Effects of Advertising on Consumer Buying Behavior
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- 0:04 Advertising
- 1:25 Advertising and Market Share
- 3:12 The Effects of Advertising on…
- 4:40 Lesson Summary
How does advertising influence the process of consumer buying behavior? What impact does advertising have on a company's market share, and how does this shape the marketing budget? This lesson describes why advertising is so important - particularly for newer companies.
In this lesson, you will learn how advertising affects the consumer-buying-behavior process. We will discuss advertising's far-reaching impact in addition to the ways that advertising can be used to shape the consumer's view of certain products.
Did you know that the average American child watches over 40,000 commercial ads a year? That's a lot of ads. Some companies such as Procter & Gamble, AT&T and Time Warner spend close to $4 billion a year on advertising in the United States. The official definition of advertising is an impersonal one-way mass communication about a product or service that is paid for by the marketer.
Advertising, public relations, sales promotion and personal selling all are essential parts of the promotional mix of a marketing plan. Advertising is everywhere and reaches consumers all day - every day! The amount companies spend on advertising is amazing. For instance, pharmaceutical companies spend double on advertising than they do on actual research! The companies that spend the highest amount overall on advertising would be the toy and gaming industries. Advertising also plays an important role in developing sales and market share.
Advertising and Market Share
In general, most companies need to spend an enormous amount of money on advertising to maintain their market share. Ninja Corp owns 52% of the market and is constantly threatened by competitors. In order to keep Ninja Corp and its products on top of their consumers' minds, they need to use advertisements as reminders. If not, the competitors will be able to steal some of the 52% of market share and sales. Ninja Corp's competitors are Martial Arts Incorporated and Musclebound University Incorporated. Both have market share of only around 15% each.
Traditionally companies that are either new or smaller in market share have to spend a larger amount in advertising than their big competitors. The reason behind this is called advertising response function. This is when spending for advertising does increase sales up to a particular market share, but then the company receives a drop in sales due to diminishing returns.
Following this logic, Ninja Corp spends a basic amount on their advertising to act more as a reminder to their customers. Meanwhile the smaller competitors do see sales results with a larger increase in an advertising budget. Martial Arts Incorporated and Musclebound University Incorporated both have a large advertising budget to help create awareness and increase sales and market share. Musclebound University Incorporated has the largest advertising budget of all of the companies since it's brand new. According to the advertising response function, new products and companies need to invest in a large advertising budget in order to maintain exposure to their target market and cause a purchase to occur.
More Effects of Advertising on Consumers
Do you recognize any of the following slogans?
- 'Tastes Great...Less Filling'
- 'Good To the Last Drop'
- 'Breakfast of Champions'
These slogans are featured in the list of the top ten best advertisement slogans in the history of the United States. By the way, the answers are Miller Lite, Maxwell House and Wheaties.
Advertising has an enormous effect on consumers' everyday life. The constant bombardment of messages affects what consumers will drive, eat, drink and watch. Advertising's power in society is so vast that it helps determine for whom people will vote for president and what drugs consumers take.
The biggest consumer impact is that advertising can actually change a consumer's negative impression of a product to a positive view. For example, Ninja Corp had an image of a tough company and they were trying to sell their classes to children. The marketing manager decided to incorporate a Doberman puppy in their ads to show parents that their kid can be small and tough. The message was previously ignored by parents, but this time the campaign was successful in creating interest about their kid martial arts program.
Advertising can also help consumers view a product's attributes. For example, a television ad can focus on the healthier ingredients of a children's snack and make the consumer look at the sweet treat in a different light.
Overall, advertising is a huge investment for corporations. Companies that are well-established with a significant market share can budget their advertising dollars in a more limited fashion. Companies that are new to the market, or have smaller market shares, need to invest heavily in their advertising budget. The reasons for this are the need for consumer awareness, to maintain exposure and increase sales.
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Chapters in Business 102: Principles of Marketing
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