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.).

While smart advertising can be effective under a range of conditions, some of the most logical conditions are as follows. Product comparison can be a very effective means of advertising. "When trying to increase their market share, companies may directly refer to other brands and explain why the product advertised is superior" (Green, 2012). Consumers see this phenomenon constantly in commercials, where the announcer stresses how their product is more wholesome, healthier, a better value, or more reliable. This can be an incredibly effective form of advertising in that it anticipates the comparative thought process the consumer goes through, and directly explains why he or she should choose their product over another.

Advertising Conditions and Market Positioning

A more challenging situation arises when a product exists in a marketplace full of comparable offerings. "For example, there are hundreds of different types of toothpaste on the market. Since these products are essentially similar, many toothpaste companies successfully target their products at different groups of consumers — for example, young children, smokers, or people with sensitive gums. This is called positioning" (Green, 2012). Rather than viewing stiff competition as daunting and insurmountable, companies can use it as a means of highlighting the unique virtues and attributes of their own product.

Advertising is crucial for startups, as they need to launch their name and brand into the public consciousness. "A big example of the benefits of advertising is bringing potential customers to your store who might otherwise never know you exist. A storefront is only seen by people who walk past your door, but advertising can reach out to others in the surrounding towns and counties" (Keen, 2010). For startups, advertising is the equivalent of extending one's hand and saying "hello, my name is…" — it is the means of making an introduction to the world and placing one's name, brand, and services into the public consciousness. This is crucial for a nascent company.

For startups, building confidence in one's brand is completely essential and particularly difficult when no one has yet heard of the brand. Advertising can help bolster that confidence in the minds of the public. "Business owners often don't realize that one of the benefits of advertising is making potential customers feel more confident in a business they see advertised. It gives them the sense that the business is professional, stable, and reputable" (Keen, 2010). The manner in which one advertises also affects perceptions of credibility. For example, a radio spot tends to convey far more legitimacy than a flier stuffed under the windshield wipers of a car.

Conclusion