Role and Impact of Advertising by mnmgroup

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									  Literature Review

The Role and Impact of


The Consumer Buying
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Any accomplishment requires the efforts of many people and this work is not different. I

thank Astt. Prof. Zia Foley my guide, whose patience and support was instrumental in

accomplishing this task. I also thank Astt. Prof. Bharat Bhushan, other faculty members

and my friends who actually helped me and provided me the valuable information for

the study. Many research studies conducted by various authors across the globe have

been of great importance for giving an insight about the topic taken.

Every effort has been made to give the credit where it is due for the material contained

herein. If inadvertently I have omitted giving credit to someone, I am heartily sorry for

that negligence.
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Topic: Role and Impact of Advertisement on Consumer Buying Behavior


As being incorporated or associated with the marketing process, advertising finds its
position in every organization. Advertising can be defined as another strategy as an ap-
proach towards competitive advantage. Various advertising concepts are in the stream
of the media and papers but still there is a little evidence that advertising can signifi-
cantly help the organization boosts its performance. In terms of sales, it is true that the
application of the marketing and its associate strategies can gain the consumers‘ trust
and loyalty, and in return, can enjoy the benefits of the market share.

Background of the Study

Many businesses explore various options in order to achieve the success. From the tra-
ditional research and development, to the training of the people, and the intervention of
the various technologies, there is no doubt that organizations are trying make a differ-
ence against the other. Obviously, the organizations‘ actions towards the threats and
challenges in globalization enable the propellers and the people to work to meet their
corporate objectives and long-term goal. However, the simple marketing concept is
viewed by the business analysts as an effective strategy if the organization is planning
to gather and/or keep the loyalty of the consumer. The use of the advertising within an
organization is interestingly growing and various researches value its importance as an
important factor that can influence the buying behavior of the consumers.
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The interest paid by the past researchers on the function of the advertising in the or-
ganization is considered as one reason of the study. In addition, maintaining and ex-
tending the purpose of the advertising from the simple operation of the organization
creates the similar interest. If the idea on how powerful the advertising can be, the or-
ganization can find its own place in the market and can play with the other competitors.

The study understands the various point-of-views of the business leaders and marke-
ters regarding the application of the advertising in their organization. In this case, the
study prepared several questions that can help the study meet its own objectives.

1.   What the factors that usually contributes to the buying perception and behavior of
the consumers?

2.   What is the common goal of advertising?
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Literature Review

   Jethwaney, J.; Jain, S.: Advertising Management (pp. 7)

   Advertising is one of the largest generators of revenue in the world economy. It gene-
   rates employment directly and indirectly and influences a large section of people. An
   advertisement interest, entices, intrigues, and entertains; and creates life style.


   American Marketing Association (1948); Advertising is any paid form of non-personal
   presentation and promotion ideas, goods, or services by an identified sponsor.

   Dorothy Cohen(1988); Advertising is a business activity, employing creative techniques
   to design persuasive communication in mass media that promote ideas, goods, and
   services in a manner consistent with the achievement of the advertiser’s objective, the
   delivery of consumer satisfaction and the development of social and economic welfare.

   S. A. Chunawalla; K. C. Sethia: Foundation of Advertising (pp15)

   John E. Kennedy (1904) described advertisement as “salesmanship in print.” Till the
   term ‗salesmanship in print‘ was coined, advertising was viewed as information disse-

   Compare and contrast:

   A working definition could be; Advertising is the mass paid communication for the brand
   building through persuasive communication and position them into consumer’s percep-
   tion, besides taking consideration of market environment and consumer expectation.
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Web: ntu education

The role of advertisement changes unto what the organization wants them to do. There
were times that an organization wants them to do. There were times that organizations
use the advertising to help them survive from the impacts of economic trends. Still, the
economists views that the advertising plays a significant effect on the consumer beha-
vior. And in a long process, the advertising can lead the organization to competition.
Based on the understanding regarding the advertising, the approach rooted in the or-
ganization‘s search for the right answer on the effects of the competition. Consequently,
the accepted basic role of the advertising is to provide the consumers with the right
amount of information regarding the product or services, which is related to the objec-
tive of the competition and that is to deliver the consumer satisfaction. In this view, the
level of advertising affects the consumer who is the focus of the organization (Park,
1996). Based on the previous studies regarding the consumer behaviors, there are
three influential factors that affect the consumer decision when buying. They are enu-
merated as external influences, internal influences and the marketing influences in
which the advertising, product promotion, and pricing technique are found. Definitely,
the marketing activity such as advertising affects both internal and external behavior of
the consumer. Most especially, the consumers‘ perceptions are influence through the
exposure such as seeing an advertisement; attention which means that the consumer
recognizes the advertisement; awareness which is common if the advertisement in-
volves some humor; and the retention that keeps or stays in the mind of the consumer
(Chen and Lee 2005). Advertisements also affect the knowledge by giving information,
attitude, personality, lifestyles of the consumers, and the culture of the consumer. The
concept of advertising makes it possible to involve the consumers which greatly affect
the buying decisions of the consumers (Tsai, Liang, and Liu, 2007).
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Khan, M. Consumer Behavior and Advertising Management (pp266-67)

Role of advertisement

   a) It stimulates demand. This stimulation is because of the availability of the prod-
      uct, discounts offered if any and the expectation of the fulfillment of latent and
      aroused needs.
   b) It supports other promotion mix elements. It does preselling and helps the sales
      promotion and personal selling activities.
   c) It counters competitive moves. By combining with other promotion elements it
      acts as a competitive weapon. It differentiates the company‘s offer from other
      products and builds a brand personality and image of its own.
   d) It develops brand preference. When the products deliver the desired quality, ser-
      vice and value it creates a satisfied customer. With consistent advertising, the
      brand preference gets reinforced. The satisfied customers spread a favorable
      word of mouth and are an asset to the company.
   e) It cuts cost—by increasing sales, more units are produced and the cost of pro-
      duction comes down (economies of scale). Even the selling costs are decreased
      because there are a less number of wasted calls by the salesman. With lower
      prices offered by the company there are more penetration markets and more
      demand for the product.
   f) It builds brand images—Images are built in the minds of the consumer. There are
      positive images and are for different segments. A brand is a promise of a certain
      level of consistency, quality, service and other benefits like warranty etc. Manu-
      facturers are proud of their brands and want to have greater brand equity for
   g) Innovation—It encourages innovation and new product development and reduces
      the risk of the product becoming obsolete. With more innovation there is more
      sales which offset the cost of innovation. Innovation leads to more sales and the
      business expands.
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Web: Encyclopedia

The Functions of Advertising

Although the primary objective of advertising is to persuade, it may achieve this objec-
tive in many different ways. An important function of advertising is the identification
function, that is, to identify a product and differentiate it from others; this creates an
awareness of the product and provides a basis for consumers to choose the advertised
product over other products. Another function of advertising is to communicate informa-
tion about the product, its attributes, and its location of sale; this is the information func-
tion. The third function of advertising is to induce consumers to try new products and to
suggest reuse of the product as well as new uses; this is the persuasion function.

The identification function of advertising includes the ability of advertising to differentiate
a product so that it has its own unique identity or personality.


Advertising and Psychology

Walter Dill Scott of Northwestern University wrote the book The Theory of Advertising
(1903), which sought to build a theoretical understanding of advertising based on the
principals of psychological science. Scott suggested that advertisers should develop
certain fundamental principles on which to construct a “rational theory of advertising.‖

The application of psychological theories to advertising provides an understanding of
how consumers process advertising messages and make purchase decisions. Theories
of attention, information processing, attitude formation, and decision making all have
relevance to understanding how advertising affects consumers. Another important ap-
plication of psychological principals is to develop an understanding of consumer needs
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so that products can be developed, designed, and communicated in a manner that re-
flects the relevant and important needs of consumers.

How Advertising Works

Advertising is a form of communication. Like all forms of communication, it has many
different effects and these effects are often related to one another. The message in an
advertisement, no matter how strong and persuasive, will have no effect if the consumer
does not see the advertisement or pay attention to it. One useful framework for under-
standing these multiple effects and their interrelationships is called the hierarchy of ef-
fects model. The hierarchy of effects model identifies different stages in the communi-
cation process.

Getting Attention

The advertiser should know where a communication should be place to increase the
odds of reaching a particular type of consumer; this is the media decision.
Advertisers often refer to characteristics of advertisements that gain attention but dis-
tract the viewer from the primary message as ―creative clutter.‖
Consumers are less likely to attend to advertisements they have already seen, and the
more often an individual consumer has seen an advertisement previously the less likely
they are to pay attention to it when exposed again. This phenomenon is referred to as
―advertising wear out.‖

Compare and contrast:

Psychology theories of behavior, motivation, learning, attitude formation etc. is certainly
helpful in the study of the behavior of a consumer and his behavior can be predicted to
some extent.
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Getting product in the attention is the big challenge to the advertisers and also the big-
gest challenge is that to maintain the curiosity of the consumers. Exposure to an adver-
tisement still does not mean that a consumer will attend to it. A consumer may simply
turn the page of a magazine, look away from the television, or click on a banner adver-
tisement on the Internet to make it go away without ever paying attention to the adver-
tisement. Thus, obtaining the attention of consumers who are, in fact, exposed to an
advertisement is a significant challenge for advertisers.

Rajgopal; International Marketing: How to developing a media plan?(321-330)

Build a profile of consumers in reference to their location, accessibility, and demo-
graphic composition.

Study media profiles for audience coverage, reach and frequency of viewing.

Match consumer profile to media profiles based on its coverage in terms of readership
or viewership.

The preliminary selection should be with regard to product and cost considerations.

The final selection of media should maximize the achievement of media objectives.

Web: online encyclopedia

Processing Information:

Advertising research has demonstrated that the message must be clear and meaningful
to the consumer; if the consumer does not comprehend the message, it will not have
the desired effect. Thus, it is important when creating the advertisement to understand
how consumers think about products and product benefits and to use language that the
consumer will understand. It is also important that the product and the product message
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be the focal point of the advertisement.

Information Evaluation:

The consumers will need to determine how believable the information is and how rele-
vant it is to their individual situation in life and to their behavior as consumers. This
evaluation phase poses significant problems for advertisers. Most consumers tend to
discount the information in advertising because they understand that the purpose of the
advertising is to persuade.

Attitude Formation:

In some cases, the objective of the advertiser is immediate action by the consumer; this
is typical of direct-response advertising where the goal is to have the consumer do
something immediately (buy a product, make a pledge, and so on). In most cases, how-
ever, there is a lag between advertising exposure and any action on the part of the con-
sumer. In such cases, an important communication goal of an advertiser is to create a
positive attitude toward their product. Attitudes are predispositions or tendencies to be-
have or react in a consistent way over time. There is an affect, or feeling, dimension as-
sociated with attitudes, and there are generally various beliefs that provide justification
for the feeling and predisposition.
in some cases, the goal of advertising may be to create negative attitudes. For example,
in various antidrug and antismoking public-service announcements, the objective of the
communication is to reduce the likelihood that the viewer will use drugs or smoke.

Compare and contrast:

Ultimately, the success of advertising rests on whether it influences or not, the behavior
of the ultimate consumer. Product advertisers want consumers to buy their product; po-
litical advertisers want voters to vote for their candidate; and sponsors of public-service
announcements related to the harmful effects of smoking wants the smoking to decline.
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Such effects are of primary interest for understanding the influence of advertising; it is
only one of many factors that influence such behaviors. A consumer might want to buy
an advertiser‘s product, but may not find it in the store, or another less-desirable product
is so much less-expensive than that the consumer chooses it instead. It is possible, in
some cases, to identify the direct effects of advertising on behavior, but in most cases,
there are too many other factors that can influence behavior of consumer. It is for this
reason that most advertising research focuses on other effects in the hierarchy of ef-
fects. When measuring the direct effect of advertising on behavior is of interest, it is ne-
cessary to design carefully controlled experiments to control for all factors other than


Advertising, as currently practiced, and ignores all that has been learned by cognitive
psychologists in the past 30 or 40 years. Consumers process all incoming information,
including advertising, in a very complex yet instantaneous manner. Advertising is not a
stimulus in the outmoded behavioral psychology stimulus-response model of human in-
formation processing. Advertising, if it is attended to at all, is nothing more than a net
addition to everything the consumer has previously learned and retained about the
brand. The challenge for advertising is to find ways and means to bypass or upset busi-
ness as usual in the consumer's brain and to build an enduring perceptual representa-
tion   of      the   brand    as    one     that   is    acceptable     and     desirable…
When an advertisement shows up in a consumer's immediate environment, it may or
may not be perceived consciously. If it is attended to at all, it will be in the context of
whatever the consumer already has retained about the advertised brand and the prod-
uct category in which it competes. What he already knows about the brand will depend
on what he has processed and remembered from previous advertising for it as well as
other sponsored marketing communications for it, past experience with the brand (either
personal or secondhand as reported by family members, friends, acquaintances, stran-
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gers, or impersonal outside evaluators like Consumer Reports), and whatever past in-
formation has come to him about the brand from other non-advertising marketing.

Compare and contrast:

Traditional view of how advertising works as the dominant brand information source for
consumers is based on the explanation developed in the first half of the 20th century by
behaviorist psychologists. To the behaviorists, all human (and animal) behavior can be
explained in terms of the external stimuli to which individuals are exposed and the res-
ponses that these stimuli evoke.

Cognitive psychology has, in the past 30 or 40 years, revolutionized how psychologists
conceptualize the ways in which human beings acquire and process information and the
relation   between    such    information    processing     and    subsequent     behavior.
Marketers' view of how advertising and marketing communications work has not kept up
with this revolution in understanding how humans process information, think, and be-

Web: Tepper education; Baohong Sun: The Impact of Advertising on Consumer
Price Sensitivity in Experience Goods Markets

Advertising can affect consumer demand in many different ways. Becker and Murphy
(1993) have argued that the "presumptive case" should be that advertising works by
raising marginal consumers' willingness to pay for a brand. This has the effect of flat-
tening the demand curve, thus increasing the equilibrium price elasticity of demand and
then lowering the equilibrium price. Thus, ―advertising is profitable not because it lowers
the elasticity of demand for the advertised good, but because it raises the level of de-

There have been many prior studies of how advertising affects two equilibrium quanti-
ties: the price elasticity of demand and/or the price level. Our work is differentiated from
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previous work primarily by our focus on how advertising shifts demand curves as a
whole. As Becker and Murphy pointed out, a focus on equilibrium prices or elasticities
alone can be quite misleading. Indeed, in many instances, the observation that adver-
tising causes prices to fall and/or demand elasticities to increase, has misled authors
into concluding that consumer ―price sensitivity‖ must have increased, meaning the
number of consumers‘ willing to pay any particular price for a brand was reduced – per-
haps because advertising makes consumers more aware of substitutes. But, in fact, a
decrease in the equilibrium price is perfectly consistent with a scenario where advertis-
ing actually raises each individual consumer‘s willingness to pay for a brand.

Compare and contrast:

Advertising actually works one need to estimate how it shifts the whole distribution of
willingness to pay in the population. This means estimating how it shifts the shape of the
demand curve as a whole, which in turn means estimating a complete demand system
for all brands in a category.

Advertising is profitable because it reduces the market share loss that the brand would
suffer from any given price increase.

Web: Global Issues; Anup Shah: Media and advertising global issue

Ben H. Bagdikian, The Media Monopoly, Sixth Edition, (Beacon Press, 2000), p.150

―Mass advertising is no longer solely a means of introducing and distributing consumer
goods, though it does that. It is a major mechanism in the ability of a relatively small
number of giant corporations to hold disproportionate power over the economy. These
corporations need newspapers, magazines, and broadcasting not just to sell their goods
but to maintain their economic and political influence. The media are no longer neutral
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agents of the merchants but essential gears in the machinery of corporate giantism. And
increasingly they are not only needed but they are owned by the corporate giants…

As globalization becomes ever more prominent, the role of media and advertising and
consumerism also increases. Ideal for the large multinationals that can take best ad-
vantage of globalization include the even larger ―market‖ to which products can be sold.
However, diverse cultures could sometimes be an obstacle to easy selling.‖

Advertainment — Advertisements disguised as Entertainment!

We are also seeing more sophisticated techniques, such as short films where the aim is
to sell a product but to cleverly do the advertising in a subtle way. These mini films can
be very entertaining and exciting, but also promote a product behind the main theme.

While it could be argued that there is nothing wrong with this, it is just a more sophisti-
cated way to sell products, more forthcoming and explicit mention that this is a commer-
cial would be good for more people to be aware of what they are watching. (Although,
that might be as hard as asking a government to tell their audience that they are about
to watch some propaganda and to take it in appropriate consideration!)

Compare and contrast:

The media plays a vital role in the advertising of the consumer goods and services,
whether it may be print, audio, electronic media or the web. There is a flood of informa-
tion from all sides towards the consumer. Most of the times it is noticed that media ma-
nipulate and use the source of information according to its or clients will or they serve
incomplete information. This is certainly harmful for the consumer point of view.
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Web: Michael Schudson; Center for Media Literacy

Advertising: Hit or Myth?

Advertising is much less powerful than advertisers
and critics of advertising claim, and advertising
agencies are stabbing in the dark much more than
they are practicing precision microsurgery on the
public Consciousness.

One of the more striking examples concerns televi-
sion advertising for the 1984 Olympics and the 1985
Super bowl. The naïve observer must assume that
businesses reap extraordinary rewards for their ela-
borate and expensive sponsorship of these events.
But, it turns out; no one really knows if they do…        NULL
With most Americans most of the time, this notion
about consumer choice explains scarcely anything          This article originally appeared

about why consumers buy what they do. Neverthe-           in Issue# 37

less, there may be ways that advertisements indi-
rectly affect consumer buying decisions.

Its effects on product sales may be questionable, but where advertising succeeds
is in selling consumers on the purchase of happiness.

If business people think ads affect consumers directly, their belief serves as a spur to an
advertising program… This self-fulfilling prophecy" also works with a company's own
sales force, distributors and retailers. A salesperson finds it easier to say "I'm selling
Proctor and Gamble," rather than "I'm selling Product X you probably haven't heard of
it.' And retailers prefer to stock well-advertised goods because they think consumers are
influenced by advertising.
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As a result, widely advertised brands become the brands most widely available. Con-
sumers confirm the supposed influence of advertising by picking the brands off the shelf

It is entirely plausible, then, that advertising helps sell goods even if it never persuades
a consumer of anything. So long as investors, salespeople, and retailers believe that
advertising affects consumers, advertising will influence product availability and this, by
itself, shapes consumer choice. Availability, as marketers sometimes say, equals sales.
Advertising may be an important signal system within the business world.

Compare and contrast:

The question we need to ask is not whether advertising works but under what conditions
it works. Ii should not be forgotten that numerous sources of information influence con-
sumer‘s decisions to buy. Normally, advertising is only one of many influences on con-
sumer decisions. However, this changes completely in certain circumstances, some
consumers sometimes and all consumers under some circumstances are deprived of
alternative information sources and are more dependent on and vulnerable to advertis-

This is the case with children, with people in transitional states in their lives and with
Third World peoples relatively new to the world of mass-marketed consumer goods and
less protected by government agencies and regulations.

It's hard to make this point too strongly: Different groups are differentially vulnerable to
advertising; and their vulnerability varies not so much with the character or quantity of
advertisements as with claim by age, education, station in life and government guaran-
tees of consumer protection.
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Works Cited
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Online Encylopedia:

Advertising Effects - The Functions of Advertising, Advertising and Psychology, How Advertising Works,
Getting Attention, Processing Information, Information Evaluation. (n.d.). Retrieved 11 28, 2010, from

Chunawalla, S., & Sethia, K. (2009). Advertising World. In Foundations of advertising (pp. 13-44).
mumbai: Himalaya Publishing House.

How advertising affects consumers. (2003, 06 1). Retrieved 11 28, 2010, from goliath:

jain, s., & jaithawaney, j. (2006). advertising. In advertising management (pp. 7-17;282-308). new delhi:
oxford university press.

Rajagopal. (2009). developing a media plan. In international marketing (pp. 321-330). new delhi: vikas
publication house.

Schudson, M. (n.d.). Advertising: Hit or Myth? Retrieved 11 29, 2010, from Center for media literacy:

Shah, A. (2008, 01 26). Media and Advertising. Retrieved 11 28, 2010, from Global Issues:

Sun, B. (n.d.). The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets.
Retrieved 11 29, 2010, from Tepper:

Zhou, D. (2003, 22 06). Long-term effects of television advertising on sales of consumer durables and
nondurables: the case of China. Retrieved 11 28, 2010, from All Business:

Park, D., 1996. Advertising and the Meaning of Competition [Online] Retrieved 11 29, 2010, from

Chen, W., & Lee, C., 2005. The Impact of Web Site Image and Consumer Personality on Consumer Beha-
        vior, International Journal of Management, Vol. 22, No. 3.

Tsai, M., Liang, W., & Liu, M., 2007. The Effects of Subliminal Advertising on Consumer Attitudes and
        Buying Intentions, International Journal of Management, Vol. 24, No. 1

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