Comments on: Why do companies advertise?

Question: Why do companies advertise?

Citizen Premier — Sat, 22 Oct 2005 14:23:10 -0800

Does advertising work?

I can understand advertising a product which is new and novel, but what does, say, Coca-Cola gain from advertising? Are they just afraid not to advertise? At the same time, don't annoying advertisments disparage product use? Do the advertising departments in certain companies just have too much power to allow themselves to be eliminated or reduced?

By: ThePinkSuperhero

ThePinkSuperhero — Sat, 22 Oct 2005 14:30:45 -0800

Of course it works. That's why people drink Coke and not the store brand.

By: crapples

crapples — Sat, 22 Oct 2005 14:31:59 -0800

No way - Advertising totally works. I remember research from a marketing class I took once, but I don't remember the specifics. In general, any exposure that a product can get results in increased sales. Coca Cola tracks these things very closely and they are still willing to pay millions for 30 seconds during the Super Bowl.

By: Citizen Premier

Citizen Premier — Sat, 22 Oct 2005 14:34:59 -0800

But people try different kinds of soda, and tend to stick with the kind they actually like.

By: ThePinkSuperhero

ThePinkSuperhero — Sat, 22 Oct 2005 14:44:10 -0800

You're assuming that people choose what they like completely independent of the world they live in. Do more people drink Coke than the store brand? Yes, and maybe they personally chose it because they like the way it tastes, but why did they choose to try it in the first place? Advertising (and PR) plays a big role in making people like things, or feel they need them.

By: ludwig_van

ludwig_van — Sat, 22 Oct 2005 14:44:50 -0800

But people try different kinds of soda, and tend to stick with the kind they actually like.

Do they really? This statement doesn't line up with my experience. And do they really stick to what they "actually like," or just what they think they actually like? How is it possible to tell?

I think advertising does work, but maybe not in the way some people think it's supposed to. I think it's a little funny every time I hear people talking about an ad for a product and how awful it was, and what the hell were the marketing people thinking making this ad, etc. They were thinking that the ad would get you to talk about it and think about their product, which it has, tends to be my response.

It seems to me that people think about advertising as though it's supposed to be much more direct than it really is. I think there tend to be more unconscious factors at work, and that these things are researched very heavily by the big corporations.

By: Blue Buddha

Blue Buddha — Sat, 22 Oct 2005 14:44:58 -0800

But given the lack of preference, people will choose the brand name they trust or associate with quality. Plus, brand preferences are formed when we're young. Young, status-conscious peers would mock you if you drank the store brand, instead of the name brand. Just like they would if you wore a no-name sneaker brand. Even if the store brand was made by the same 10-year old in China and costed half the price of the brand name sneaker.

By: Idiot Mittens

Idiot Mittens — Sat, 22 Oct 2005 14:45:32 -0800

The guys making the ads don't have the power, that belongs to the guys looking at the bottom line. If it wasn't working (increasing profits), they wouldn't do it. I remember listening to a talk by the head of advertising for Coke. They just put out an ad that was hugely popular, everyone was talking about it. He pulled it after a week. Why? Sales didn't increase.

By: qslack

qslack — Sat, 22 Oct 2005 14:47:02 -0800

How much of their preference for Coca-Cola, though, is purely in the taste buds? Most people wouldn't be caught dead with a Diet Rite Cola, even if it were their favorite. Pepsi, in my mind, also seems "cheaper" than Coca-Cola. That's all a result of Coke's advertising.

I know this skirts the question, but if advertising weren't effective, companies wouldn't spend significant portions of their budgets on it.

Also, remember that advertising is not limited to the consumer sector. Business-to-business marketing is also huge.

By: ludwig_van

ludwig_van — Sat, 22 Oct 2005 14:52:00 -0800

Also, think about this: why do people desire so much soda in the first place? Isn't it a little strange that cola is such an incredibly pervasive and popular beverage in western culture, especially considering its health benefits, or lack thereof? Why is it considered normal to drink soda at any time and with practically any meal? I think that's a huge marketing success in itself. The marketing aims to create a desire that can only be filled by the product.

By: StickyCarpet

StickyCarpet — Sat, 22 Oct 2005 14:56:53 -0800

By: gorillawarfare

gorillawarfare — Sat, 22 Oct 2005 14:57:50 -0800

In support of the "advertising affects perceived taste" camp, here's a summary of a taste test experiment.

Given unlabelled Coke and Pepsi, people have no consistent preference. With labels, they think the one called "Coke" is tastier, even in comparison to an identical, but unlabelled, alternative.

By: smackfu

smackfu — Sat, 22 Oct 2005 14:58:30 -0800

If they didn't advertise, they wouldn't be the name brands.

By: gramcracker

gramcracker — Sat, 22 Oct 2005 14:59:46 -0800

If advertising didn't work, businesses wouldn't spend money on it. There's data behind it all, I'm sure.

By: allen.spaulding

allen.spaulding — Sat, 22 Oct 2005 15:02:46 -0800

Here's a framework to think about this question. Sales in a market economy are driven by supply and demand. Firms thus have to choose to either reduce prices, create new products that tap into unrealized demands, or increase the demand for their product. The last can be done through technical impovements (like larger hard drives for the iPod) or through marketing campaigns (like those iPod ads). Advertising allows firms to alter the demand curve and thus realize greater products. There are two theories on how this works: 1) Advertising provides more information to consumers to make educated decisions. 2) Advertising alters people's preferences.

In practice, some advertising campaigns succeed and other don't. Undifferntiated products are hard to advertise, which is why you almost never see ads for individual meat brands. Instead, the entire industry will create a group to encourage more consumption. Also, many firms resort to rent-seeking through corrupt government contracts and other non-productive efforts (domain name squating, etc). Whether advertising is rent-seeking depends on whether you believe 1) or 2) above.

By: kindall

kindall — Sat, 22 Oct 2005 15:21:02 -0800

I felt the effects very clearly when free samples of Zest soap were distributed before any TV ads. I thought that it smelled bad and threw it out. Once the ads started running about how that smell was supposed to wake me up I wished I had kept it. ... But the ads wore off and now I think it stinks again.

The ads wore off indeed if you can't even remember what product the ad was for. Coast was the name of the soap that wakes you up. The makers of Coast would probably be secretly pleased that you associated your negative feelings about their product with their competitor.

Or maybe not, because actually they're both Procter and Gamble brands... though I seem to remember P&G tried to sell Coast a few years back.

(Also, for the record, Zest isn't soap, it's a detergent bar, that's why it doesn't leave a soapy residue.)

By: jasondigitized

jasondigitized — Sat, 22 Oct 2005 15:27:26 -0800

I have wondered the same thing as Citizen Premier. As a consumer, I could never see a Coca-Cola ad for the rest of my life, and I think I would still drink the same amount of Coke as I do today, which is about 3 cans a week. Every once in a while, I will grab a Pepsi if I am feeling crazy, but I just like Coke better.

I can get my head around the need to advertise big ticket items, vanity items, novelty products, and special promotions, but Coke. Who doesn't know what Coke is? Couldn't you just quit marketing Coke for 10 years, and then startup again, just in case, maybe, someone forgot about it? Seems to me that you wouldn't lose any market share, and would save significantly on advertising costs.

Am I just completely ignorant to the complete control those cute polar bears have over me every Holiday season?

By: flarbuse

flarbuse — Sat, 22 Oct 2005 15:48:37 -0800

I have wondered about this for a long time.

Using our current example, what if Coke stopped advertising for one year? What if they announced that they were going to do so? How much would they really lose in revenue during that year? How much money would they save (I am sure that is easy for them to calculate). And what about the value of the free advertising that they would get from the media for having the nerve to (gasp!) not advertise for a year? Would that not go a long way toward helping them?

I believe that Coke would profit from such an action, but my opinion is irrelevant. I think that it is difficult to know just what the consequences would be. And Coke would rather go with the model that has been working well for them. I can't say that I blame them. However, it would be an interesting experiment.

By: jdroth

jdroth — Sat, 22 Oct 2005 15:54:50 -0800

But people try different kinds of soda, and tend to stick with the kind they actually like.

I think this is demonstrably untrue, though I don't have the time to track down data to support me. There are many factors that go into a purchasing decision: price, preference, advertising, convenience, availabiltiy, politics, etc.

Examples: I love Domino's Pizza. I will not purchse from them, however, because the company donates to anti-abortion causes. I have some favorite wines, but I don't buy them very often because they cost too much. There's a specific flavor of pototo chip I love, but do not purchase because none of the local stores carry it.

Regarding soda specifically: I prefer Barq's root beer, but don't often buy it because it has too many calories. Of diet sodas (which is what I usuall drink), I like diet Dr. Pepper, but I rarely think to buy it. Seriously. I buy Diet Pepsi mostly. Why? Because that's what I think to buy. And why do I think to buy it? Advertising...

Advertising makes a difference.

By: jenovus

jenovus — Sat, 22 Oct 2005 16:03:17 -0800

But people try different kinds of soda, and tend to stick with the kind they actually like.

That's as may be, but I think the advertising has a huge effect on which sodas they try in the first place. (Likewise with packaging and design.) Companies have got to get you to buy the soda first; then you determine whether or not you like it.

By: McSly

McSly — Sat, 22 Oct 2005 16:08:17 -0800

Here are some data from the Effie awards website. They awards the most effective ad campaigns. From the 2005 winner list, you have briefs from the advertisers describing their results, like this one for Heineken (pdf file).

By: Mayor Curley

Mayor Curley — Sat, 22 Oct 2005 16:12:49 -0800

Using our current example, what if Coke stopped advertising for one year? What if they announced that they were going to do so?

It would be a disaster. From the 1890's to the 1920's, the most popular soft drink was a brand called "Moxie," which you've likely never heard of unless you live in New England. Moxie was so ubiquitous that the term "moxie" is derived from the brand name.

Anyway, some year in the 20's the cost of sugar rose precipitously. Moxie executives thought "Hey, we're number one already. People like us. Let's use our ad budget to buy sugar." Then everyone forgot about Moxie and it never came close to its former grandeur.

By: yclipse

yclipse — Sat, 22 Oct 2005 16:34:58 -0800

Evidence that it does work: my wife and I were at the grocery store - a few years ago - and we were considering a beef roast vs. a pork roast, when she mentioned that pork is "the other white meat". Since no one ever thought of pork as "white meat" before the ads ran, they did make a mark.

By: AmbroseChapel

AmbroseChapel — Sat, 22 Oct 2005 16:37:24 -0800

One of the principles of advertising is that it reassures people who've already bought the product that they made the right choice, particularly for products which are "premium" brands, brands which cost more than average.

Have they made the right choice (in the case of major purchases like cars)? Should they continue to buy that brand (in the case of smaller, more frequent purchases like food and drink)?

The ads assure them (and their friends / colleagues / neighbours) that they got a better car for their higher price, or that the extra few cents a can on sode really is getting them a better taste.

By: Ritchie

Ritchie — Sat, 22 Oct 2005 16:57:11 -0800

Coke is an interesting example because the ever-present advertisements don't actually advertise the drink which is, when you get right down to it, just sugar-water.

What Coke sells, and in fact what all the successful mass brands sell, is lifestyle. From a marketing perspective this allows ad executives to turn the tables on the consumer, because while most people are naturally cynical and cautious when someone with a vested interest tries to get them to buy a particular product, they will actually identify themselves very strongly with a particular lifestyle, even if they don't live it.

For lifestyle-based advertising this means that in effect, people sell themselves to the product, rather than the other way around. It plays to their aspirations.

Once you realise this, you'll start to notice some odd things. McDonalds, for example, doesn't even show the food it is selling in a high proportion of it's TV advertisements. Many fast-food companies are the same.

By: jessamyn

jessamyn — Sat, 22 Oct 2005 17:11:48 -0800

Then everyone forgot about Moxie

Moxie also tastes like fizzy water with a sweat sock soaking in it, but I digress.

Advertising in general makes people more condusive to purchasing stuff. I've heard that advertising for, say, Coca-Cola is only more likely to make you to be interested in leisure time soft drinks as a solution to thirstiness [as opposed to water, for example] and from there issues like price and availability come into play as well as more nuanced ideas like, well, taste. There was a great book I read on the subject which had some snappy title like "Why Advertising Doesn't Work" that I can't conjure up now. Anyone read it, or know if I have the title wrong?

By: five fresh fish

five fresh fish — Sat, 22 Oct 2005 18:17:04 -0800

I'd probably drink more Coke if it didn't cost a buck-and-a-half a can.

At that kind of price, I'm looking at everything else, too. Hell, I can get some nice Knudsen's (?) Jamacian Lemon Lime for a buck. I can get San Pellagrino at that price, too. Both of them kick Coke's ass around the block. I think Jone's soda is also cheaper.

And all of those drinks don't leave my teeth feeling line the enamel has been eaten off. Coke is just plain nasty for that.

I'm such a rebel.

By: bingo

bingo — Sat, 22 Oct 2005 19:05:08 -0800

If you're paying a buck and a half a can for Coke, you're getting ripped off.

By: number9dream

number9dream — Sat, 22 Oct 2005 19:07:43 -0800

I saw a really interesting survey about advertising in a philosophy class I took several years ago (Critical Thinking course, it was lame, but that's another story). Anyway, this survey asked people how much they thought advertising affected them, compared to other people. The result was that something like 85% of respondents said that they were affected far less than most other people by advertising.

My point is that, while you may not feel like ads are really doing anything, most likely you are being affected on an unconscious level.

By: oaf

oaf — Sat, 22 Oct 2005 19:20:45 -0800

bingo: five fresh fish is Canadian, so the price is not outrageously bad—it's just bad (about US$1.26). I still think I deserve a 20-oz bottle for that price, and the ones around here range from $1.21 to $1.47, including tax.

By: odinsdream

odinsdream — Sat, 22 Oct 2005 19:27:08 -0800

And all of those drinks don't leave my teeth feeling line the enamel has been eaten off. Coke is just plain nasty for that.

I'm such a rebel.

I know a lady who used to clean her toilets with coke.

By: Good Brain

Good Brain — Sat, 22 Oct 2005 19:35:02 -0800

There is an old cliche about advertising that goes something like: Everyone in business knows that half their advertising budget is wasted. The problem is, they don't know which half."

By: afroblanca

afroblanca — Sat, 22 Oct 2005 19:40:17 -0800

All advertising is basically spam. We all laugh at the spam messages we get in our inbox, but all it takes is for one person out of 40,000 to actually buy the product, and the spammer has recouped his losses. Two out of 40,000, and they make a profit.

Although the amount money that companies like Coke and Pepsi spend on advertising is probably orders of magnitude more than your average spammer's operating costs, I'm sure that the economics work out the same way.

By: Citizen Premier

Citizen Premier — Sat, 22 Oct 2005 20:42:43 -0800

Of course, this makes me crave soda. However, I happen to be more likely to go down to Vons and buy the 35 cent sodas than a coke--and it would seem most think the same as the machine is usually low on soda.

afroblanca's statement seems the most correct to me; but nobody seems to be supplying cold data. And the link to the Coke article didn't say too much; most people prefer dried plum juice to prune juice.

By: BaxterG4

BaxterG4 — Sun, 23 Oct 2005 00:49:41 -0800

There's also the aspect that if Coke doesn't advertise, then, even if Pepsi doesn't increase their ad budget at all, the percentage of things you hear associating "soda" with "Pepsi(R)" will have gone up from the minority position they hold today to the vast majority. If Pepsi doesn't advertise, and Coke continued to, soda->"Pepsi(R)" associations you hear would drop to nearly zero, comparatively.

By: Kirth Gerson

Kirth Gerson — Sun, 23 Oct 2005 04:33:05 -0800

Moxie also tastes like fizzy water with a sweat sock soaking in it

You're far too kind. Moxie is vile.

In general, any exposure that a product can get results in increased sales.

Unless it's news reports that the stuff is poisoned. Remember the Tylenol scare?

Advertising does work. My son and I were just discussing the original "Hey Mikey" commercial. He's far too young to remember it, but the much-later sequel made enough of an impression that he knew about the original. I don't buy that cereal, because advertising doesn't work well on me, but it was a memorable commercial. Advertising doesn't have to work well on me to be successful, as long as it works on a large proportion of other people. And it does.

By: benzo8

benzo8 — Sun, 23 Oct 2005 08:21:34 -0800

Good Brain writes "There is an old cliche about advertising that goes something like: Everyone in business knows that half their advertising budget is wasted. The problem is, they don't know which half.'"

I was coming in here to deliver that one - it was (widely accepted to have been said by) Lord Leverhulme, one of the founder of Lever Brothers. He said:

"I know that half of my advertising budget is wasted, but I'm not sure which half..."

Having worked in advertising myself in, what many will call it's heyday, I can assure safely say that advertising does work, but there is (and always has been) an "arms race" between increasingly canny consumers and the marketeers. It's safe to say though that the people who claim to be unaffected by advertising are probably fooling themselves and merely buying into a image of coolness, sophistication and independence which can be just as easily, if less obviously, sucessfully targeted by advertising...

By: lackutrol

lackutrol — Sun, 23 Oct 2005 13:54:30 -0800

I've been in the industry as well, and sort of still am.

To build on benzo8's statement above, I'd like to point out how successfully certain brands have been built using a kind of sophisticated counter-culture image. The two that come most immediately to mind are Appl's iPod campaign and Volkswagen's advertising of the last ten years or so.

Notice that the iPod advertisements generally use a relatively obscure "indie" sound--you won't catch them dead with more mainstream pop acts. This is because of the taste of the targeted demographic and the lifestyle image they want to project. Even if the audience they're targeting isn't entirely urban, affluent, professional, and "cool," they would like to think they are.

Similarly, Volkswagen uses a very atypical approach to car advertising to build credibility with a group that at least aspires to a certain kind of hip, urban lifestyle. This approach has been hugely successful for them, and frankly I'm surprised that more car companies haven't attempted to get past the paint-by-numbers marketing the auto industry has traditionally used.

A large amount of research and analysis goes into the marketing briefs that ad creative types are given. My opinion has usually been that ad failures are more due to the creative team not being able to connect with the demographic than with any failure to correctly identify the demographic.

Obviously these are just my opinions, but my firm belief is that the industry has been very successful in creating advertising that winks at viewers, allowing them to think themselves superior while also giving them permission to buy the product because it's cool enough for them. Of course this method of reaching customers keeps hitting a saturation point, forcing certain advertisers to get more and more "different" while making sure that the message gets across.

By: lackutrol

lackutrol — Sun, 23 Oct 2005 13:57:55 -0800

Oh, and for one example of this "rebel" approach that to me looks absolutely ridiculous, take a look at the current Citibank campaign, which is just all over the place in NY. A bank telling me "life's not about money"? Please. Mind-boggling contradictions there. But it certainly could be successful.

By: Citizen Premier

Citizen Premier — Sun, 23 Oct 2005 16:17:05 -0800

I seem to remember one particular arms race, as benzo8 (isn't that an ingredient in Coke?) was mentioning between the king and the president of beers. While some of the advertisements were funny, I find it hard to imagine that someone would switch their beer choice because of them. And on another odd note, it appears the King of Beers is now also the Girl on the Moon--some kind of cosmic cross dresser? That switched association might cost them money, if the beer companies audience is bothered by that sort of thing.

I think lackutrol is pretty right too--each commercial has its own audience, and while the average person feels he's seen too many adverts for any to sink in, a few probably do.

What I really don't understand is advertisements for something as serious as buying a car or getting a loan. But I guess those ads have a market too.

By: aaronh

aaronh — Sun, 23 Oct 2005 16:43:43 -0800

Most "established" brands sell their lifestyle or images. I've never had 1/10th as much drinking a Coke or a beer as the people on TV seem to have doing the same thing.

A few years ago, Pepsi had some success with some advertising that targeted "the youth market." As a result, Coke lost some ground and has been working hard to make it up in that segment.

For a behemoth like Coke and Pepsi, it doesn't take a lot of swing to justify the advertising expense. I'm sure that what they spend costs far less than even a 2% drop in sales.

By: dhartung

dhartung — Sun, 23 Oct 2005 20:35:01 -0800

One example of the arms race is the heavy reliance of certain types of products -- notably breakfast cereal -- on discount coupons. These drive sales like you wouldn't believe, and they cost the manufacturers money. The last several years certain of the biggest brands have been experimenting with using price breaks more than coupons to drive sales.

The other major factor in grocery sales, of course, is shelf space. Part of any soda's "advertising" budget is purchasing -- yes -- shelf space from grocery stores. That's why there are fifteen miles of Coke 2-liters -- so you end up in front of nothing but Coke. That works.

Yeah, at a certain level, there's a diminishing-returns effect. Getting sales to increase from $1 billion a year to $1.1 billion might be just as hard and expensive as increasing them from $500,000 a year to $1 billion.

Advertisers spend tons of money on focus groups before, during, and after campaigns to see what works. But focus groups are notoriously idiosyncratic. Ultiamtely they still don't know what part of their message drove a consumer to buy their product. This is why web advertising is the Great White Hope of the industry -- finally, they can connect one specific ad with one specific sale. Maybe.

By: Chunder

Chunder — Mon, 24 Oct 2005 03:25:22 -0800

What I really don't understand is advertisements for something as serious as buying a car or getting a loan. But I guess those ads have a market too.
posted by Citizen Premier at 4:17 PM PST on October 23

It's the same principle - unless you are prompted to think otherwise, you'll always go with what's familiar.

You want a loan, you just go and speak to your current bank (if you're not financially clued-up already, that is) - irrespective of the rates available... because it's convenient.
You see an advertisment offering loans at a lower rate, so you make a conscious decision to check the company out, or at least to look around more.

It's extremely rare that I'll buy something on the strength of an advert, but more frequently if it's something I'm already interested in or in the market for, then I'll do some more investigation into the advertising company - which wouldn't have happened if they didn't advertise.