Why Companies Advertise: Motivations, Strategy & Brand

Introduction: Why Advertising Matters

"Advertising is riddled with myths and misunderstandings. It is simultaneously believed to be both immensely powerful and immensely wasteful, to increase economic prosperity and to be morally questionable" (Fletcher, 2010). While all of these elements contain some truth, a more complete and nuanced perspective on advertising requires a better understanding of the motivating factors that drive most companies. The motivations for companies to advertise are largely multifaceted.

The simplest reason companies advertise is because they want to sell their products, and advertising creates awareness of those products (Green, 2012). Advertising allows companies to "launch new products, increase their market share at the expense of rivals, and recruit new staff. When a major company launches a new product, it is often promoted through multiple channels. In the course of a single day, you might learn of a product on the radio, at the shopping center, on posters, on TV, and on the Internet" (Green, 2012). At the same time, it is definitely a balance; companies need to push their existing products so that they bolster their portion of the market and ensure that the products they already have remain marketable (Green, 2012).

As some experts in the field have pointed out, consumers often do not have the loyalty that they once did: "The National Retail Merchants Association states: 'Mobility and non-loyalty are rampant. Stores must promote to get former customers to return and to seek new ones'" (Moneymailer.com, n.d.). As a result of the highly competitive market, companies need to invest heavily in their advertising budgets in order to hold on to the customers they have already acquired, lest competitors attempt to woo them away. Furthermore, "shopping around" and engaging in constant price comparisons is now a common part of the buying process; a company competing in today's environment needs a strong advertising concept so that it stays in the mind of the consumer throughout this journey (Moneymailer.com, n.d.).

This points to one of the other reasons companies must advertise: their competition is advertising. Failing to advertise effectively is tantamount to giving competitors the opportunity to gain influence over one's consumers. As one source notes, "Advertising gives you a long-term advantage over competitors who cut back or cancel advertising. A five-year survey of more than 3,000 companies found" continued gains for those that maintained their advertising investment (Moneymailer.com, n.d.).

Another crucial aspect of advertising is the necessity of creating a brand image. "Companies also advertise to improve their corporate image — to create a favorable impression with the public. Industries that may suffer from a negative image, such as oil companies and power companies using nuclear energy, spend large sums to convince us that their safety record is good or that they care about the environment" (Green, 2012). Much of consumerism is built on trust: the consumer trusts that a product will do what it promises and that it will be consistent and reliable. So much of this trust originates with the company and its brand image. As another source puts it, "In a competitive market, rumors and bad news travel fast. Advertising corrects misleading gossip, punctures 'overstated' bad news. Advertising that is vigorous and positive can bring shoppers into the marketplace, regardless of the economy" (Moneymailer.com, n.d.).

References

Fletcher, W. (2010). Advertising: A Very Short Introduction. New York: Oxford Press.

Green, J. (2012). Advertising. New York: The Rosen Publishing Group.

Keen, D. (2010, April 3). 10 benefits of advertising. Retrieved from Mademan.com:

Moneymailer.com. (n.d.). 10 reasons to advertise. Retrieved from Moneymailer.com: