Economics Advertisement

1. Explain how advertising that is ostensibly uninformative might influence a rational consumer’s behavior, even if it does not directly impact or change the consumer’s tastes and preferences.

  Advertising is used for helping customers know the facilities comparison of products and teaching consumers about new products and how to use them. In advertising, the information is very important because it will affect customers’ behaviors. But an asymmetry exists in the information available to buyers and sellers. So it is hard to ensure that sellers and customers have the equal knowledge of the market. Sometimes customers may lack the information of price of products and the quality variation.

  But, in some way, even if the uninformative advertisement doesn’t have the fall information of products, it still has influence on customers. For example, the advertisement of Burberry’s Heritage Trench coat, it doesn’t have so much details but a lot of customers admire it. Why? Because this advertisement claims the spirit of Burberry about hereditary. Though the uninformative advertisement couldn’t let customers made decision their directly, but it will change the thinking of customer day by day and let them have the brand image. So gradually, customers know the special of Burberrys’ coat which are made special cotton materials and they always have their own classic style, so it can be use for a long time because it has high quality and not easy to over time. So this product may become the image representation of coat for customers. And customers will follow this standard to consider their next coat.

  To sum up, even uninformative advertising doesn’t affect customers’ tests and preferences directly, but it will have some influences on their behaviors.

1. For consumer products (e.g., cigarettes, laundry detergents, and beer) there is often a minimum level of advertising that must be undertaken when entering the market to achieve a “threshold” level of consumer awareness. Explain how the need to build a “brand image” through advertising serves as a barrier to entry.

  For company, they need to always be aware of their brand image and what they need to do is to sure that it is good and it can be as a barrier to entry. They must always try to have the best brand image that people can be proud of their products.

  Firstly, build the brand image can let their brands become famous and more people will know it, which will arise the brand effect. When a company first entry to a new market, if they already undertake some advertising, it will aware customers’ awareness. For example, when Kat Von D Lolita began to sell in Sephora, it spent many days to do advertising in the magazine and even have some billboards in subway station. So, the first day their products sold in Sephora, a lot of people went to buy because they already have enough information of this brand.