effective advertising influences demand by setting the product apart from competitors and educating consumers about the results they will achieve.

For example, if a business is selling children’s backpacks, the best time to increase demand for the product may be in the late summer before schools reopen.

In order to increase demand, the business needs to show consumers why their backpacks are better than any other backpacks on the market. The business can increase demand for their product by carefully selecting the timing and venue for advertising, and showing them apart from the competition.

Increase demand within an audience segment

Through advertising another way to increase demand is to target a particular audience segment. The effects of advertisement on consumer demand are linked to brand awareness and brand loyalty. If an audience segment doesn’t know about the product or service, they have no way of affecting the demand. That’s why it’s important for businesses to understand their consumers and target them effectively.

Advertising aimed at creating consumer awareness for a product needs to carefully consider who the audience segments are. There are often multiple audience segments for a specific product. Those different segments may have different needs and problems, but the same product may fill those needs and solve those problems.

For example, while the main target audience for the business that sells backpacks are parents and their school-aged kids, they may also have a secondary audience of new moms who use the backpacks as diaper bags. To increase demand for that particular audience segment, the business could advertise in local online mommy groups. This way, they can raise brand awareness and build demand in a new audience segment.

Decreasing demand for a product or services

The demand for a product or service can be decreased if an advertising campaign is unsuccessful . For example, if the ad misrepresents the product or sets unrealistic expectations, the campaign can have negative results on the business. It’s critical for advertising to be truthful about what kinds of benefits the product or service provides. This helps to build trust and loyalty with consumers, which can increase demand.

Decreasing Demand Within an Audience Segment

A successful advertising campaign would likely raise demand within a specific audience segment. However, if the business doesn’t correctly target the market, then the campaign can fail. This is why it’s imperative for businesses to thoroughly research their audience. Through market research and competitor research, businesses can learn more about who they serve. They need to know their demographic and behavioral attributes to know how to appeal to them through advertising.

Advertising effects on consumer demand

Advertising can have a range of impacts on consumer demand for a product or service. An advertising campaign can have different influences on demand, depending on its target audience. Effective advertising aims at influencing customers to purchase the advertised brand.

For example, the Tea Board may advertise to consume more tea by highlighting the benefits of tea. In competitive markets, advertisers can create selective demand, i.e., demand for a particular brand. To increase selective demand, advertisers may highlight special features of their brand. For instance, Tata Tea advertises to increase demand for Tata Tea brands.

2.  Evolving Experiences: Effective advertising creates an emotional experience for the consumers that induce them to increase demand for the advertised brand. For instance, a health drink ad which dramatizes fit and fine or healthy people may induce existing consumers (occasional users) to increase the demand for that health drink. The ad may also induce non-users to buy the advertised product.

3.  Social Media and Demand: Social media may also help the advertisers to increase the demand for their products. Online audiences have a more direct and interactive experience with marketers.

Social networks such as Facebook, LinkedIn, Twitter, Whatsapp, etc., can help to increase demand for goods. People may provide review or comments of the products which they have purchased and used. If the reviews or comments are very positive and convincing, other people may also go for purchase of such product. Therefore, it is vital for the advertisers to create a favourable impression on the minds of the people so that they comment favourable on the social media.

4.  Professional Advertising: Some business firms depend largely on professional people to increase the demand for their products. Therefore, advertisers must undertake professional advertising or influence the professionals by personally approaching them for their recommendations.

The professional advertising is undertaken to influence the professionals like doctors, engineers, professors, architects, and others. If the professionals are convinced, they may prescribe or recommend the brand. Such recommendations help to increase the demand for the brand.

5.   Creativity in Advertising and Demand: Advertisers need to come up with creative ads to influence and induce people to buy the products. Creativity is an on-going process. For instance, Amul Butter comes up with creative ads based on current events. Such ads act as a reminder to existing buyers to continue using the brand, and on the non-users, the creative ads create ‘top of mind’ awareness, which may influence the demand for the brand from non-users.

6.   Effect of Advertising on Competition and Demand: Advertising may stimulate increase in competitive activities. Advertising makes competitors active and alive. Due to stiff competition, the competitors may come up with sales promotion techniques such as special discounts, free samples, gifts, extended warranties. The competitors may be forced to come up with new brands with innovative features, and improve the quality of existing brands.

7.   Demand from Market Segments: Demand can be increased from certain segments of the markets by creating a new ad campaign that suits or influences the specific type of market segment. For instance, young adults are influenced by pop music, and therefore, the advertiser may use pop music in the ads to influence the young adults. If the advertisers want to influence senior citizens, who may be influenced by classical music, the advertiser may use classical music in the ads to influence them to make a buy decision.

8.   Temporary Increase in Demand: Advertising may help to increase the demand temporarily. For instance, if a firm wants quick infusion of cash or wants to quickly liquidate old stock to make room for new stock, advertising can come to the rescue of the firm. The firm may advertise for special time-bound incentives, such as special discounts. The ad may state the last date on which the incentive offer ends to create a sense of urgency amount the buyers. The buyers may take advantage of the offer, thereby, increasing the demand for the firm’s brand temporarily.

9.   Increase in Specific Product’s Demand: A firm having abroad product line and usually advertises the business in general, rather than specific goods or services; the firm can increase the demand for a specific brand through specific brand’s advertising. For example, if a firm wants to increase the demand for a specific brand of toilet soap, it may focus its advertising effort on only that specific brand. In such a case advertising may be able to increase the demand for that specific brand.

10.   Advertising and Decrease in Demand: Advertising may lead to decrease in demand or sales. If advertising gets backfired, the firm may lose the demand in the market. For instance, controversial ads may lead to decrease in demand. Also, if the brand ambassador does something of disrepute, the sales of the endorsed brand may decrease. Poor brand extension may also affect the demand for the flagship brand of the Company.

Effect of advertising on monopoly and competition

Monopoly means a complete or a very substantial hold over a market in respect of one or more products by one seller. Critics, often claim that advertising contributes and strengthens brand monopolies by reducing the opportunity for new products to enter the market, whereas, supporters of advertising assert that advertising helps to face competition.

Critics of Advertising:

Some even claim that big advertisers drive out small-scale advertisers by achieving economies of large scale. They cite the examples of those very large advertisers who have the strongest positions in the market.

Thus, it can be concluded that advertising need not develop monopolies, but it can be used creatively to generate competition in the market, and that huge advertising by existing firms need not act as an entry barrier for new players in the market.

Effect of advertising on consumer price

The Consumer price is the final price which the consumers pay for goods and services.

The consumer price is comprised of:

Advertising may help to reduce the production cost and the distribution cost per unit produced due to large scale production and distribution on account of increase in demand on account of advertising. The consumer price can decrease provided the seller passes on the benefits of large scale production and distribution (either partly or wholly) to the consumers, without increasing the profit margin.

Impact of Advertising on Production Costs

The cost of production is comprised of three basic costs-

(a) Material Cost;

(b) Labour Cost; and

(c) Overhead Costs

Advertising is a selling and distribution cost and it does not form part of production cost. As such it will not add to the cost of production and hence, it will never increase the cost of production.

However, advertising may indirectly reduce or bring down the cost of production per unit produced (assuming that the firm is operating below optimum production capacity). This is possible, provided advertising generates demand upto the firm’s optimum production capacity.

Impact of Advertising on Distribution Costs

Selling and Distribution costs generally includes –

(a) Advertising;

(b) Sales Expenses;

(c) Other Distribution Costs, etc.

Since advertising is a part of selling and distribution costs, it will naturally add to the total selling and distribution costs. However, advertising may reduce the cost per unit distributed, provided the benefit of large scale selling (due to advertising) is more than the amount spent on advertising.

The above claim i.e. advertising can reduce the cost per unit distributed may be justified from the fact that the sales force required may remain the same, since advertising does the additional job of sales promotion. However, it may be noted that incentives of the sales force and other selling expenses may increase to some extent.

It is to be noted that distribution cost per unit sold will go up when the advertising costs are more than the benefits of large scale distribution.

Impact of Advertising on Consumer Price

It is observed from the above two tables that advertising brings in economies of large scale production and distribution to the manufacturer-advertiser.

In case the advertiser transfers these benefits to the consumer either in part or in full, then the consumer stands to gain as he has to pay a lower price than otherwise.

It is also to be noted that large scale production enables the manufacturer to go for Research & Development, which not only brings in new and improved products but also production takes place at reduced costs.

The seller partly transfers the benefits of economies of scale to the consumer.

It is to be noted that there will be no effect on consumer price, if the advertiser does not pass on the benefit of large scale production and distribution to the consumers.

The consumer price will also increase, if the advertiser increases the profit margin, apart from enjoying the total benefit of large scale production and distribution.