Advertising is an outgrowth of sale by description. It may be employed either as a substitute for middle-men and salesmen, for purposes of demand creation, or as an auxiliary to aid them in their exercise of the selling function. It tends to displace these other agencies, in whole or in part, whenever it is a less expensive or more effective means of communicating ideas to the consumer. Illustrations showing how it justifies itself from the social as well as the business point of view. When waste occurs in advertising, it is generally due to one of five things : lack in the product of those elements of quality and service which appeal to the consuming public's need or desire, ignorance of the true function of advertising, blundering application of recognized principles, failure to develop laboratory standards for ideas, or neglect to keep in operating balance the other essential agencies of distribution.
The characteristics which peculiarly commend advertising are its expansive reach, its economy, and the complete control it allows the management over the presentation of ideas to prospective buyers. Factors bearing on the formulation of a policy as to advertising.
Organization — Analysis OF THE Market
The problems incident to organizing for demand creation fall into three groups, which are concerned respectively with analysis of the market, fixing a price for the goods, and the combination and coordination of agencies, each of the three groups being an important factor in the others.
The business man's broad problem in analyzing his market is to find where his product can be marketed profitably, and in approximately
what quantities. In approaching the problem, he finds an indefinite body of possible purchasers, widely distributed geographically, living under the various conditions of town and country, and exhibiting various degrees of purchasing power and intelligence, various tastes and beliefs and both conscious and unconscious demand. Every locality in which it is proposed to distribute his product should be examined with respect to these and still other conditions. The method of examination illustrated. Tests of typical localities give typical reactions, and thus show, at relatively small cost, the desirability or undesirability of using the same policy in a larger field.
How a market analysis made it possible to equalize the seasons of a department store. A suggestive list of factors to be considered in analyzing a market.
Organization — Price (Policy)
Not the cost of production but the requirements of the market are the primary consideration in fixing prices. The manager has the choice of three general price policies: (1) selling at the market minus, (2) selling at the market par, and (3) selling at the market plus. The first policy aims to increase volume of sales by reducing price. Ordinarily, it does not involve differentiation from other stock products of like nature. Selling at the market minus is the easy method of securing distribution, although other than economic motives govern sales in many instances and the middle-man's indifference becomes an obstacle unless it is turned into active interest by the prospect of larger profit on the new article.
Subject to certain restrictions, the policy tends not only to draw purchasers away from competitive goods but to bring new purchasers into the market.
To sell at the market par, the merchant must, in general, differentiate his product those of his competitors and build up a particular demand for it. Under this policy, new purchasers may be drawn into the market by giving the product an added importance in their eyes. Selling at the market plus is perhaps the most characteristic feature of modern distribution. It makes the severest demands on the ability of the distributor and offers correspondingly great rewards for success. Usually the product is more effectively differentiated, more closely adapted to human needs or desires, and the large profits it sometimes brings — not infrequently out of all proportion to the added cost of manufacturing the article — may be regarded as the price society pays for this special service.