By and large, companies depend very much on advertising – they pay hefty amounts to the media, pitch in professionals to churn out the best advertisement concepts possible, and study the after-effects of the advertisement, whether they have helped in reaching the brand's goals or not. The main aim of advertising is to take a product well into the customers, raise sales and retain the same, and sustain the brand image of the company and the trust that the customers have in the company.
Advertising impacts the economy, the customers' thinking, the market's competitiveness, and the demand and supply. Behind the scenes, advertising follows many concepts – customer's tastes, budget, lifestyle habits, thinking attitude, competitor analysis, etc.
At the micro level, or talking in terms of microeconomics, the impact of advertising is very profound. This post discusses some areas of microeconomics where advertising plays a key role.
Roles Advertising Play in Microeconomics
1. Decision-making Process
When advertising is about impacting the customers' minds and making them think about the product's usage, there is no doubt that the decision-making process of both the customers and the companies is based on advertising.
Advertisements are always designed to stress that customers always get that ultimate happiness when they buy the product being shown. They trigger the hidden needs of the viewers, and thus, they make them think that the product is mandatory for them and turn them into customers of the product.
On the other hand, companies also analyse how customers react to their ads. Especially in this internet age, counting the opinion and catching the pulse of customers about an ad or a product is not difficult. They then take many business decisions based on the outcomes. Thus, advertisements impact both customers and companies.
2. Identity and Brand
Customers often get impressed by a product's image value or brand strength. They also check the quality and lifespan of the product they purchase by comparing various brands and then decide about the final purchase.
It is often easier to persuade customers with the brand's name rather than selling on a local character with good quality. Advertising makes this more accessible – it makes the name of the product listed in the minds of every customer who watches the ad.
3. Awareness among Customers
It needs awareness for customers when a product first enters the market. They should know that this product has some unique features compared to existing ones.
For example, some foreign brands that enter a national market become hits, while others become huge flops. That is all about correct advertising and reaching out to the customers right.
4. Creating a Personal Identity
Some products, such as beauty and styling, apparel, perfumes, and other related items, need to create an impression that by using these products, the customers can create their identity that makes them stand apart from others. That is a significant factor for retaining retail customers at a micro level.
5. Sense of Urgency
Business is all about meeting the demand at the right moment. For this, companies create a sense of urgency to the customers by mentioning that there are "few days only", "offer till stock exists", "last two items left", etc. This makes customers rush to buy the product in a false belief that they are missing out on something if they do not make a purchase. That indirectly creates an artificial desire for the customer and urges them to buy the product.
Some advertisements target a whole bunch of human relations. For example, insurance companies, home furnishings, food, health supplements, investments, etc. They frame their advertisement concepts around many relations – father, mother, kids, elders, and their emotions. That indirectly affects the purchasing habits of all the considerations involved. Some companies also take surveys, impart their ideas, and make customers think their products are essential for the whole family.
Some advertisements also imprint on customers' minds such that they carry forward the importance of the product to the next generations too.
Thus, advertising plays a crucial role in microeconomics – both at the customer and company levels.
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