Advertising is commonly seen as a business activity aimed at demand creation. However, there are several more benefits of advertising for businesses, customers, and society. Every day people come across hundreds of ads while commuting, while sitting before the television, when searching online, and while shopping. Most of these ads are laid by businesses to inform customers about their products and services. However, advertising is generally seen as an investment in business growth. With the growth of digital technology, the advertising industry has also experienced very fast growth. A large number of businesses worldwide use digital technologies to promote their businesses whether through paid online advertising or other forms of promotion like social media and email marketing.
Kotler has defined advertising as
“Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.”
Advertising has benefits for both – businesses and customers. Some of the leading benefits of advertising for each are listed below.
Benefits of advertising for businesses:
Companies mostly undertake advertising and promotional activities for churning demand. You must have come across a large number of seasonal promotions that promote sales and discounts to encourage you to buy more. Even established companies like Walmart, Nike, Coca Cola and Pepsico rely on advertising and promotions to create demand. In several industries including retail, fashion, food, and automobiles as well as FMCG, advertising, and promotions are the main tools to create demand and build growth momentum. Nike and Coca Cola spend billions each year on promotions. Despite being established brands, they need to invest in advertising so as to retain their customer base and market share.
One important reason that several companies worldwide have large advertising budgets is growing competition industrywide. Several large and global businesses that are also the leaders in their respective industries have huge advertising budgets. Take the example of Pepsi and Coca Cola. The two soda giants are known for their intense competition. Over the last some years, each has been spending around $4 billion on advertising and promotions. In other industries too where competition is intense brands spend a large fortune each year on advertising and promotions, just to maintain their competitive edge.
For a large number of brands, advertising is one of the leading options to build a strong market reputation. They do not just invest in advertising to promote their products and services or their quality but also to maintain a strong social image. Many of them promote their work culture and differentiated image through marketing. Companies emphasize on their distinct strengths in their advertisements and other promotional material. A strong reputation is a source of competitive advantage and helps improve sales and find faster growth. However, it is not just that advertising helps you build a stronger reputation but a strong reputation also drives better ROI on your investment in marketing and promotions.
The promotional strategies of businesses are mostly a core pillar of their business growth strategies. It helps them find faster growth by extending their reach to new customers and helping them build stronger relationships with the existing ones. Apart from helping businesses attract new customers, it helps them sell more to their existing customers. Promotional campaigns help businesses grow their sales. Many times when sales are slowing down and businesses run and advertising campaign, they experience an instant growth in their sales. Advertising grows sales by drawing in crowds of customers who are eagerly waiting for a discount or sales bonanza. It is why many businesses see advertising as an essential operational expense that helps build growth momentum. Many times when things are not taking off and sales are lower than expectations, increasing the spending on promotions, helps businesses achieve incremental sales.
Advertising and promotions also help build customer loyalty and achieve repeat sales. It helps attract new customers and turn them into loyal buyers. The more loyal are your customers, the higher are your sales each season. Building customer loyalty is essential for businesses since sometimes it is more profitable to sell more to your existing customers than attracting new ones and turning them into loyal consumers. The growing focus of businesses on customer retention is also due to the reason that one customer retained is more profitable than gaining two new customers. However, the loyalty of customers depends on the level of trust they place in a brand. Take the example of brands like Apple
Advertising also drives higher brand recall. In a large number of cases, businesses keep running promotions and marketing campaigns just to drive higher brand recall and so that customers choose their products over that of the other brands. Beverages brands like Coca Cola and Pepsi or fast food brands like KFC, Domino’s, McDonald’s, and Pizza Hut run ongoing promotions for brand recall. It helps maintain sales and keeps bringing customers back to the stores.
Customer engagement has become very important for large businesses in the twenty-first century. The level of competition across most industries is very high and companies also invest in promotions to prevent brand switching by growing customer engagement. Higher customer engagement generally results in higher sales and better revenues. Such companies run promotional campaigns that focus on engaging customers on a variety of topics. Sometimes the intention behind running promotional campaigns is to drive higher awareness and at other times the focus is to engage consumers on topics including environmental and social issues.
These are just some of the benefits of advertising for businesses and there is a long list of advantages that businesses can obtain from promotions. Advertising and promotions help build and sustain a competitive advantage. Whether the intention is to grow brand awareness or strengthen the social image, advertising helps businesses in all these areas. However, the customer is mainly the core focus of marketing campaigns run by businesses worldwide. The advertising strategies of businesses also focus on creating a great customer experience.
Benefits of advertising for customers:
Access to and knowledge of more products and services:
Advertising has several benefits for customers and the leading benefit is that customers find access to and knowledge of a large variety of new products and services. Suppose you have been using a product that satisfies a specific need to a certain extent and you need a better replacement. How do you gain access to or knowledge of a product that satisfies your need perfectly? Mostly, it is through an advertisement. Whether it is a deodorant that matches your choice, a food product that is healthier or electronic equipment that has more features, advertisements introduce you to products and services that serve your needs better.
Advertising is also related to customer convenience and helps customers obtain products and services more conveniently whether online or offline. Companies run promotional campaigns to make customers aware of new products and services as well as locations where they can purchase them easily. A large number of products and services are now being sold online. From grocery to jewelry and a large variety of services including your daily dose of entertainment, you have the option to purchase them all online. However, the online marketplace has also grown crowded. Companies inform customers of everything from product features and pricing through advertisements. In this way, advertising benefits the customers by offering them higher convenience and saving them from a lot of hassles that are generally associated with buying a new product or service.
Advertising also saves customers a lot of time by reducing the time spent upon searching and finding the required products and services as well as their purchase. Customers want to use their time in the best manner possible whether they are shopping online or inside a brick and mortar store. Advertisements save their time by reducing the time consumers spend on research and selection. Otherwise, the customer has to spend a lot of time on finding the right product and selecting the right channel for purchasing it.
Increased bargaining power:
With time the bargaining power of customers has increased a lot driven by several factors including growing competition, changing consumption patterns, and increased availability of information. Advertisements raise the awareness of customers regarding products and services but apart from that, they have also worked to increase the bargaining power of consumers. Consumers have access to a larger number of products and services. They have more choices before them to select from and apart from that, they can always grab the best deal which means higher savings. Advertisements make so much possible for consumers and also maximize satisfaction from each purchase they make. With time as competition has grown, the bargaining power of customers has kept growing.