Sunday, 26 May 2013

Advertising doesn't create new demand


Advertising makes us buy stuff goes the argument. There’s even a name for it; “false demand”

A large number of folks are basically broke today because of the false demand created by commercial advertising. Using monies gathered from bad credit, lousy mortgage loans and lack of savings, they went out to the market place and bought tons of stuff that they didn’t really need, really want, to satisfy the false demand created by the advertisers in this country.

This all sounds right doesn’t it? Advertising is all about making us buy stuff – more advertising sort of forces us into buying things that we don’t need.

The problem is that quite simply this argument is untrue.

“The null hypothesis that advertising does not cause consumption cannot be rejected, but some evidence that consumption may cause advertising is presented.”

Far from advertising being a cause of our consumer society, it is rather a symptom of said society. The research above is general – looking at aggregate advertising expenditure. If we take it down to the specific product level – here for booze and fags:

In an empirical application to data for the alcoholic drinks and tobacco markets in the United Kingdom, it is concluded that aggregate advertising appears to have had little or no effect upon product demand in this sector over the past three decades.

Yet again there is no evidence that advertising creates new demand. Indeed, if you were to sneak into the hallowed Mad-Men halls of the advertising fraternity, you’ll discover that they’ve known this for years. Advertising assumes a static market and seeks to maximise share for the product within that market.

If you think about this for a minute, it makes sense. Why should I spend my client’s scarce cash on making the market bigger – promoting sausages rather than Fred’s Grand Yorkshire Sausage, The Champion on Your Plate?

I find it rather odd that otherwise intelligent people don’t take the trouble to understand the basics of something that is both ubiquitous and also the subject of their opprobrium. I wrote this a while ago when pop-philosopher Alain de Botton has an ill-informed go at advertising:

Mr de Botton falls into a very familiar trap when talking about advertising – that its messages are somehow different from the millions of other messages we receive, process and respond to in our lives. And our philosopher goes further to suggest some kind of balancing of advertising – doubtless under the control of Platonic Philosopher Kings or maybe just the vanguard of the ‘general will’.

Advertising messages are mere communications – of course they seek to nudge us, at least insofar as their objective is to affect our behaviour. Most commonly the purpose of advertising is not to sell you something but to persuade you to carry on buying the thing you’re already buying. The promotion of brand loyalty – the core purpose of much advertising – is, if anything, anti-nudge.

To take one example, you want to have the time available to you throughout the day and there’s a handy little invention called the wristwatch. You don’t go in search of buying that watch because of the shiny Omega advertisement on the back page of your magazine. Nor does your search commence because Rolex sponsor the clocks at Wimbledon. Your demand – ‘I want a new watch’ – isn’t created by advertising but the choice of which particular watch you buy may indeed be shaped by those adverts.

The point about the advertising is that, when I think of a watch, I think of a particular brand (more usually a set of brands). That is why we advertise. And it doesn’t matter whether it’s fast food, cars, shoes or jewellery, advertising is always about brand equity – about making sure that your brand is in the consumer’s mind when she is in the market to buy that product.

The quote at the top is straight from the Naomi Klein playbook. It may be the case that our avarice is the root of our economic problems (for the record, I think this is nonsense) but rather than ask about that avarice what we do is shoot the messenger. Many years ago, I was told by the boss of an advertising agency that advertising was a mirror held up to society. And if we don't like what we see then the problem is with society not with advertising.



Mike Chitty said...

Surely advertising helps new markets to become established and expand. In mature markets like tobacco it is just about shifting market share.

Anonymous said...

One of the best examples of advertising never creating new overall demand is in the market for sanitary protection for ladies.

The mega-millions spent on advertising the product on TV and in women's magazines do not create a single additional customer, they merely aim to cause current and near-future customers to switch or maintain brands.
All women will use some form of the product, it's simply an issue of which brand, so the market is not created, it is merely serviced.

Strangely, the tobacco marketeers have never used that model in their argument.

SadButMadLad said...

There are so few new markets that require advertising to let people know of it's existence. 99.9% percent of advertising is of products within existing markets. What drives up consumption is peer pressure, trying to keep up with the Joneses.