Advertising

Article byNanditha Saravanakumar
Edited byAlfina
Reviewed byDheeraj Vaidya, CFA, FRM

Advertising Definition

Advertising refers to a component of marketing communication that transfers open, non-personal messages to sell or promote a product or service to a wide audience. It has huge benefits, and when done rightly, it can increase business profits and market share.

What is Advertising?

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Advertising presents a few challenges to businesses, too, including a considerable expense that is usually involved in it. This is why businesses usually employ other means of communication like personal selling, sales promotions, etc. With the evolution of businesses, advertisements have also evolved from traditional to online media.

Key Takeaways

  • Advertising is an essential part of marketing that targets a wide range of people who may or may not be prospective customers.
  • Advertisements aim to increase the awareness of a company’s offerings and remind the customers of a product or service.
  • Traditional media is non-personal, whereas new media is primarily personal and thus features customized ads and messages.
  • Advertisements have a few benefits, but if not implemented effectively, the drawbacks might outweigh the benefits due to the high cost and wastage of resources incurred in targeting large audiences.

Advertising Explained

Advertising is mostly the first point of reference or awareness for most people. It is how people know about a product, service, features, cost, etc. Awareness is, thus, the main objective of advertisements.

Since we started trading, advertising has become a part of human society. However, the history of advertisements can be more visibly traced back to ancient Egyptian and Roman civilizations. Back then, papyrus messages and wall and rock paintings were commonly used modes. Later, messengers went around delivering messages to people in villages.

But the modern form might have developed with the industrial revolution when production was full-fledged. The printing press, too, was a huge turning point in the history of print media. From there, posters, pamphlets, brochures, and billboards gained prominence.

The next advance came in the twentieth century, with radio and television being used for a more interactive form of advertisements. Finally, the newest advent came with the internet, with businesses advertising on websites and social media. It is driven by data to target the right people, thus decreasing the wastage of resources and money and increasing the response rate.

Businesses have started advertising on Google for more comprehensive, versatile, and informed communication. Though moderately expensive, it gives better returns to businesses. Another example is Facebook advertising, which allows businesses to target their audience on social media platforms like Facebook and Instagram.

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Types

Advertisements can be classified into traditional and new media approaches. Within these types, there are many other subcategories or modes. Let’s understand these in detail.

#1 – Traditional media

Traditional media refers to the earliest forms of advertising. The industrial revolution and the invention of the printing press are a few important markers that led to the popularity of traditional media. It includes print media like pamphlets and brochures, newspapers, posters, billboards, etc. It later evolved to include technological developments like radio and television advertisements.

Another sub-type is point-of-sale advertisements, where posters, props, and displays are used to promote a product. Here, it is essential to note the reliance of traditional media on advertising agencies or intermediaries specializing in certain forms of advertisements.

#2 – New media

The new media became prominent with the wide use and adoption of computers and the internet. Online advertising doesn’t just involve search engine results page (SERP) ads, display ads, or email marketing. Also known as data-driven advertising, it collects and uses vast customer data, segments the audience, identifies target customers, and focuses on them entirely to promote and sell products.

The many search engine and social media metrics evaluate data and understand customer interests and likes. Based on this, they are targeted. New media is more personalized and customized to attract customers. It uses technology like machine learning, AI, etc. As a result, online media’s success or response rate is usually higher than traditional media.

Examples

Now, let’s discuss a few examples to get a better idea of advertising:

Example #1

A company sells cheap but designer footwear online. Their target segment is women and teenage girls. They mainly advertise through social media, especially Instagram and Facebook. However, the company also re-targets customers across websites by advertising on Google. It also offers coupons on Google Pay to encourage customers to buy more.

Example #2

Technology company Apple is set to expand its revenue model by displaying ads on iPhone, iPad, and Mac. The company currently earns around $4 billion in revenue and aims to bring the figure to double-digits. As a result, Apple has decided to start displaying advertising on its apps, including the App Store, News, and Stocks.

This is likely to be implemented by slowing down the pace of the company’s acquisitions. Apple has always followed the privacy-first policy and even introduced the app tracking transparency (ATT) feature, allowing customers to decide if apps can track them across other apps and websites. Currently, this feature is being used for third-party apps that use consumer data to personalize ads.

But the company’s new advertising model will track consumer data from other Apple apps and services. Hence, Apple customers might not be up for such a transition when they have to pay high and yet be prey to personalized ads.

Advantages And Disadvantages

For any business, it is essential to understand what advertising can offer and what it cannot. Based on this, they can effectively design communication means and target audiences.

First, let’s look at the advantages. Mass media advertisements are necessary if businesses want to introduce or launch a product in the market. It can inform the market about the business offerings. Also, it can be used to remind customers about the product or service.

It increases awareness among customers. Further, advertisements can also enhance the reputation and goodwill of the company. Moreover, new forms of media have eliminated the need for intermediaries like advertising agencies.

Moving on to the disadvantages of advertisements, it is usually a high expense for companies. Especially traditional media, like newspapers, billboards, etc., can be a huge cost for businesses. But adding to this is the result or response to advertisements. Mass media advertisements target a broad audience, and the messages get scattered. In reality, it might just be enough to focus on the target segments, which would be less expensive.

And finally, advertisements are associated with promoting unreal and artificial standards. As a result, they fail to deliver the promised quality. Although however, this might not be the case everywhere; customers are sometimes skeptical.

Advantages of Advertisements Disadvantages of Advertisements
Inform about new launches in the marketExpense
Inform about business offerings or dealsMessage can get scattered
Increase awareness about brandsAds can sometimes give false promises
Improve the reputation of a companyGives unreal or artificial standards

Advertising vs Marketing

The main difference between advertising and marketing is that the former is a part of the latter. Marketing is a discipline, and advertising is one of its components. On the other hand, advertisements are marketing tools that can be used effectively to achieve business goals.

Marketing involves identifying and understanding the needs of the people and fulfilling those needs. It aims to deliver value to customers. Advertising refers to promoting and communicating a company’s products or services. Thus, advertisements are necessary for any marketing campaign to succeed.

Frequently Asked Questions (FAQs)

1. Is advertising important?

Yes. Advertisements are an essential part of any organization’s marketing initiatives. It has enormous benefits and enhances a firm’s reputation, which is why many companies spend essentially on different modes of advertisement.

2. Is advertising a fixed cost?

Yes. Advertisements are a fixed cost to any business. Usually, it is allocated as a percentage of the budget under the marketing section. The cost, however, depends on the company size, revenue, returns from products, and customers.

3. How does advertising work?

Traditional media displays open and non-personal messages to a large undifferentiated group using television, newspapers, billboards, etc. Online advertising is more personalized and targets the audience more effectively using big data and machine learning.

4. Does advertising work?

Yes. When implemented correctly, advertisements work effectively. Businesses have to track performance metrics instead of just advertising randomly. Based on the metrics, they must constantly improve and thus make higher returns.

This article has been a guide to Advertising and its definition. Here, we explain it in detail, including its types, examples, advantages & disadvantages. You may also find some useful articles here –

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