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Competitive Advertising

( Originally Published 1939 )

What has just been said about privately branded goods does not apply to articles sold under the manufacturer's national brand. The selling of these goods, especially those of almost identical nature, involves a large amount of competitive advertising. Among the kinds of goods whose production cost and inherent qualities do not vary greatly from one brand to another but which are advertised extensively by the manufacturer, are cigarettes, toothpaste, shaving cream, packaged medicines, cosmetics and many other drugstore products, bread, gasoline, and possibly automobile tires. The list of nationally advertised products is of course much more extensive and includes many products like automobiles and radios which vary widely in quality.

Whether or not real differences exist, the manufacturer uses national advertising to create consumer demand by extolling the special virtues of his own product. Much national advertising makes no serious attempt to emphasize the supposed superior features of a product but is designed merely to create "consumer consciousness" for the particular brand. Whatever the nature of the advertising, the consumer often pays more for a nationally advertised branded article than for a similar article sold under a private brand or no brand at all. Being forced to choose among several private brands of a commodity like canned corn costs consumers little or nothing, but the cost of having a choice among advertised brands of toothpaste, for example, may be appreciable.

Not only do buyers pay more for branded articles than for unbranded ones; but, curiously enough, they often pay more for the latter than if the branded article were not advertised. Because of advertising and other expenses-and often higher profits-on the advertised product, it carries a high price. Since this price rather than cost or inherent value establishes a standard of value in the consumer's mind, the retailer, buying an unbranded substitute at a much lower price, is able to sell it at a higher mark-up than he otherwise could.

Pros and Cons of Advertising

Advertising as a technique of selling is clearly necessary in the marketing of many kinds of goods. It is a useful selling method which, like other selling methods, can be used for bad as well as good ends. It may, and often does, make large-scale low-cost distribution possible. It may, and usually must, result in maintaining standards of quality. And it may, and often does, create a demand not only for the advertised product but for many unadvertised substitutes. It is not safe to conclude that even substitute brands, now able to take advantage of the "price umbrella" raised by national advertisers, would be sold more cheaply if the national advertising were to stop. Perhaps the general demand created by advertising would also stop. Moreover such by-products of advertising as the radio and magazines and newspapers may be worth more to the consumer than the added cost of the advertised commodities.

Advertising has undoubtedly widened the market for automobiles and other products so greatly that the ultimate price to the consumer is far less than it would have been without advertising. Clarence Francis in a recent address before the American Marketing Association said:

When General Foods first took over the Jell-O Company, Jell-O was selling to the consumer for an average of twelve cents per package. Today the prevailing price is around five to six cents per package. The whole Jell-O enterprise was developed largely through advertising resulting in large production and wide distribution, with attendant economies. The total advertising cost at present is less than one-half a cent per package.

Few will question the important social aspects of certain types of advertising. Advertising is needed to educate the consumer to use new products, particularly those of a technically complex nature. Air conditioning, hydraulic brakes on motor cars, the importance of vitamins in diet have all been made familiar to the consumer through advertising. But it is just as true that the consumer has been bombarded with bombastic claims about useful products and with a lot of nonsense about useless or harmful ones. Some advertising has undoubtedly led buyers to use foods that were not good for them. Some advertising has pushed harmful laxatives and patent medicines the sale of which to the American people is enormous. Yet a good deal of modern competitive advertising makes for better living by encouraging the use of healthful products and promoting habits that are socially desirable-such as the regular brushing of one's teeth.

Competitive advertising deserves a critical analysis so that the more useful features may be retained and the harmful and wasteful ones eliminated. That this point of view is actually being adopted by advertisers is evident in the self-criticism apparent in trade association meetings of recent years. It is shown in a practical way by the fact that the Association of National Advertisers is sponsoring a thorough and impartial survey of the economics of advertising which is being conducted by the Bureau of Business Research of the Harvard Graduate School of Business Administration.

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