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Canada's Business

by Bruce Whitestone


Good riddance?

As we enter the peak retail season, we usually are bombarded by a tremendous increase in advertising, as companies try to capture a share of the Christmas buying spree.

However, this year it may be different. The boss of a big advertising group said, "We led the downturn, we'll lag the upturn; it's very tough."

Advertising budgets tend to be one of the first things cut when times get difficult.  One would assume that promotional expenditures should be boosted as sales weaken, yet, paradoxically, that is not the case.

The retrenchment in advertising and promotion frequently is counterproductive, costing firms more in the long run to recover the lost ground.

According to projections, advertising budgets probably will register a double-digit decline for the current year, reflecting not only the business recession, but also the lack of special events, such as elections.

The Olympic Games in British Columbia will provide a temporary lift to promotional spending, but will not compensate for the fall in total advertising budgets.

For many businesses that carry ads, there will be a great deal of pain. Advertising in magazines probably will register a very sharp decrease when the 2009 results are in.

Some advertising agencies have resorted to outlandish tactics to raise revenues, giveaways, contests, or absurd promotional events. Should we applaud the decline in advertising, saying "good riddance?"

Much advertising seems "bad." Most of us are aware how annoying it is to watch commercial television programs or listen to AM radio stations.

There are so many advertisements on some programs, one can barely maintain the story line of the movie that is being shown or follow the radio broadcast. Therefore, advertising seems "bad."

Nevertheless, it is not the form of the advertising, but the amount of advertising that is particularly irksome, rather than the advertising itself.

Of course, all object to deceptive advertising. Clearly, we should distinguish between normal or dishonest advertising.

Too, critics contend that advertising expenditures divert resources from much more pressing needs. All but forgotten is much advertising is self-cancelling.

If every producer or a product must spend money, with each competitor advertising at once, no additional consumers will be gained.

Furthermore, at some point economies of scale will diminish.

Before we say "good riddance" to all advertising, we should realize that, according to data furnished by many businesses, advertising usually does lead to lower distribution and selling costs, saving companies from more expensive spending that may be less productive as well.

Needless to say, advertising can convey information that is genuinely useful to the consumer or it can introduce new products.

Overall, advertising should not be entirely condemned.

 

 
 

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