ADVDMKTopic2 - Topic 2: Advertising and Society These are...

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Topic 2: Advertising and Society These are notes from a lecture given by Professor Hershey Friedman that I have borrowed for this topic. The following are a list of criticisms of advertising that you may have even voiced yourself. I will play devil’s advocate and argue both for and against these. 1. Advertising is wasteful – why is it needed? Actually, research done on advertising indicates that even when the ad is what is referred to as a persuasive ad (i.e. Pepsi is better than Coke), more than 50% of the ad is informative and serves and important purpose. This purpose is to inform the public of the existence of such a product, the availability of the product and the cost. This is information needed in a free society. 2. Advertising raises prices and prices would be lower without advertising. However, the more customers purchase a product, the lower the prices may go. For example, when the FCC forced professional organizations (AMA, ABA etc) to allow advertising (doctors, lawyers) and the price of eyeglasses became competitive, the cost actually dropped 30%. When legal fees were advertised, the cost for legal services dropped 5 to 13%. Hence when a customer reads an ad and knows what things cost, this becomes public knowledge and increases competition. 3. Advertising helps to create monopolies. This is an economic argument that suggests that advertising will help large firms maintain a monopoly position in the marketplace since small firms will be unable to compete since they cannot afford the advertising costs. This argument ignores the fact that many small firms use a
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This note was uploaded on 04/03/2012 for the course MKT 363 taught by Professor Lieliesy during the Spring '12 term at Rutgers.

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ADVDMKTopic2 - Topic 2: Advertising and Society These are...

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