Effect of Advertising on Distribution Costs

The total cost for any product is made up of the cost of production and the cost of selling and distribution. Advertising is a part of selling and distribution. Advertising is a part of selling and distribution costs. The costs of production and the costs of distribution costs increase, they proportionately go down as a percent and distribution costs. The costs of product and the costs of distribution show a different trend over a period of time. Though production costs increase, they proportionately go down as a percentage of the total cost. In other words, production costs increase at a lower rate than the increase in the distribution costs. This is natural in view of the improved technology which has streamlined production. This costs the improved technology which has streamlined production. The costs of distribution have been increasing considerably over the years. This is a natural corollary of increased competition.

Ideas for Action

Appointment ads by corporations and employment agencies, the seeking of donations by charitable institutions and political parties, and election candidates advertising to “sell” themselves to the public are striking examples of advertising being fruitfully employed for a persuasive communication of ideas for action. In fact, in the presidential election in America-a much-advertised and the lengthiest election in the world – candidates do employ ad agencies to sell “The President 1992.” This is not a product, nor a service, but an idea for action. In most social marketing, we advertise ideas fro a social cause, may be family planning, prohibition, adult education, etc., The services of ads released by the Loss Prevention Association of India Promoting the prevention of losses and the preservation of life are very relevant here. One such ad may highlight the hazards of fire-crackers during the festival seasons which may take he lives of children who are somewhat careless. The headlines may say: “This year, take that nagging fear of Festival days. Teach your children these simple rules of safety.

Receptivity to corporate advertising

Mostly people by and large are not ready to receive this genre of advertising. The sterile information is hardly relevant for many. The recall rates are low. Except boosting eh chairman’s ego, they are not of much use. The aversion occurs because of self-praise – say a company makes an often-made claim that we have a vision for the future. But can they substantiate it? Commercials on TV shows a computer generated factory site. There are so many such commercials. Can they be inspiring? While designing corporate ads, we should pay heed to the type of response we want. Corporate communication’s single-track. It asks for no action on the part of the audience; except passive approval. Corporate ads are difficult to evaluate. How the company behaves as a citizen? This defines its image. But ads must be backed by deeds. Even then, corporate campaigns on a sustained basis on a low key basis do have a compound effect.

Institutional advertising of corporate advertising

As the name itself suggests, in this form of advertising, the institute presents its own story to build up an image of itself in the public mind. It is a public-relations-approach advertising. The institute may present its viewpoint about a national cause, say, prevention of blindness and the efforts it has taken to help this cause. Alternatively, it may list its social contributions, or may emphasize its socially oriented policies. It may also lay stress on the mission of the organization and its philosophy. Institutional advertising aims at building a positive image for the firm in the eyes of internal and external public. The institutional advertising is indirect, subtle, and affects our basic attitudes. The organization may reveal its history and may try to build an awareness of the interest groups like employees, shareholders, government etc., Institutional advertising cultivates or tries to promote a spirit of friend towards it among the public.

Advertising and the Creation of Monopolies

The term monopoly demotes a complete control of the market by one organization. As advertising aims at increasing the demand for a particular brand and establishing a brand image, it first separates and then isolates its market from the total market by creating a separate and distinct personality for its brand. Advertising has become a potent tool for creating and strengthening monopolies in the private and public sectors. If freedom of entry is restricted or barred by using advertising, then it becomes an instrument for creating monopolies. However, advertising alone is now to the blamed. High capital investment in the business has really limited the entry in many fields. Government regulations and restrictions, too, are responsible for creating monopolies in m modern business. Monopoly means that you exercise a total control over the market. Here others are barred an entry into the market.

Service advertising

Services are activities, benefits or satisfactions offered for sale, they are intangible, inseparable, variable and perishable. They therefore require strict quality control, supplier credibility and adaptability. Personalized services like laundry, hair-grooming, beauty salon, automotive repairs, when advertised, place greater emphasis on the institution offering it and the advantages in patronizing them. They may talk of about congenial environment, quickness and promptness of service, economy, exclusiveness, status significance, etc. Luxury hotels and airlines, when advertising their services, attach greater importance to service with a smile, courtesy, thoughtfulness and claim that they offer a home away from home. Banks also advertise the services they offer to their clientele, like the teller system, personalized banking, computer banking, etc. , Services like physical goods also use channels to make their output available and accessible, e.g., location of a hospital to cater a particular catchment area. Promotion of services also emphasizes the location aspects.

Goods Classification

Consumer goods may be further classified as convenience goods, shopping goods and specialty goods. Convenience goods are those items which are frequently purchased, have a low unit price and have little of no fashion connotation. They are bought at the most accessible retail outlet shortly after a need for them is felt. The marketing strategy for such products is the unloading of goods through every possible retail outlet with a view to achieving an extensive distribution. The same strategy is followed in the advertising campaigns of such products as soft drinks, cigarettes, and food and household items, so that the consuming public may become familiar with the product name, the brand name and it satisfy with the product name, the brand name and its satisfying qualities. From the advertising point of view, the consumer is familiar with the product and its attributes before he sets out to buy it. The retail outlet is of little importance, while packaging and brand name are of the utmost importance.

Success of Small-time Agencies

The success of small-time agencies in this sector is due to their rapport with the stock-brokers, merchant bankers, low costs of operating, quick reckon to market conditions, ability to work round-the-clock and manpower’s financial background. There is bifocal advertising: One campaign to paint the larger picture of the company and another to provide the nitty-gritty. The recent SBI issue was handled by Lintas as pre-issue corporate campaign and then by Pressman as the issue advertising. In future, this trend may continue. Corporate accounts will go to mainline agencies and issue accounts to specialist financial agencies. Even, then specialist agencies may take up the integrated issue marketing. In spite of all this, financial advertising leaves much to be desired in terms of quality. Most of the issues still remain unbranded. Just issue highlight cannot make a good copy. Till the investment is buoyant, the ads may afford to remain unprofessional. Mudra attempted to brand Reliance petrochemicals issue – Khazana way back in 1987, which was the first attempt to market an issue.

Industrial product advertising

As a per cent of sales, industrial product advertising is much smaller than consumer products advertising. An industrial product is bought by a very elaborate buying process affected by a number of variables. The advertising is thus very complicated. The end-product here is a combination of many manufactured and bought-out parts. Many components lose their identity in the end-product. Most common objectives for industrial product advertising are to inform, to bring in orders, to stimulate queries, to empanel the marketer’s name on the buyer’s panel of sources. It also seeks to influence the buying persons in the purchasing organization whom sales people inserted in trade journals and at time in lay press. It reminds the final consumers about the role the industrial marketer plays in their lives by offering products which a customer finally ends up using. It motivates the distributors. it also seeks to build up a corporate image.

Advertising and cultural values

Culture is the most fundamental determent of a person’s wants and behavior. Whereas lower creatures are largely governed by instinct, human behavior is largely learned. External or core cultural values are very difficult to change by advertising. The child growing up in a society learns a basic set of values, perceptions, preferences, and behaviors’ through process of socialization, involving the family and other key institutions. The child growing up in the United States is exposed to the following cultural values: achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism and youthfulness. Culture shapes our attitudes to products. These cultural values distinguish one social group from another. Each culture contains smaller groups of sub-cultures that provide more specific identification and socialization for its members. Four types of sub-cultures can be distinguished – nationality groups, religious groups, racial groups, racial groups, and groups by geographical areas.

Product positioning

The dose of advertising and its nature and type are determined for the nature of the other components in the marketing mix. Another important concept in marketing is product positioning. Each marketer wants to create a specific position for its product among many competitive products, and advertising is effectively employed to achieve this end. To be successful, an advertiser must create a niche in the prospect’s mind. The niche or “position” involves not only the strength or the benefit to be derived from the product, but also the manner in which it differs from the products of other competitors. In cigarette advertising of different brands, positioning may be in regard to taste, or its strength; the third one may be positioned as personalized product, and the fourth maybe positioned as a perfect blend of taste and flavor. The fifth one may be positioned as a, the largest among king-size cigarettes. These are all typical examples of product positioning through advertising.

Financial advertising

As students of commerce and management, you are aware that public limited companies invite the general public to subscribe to the share capital of the company. These are as many as 50million shareholders who invested more than Rs. 26,000 crores in 1992. In 193-94, over a thousand public issues are vied for a capital pie of roughly s. 40,000 crores. Obviously, the market is fiercely competitive. A small part of this investor community can always be motivated and won with advertising campaign that understands their aspirations and respects their intelligence. Some private and public limited companies invite people to deposit money in the company as a loan or sell bonds and debentures to the general public. In the later life of the company for expansion and diversification or for capital investment, the company may approach the shareholders again in the form of a rights issue or may offer share to the public again.

Product advertising

It has been said that advertising is an important component of the marketing mix. Marketing executives’ decide about the marketing mix elements to be used, and the proportion in which they are to be blended into their marketing programmers. The determine the executives’ success, and make for the marketer’s reputation. Almost all consumer goods manufacturers and many industrial product marketers include advertising in their marketing mix. Advertising’s specific role is of pre-selling to present and potential customers. Together with other elements of the promotion mix such as personal selling and sales promotion activities, the point-of-purchase displays, coupons, premium offers, demonstrations and trade shows – advertising ensures, that these important functions lead to a successful marketing program me of selling mass produced, mass marketed consumer goods. In the marketing of industrial products, too, advertising plays a useful role; it informs unknown prospects and enables the salesman in the field to obtain a hearing from the buyers. Not only this, marketing concepts and techniques can be well applied to non-commercials social ventures; and advertising promotes such non-commercial ventures such as family planning, adult literacy, etc.,

Advertising in the promotion mix

As a marketer, we are interested in the right mix or combination of advertising, publicity, personal selling and sales promotion. An appropriate mix of these four elements helps us to achieve our overall marketing objectives. The activities of the sales force, the advertising and publicity programmer and all the other promotional efforts should be properly co-ordinate for the marketing success of the product. While advertising is a non-personal communication through the mass media of ideas, goods and services, personal selling is a personal presentation; it is a face-to-face sale. Sales promotions are those promotional activities which are different from advertising activities. Personal selling and publicity stimulate consumer purchase and earlier effectiveness, such as displays, shows and exhibitions, demonstrations and various other non-recurrent selling affairs which are not a part of the ordinary routine of advertising. Here, we are concerned with the nature of the promotion mix and the relative importance of advertising in this mix.