Many business firms as well as not-for-profit organizations have faith in advertising. In general, advertising is valued because it is recognized as performing five critical communications functions: (1) informing, (2) influencing, (3) reminding and increasing salience, (4) adding value, and (5) assisting other company efforts.

 Informing

One of advertising’s most important functions is to publicize brands. That is, advertising makes consumers aware of new brands, educates them about a brand’s distinct features and benefits, and facilitates the creation of positive brand images. Because advertising is an efficient form of communication capable of reaching mass audiences at a relatively low cost per contact, it facilitates the introduction of new brands and increases demand for existing brands, largely by increasing consumers’ top-of-mind awareness (TOMA) for established brands in mature product categories. Advertising performs another valuable information role—both for the advertised brand and the consumer—by teaching new uses for existing brands.

Influencing

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Effective advertising influences prospective customers to try advertised products and services. Sometimes advertising influences primary demand—that is, creating demand for an entire product category. More frequently, advertising attempts to build secondary demand, the demand for a company’s brand. Advertising by both B2C and B2B companies provides consumers and customers with reasoned arguments and emotional appeals for trying one brand versus another.

Reminding and Increasing Salience

Advertising keeps a company’s brand fresh in the consumer’s memory. When a need arises that is related to the advertised product, the influence of past advertising makes it possible for the advertiser’s brand to come to the consumer’s mind as a purchase candidate. This has been referred to as making a brand more salient; that is, enriching the memory trace for a brand such that the brand comes to mind in relevant choice situations. Effective advertising also increases the consumer’s interest in mature brands and thus the likelihood of purchasing brands that otherwise might not be chosen. Advertising has been demonstrated, furthermore, to influence brand switching by reminding consumers who have not recently purchased a brand that the brand is available and that it possesses favorable attributes.

Adding Value

Advertising adds value to brands by influencing perceptions. Effective advertising causes brands to be viewed as more elegant, more stylish, more prestigious, of higher quality, and so on. Indeed, research involving over 100 brands drawn from five nondurable products (e.g., paper towels and shampoo) and five durable products (e.g., televisions and cameras) has demonstrated that greater ad spending influences consumers to perceive advertised brands as higher in quality. Effective advertising, then, by influencing perceived quality and other perceptions, can lead to increased market share and greater profitability.

 

By adding value, advertising can generate for brands more sales volume, revenue, and profit and reduce the risk of unpredictable future cash flows. In finance parlance, all of this can be captured in the concept of discounted cash flow (DCF). By making a brand more valuable, advertising generates incremental DCF.

 

Assisting Other Company Efforts

Advertising is just one member of the Advertising pre-sells a company’s products and provides salespeople with valuable introductions prior to their personal contact with prospective customers. Sales effort, time, and costs are reduced because less time is required to inform prospects about product features and benefits. Moreover, advertising legitimizes or makes more credible the sales representative’s claims.

 

Advertising also enhances the effectiveness of other tools. For example, consumers can identify product packages in the store and more readily recognize a brand’s value following exposure to advertisements for it on television or in a magazine. Advertising also can augment the effectiveness of price deals. Customers are known to be more responsive to retailers’ price deals when retailers advertised that fact compared to when retailers offer a deal absent any advertising support.

MIE