The role of advertising in society

Present situation and contributions of Vietnam’s advertising industry

Ministry of education and training

Ha noi foreign trade university

Introduction

Part I : General knowledge of advertising

1 Some typical concepts of advertising

2 Classifications of advertising

Part II : The role of advertising in society

1 Economic effects of advertising

Advertising is instrumental in sales promotion, which is one of themost vital tools in Marketing The appearance and the role of advertising isincreasingly higher in the market economy Advertising shows the rapidgrowth in technology and lifestyle, in people’s tastes and consumption.

Advertising has become an important part of economic developmentprocess not only in one country but also in the world In Vietnam,advertising activities have just become effervescent It has contributed much

to the country’s renovation, to the growth of production, to the enrichment ofpeople’s knowledge and needs to goods, which makes it develop thecountry’s human resources effectively Moreover, advertising also plays animportant role in promoting and developing the cooperation betweenVietnam and other countries in trade and technology

Along with the deep and wide development of international anddomestic relationships, Vietnam advertising industry has rapidly developedwith more and more various types though it still faces with many difficultiesand law on advertising has not been fixed Therefore, the government shouldpay more attention to this “no smoking” industry

With the limited knowledge and materials on advertising, I myself try

to give out an overview of advertising and its role in economy, of whichmistakes and shortcomings are not avoidable I give my strongacknowledgement to MBA LE THI HAI and Mr PHAM GIA TRI , MrNGUYEN HUYEN MINH who all supported me much during finishing thisthesis

Part I : General knowledge of advertising

1 Some typical concepts of advertising.

Advertising is any of indirect appearance of goods, services or ideaswhich we have to pay for to recognise the advertisers ( according to AmericanMarketing Association – AMA )

Advertising involves widely introducing about firms, goods, services,brandnames and symbols according to the operational aimes of companies( according to the decree No 194/ CP issued 21/12/94 )

Advertising is used to promote consumers’ tastes, introduce newgoods and improve the people’s consuming habit ( according to thedictionary of scientific and technical publisher – 1990 )

2 Classifications of advertising

a Advertising to the consumer market

a1 National advertising.

Advertising done by a company on a nationwide basis or in mostregions of the country and targeted to the ultimate consumer market isknown as national advertising The companies that sponsor these ads aregenerally referred to as national advertisers Most of the ads for well-knownbrands that we see on prime-time TV or in other major national or regionalmedia are examples of national advertising This form of advertising isusually very general; it rarely includes specific prices, directions for buyingthe product, or services associated with the purchase It informs or remindsconsumers of the brand and its features, benefits, advantages, and uses orreinforces its image so consumers will be predisposed to purchase it.National advertising is the best known and most widely discussed form ofpromotion, probably because of its pervasiveness

a2 Retail/local advertising

Another prevalent type of advertising directed at the consumer market

is classified as retail/local advertising This type of advertising is done bymajor retailers or smaller local merchants to encourage consumers to shop at

a specific store or use a local service such as a bank, fitness club, orrestaurant

While the national advertisers sell their products at many locations,retail or local advertisers must give the consumer a reason to patronize theirestablishments Retail advertising tends to emphasize specific customerbenefits such as store hours, credit policies, service, atmosphere,merchandise assortments, or other distinguishing attributes Productavailability and price are important advertising themes, often used inconjunction with a sale or special event Retailers are concerned withbuilding store traffic, and often their promotions take the form of direct-action advertising designed to produce immediate store traffic or sales

In addition to their product- and price-oriented advertising, manyretailers use image advertising to influence consumers perceptions of theirstores.

a3 Direct-response advertising

One of the fastest-growing sectors in developed countries is directmarketing Direct response advertising is a method of marketing whereby aproduct is promoted through an ad that lets the customer purchase directlyfrom the manufacturer Traditionally, direct mail has been the primarymedium for direct-response advertising, although television is becoming anincreasingly important medium

Direct-response advertising has become very popular in recent yearsowing primarily to changing lifestyles, particularly the increase in two-income households This has meant more discretionary income but less timefor in-store shopping The convenience of shopping through the mail or bytelephone has led to the tremendous increase in direct-response advertising.Credit cards and toll-free telephone numbers have also facilitated thepurchase of products from direct-response advertisements

a4 Primary and selective demand advertising

Another way of viewing advertising to the ultimate customer is interms of whether the message is designed to stimulate either primary orselective demand Primary demand advertising is designed to stimulatedemand for the general product class or entire industry; selective demandadvertising focuses on creating demand for a particular manufacturer'sbrands Most advertising for various products and services is concerned withstimulating selective demand and emphasizes reasons for buying a particularbrand Advertisers generally assume there is a favorable level of primarydemand for the product class and focus attention on increasing their marketshare Thus, their advertising attempts to give consumers a reason to buytheir brand

Advertisers might concentrate on stimulating primary demand inseveral situations When a company's brand dominates a market, it mayfocus on creating demand for the product class, since it will benefit the mostfrom market growth For example, Pepsi Cola has over 70 percent of the softdrink market, and the company's advertising objective is to encourageconsumers to drink more Primary demand advertising is often used as part

of a promotional strategy to help a new product gain acceptance amongcustomers Products in the introductory or growth stages of their life cyclesoften have primary demand stimulation as a promotional objective becausethe challenge is to sell customers on the product as much as it is to sell aparticular brand

b business-to-business advertising

For many companies, the ultimate customer is not the mass consumermarket but rather another business, industry, or profession Business-to-business advertising is used by one business to advertise its products orservices to another The target for business advertising is individuals whoeither use a product or service or influence a firm's decision to purchase aproduct or service Two basic categories of business-to-business advertisingare industrial and professional advertising

b.1 Industrial advertising

Advertising targeted at individuals who buy or influence the purchase

of industrial goods or other services is known as industrial advertising.Industrial goods are those products that either become a physical part ofanother product (raw material, component parts), are used in manufacturingother goods (machinery, equipment), or are used to help the manufacturerconduct business (office supplies, computers, copy machines, etc.) Businessservices, such as insurance, financial services, and health care, are alsoincluded in this category

Industrial advertising is usually found in general business publications

or in trade publications targeted to the particular industry In recent years,ads for industrial products and services have become more common in massmedia such as television

Industrial advertising is often not designed to sell a product or servicedirectly, since the purchase of industrial goods is often a complex processinvolving a number of individuals An industrial ad helps make the companyand it product or service better known, assists in developing an image for thefirm, and perhaps most important, opens doors for the company's sales repswhen they call on industrial customers

b.2 Professional advertising

Advertising that is targeted to professional groups-such as doctors,lawyers, dentists, engineers, or professors-to encourage them to use theadvertisers’ product or specify it for others to use is known as professionaladvertising Professional groups are important because they constitute amarket for products and services they use in their businesses Also, theirrecommendation or specification of a product or service often influencesmany consumer purchase decisions For example, Colgate initially targetedadvertising for Colgate plaque-fighting toothpaste and oral rinse to dentists

to encourage them to recommend these products to their patients

Professional advertising should not be confused with advertising done byprofessionals In recent years, advertising by professionals such as dentists,lawyers, and doctors has increased in popularity as legal restrictions wereremoved and competition increased

These classifications of the various types of advertising demonstratethat this promotional element is used in a variety of ways and by a number ofdifferent organizations Advertising is a very flexible promotional toolwhose role in a marketing program will vary depending on the situationfacing the organization and what information needs to be communicated.

Part II : the role of advertising in society

1 Economic effects of advertising.

Advertising plays an important role in a free market system by makingconsumers aware of products and services and providing them withinformation for decision making

Advertising can encourage consumption and foster economic growth

It not only informs customers of available goods and services but alsofacilitates entry into markets for a firm or a new product or brand; leads toeconomies of scale in production, marketing, and distribution, which in turnlead to lower prices; and accelerates the acceptance of new products andhastens the rejection of inferior products

a Effects on citizens

a.1 To the consumer choice.

Some people say advertising hampers consumer choice, as largeadvertisers use their power to limit our options to a few well-advertisedbrands They argue that advertising is used to achieve (1) differentiation,whereby the products or services of large advertisers are perceived as unique

or better than competitors', and (2) brand loyalty, which enables largenational advertisers to gain control of the market, usually at the expense ofsmaller brands

Larger companies often end up charging a higher price and achieve amore dominant position in the market than smaller firms that cannot competeagainst them and their large advertising budgets When this occurs,advertising not only restricts the choice alternatives to a few well-known,heavily advertised brands but also becomes a substitute for competitionbased on price or product improvements

Heavily advertised brands dominate the market in certain productcategories, such as soft drinks, beer, and cereals However, advertisinggenerally does not create brand monopolies and reduce the opportunities fornew products to be introduced to consumers In most product categories, anumber of different brands are on the store shelves and thousands of newproducts are introduced every year The opportunity to advertise new brandsgives companies the incentive to develop new brands and improve theirexisting ones When a successful new product such as a personal computer isintroduced, competitors quickly follow and use advertising to informconsumers about their brand and attempt to convince them it is superior tothe original

Many critics claim advertising has an adverse effect on consumervalues by encouraging materialism, a preoccupation with material thingsrather than intellectual or spiritual concerns The United States isundoubtedly the most materialistic society in the world, which many criticsattribute to advertising that

Seeks to create needs rather than merely showing how a product orservice fulfills them Surrounds consumers with images of the good life and

suggests the acquisition of material possessions leads to contentment andhappiness and adds to the joy of living Suggests material possessions aresymbols of status, success, and accomplishment and/or will lead to greatersocial acceptance, popularity, sexual appeal, and so on.

The criticism of advertising on the grounds that it encouragesmaterialistic values assumes that materialism is undesirable and is sought atthe expense of other goals Many believe materialism is an acceptable part ofthe Protestant ethic, which stresses hard work and individual effort andinitiative and views the accumulation of material possessions as evidence ofsuccess Others argue that the acquisition of material possessions haspositive economic impact by encouraging consumers to keep consumingafter their basic needs are met Many Americans believe economic growth isessential and materialism is both a necessity and an inevitable part of thisprogress

A famous economist describes the role advertising plays inindustrialized economies by encouraging consumption:

Advertising and its related arts thus help develop the kind of man thegoals of the industrial system require-one that reliably spends his income andworks reliably because he is always in need of more In the absence of themassive and artful persuasion that accompanies the management of demand,increasing abundance might well have reduced the interest of people inacquiring more goods Being not pressed by the need for these things, theywould have spent less reliably to get more The consequence-a lower andless reliable propensity to consume-would have been awkward for theindustrial system

It has also been argued that an emphasis on material possessions doesnot rule out interest in intellectual, spiritual, or cultural values Defenders ofadvertising say consumers can be more interested in higher-order goals whenbasic needs have been met They point out that consumers may purchasematerial things in the pursuit of nonmaterial goals For example, a personmay buy an expensive stereo system to enjoy music rather than simply toimpress someone or acquire a material possession

Even if we assume materialism is undesirable, there is still thequestion of whether advertising is responsible for creating and encouraging

it While many critics argue that advertising is a major contributing force tomaterialistic values, others say advertising merely reflects the values ofsociety rather than shaping them They argue that consumers' values aredefined by the society in which they live and are the results of extensive,long-term socialization or acculturation

Advertising does contribute to our materialism by portraying productsand services as symbols of status, success, and achievement and byencouraging consumption As one said, "While it may be true thatadvertising reflects cultural values, it does so on a very selective basis,echoing and reinforcing certain attitudes, behaviors, and values far morefrequently than others."

The extent to which advertising is responsible for materialism and thedesirability of such values are deep philosophical issues that will continue to

be part of the debate over the societal value and consequences of advertising

Furthermore, a common criticism of advertising is that it

manipulates consumers into buying things they do not need Many critics

say advertising should just provide information useful in making purchasedecisions and should not persuade They view information advertising,which reports price, performance, and other objective criteria as desirable.Persuasive advertising, however, which plays on consumers' emotions,anxieties, and psychological needs and desires such as status, self-esteem,and attractiveness, is viewed as unacceptable Persuasive advertising iscriticized for fostering discontent among consumers and encouraging them topurchase products and services to solve deeper problems

Critics say advertising exploits consumers and persuades them to buy things they don't need Defenders of advertising offer a number of rebuttals to these criticisms First, they point out that a substantial amount

of advertising is essentially informational in nature Also, it is difficult toseparate desirable informational advertising from undesirable persuasiveadvertising

If advertising critics really believe that persuasive advertising shouldnot be permitted, they are actually proposing that no advertising be allowed,since the purpose of all advertising is to persuade Defenders of advertisingalso take issue with the argument that it should limit itself to dealing withbasic functional needs In our society, most lower-level needs recognized inMaslow's hierarchy, such as the need for food, clothing, and shelter, aresatisfied It is natural for people to move from basic needs to higher-orderones such as self-esteem and status or self-actualization Consumers are free

to choose the degree to which they attempt to satisfy their desires, and wiseadvertisers associate their products and services with the satisfaction ofhigher-order needs

Proponents of advertising offer two other defenses against the chargethat advertising makes people buy things they do not really need First, thiscriticism attributes too much power to advertising and assumes consumershave no ability to defend themselves against advertising

Second, it ignores the fact that consumers have the freedom to maketheir own choices when confronted with persuasive advertising While theyreadily admit the persuasive intent of their business, advertisers are quick tonote it is extremely difficult to make consumers purchase a product they donot want or for which they do not see a personal benefit

If advertising were as powerful as the critics claims, we would not seeproducts with multimillion-dollar advertising budgets failing in themarketplace The reality is that consumers do have a choice, and they are notbeing forced to buy Consumers ignore ads for products and services they donot really need or that fail to interest them

a 2 To the product costs and prices consumers have to pay.

Critics argue that advertising increases the prices consumers pay forproducts and services First, they say the large sums of money spentadvertising a brand constitute an expense that must be covered, and theconsumer ends up paying for it through higher prices This is a commoncriticism from consumer advocates Several studies show that firms withhigher relative prices advertise their products more intensely than do thosewith lower relative prices

A second way advertising can result in higher prices is by increasingproduct differentiation and adding to the perceived value of the product inconsumers' minds The fundamental premise is that advertising increases theperceived differentiation of physically homogeneous products and enablesadvertised brands to command a premium price without an increase inquality

Critics of advertising generally point to the differences in pricesbetween national brands and private-label brands that are physically similar,such as aspirin or tea bags, as evidence of the added value created byadvertising They see consumers' willingness to pay a higher price forheavily advertised national brands rather than purchasing the lower-priced,non-advertised brand as wasteful and irrational However, consumers do notalways buy for rational, functional reasons The emotional, psychological,and social benefits derived from purchasing a national brand are important tomany people

Unfortunately there seems to be no single way to measure productdifferentiation, let alone determine how much is excessive or attributable tothe effects of advertising both price insensitivity and brand loyalty could becreated by a number of factors such as higher product quality, betterpackaging, favorable use experience and market position They are probablyrelated to each other but need not be the result of advertising

Proponents of advertising offer several other counterarguments to theclaim that advertising increases prices They acknowledge that advertisingcosts are at least partly paid for by consumers But advertising may helplower the overall cost of a product more than enough to offset them Forexample, advertising may help firms achieve economies of scale inproduction and distribution by providing information to and stimulatingdemand among mass markets These economies of scale help cut the cost of

producing and marketing a product, which can lead to lower prices-if theadvertiser chooses to pass the cost savings on to the consumer

Advertising can also lower prices by making a market morecompetitive, which usually leads to greater price competition Finally,advertising is a means to market entry rather than a deterrent and helpsstimulate product innovation, which makes markets more competitive andhelps keep prices down

Overall, it is difficult to reach any firm conclusions regarding therelationship between advertising and prices

In general, in the market-oriented economy nowadays, it can’t be

denied that advertising plays an important role in society Consumers can’tfind what the market has without advertising’s help Moreover, with thecontinuous development of science technology, consumers’ need vary much.Also, manufactures develop various products, which consumers feel free tochoose to suit them best Therefore, competition among manufacturers isgetting more fierce and advertising plays a vital role in that competition.Another benefit that consumers gain from advertising is that it createsopportunities for them to actively decide whether that product suits them ornot and save time looking for goods or services that they need I myself thinkthat advertising cannot increase the cost per unit of quality to consumersbecause if it did, consumers would not continue to respond positively toadvertising Advertising lowers the costs of information about brandqualities, leads to increases in brand quality, and lowers the average price perunit of quality

b On businesses

b.1 On businesses’ activities.in society

Firstly, to businesses which have products advertised, advertising is

considered the bridge between them and consumers It is the major factor tobring their products to the public Appearantly, advertising is an excellentmarketing tool for businesses Let’s take an example: many years ago, manyproducts are still very new to Vietnamese especially products imported fromabroad, now it is advertising that brings them closer to Vietnamesecustomers For example, Tiger-Carlsberg, Cocacola-Pepsi are all competitors

in the market and their products have been very well-known in Vietnam due

to their very successful advertising campaign Whenever you feel thirsty orneed drinks for a party you immediately think of Cocacola, Pepsi, Tiger orCarlsberg

Secondly, to businesses which do advertising service, it is really a

lucrative job They gain millions of dollars from enterprises’ advertising

budget every year In Vietnam there is a growing trend of advertisingexpenditure now The top ten advertisers in 2001 spent some 27.18m in thefirst five months compared to 30.14m during the same period this year, anincrease of 10.9 percent Of those advertisers the largest growth wasexperienced in the foodstuffs grouping, which grew at alarming 168 percent,followed by alcohol advertising spending (84 percent) and milk products (63percent) The largest decrease in spending in the top ten was in the toiletriessector which experienced negative growth of 33.8 percent, followed bymotorcycle/bicycle advertising spending which dropped by 26.5 percent.

The growth of the industry is largely being generated by new entrantsand smaller advertisers spending more on commercialising their goods andservices This is a very healthy sign for the advertising industry in generalsince it represents an organic growth curve and also identifies a trend inoverall advertising spending becoming more and more broad in terms ofsector growth

Newspapers and magazines receive nearly 70 percent of their revenuefrom advertising; commercial TV and radio derive virtually all their incomefrom advertisers Small, financially insecure newspapers, magazines, orbroadcast stations are the most susceptible to pressure from advertisers,particularly companies that account for a large amount of the medium'sadvertising revenue A local newspaper may be reluctant to print anunfavorable story about a car dealer or supermarket chain on whose advertising

it depends

While larger, more financially stable media should be less susceptible

to an advertiser's influence, they may still be reluctant to carry storiesdetrimental to companies that purchase large amounts of advertising time orspace For example, since cigarette commercials were taken off radio and TV

in 1970, tobacco companies have allocated most of their budgets to the printmedia The tobacco industry outspends all other national advertisers innewspapers, and cigarettes constitute the second largest category ofmagazine advertising (behind transportation) This has led to charges thatmagazines and newspapers avoid articles on the hazards of smoking toprotect this important source of ad Revenue

Individual TV stations as well as the major networks also can beinfluenced by advertisers Programming decisions are made largely on thebasis of what shows will attract the most viewers and thus be most desirable

to advertisers Critics say this often results in lower-quality television, aseducational, cultural, and informative programming is usually sacrificed forshows that get high ratings and appeal to the mass markets

Advertisers have also been accused of pressuring the networks tochange their programming Many advertisers have begun withdrawingcommercials from programs that contain too much sex and violence, often inresponse to threatened boycotts of their products by consumers if theyadvertise on these shows