What are the economic functions of advertising?
The economical importance of advertising is a function of its social acceptance. There are two contrasting points to advertising's effect on the economy:
- The first being the rational view where advertising is seen as a vehicle for helping consumers assess value through price cues and other information such as quality, location, and reputation. Advertising is seen as a means to objectively provide price/ value information, thus creating more rational economic decisions.
- The second approach focuses on images and emotional responses in order to appeal to consumers who are making a decision on non-price, emotional appeals. This demonstrates how images and psychological appeals influence consumer decisions. Claimed to be so persuasive that it greatly decreases the likelihood a consumer will switch products/ brands.
- Advertising also plays into the realm of marketing: which is activity, set of institution and process of creating, communicating, delivering, and exchange offerings that have value to customers, clients, partners and society at large. The marketing concept focuses on consumer needs and wants.
- The economic effect of advertising introduces the 4 P's: Product, Price, Promotion, and Place. This is where the marketing mix combines with the target marketing.
- The economic function allows for the creation of a value gap on products, which is the difference in how much and individual is willing to spend on a product and how much the product actually is.
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