13.
Advertising
Advertising has been
given a bum rap in economic theory.
Aside from any inherent bias against the free market itself, the reason
for this is the theory of perfect competition. Once the economist perceives the world through "perfect
competition colored glasses" it naturally follows to disparage
advertising. Given the fanciful
assumptions of perfect competition--perfectly homogeneous products, perfect
mobility of resources, perfect knowledge, and all firms so small that none can
influence price--advertising is
purely wasteful. What valuable
economic role could advertising play in such a world? All consumers know the attributes and availabilities of the
products, products are equally readily (instantaneously) available in regard to
location, and the prices for these products are all the same.
So much for
advertising in a world of perfect competition. What about in reality?
In reality, in the real world of actual competition--rivalrous attempts
among firms to attract consumers--advertising does indeed play a useful,
beneficial economic role. The
three major points of contention regarding advertising are persuasion versus
information, waste versus efficiency and concentration versus competition.
Persuasion versus Information
The claim that much
of advertising is only persuasive rather than informative is based on such
examples as "Coke is it!"
The anti-advertiser claims that there is no information in such an
advertising slogan, there is only hoopla in an attempt to persuade a poor
consumer to part with his cash. It
should be understood that just because advertising is of no value to a
particular critic, someone else may find the advertising to be of value. For any one person most advertising is
in fact not directed at him. Many
of us will agree that the above slogan is lacking in information--what's the
price?, where can it be bought?, what's the nutritional content?, etc. But for someone on their way home who
has promised to pick up a six pack of Coke for the evening's company the slogan
is in fact a welcomed reminder.
People are busy with a multitude of activities and cannot keep
everything in mind; reminders are often necessary.
I suspect everyone
reading this page can cite an example wherein they had neglected the consumption
of some favored product only to spot it or a simple advertising slogan again
and think in effect: "Oh yes,
I used to enjoy X, I'll have to buy it again!" People in such situations are glad to have had the reminder.
Further, newcomers
need to be introduced to products which are familiar to the rest of us. Newcomers would include infants,
immigrants and populations where the product is first being introduced. The reason the particular product in
that slogan strikes us as needing no further advertising is because the company
has done such a thorough job of constantly keeping the product before us that
we perceive it as unnecessary.
The anti-advertisers
have set up a false dichotomy between persuasion and information; the two are
actually and necessarily intertwined.
The only way to inform someone is to first persuade them to direct their
attention to that information, thus the clever slogans, bright colors, catchy
tunes, etc. And the only way to
persuade someone is with information, however limited.
But, let's grant the
anti-advertisers their point:
consumers at times buy products only because of a purely persuasive
advertisement. The very proper
response to such a charge is: SO
WHAT? If a consumer wants to buy a
product purely based on the persuasion of an advertisement that's his right as
a consumer to spend his money as he chooses. Besides, how many wants are inherent, beyond the persuasion
from anyone? Very few purchases or
human preferences are for inherent wants--and certainly being consumed with
animosity toward advertising is not one of them!
Waste versus Efficiency
The second claim
against advertising is that it increases production costs--undeniably producing
a product and then spending money on advertising is more costly than spending
nothing on advertising. But this
is also true of every feature of any product--producing an automobile with an
engine versus one without an engine, for example. The real issue is:
are the extra costs (advertising, the auto engine, etc.) a value to the
consumer he is willing to pay for?
If not, generic-type non-advertised goods will out-compete flashy,
heavily advertised goods; the consumer ultimately decides. Since heavily advertised products are
in fact the norm, what is it that advertising provides that is of value to the
consumer? Information as to the
existence of the product, its special features, where it is available,
etc. Anyone who doubts that the
consumer values the information in advertising can just think of the last time
he bought a newspaper to check movie schedules or perused the flyers in the
Sunday newspaper searching for a purchase.
A different line of
argument which claims advertising is wasteful is based on the notion that many
products are the same except for the advertising--examples often cited are
detergents, soft drinks, aspirin, etc.--and thus the advertising is an
unnecessary extra cost. The truth
is exactly the opposite, the more one knows and cares about the subtle differences between different
brands the more obvious the differences are. What the advertising critic is really saying here is that
the differences between, say Coke and Pepsi, are unknown to him and he really
does not care about any such differences.
This is the argument from snobbery or what Murray N. Rothbard has called
"the sustained sneer."
Imagine telling a major critic of advertising like John Galbraith that
all economics books are the same, they all cover prices, costs, supply, demand
and so on. The only one who could
honestly believe such a statement is someone unfamiliar with and uninterested
in economics--the way Galbraith is unfamiliar with and uninterested in the
differences between Coke and Pepsi.
Given the actual though subtle differences among products, advertising
alerts consumers to the availability of products which may more closely match
the consumers' preferences--a valuable service, indeed.
Concentration versus Competition
The last claim
against advertising is that it encourages concentration in industries, that the
high cost of advertising locks out newcomers who can't afford to compete with
established heavy advertisers.
Actually advertising--getting consumers' attention--makes it possible
for the newcomer to attract consumers away from their established habits. Closing down all advertising would
secure the position of the large, established firms.
Notice that new
products, new malls, new restaurants, new gas stations are advertised heavily,
and with the most glaring, loud and obtrusive means. Some examples:
could Wendy's have ever broken through to successfully compete with
McDonald's without advertising, could Diet Coke have succeeded without
celebrity endorsements, could Wal-Mart have surpassed Sears in total sales if
they could not have widely and repeatedly advertised their prices and very
existence as an alternative? The
lack of advertising (or the outlawing as has been done and is advocated by the
critics) plays right into the hands of the dominant firms and products. Other than the anti-advertising
theorists these are the biggest champions for ending advertising. Legal services, eyeglass, and vitamin
advertising have all been outlawed at various times at the behest of the
sellers of these goods and services.
What freedom of advertising does is allow the consumer to shop for low
prices in advance of entering these places of business; without advertising the
consumer must go "blindly" in search of the best deals.
The desire to shut
out newcomers' ability to reach potential consumers is a broader sociological
law with widespread application.
Examples: Incumbent
candidates rarely willingly debate their newcomer challengers, established
authorities ignore the arguments of their lesser-known critics, old money
elites have no regard for the nouveau-riche.
Finally, the coup
de grace in this entire
argument: Anti-advertisers ....
advertise! Yes, in trying to
convince others of the evils they see in advertising they do all of the very
things they condemn: They use
clever phrases and examples to persuade others, incur costs in the creation of
new arguments with subtle distinctions, and attempt to break through to reach
followers who may be content with their existing understanding of the value of
advertising.
-
Armentano, D.T.
Antitrust and Monopoly: Anatomy of a Policy Failure,
(New York: John Wiley & Sons, 1982)
pp. 37 - 39, 256- 257, 262.
-
Armentano, D.T.
Antitrust Policy: The Case for Repeal,
(Washington, D. C.: The Cato Institute, 1986)
pp. 35 - 38.
-
Block, Walter
Defending the Undefendable,
(New York: Fleet Press Corporation, 1976)
pp. 68 - 79.
-
Brozen, Yale, editor
Advertising and Society,
(New York: New York University Press, 1974)
pp. 25 - 109.
-
Hayek, F. A.
Studies in Philosophy, Politics and Economics,
(Chicago: The University of Chicago Press, 1967)
pp. 313 - 317.
-
Rothbard, Murray N.
Man, Economy, and State,
(Los Angeles: Nash Publishing, 1970)
pp. 843 - 846.
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