The Big Five Benefits of Advertising
So advertising gets a bad wrap. So you may not like your favourite TV show being interrupted by Rhonda’s holiday in Bali. Or that ‘Longer lasting sex’ billboard plastered up near the local primary school really annoys you. However, before you hate on all of us Please consider this big five benefits of advertising.
i. Advertising creates something out of nothing
Imagine a motorbike manufacturer who wants to sell more motorbikes. They have $1,000,000 to invest into selling more. They can use the $1,000,000 to either:
- reduce the price of each bike
- put a leather seat and chrome exhaust onto each bike
- do advertising to make the bikes more desirable.
You may argue that 1) is better as the consumer pays less, or that 2) is better as the consumer gets more. However, the issue with 1 and 2 is it becomes unprofitable for the company to keep reducing the cost of goods, charging for the material value of something alone is extremely difficult to sustain. In both examples, the operating margins will decrease, and in scenario 2 there will be a greater demand on non-renewable resources too. With both 1 and 2 the company risks going broke. There is a ‘proven’ strong positive correlation between rates of advertising and GDP growth. Therefore scenario 3 wins. It’s create more perceived value, and extra desire for something. It is a better alternative than 1) because it creates a more profitable company, and ii) I enjoy my motorbike more as its more desired, and has a stronger brand image. What’s wrong with perceived value? What’s wrong with wanting something for image as opposed to function? Rory Sutherland talks beautifully about perceived value created by advertising here.
ii. Advertising is fundamentally a socialist or egalitarian pursuit
Our good friend Andy Warhol (who you are about to see more of) said “What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca Cola, and you know that the President drinks Coca Cola, Liz Taylor drinks Coca Cola, and just think, you can drink Coca Cola, too. A coke is a coke and no amount of money can get you a better coke than the one the bum on the corner is drinking. All the cokes are the same and all the cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.”
To paraphrase The president and a homeless person both drink the same bottle of coke, the president can’t buy a better Coke than the homeless person. Advertising, by its nature is mass market, and non-discriminating. It does not care who purchases as long as as many people purchase as possible.
iii. Advertising makes things free
In his book ‘Free: Why $0.00 is the Future of Business’ Chris Anderson examines how more and more business models will become entirely advertiser funded. Currently we have free to air TV that is free. Why? Advertising. We have free search engines like Bing and Google. We have free social networking sites like Facebook, all advertiser funded. Free stuff is being offered to people who are willing to expose themselves to, or help participate in advertising. In fact you may be reading this because advertiser dollars made it available.
iv. Advertising creates opportunity
‘Poetry is when you make new things familiar and familiar things new’, is quoted by Rory Sutherland (from somewhere). It’s as applicable to advertising as it is to poetry.
- ‘Advertising makes new things familiar’: is the challenge for any entrepreneur or new business, or new product. How do I get people to like this and buy it? Familiarity equals liking and liking equals buying. The best way still to make a new product familiar is to advertise it. However, its the second half of this equation that better explains why advertising is the cornerstone of capitalism and capitalism is, although not perfect, a proven economic model that drags countries out of poverty and into prosperity. Let me explain..
- ‘Advertising makes familiar things new’: Advertising can breath new life into the stale or boring. An advertiser can again change the perception of something that appears to be redundant. The advantage of this is that is creates markets where there wasn’t one. It creates economic opportunity.
v. Advertising gives creative people the opportunity to save the world
So this one may make you laugh but as Banksy said “The thing I hate the most about advertising is that it attracts all the bright, creative and ambitious young people, leaving us mainly with the slow and self-obsessed to become our artists. What we have discovered, as we leave the information age is that datata and information is not a great way to change hman behaviour. The information age, and proliferation of information available has not saved the world from any of its big issues. The environment continues to suffer, wars continue to happen, people continue to die of starvation despite our fantastic wealth. However, advertising can move people and inspire them to act. I predict that advertising will get sucked into tackling the bigger issues of the planet more and more.
I’m sure there are some counter points as to why advertising may not be great – but let’s begin the debate here. Here is the article discussed with James Ologhlin on ABC, he’s the one who challenged me to write it!