Effects on Consumer Choice

Some critics say advertising hampers consumer choice, as large advertisers use their power to limit our options to a few well-advertised brands. Economists argue that advertising is used to achieve (1) differentiation, whereby the products or services of large advertisers are perceived as unique or better than competitors', and (2) brand loyalty, which enables large national advertisers to gain control of the market, usually at the expense of smaller brands.

Larger companies often end up charging a higher price and achieve a more dominant position in the market than smaller firms that cannot compete against them and their large advertising budgets. When this occurs, advertising not only restricts the choice alternatives to a few well-known, heavily advertised brands but also becomes a substitute for competition based on price or product improvements.

Heavily advertised brands dominate the market in certain product categories, such as soft drinks, beer, and cereals.92 But advertising generally does not create brand monopolies and reduce the opportunities for new products to be introduced to consumers. In most product categories, a number of different brands are on the store shelves and thousands of new products are introduced every year. The opportunity to advertise gives companies the incentive to develop new brands and improve their existing ones. When a successful new product such as a personal computer is introduced, competitors quickly follow and use advertising to inform consumers about their brand and attempt to convince them it is superior to the original. Companies like

Belch: Advertising and I VII. Special Topics and I 22. Evaluating the Social, I I © The McGraw-Hill

Promotion, Sixth Edition Perspectives Ethical, & Economic Companies, 2003

Aspects of Advtising & Promotion

Virgin Atlantic Airways recognize that advertising has been an important part of their success (Exhibit 22-19).

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Advertising With Circulars

Advertising With Circulars

Co-op Mailing means that two or more businesses share in the cost and distribution of a direct mail campaign. It's kind of like having you and another non-competing business split the cost of printing, assembling and mailing an advertising flyer to a shared same market base.

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