Mises Daily Articles
The Supposed Sham of Advertising
One pernicious idea radiating throughout political circles is that advertising is a waste of resources. Undersized minds believe that deep within the inefficiencies of competition and capitalism rests needless spending on marketing to consumers.
Why is it that otherwise intelligent individuals rely on such callous influences to pervert their political judgments? Could it simply be that these claymore mines are set by slumbering minds? Or are free-market ideas simply too toilsome?
Why does one need to drive the costs of production upward by creating silly jingles for commercials and radio? Why can't we just let competition be based on the optimum product instead of optimum marketing? On the surface, intuitively, these arguments seem to bear merit, but a more prudent observer will distinguish their fallaciousness. Indeed, to proclaim that increased marketing increases prices is, at best, naive.
For example, what other factors affect the cost of production, and by what methods can production prices be made to decline? Aside from increases in production efficiency, one of the simplest ways to decrease production costs is to simply produce in greater volume. Thus, by means of specialization, companies can lower per-unit costs by increasing the amount of units produced. Yet, how is one to gauge the volume of production without the use of marketing? More importantly, what is the desire to produce in bulk without advertising for the bulk of one's production?
Therefore, it is just as likely that advertising costs may decrease per-unit prices, for indeed that advertising may allow the company to produce in higher volume.
Maybe from here our fellow activists might argue that if individuals are in the market for a product, there is no need to boast silly jingles; just sell them the best product! Moreover, by investing in advertising, a company is, by definition, not investing in their product.
We will deal with these arguments separately.
Substitutes and Product Awareness
To say that individuals who are in the market for a product are not in need of silly advertising, but instead in need of the best product, is to overlook the economic consequences of substitutes. For example, an individual may be in the market for a portable computer, but this demand may be serviced through the purchase of a laptop, PDA, cellular phone, cellular phone/PDA, or many other products, depending on what employment the product will serve.
Furthermore, as Ludwig von Mises wrote in Human Action,
The consumer is not omniscient. He does not know where he can obtain at the cheapest price what he is looking for. Very often he does not even know what kind of commodity or service is suitable to remove most efficaciously the particular uneasiness he wants to remove.
Therefore, in this regard, advertising provides awareness of the product in addition to promotion of it.
Yet, what is so bad about the art of product promotion? Indeed, we as individuals engage in self-advertising every day.
Shall we apply the antiadvertisers' logic to human romantic interactions? Should we sit on the sidelines and dedicate all our efforts to self-preservation and personal attractiveness, and then let the opposite sex choose the best product? This would be the reasoning of the antiadvertisers. Just look at the resources we are squandering by advertising the fact that we are single and looking rather than focusing our energies on simply increasing our looks!
But wait, what if we took a small portion of our labor, at the expense of our attractiveness, and promoted our eagerness to be acquired by the opposite sex? Wouldn't this self-advertisement benefit both parties?
To most people, this kind of self-promotion seems commonsensical. But by the logic of the antiadvertisers, it is a ridiculous idea!
Additionally, advertising plays the role of a trust mechanism. Let us imagine how advertising existed prior to the well-circulated media outlets of today. Posters can be dated back to as early as ancient Rome, yet, in the absence of rural areas and large platforms (giving the poster vast visibility); the most common form of advertising was word of mouth. You must "place butter on that burn" or "suck the venom from that snake bite" if you want to be healed. There are vast inefficiencies built into word-of-mouth advertising, because the cost to offer such advice is minimal.
Current pyramid schemes offer insight into sales in the absence of advertising. Here, individuals may exploit the consumers' trust because the initial investment to acquire this trust is minimal.
Now, parallel this word-of-mouth advertising to a company that makes a large initial investment to promote a product that is inferior. Such a company must be willing to operate under an expensive and precarious scam. They must be willing to gamble on a large, enduring swindle with the potential to lose vast sums of their own money. For most, it is simply a gamble not worthy of one's time. And even those parasites auditioning for the part of the next Bernie Madoff must therefore anticipate a newly cautious consumer, previously burnt from such scams. Thus, they must anticipate a much larger investment of their own time and money.
This is why product promotion is routinely coupled with quality products.
Finally, as the great giant of liberty Murray Rothbard said, consumers are limited in their time. For many consumers, their time is too scarce to find the best product. When I purchase a set of headphones, I have neither the time nor inclination to sift through the 210 various styles of Sony headphones, much less the styles of the 170+ other headphone manufacturers (see appendix).
Therefore, like the gas-station sign along the interstate highway, advertising not only tells you about the product, it also tells you whereabouts the product is in an efficient manner, so that you may move forward in your ambitions.
Advertising is not a scam at all. It is individuals sacrificing a level of product perfection in exchange for a level of product trust and time efficiency that cannot be fulfilled through word-of-mouth advertising.
Therefore, stop wasting our time advertising your antiadvertising!