The role of advertising in society

Part III : The role of Vietnam’s advertising industry in the economy Present situation and contributions of Vietnam’s advertising industry The changing responses of Vietnamese towards advertising. Conclusion Introduction Entering the 21st century, integrating the market mechanism, enterprises have to accept competition and be compatible with the circulation of economic regulations in the economy. One of the keys for firms to reach these goals is advertising. The more feasible one company’s advertising campaign is, the less risks in business it has, the more profits it gains and the more it breaks into market. Advertising is instrumental in sales promotion, which is one of the most vital tools in Marketing. The appearance and the role of advertising is increasingly higher in the market economy. Advertising shows the rapid growth in technology and lifestyle, in people’s tastes and consumption. Advertising has become an important part of economic development process 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 of people’s knowledge and needs to goods, which makes it develop the country’s human resources effectively. Moreover, advertising also plays an important role in promoting and developing the cooperation between Vietnam and other countries in trade and technology. Along with the deep and wide development of international and domestic relationships, Vietnam advertising industry has rapidly developed with more and more various types though it still faces with many difficulties and law on advertising has not been fixed. Therefore, the government should pay 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 which mistakes and shortcomings are not avoidable. I give my strong acknowledgement to MBA LE THI HAI and Mr PHAM GIA TRI , Mr NGUYEN HUYEN MINH who all supported me much during finishing this thesis. Part I : General knowledge of advertising 1. Some typical concepts of advertising. Advertising is any of indirect appearance of goods, services or ideas which we have to pay for to recognise the advertisers ( according to American Marketing 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 new goods and improve the people’s consuming habit ( according to the dictionary of scientific and technical publisher – 1990 ). 2. Classifications of advertising Advertising to the consumer market a1. National advertising. Advertising done by a company on a nationwide basis or in most regions of the country and targeted to the ultimate consumer market is known as national advertising. The companies that sponsor these ads are generally referred to as national advertisers. Most of the ads for well-known brands that we see on prime-time TV or in other major national or regional media are examples of national advertising. This form of advertising is usually very general; it rarely includes specific prices, directions for buying the product, or services associated with the purchase. It informs or reminds consumers of the brand and its features, benefits, advantages, and uses or reinforces its image so consumers will be predisposed to purchase it. National advertising is the best known and most widely discussed form of promotion, 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 by major 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, or restaurant. While the national advertisers sell their products at many locations, retail or local advertisers must give the consumer a reason to patronize their establishments. Retail advertising tends to emphasize specific customer benefits such as store hours, credit policies, service, atmosphere, merchandise assortments, or other distinguishing attributes. Product availability and price are important advertising themes, often used in conjunction with a sale or special event. Retailers are concerned with building 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, many retailers use image advertising to influence consumers perceptions of their stores. a3. Direct-response advertising One of the fastest-growing sectors in developed countries is direct marketing. Direct response advertising is a method of marketing whereby a product is promoted through an ad that lets the customer purchase directly from the manufacturer. Traditionally, direct mail has been the primary medium for direct-response advertising, although television is becoming an increasingly important medium. Direct-response advertising has become very popular in recent years owing primarily to changing lifestyles, particularly the increase in two-income households. This has meant more discretionary income but less time for in-store shopping. The convenience of shopping through the mail or by telephone has led to the tremendous increase in direct-response advertising. Credit cards and toll-free telephone numbers have also facilitated the purchase of products from direct-response advertisements. a4. Primary and selective demand advertising Another way of viewing advertising to the ultimate customer is in terms of whether the message is designed to stimulate either primary or selective demand. Primary demand advertising is designed to stimulate demand for the general product class or entire industry; selective demand advertising focuses on creating demand for a particular manufacturer's brands. Most advertising for various products and services is concerned with stimulating selective demand and emphasizes reasons for buying a particular brand. Advertisers generally assume there is a favorable level of primary demand for the product class and focus attention on increasing their market share. Thus, their advertising attempts to give consumers a reason to buy their brand. Advertisers might concentrate on stimulating primary demand in several situations. When a company's brand dominates a market, it may focus on creating demand for the product class, since it will benefit the most from market growth. For example, Pepsi Cola has over 70 percent of the soft drink market, and the company's advertising objective is to encourage consumers to drink more. Primary demand advertising is often used as part of a promotional strategy to help a new product gain acceptance among customers. Products in the introductory or growth stages of their life cycles often have primary demand stimulation as a promotional objective because the challenge is to sell customers on the product as much as it is to sell a particular brand. b. business-to-business advertising For many companies, the ultimate customer is not the mass consumer market but rather another business, industry, or profession. Business-to-business advertising is used by one business to advertise its products or services to another. The target for business advertising is individuals who either use a product or service or influence a firm's decision to purchase a product or service. Two basic categories of business-to-business advertising are 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 of another product (raw material, component parts), are used in manufacturing other goods (machinery, equipment), or are used to help the manufacturer conduct business (office supplies, computers, copy machines, etc.). Business services, such as insurance, financial services, and health care, are also included 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 mass media such as television. Industrial advertising is often not designed to sell a product or service directly, since the purchase of industrial goods is often a complex process involving a number of individuals. An industrial ad helps make the company and it product or service better known, assists in developing an image for the firm, and perhaps most important, opens doors for the company's sales reps when 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 the advertisers’ product or specify it for others to use is known as professional advertising. Professional groups are important because they constitute a market for products and services they use in their businesses. Also, their recommendation or specification of a product or service often influences many consumer purchase decisions. For example, Colgate initially targeted advertising 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 by professionals. In recent years, advertising by professionals such as dentists, lawyers, and doctors has increased in popularity as legal restrictions were removed and competition increased. These classifications of the various types of advertising demonstrate that this promotional element is used in a variety of ways and by a number of different organizations. Advertising is a very flexible promotional tool whose role in a marketing program will vary depending on the situation facing 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 making consumers aware of products and services and providing them with information for decision making. Advertising can encourage consumption and foster economic growth. It not only informs customers of available goods and services but also facilitates entry into markets for a firm or a new product or brand; leads to economies of scale in production, marketing, and distribution, which in turn lead to lower prices; and accelerates the acceptance of new products and hastens the rejection of inferior products. Effects on citizens a.1. To the consumer choice. Some people say advertising hampers consumer choice, as large advertisers use their power to limit our options to a few well-advertised brands. 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 large national advertisers to gain control of the market, usually at the expense of smaller brands. Larger companies often end up charging a higher price and achieve a more dominant position in the market than smaller firms that cannot compete against 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 competition based on price or product improvements. Heavily advertised brands dominate the market in certain product categories, such as soft drinks, beer, and cereals. However, advertising generally does not create brand monopolies and reduce the opportunities for new products to be introduced to consumers. In most product categories, a number of different brands are on the store shelves and thousands of new products are introduced every year. The opportunity to advertise new brands gives companies the incentive to develop new brands and improve their existing ones. When a successful new product such as a personal computer is introduced, competitors quickly follow and use advertising to inform consumers about their brand and attempt to convince them it is superior to the original. Many critics claim advertising has an adverse effect on consumer values by encouraging materialism, a preoccupation with material things rather than intellectual or spiritual concerns. The United States is undoubtedly the most materialistic society in the world, which many critics attribute to advertising that. Seeks to create needs rather than merely showing how a product or service fulfills them. Surrounds consumers with images of the good life and suggests the acquisition of material possessions leads to contentment and happiness and adds to the joy of living. Suggests material possessions are symbols of status, success, and accomplishment and/or will lead to greater social acceptance, popularity, sexual appeal, and so on. The criticism of advertising on the grounds that it encourages materialistic values assumes that materialism is undesirable and is sought at the expense of other goals. Many believe materialism is an acceptable part of the Protestant ethic, which stresses hard work and individual effort and initiative and views the accumulation of material possessions as evidence of success. Others argue that the acquisition of material possessions has positive economic impact by encouraging consumers to keep consuming after their basic needs are met. Many Americans believe economic growth is essential and materialism is both a necessity and an inevitable part of this progress. A famous economist describes the role advertising plays in industrialized economies by encouraging consumption: Advertising and its related arts thus help develop the kind of man the goals of the industrial system require-one that reliably spends his income and works reliably because he is always in need of more...In the absence of the massive and artful persuasion that accompanies the management of demand, increasing abundance might well have reduced the interest of people in acquiring more goods...Being not pressed by the need for these things, they would have spent less reliably to get more. The consequence-a lower and less reliable propensity to consume-would have been awkward for the industrial system. It has also been argued that an emphasis on material possessions does not rule out interest in intellectual, spiritual, or cultural values. Defenders of advertising say consumers can be more interested in higher-order goals when basic needs have been met. They point out that consumers may purchase material things in the pursuit of nonmaterial goals. For example, a person may buy an expensive stereo system to enjoy music rather than simply to impress someone or acquire a material possession. Even if we assume materialism is undesirable, there is still the question of whether advertising is responsible for creating and encouraging it. While many critics argue that advertising is a major contributing force to materialistic values, others say advertising merely reflects the values of society rather than shaping them. They argue that consumers' values are defined 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 products and services as symbols of status, success, and achievement and by encouraging consumption. As one said, "While it may be true that advertising reflects cultural values, it does so on a very selective basis, echoing and reinforcing certain attitudes, behaviors, and values far more frequently than others." The extent to which advertising is responsible for materialism and the desirability 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 purchase decisions 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 is criticized for fostering discontent among consumers and encouraging them to purchase 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 to separate desirable informational advertising from undesirable persuasive advertising. If advertising critics really believe that persuasive advertising should not be permitted, they are actually proposing that no advertising be allowed, since the purpose of all advertising is to persuade. Defenders of advertising also take issue with the argument that it should limit itself to dealing with basic functional needs. In our society, most lower-level needs recognized in Maslow's hierarchy, such as the need for food, clothing, and shelter, are satisfied. It is natural for people to move from basic needs to higher-order ones 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 wise advertisers associate their products and services with the satisfaction of higher-order needs. Proponents of advertising offer two other defenses against the charge that advertising makes people buy things they do not really need. First, this criticism attributes too much power to advertising and assumes consumers have no ability to defend themselves against advertising. Second, it ignores the fact that consumers have the freedom to make their own choices when confronted with persuasive advertising. While they readily admit the persuasive intent of their business, advertisers are quick to note it is extremely difficult to make consumers purchase a product they do not want or for which they do not see a personal benefit. If advertising were as powerful as the critics claims, we would not see products with multimillion-dollar advertising budgets failing in the marketplace. The reality is that consumers do have a choice, and they are not being forced to buy Consumers ignore ads for products and services they do not 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 for products and services. First, they say the large sums of money spent advertising a brand constitute an expense that must be covered, and the consumer ends up paying for it through higher prices. This is a common criticism from consumer advocates. Several studies show that firms with higher relative prices advertise their products more intensely than do those with lower relative prices. A second way advertising can result in higher prices is by increasing product differentiation and adding to the perceived value of the product in consumers' minds. The fundamental premise is that advertising increases the perceived differentiation of physically homogeneous products and enables advertised brands to command a premium price without an increase in quality. Critics of advertising generally point to the differences in prices between national brands and private-label brands that are physically similar, such as aspirin or tea bags, as evidence of the added value created by advertising. They see consumers' willingness to pay a higher price for heavily advertised national brands rather than purchasing the lower-priced, non-advertised brand as wasteful and irrational. However, consumers do not always buy for rational, functional reasons. The emotional, psychological, and social benefits derived from purchasing a national brand are important to many people. Unfortunately there seems to be no single way to measure product differentiation, let alone determine how much is excessive or attributable to the effects of advertising...both price insensitivity and brand loyalty could be created by a number of factors such as higher product quality, better packaging, favorable use experience and market position. They are probably related to each other but need not be the result of advertising. Proponents of advertising offer several other counterarguments to the claim that advertising increases prices. They acknowledge that advertising costs are at least partly paid for by consumers. But advertising may help lower the overall cost of a product more than enough to offset them. For example, advertising may help firms achieve economies of scale in production and distribution by providing information to and stimulating demand among mass markets. These economies of scale help cut the cost of producing and marketing a product, which can lead to lower prices-if the advertiser chooses to pass the cost savings on to the consumer. Advertising can also lower prices by making a market more competitive, which usually leads to greater price competition. Finally, advertising is a means to market entry rather than a deterrent and helps stimulate product innovation, which makes markets more competitive and helps keep prices down. Overall, it is difficult to reach any firm conclusions regarding the relationship 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’t find what the market has without advertising’s help. Moreover, with the continuous development of science technology, consumers’ need vary much. Also, manufactures develop various products, which consumers feel free to choose to suit them best. Therefore, competition among manufacturers is getting more fierce and advertising plays a vital role in that competition. Another benefit that consumers gain from advertising is that it creates opportunities for them to actively decide whether that product suits them or not and save time looking for goods or services that they need. I myself think that advertising cannot increase the cost per unit of quality to consumers because if it did, consumers would not continue to respond positively to advertising. Advertising lowers the costs of information about brand qualities, leads to increases in brand quality, and lowers the average price per unit of quality. 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 to bring their products to the public. Appearantly, advertising is an excellent marketing tool for businesses. Let’s take an example: many years ago, many products are still very new to Vietnamese especially products imported from abroad, now it is advertising that brings them closer to Vietnamese customers. 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 or need drinks for a party you immediately think of Cocacola, Pepsi, Tiger or Carlsberg... 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 advertising expenditure now. The top ten advertisers in 2001 spent some 27.18m in the first five months compared to 30.14m during the same period this year, an increase of 10.9 percent. Of those advertisers the largest growth was experienced in the foodstuffs grouping, which grew at alarming 168 percent, followed by alcohol advertising spending (84 percent) and milk products (63 percent). The largest decrease in spending in the top ten was in the toiletries sector which experienced negative growth of 33.8 percent, followed by motorcycle/bicycle advertising spending which dropped by 26.5 percent. The growth of the industry is largely being generated by new entrants and smaller advertisers spending more on commercialising their goods and services. This is a very healthy sign for the advertising industry in general since it represents an organic growth curve and also identifies a trend in overall advertising spending becoming more and more broad in terms of sector growth. Newspapers and magazines receive nearly 70 percent of their revenue from advertising; commercial TV and radio derive virtually all their income from advertisers. Small, financially insecure newspapers, magazines, or broadcast stations are the most susceptible to pressure from advertisers, particularly companies that account for a large amount of the medium's advertising revenue. A local newspaper may be reluctant to print an unfavorable 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 stories detrimental to companies that purchase large amounts of advertising time or space. For example, since cigarette commercials were taken off radio and TV in 1970, tobacco companies have allocated most of their budgets to the print media. The tobacco industry outspends all other national advertisers in newspapers, and cigarettes constitute the second largest category of magazine advertising (behind transportation). This has led to charges that magazines and newspapers avoid articles on the hazards of smoking to protect this important source of ad Revenue. Individual TV stations as well as the major networks also can be influenced by advertisers. Programming decisions are made largely on the basis of what shows will attract the most viewers and thus be most desirable to advertisers. Critics say this often results in lower-quality television, as educational, cultural, and informative programming is usually sacrificed for shows that get high ratings and appeal to the mass markets. Advertisers have also been accused of pressuring the networks to change their programming. Many advertisers have begun withdrawing commercials from programs that contain too much sex and violence, often in response to threatened boycotts of their products by consumers if they advertise on these shows. The commercial media's dependence on advertising means advertisers can exert influence on its character, content, and coverage of certain issues. However, media executives offer several reasons why advertisers do not exert undue influence over the media. First, they point out it is in the best interest of the media not to be influenced too much by advertisers. To retain public confidence, they must report the news fairly and accurately without showing bias or attempting to avoid controversial issues. Media executives point to the vast array of topics they cover and the investigative reporting they often do as evidence of their objectivity. It is in their best interest to build a large audience for their publications or stations so they can charge more for advertising space and time. Media executives also note that an advertiser needs the media more than they need any individual advertiser, particularly when the medium has a large audience or does a good job of reaching a specific market segment. Many publications and stations have a very broad base of advertising support and can afford to lose an advertiser that attempts to exert too much influence. This is particularly true for the larger, more established, and financially secure media. For example, a consumer products company would find it difficult to reach its target audience without network TV and could not afford to boycott a network because of disagreement over editorial policy or program content. Even the local advertiser in a small community may be dependent on the local newspaper, as it may be the most cost-effective media option available. The media in the United States are basically supported by advertising, which means we can enjoy them for free or for a fraction of what they would cost without advertising. The alternative to an advertiser-supported media system is support by users through higher subscription costs for the print media and a fee or pay-per-view system with TV. Another alternative is government-supported media like those in many other countries, but this runs counter to most people's desire for freedom of the press. Although not perfect, the system of advertising-supported media provides us with the best option for receiving information and entertainment. b.2. On competition among businesses. Some people say that power in the hands of large firms with huge advertising budgets creates a barrier to entry, which makes it difficult for other firms to enter the market. This results in less competition and higher prices. They note that smaller firms already in the market find it difficult to compete against the._.