ADVERTISEMENTS:
Advertisements generally focus on consumer behaviour, thereby creating plans that reflect purchase process. It is generally a form of paid communication of firms and other organizations which is directed towards consumers and the broader society.
TV and radio ads, bill boards, paid spaces in the press and other means are used to spread key messages about products, brands, brand values, and identities.
NEED FOR ADVERTISEMENTS:
Advertising follows logically after listening to consumer requirements, introducing productive conditions and finally distribution of the goods. However, the actual sequence and emphasis deriving from the diverse sub-cultures can be quite differentiated. The expected aftereffects of such advertisements …show more content…
The primary aim of advertising is to differentiate the products from competitors, reducing the relative degree of substitution. This sustains a premium-price over them, which in turn guarantees fairly high margins on costs, leading to high profits. However, these objectives can be achieved, provided the quantity sold is large enough to justify the fixed discretionary costs of advertising.
Neoclassical Approach to Advertising:
Advertising in economics is a very interesting field because the neoclassical theory, with its assumption of rational consumer, who should not be influenced by what firms say but only by the utility in the good. However, in a perfectly competitive market, any firm paying for advertising would simply fail and shut down.
Advertising & Vertical Differentiation:
The sole purpose is to analyze the impact of advertising and quality decisions on price competition in a duopoly setting. Firms are able to differentiate their products vertically and use persuasive advertising to increase consumer brand loyalty. The model predicts that the high quality firm will advertise more intensively than the low quality firm in both covered and uncovered markets. Since, it is assumed that consumers are already informed about product characteristics, advertising neither signals high quality nor discourages firms from lowering product quality
Advertisements generally focus on consumer behaviour, thereby creating plans that reflect purchase process. It is generally a form of paid communication of firms and other organizations which is directed towards consumers and the broader society.
TV and radio ads, bill boards, paid spaces in the press and other means are used to spread key messages about products, brands, brand values, and identities.
NEED FOR ADVERTISEMENTS:
Advertising follows logically after listening to consumer requirements, introducing productive conditions and finally distribution of the goods. However, the actual sequence and emphasis deriving from the diverse sub-cultures can be quite differentiated. The expected aftereffects of such advertisements …show more content…
The primary aim of advertising is to differentiate the products from competitors, reducing the relative degree of substitution. This sustains a premium-price over them, which in turn guarantees fairly high margins on costs, leading to high profits. However, these objectives can be achieved, provided the quantity sold is large enough to justify the fixed discretionary costs of advertising.
Neoclassical Approach to Advertising:
Advertising in economics is a very interesting field because the neoclassical theory, with its assumption of rational consumer, who should not be influenced by what firms say but only by the utility in the good. However, in a perfectly competitive market, any firm paying for advertising would simply fail and shut down.
Advertising & Vertical Differentiation:
The sole purpose is to analyze the impact of advertising and quality decisions on price competition in a duopoly setting. Firms are able to differentiate their products vertically and use persuasive advertising to increase consumer brand loyalty. The model predicts that the high quality firm will advertise more intensively than the low quality firm in both covered and uncovered markets. Since, it is assumed that consumers are already informed about product characteristics, advertising neither signals high quality nor discourages firms from lowering product quality