I. Economic AspectsLester G. Telser
II. Advertising ResearchCharles K. Ramond
As more resources are spent on advertising, there is increasing controversy about its consequences. Only the economic aspects of advertising, however, are within the scope of this article. First, we will give some facts about the use and importance of advertising as a means of promotion; the data relate mainly to the United States, but we will also cite some figures for the United Kingdom and Canada. Second, we will show why firms use advertising. We will then discuss how advertising affects price competition and the size of firms and why advertising is used in the Soviet Union. Finally, we will consider those communications media that depend on advertising as their major source of revenue and discuss the relation between advertising and consumer sovereignty.
Scope of advertising
In 1960 total advertising outlays in the United States were estimated to be about $12,000 million, which was 2.3 per cent of gross national product (GNP). Since in 1947 advertising was 1.8 per cent of GNP, there is a slight upward trend in the post-World War II period. However, too much should not be made of this evidence. It covers a short period of time, advertising figures prior to 1935 are unreliable, and the figures just preceding World War II show that the relation between advertising and GNP was about the same as in the late 1950s (Blank 1963).
In 1954 Canadian advertising outlays were 1.6 per cent of GNP, and comparable figures for the United Kingdom are of the same order. In both of these countries advertising outlays constitute a smaller percentage of either GNP or national income than they do in the United States. So far as can be judged from the limited data available, advertising is a less important means of promotion in most other countries than it is in the United States.
There are four major channels of advertising. The printed media, such as magazines and newspapers, contain both advertising and editorial material and are sold directly to the public. The audio–visual media, such as television and radio, are supported primarily by advertising receipts. These media do not, in many countries, collect fees directly from the public. Instead, they aim to attract an audience for advertisers by providing the public with free entertainment. Direct-mail and outdoor advertising attempt to attract the public’s attention and make direct sales appeals. In the United States in 1959, advertising in the printed media accounted for between 45 and 50 per cent of total estimated advertising expenditures. Television and radio received about 14 per cent and 6 per cent, respectively, of advertising expenditures. Direct mail accounted for 14 per cent of the advertising bill, and outdoor advertising was about 2 per cent. The remaining expenditures were on sale display, advertising departments, and the like.
Modern advertising began during the early part of the nineteenth century, after the cheap daily newspaper and the national magazine were introduced. Radio in the 1920s and television in the 1950s caused major changes in the composition of advertising outlays. As a result of these innovations, the cost per advertising message has sharply decreased and the number of advertising messages has risen more than would be implied by the increased dollar expenditures.
The ratio of advertising to sales differs considerably among products. Industrial products, which are purchased primarily by a relatively small number of firms, have a much lower ratio of advertising to dollar sales than do consumer products. Promotion of industrial products depends primarily on salesmen. The products advertised most heavily in relation to dollar sales in the United States in 1957 were toilet preparations (14.7 per cent of sales), drugs and medicines (10.3 per cent), and soaps (7.9 per cent).
Canadian figures that give advertising as a percentage of sales by product category are roughly the same as the U.S. figures. Moreover, a study of advertising relative to sales in 1940 and 1941 by the U.S. Federal Trade Commission (1944) shows that the ratios by product category in the United States are quite close to comparable figures for the year 1935 in the United Kingdom as shown by the Kaldor and Silverman study (1948). That the pattern of advertising outlay with respect to commodity is similar in all three countries is an important finding and deserves a fuller explanation than has so far appeared. Equally important would be an explanation for the differences among the advertising intensities of various products.
Why firms advertise
A correct but umlluminating explanation of advertising is that firms find it profitable. Advertising, however, is only one, and not even the most important, method of sales promotion. Although some products are promoted mainly by advertising, personal selling still accounts for the largest share of promotional outlays. Advertising is a much less labor-intensive method of promotion than are many alternatives for accomplishing the same end. Therefore, it is a technique well suited to sell those products that are, or can be, widely used and for which potential customers are not readily distinguished from the rest of the population. A firm deliberates over the same kinds of factors in allocating its funds to different advertising media as in allocating funds to other methods of sales promotion.
For an understanding of why firms advertise, it is helpful to see how advertising affects sales. Advertising affects sales in two stages. In the first stage a firm buys space in the press or time on television in order to convey advertising messages that create awareness in potential customers. In the second stage these advertising messages induce sales with varying degrees of effectiveness. In order to determine its advertising budget a firm must both decide how many advertising messages of each type it should buy and estimate their effectiveness.
The audience of an advertising medium approximates the number of advertising messages that can be received via that medium. For printed media, such as magazines or newspapers, the paid circulation gives a first approximation of the audience. However, the readership of a newspaper or magazine may exceed the circulation, and, conversely, the number of readers who take note of the advertising may fall short of the circulation. Thus, paid circulation is at best only an approximation to the number of advertising messages received via a printed medium. The audience of a television or radio program is harder to estimate, and special research techniques have been devised for this purpose. Audience size (along with composition) is one of the key determinants of advertising rates. Given this information about an advertising medium, a company can calculate the cost and estimate the effectiveness of advertising messages conveyed by that medium.
The number of advertising messages is the relevant physical measure of the quantity of advertising. This is why advertising per dollar of sales is not always a reliable measure of the quantity of advertising. The absolute advertising outlay and the number of messages transmitted may be very large although the ratio between advertising expenditure and sales is very low. For example, advertising as a percentage of sales is very low for automobiles. However, in 1957 U.S. consumers received nearly $400 million of automobile advertising messages, half from auto manufacturers and half from auto dealers.
Advertising messages can be effective indirectly. Thus, potential customers can learn about products, even though not directly exposed to advertising messages, by hearing about these products from others. By a chain reaction, advertising messages can stimulate transmission of a sizable volume of information (Katz & Lazarsfeld 1955; Ozga 1960).
The preceding analysis explains some dynamic aspects of advertising. There is typically a delayed response to advertising for several reasons. First, many of the advertised products are not of great importance to consumers; thus, a certain amount of repetition or redundancy is necessary to create awareness of the product. Advertising in smaller amounts is not likely to pass the threshold of awareness and, therefore, is likely to be ineffectual. Second, in addition to the problem of making consumers aware of the product, there is the further problem of overcoming their inertia. Although inertia increases the delay between advertising messages and sales, it also makes the effects of advertising persist beyond the time the messages are disseminated. Thus, advertising expenditure can be thought of as an investment to create an asset—sometimes called good will. This asset yields a return for some period of time, it depreciates like a capital good, and it requires maintenance. The marginal rate of return on advertising, as well as the rate of depreciation, can be calculated. Nerlove and Arrow (1962) provide theoretical analysis and Telser (1962) shows empirical results along these lines.
This approach to advertising has several implications. First, we can expect new products to be more heavily advertised than established products. Second, continuous advertising of established products is necessary because new consumers enter the market and others either leave it or forget about the product. Third, in an expanding economy there will be relatively more advertising than in one that is stable or declining.
Advertising versus price competition
One of the criticisms of advertising is that it is wasteful. If firms compete by offering to sell at low prices, then buyers benefit. Such competition among sellers results in products of given quality being sold at the lowest price. However, it is argued, if sellers compete for customers by advertising, then buyers do not benefit by obtaining a lower price; on the contrary, they pay a higher price to reimburse the sellers’ advertising expenses. In its crude form this argument has little merit; if some buyers do not wish to purchase advertised goods, there will generally be sellers who find it profitable to cater to their demand. Then some buyers will seek out the lowpriced sellers who do not advertise, whereas other buyers will choose to pay higher prices for well-known goods.
A more sophisticated version of the argument that advertising may increase prices assumes that by advertising, a company can reduce the elasticity of demand for its product [seeElasticity]. Advertising can change the character of the demand so that customers become less sensitive to price and the advertiser obtains a loyal clientele. This makes possible higher prices and larger profits. Whether advertising can as a matter of fact create brand loyalty is not known with certainty although it is a possibility. There is some evidence worth bringing to bear on this question. We noted above that toilet preparations are the most intensively advertised consumer articles. If advertising tends to create brand loyalty, market shares of cosmetics and similar products should be more stable than market shares of less advertised items, such as branded food products. However, a study of the four leading brands of each of a number of articles in these two product classes over a 13-year period showed that market shares of toilet preparations were markedly less stable than were shares of branded foods. There was, in addition, a substantial turnover of brands in the toilet-preparation class. Because new brands are advertised much more intensively than are established brands, the high ratio, among toilet preparations, of advertising to sales may reflect the short life and high turnover of brands rather than brand loyalty. If this is true, the high intensity of cosmetics advertising results from the lack of brand loyalty to such products as compared with branded food items.
It is by no means obvious that advertising necessarily reduces the price elasticity of demand. Increased advertising may bring a firm new customers whose preferences for the product are weaker than those of the old customers. The new customers are consequently more sensitive to price, and the increased advertising thus increases the price elasticity. Although advertising by a given firm may reduce the price elasticity for its goods by strengthening preferences, competitive advertising has the opposite effect. On balance, increased advertising may increase price elasticity.
Advertising can intensify competition among retailers, thereby reducing retail prices. Since shoppers can compare the various retail prices of a well-known brand at different stores more easily than they can those of a nonstandard item, competition is keener among retailers selling the well-known item. This forces the retail prices of advertised articles closer to invoice costs. Retailers’ advice influences consumer choice of nonstandard items more than the choice of advertised articles. Hence, advertised goods need less promotion at the point of purchase. As a result, the character of both retailing and wholesaling has changed markedly. Sales personnel can be less skilled, and discount houses and self-service stores have become feasible.
Advertising and the size of firms
Defenders of advertising often claim that advertising, by creating mass markets, makes it possible to produce goods at lower unit costs. It is doubtful that this claim is supported by the evidence available. First, many companies that rely heavily on advertising operate plants of different sizes; this is inconsistent with production economies of scale. Second, there are many industries in which a few firms are quite large but which use little advertising; examples of these are to be found primarily among producers of industrial goods. Third, as was noted above, there are some heavily advertised commodities manufactured primarily by small firms; the leading examples are toilet preparations.
There are, however, certain important producers of consumer goods who are heavily dependent on advertising and account for sizable fractions of their industry sales. Examples are producers of breakfast cereals, soaps, automobiles, cigarettes, razors and razor blades, soft drinks, canned soups, baby foods, and distilled liquor. To sum up, there is considerable evidence against the general proposition that advertising, by expanding the market, makes it possible to lower unit costs, and some evidence to support the idea that in some industries, high concentration of output is associated with considerable advertising.
An understanding of the association between advertising and concentration in the industries just cited begins with an examination of the advertising rate schedule. Advertising rates rise as audience increases, but less rapidly. This can give the national advertiser of a given product an advantage over the local advertiser, because the former has a lower promotional cost. The cost advantage to the large firm makes the growth of the small firm more difficult. In addition, sales may rise more rapidly in response to advertising expenditures over some range. If this is true, it reinforces the tendency brought into play by the structure of the advertising rates. For these reasons some firms will make and advertise a large number of consumer goods in order to obtain the savings of largescale advertising. Certain large firms in the food and drug industries owe their size in part to these economies.
Advertising in the Soviet Union
Many of the effects of advertising stand out more clearly in the light of the Soviet Union’s experience with forgoing the use of both trademarks and advertising. Because of adverse experience with this policy, the Soviet Union has come to encourage advertising and the use of brand names. Its reasons for abandoning the old policy and adopting the new are very instructive. First, anonymous producers had less incentive to maintain quality because shoddy goods were not so easily identified by consumers. The government can now shift some of the burden of quality control to factories that are forced to trademark their products and can lose customers if their goods prove unsatisfactory. Second, when advertising is encouraged, information about new goods is disseminated more rapidly, and innovations are stimulated. Because in the past it was not possible to use advertising to generate demand for new products, the incentive to contrive new products was discouraged. Third, a more efficient marketing system, which conserves scarce resources of the state as well as saving the consumer’s time and trouble, is made possible by the use of advertising. Thus, the Soviet Union can now use self-service stores and distribute a given volume of goods with a smaller amount of labor. Goldman (1960) contains a careful account of Soviet advertising experience.
Advertising and the communications industry
In the United States, the broadcasting industry receives virtually all of its revenue from advertisers. Newspapers and periodicals obtain some two-thirds of their revenue from advertising and the balance from sales and subscriptions. Clearly, a substantial part of the entertainment and news provided the public in the United States is paid for directly by advertisers and only indirectly by the public. This creates concern about the quality of the entertainment and the degree to which it reflects the public’s taste. There is, in addition, the question of whether advertising affects freedom of the press. Finally, because most television advertising in the United States is purchased by relatively few companies and only three national networks exist, there are some special problems of economic policy with regard to regulation of the industry.
The public registers its taste for drama and motion pictures directly, by the purchase of tickets to those it likes. Producers have a direct financial incentive to cater to public taste. Although viewers and listeners do not pay directly for radio and television programs, it cannot be doubted that similar considerations guide the producers of these programs. Since advertisers desire large audiences and are willing to pay more for them, producers of radio and television shows have strong incentives to provide what they expect will be popular. The reason the cost of radio and television entertainment is not collected directly from the audience is the economic fact that it is cheaper to collect this cost from advertisers. If certain experiments with closed-circuit television prove successful, direct collection from viewers will make subscription television a profitable enterprise. Yet it is by no means obvious that advertising would be absent from subscription television. People buy magazines and newspapers directly, and both these media contain advertising. Newspapers that did not include advertising have either changed their policy or failed. Aside from the absence of advertising revenue, this suggests that people demand certain kinds of advertising.
There is still more direct evidence that people want certain kinds of advertising. Newspaper advertising rates have always been lower for local advertisers than for national advertisers. Since the cost to a newspaper of local advertising is, if anything, higher than the cost of national advertising, and since national advertisers have several alternatives not available to local advertisers, this phenomenon has mystified students of advertising for a long time. Ferguson (1962) provides an explanation. Most of the local advertising gives newspaper readers information about goods available from local retailers and about the terms of sale. Newspaper readers are as eager to learn about these matters as about news. Hence the more advertising of this kind a newspaper contains, the larger its circulation. Therefore, local advertising rates are lower than those for national advertising, which generally does not have the same stimulus on circulation. Perhaps the communications media would freely carry items as news about consumer goods and services if there were no advertising, just as they now review books and motion pictures.
Partly for these reasons, the more sophisticated critics of advertising take the position that advertisers and television producers cater unduly to popular taste and do not experiment boldly enough with higher art forms. Because there are only three major television networks in the United States and few television channels per city, these critics maintain that the desire to reach a maximum audience leads television producers to undue similarity and slavish imitation of what has proved to be popular. Minority audiences are ignored, and the television fare is reduced to a low, vulgar common denominator. It is one thing to argue that intellectuals cannot find suitable fare on television because it never pays an advertiser to try to attract this audience, an extreme position without empirical support; it is another to argue that serious intellectual programs should be provided during the evening hours and on the days when the potential audience is largest. It would be profitable for advertisers to cater more to minority tastes than they now do if there were more commercial television stations per city and if subscription television became a profitable enterprise. Nevertheless, even if both of these developments occurred and increased variety became possible, it would be naive to expect too much. Since there are fashions in novels and in movies, we should not expect less conformity of television programs.
Both radio and television depend on a relatively small number of firms for a substantial part of their advertising revenue. The 20 largest network television advertisers account for more than 22 per cent of network advertising receipts, and the 20 largest spot television advertisers account for nearly 14 per cent. By way of comparison, the 20 largest newspaper advertisers contribute less than 6 per cent of newspaper advertising revenue. Since there are only three national networks, it is safe to conclude that advertising rates for the largest firms are not arrived at by a purely competitive process. The Federal Communications Commission licenses all television and radio stations and limits the number of stations any one company, or network, may own. The public would benefit more from a larger number of television stations per city than it would from regulation of advertising rates. The development of ultrahigh-frequency (UHF) television, for example, would, by increasing competition, lead to a greater variety of television fare, just as the advent of frequency modulation (FM) radio and the consequent opening up of more radio stations gave listeners a wider range of choice.
Defenders of advertising have claimed as one of its benefits that it makes possible a free press. There can be little doubt that if there could not be advertising in newspapers, the price of newspapers would rise considerably and the circulation would fall—not only for this reason, but also because an important kind of news, advertising, could not be published. Without advertising, broadcasting companies could not survive unless subscription radio and television became profitable. When there is a free press the public can hear a greater variety of views than when the press is controlled by the government. Truth is less easily concealed when conflicting views can be presented to the public. A government that supports and controls the news media, no matter how benevolent it is, cannot be trusted to give as much free expression as would unfettered competition among companies in the news industry, which depend on the public and advertisers for revenue.
Advertising and consumer sovereignty
A convenient assumption in textbooks is that consumers have given, and possibly sacrosanct, tastes and that firms cater to these. As a practical matter this is a myth. People are molded by the opinions and pressures of others from the moment of birth. Our role as consumers begins with what we learn from our parents and continues throughout our lives. Of course, advertisers serve their own interests when they try to get us to buy their wares. However, most people attempting to persuade others are often serving their own interests, and we must learn to be discriminating. A free society requires freedom of persuasion, including attempts to influence how people spend their money. Critics who claim that advertisers lie or induce people to buy things they do not need or to discard goods that are still serviceable overlook the fact that sales clerks can do all this just as effectively; these critics certainly exaggerate the power of advertising. Moreover, they ignore certain mundane but nevertheless important facts about advertising. For every advertiser who tries to persuade consumers to do a particular thing or to buy a particular item, there are others trying to persuade consumers to buy a rival product. In modern industrial society consumers can choose from an ever-increasing and ever-changing array of goods. Wise consumption is difficult under these conditions and demands a degree of skill not required of shoppers in a simpler economy. Efficient distribution in a society of rising real wages requires greater reliance on such labor-saving devices as the self-service store. Advertising is one of the promotional techniques that meets the requirements of efficient distribution. We can expect it to play an ever-increasing role in the developing economies of the world.
Lester G. Telser
Advertising Age: The National Newspaper of Marketing. → Published weekly since 1930.
Blank, David M. 1963 A Note on the Golden Age of Advertising. Journal of Business 36:33–38.
Borden, Neil H. 1942 The Economic Effects of Advertising,. Chicago: Irwin.
Canada, Dominion Bureau of Statistics 1956 Advertising Expenditures in Canada, 1954. Reference Paper No. 67. Prepared by the Merchandising and Services Section, Industry and Merchandising Division, Department of Trade and Commerce. Ottawa: Department of Public Printing and Stationery.
Ferguson, James M. 1962 The Advertising Rate Structure in the Daily Newspaper Industry. Ph.D. dissertation, Univ. of Chicago.
Goldman, Marshall I. 1960 Product Differentiation and Advertising: Some Lessons From Soviet Experience. Journal of Political Economy 68:346–357.
Harris, Ralph; and seldon, Arthur 1962 Advertising and the Public. London: Institute of Economic Affairs.
Kaldor, Nicholas 1950 The Economic Aspects of Advertising. Review of Economic Studies 18:1–27.
Kaldor, Nicholas; and SILVERMAN, RODNEY 1948 A Statistical Analysis of Advertising Expenditure and of the Revenue of the Press. Cambridge Univ. Press.
Katz, Elihu; and Lazarsfeld, Paul F. 1955 Personal Influence: The Part Played by People in the Flow of Mass Communications. Glencoe, III.: Free Press.
Nerlove, Marc; and Arrow, Kenneth J. 1962 Optimal Advertising Policy Under Dynamic Conditions. Economica New Series 29:129–142.
Ozga, S. A. 1960 Imperfect Markets Through Lack of Knowledge. Quarterly Journal of Economics 74:29–52.
Printers’ Ink: The Weekly Magazine of Advertising, Selling, and Marketing. → First published in 1888. Since 1954 one issue each year is a guide to marketing.
Stigler, George J. 1961 The Economics of Information. Journal of Political Economy 69:213–225.
Telser, Lester G. 1962 Advertising and Cigarettes. Journal of Political Economy 70:471–499.
U.S. Federal Trade Commission 1944 Advertising as a Factor in Distribution. Part 5 of Report on Distribution Methods and Costs. Washington: Government Printing Office.
Advertising research is here defined as the study of that part of human behavior attributable to overtly paid-for communications. It is thus distinguished not only from the broader discipline of marketing research but also from kindred studies of aggregate purchasing behavior, economic concomitants of advertising, and communications not always or not overtly paid for. [For discussion of these fields, seeCommunication, mass; Consumers, article onconsumer behavior; Market research; Propaganda.]
As subject matter for the social sciences, advertising remains curiously neglected. Advertising has long been of importance and today accounts for at least one per cent of the national income of most highly industrialized countries (International Advertiser 1965), but it had no important place in economic theory until the 1930s. Advertising accounts for a major share of the promotional expenses of most firms but has not been extensively treated in any but the most recent microeconomic theories of the firm (Ramond 1964c, pp. 662–675). Advertising accounts for an undeniably larger and larger visible and audible part of world culture but as a sociological phenomenon has been described mainly by journalists. Advertising is a much-discussed influence on individual behavior but has interested psychologists only insofar as it can be studied in the experimental laboratory or used to illustrate the clinician’s theories of unconscious motivation. It is hardly surprising that there is no accepted theory of advertising.
The little known about how advertising works comes largely from research done since World War II by advertisers and advertising agencies in the United States, western Europe, and Japan. Most early studies remained unpublished. Until the establishment in 1960 of the Journal of Advertising Research (JAR), there was no means for exchange of ideas among all gatherers or users of this work. Since then some fifty or sixty reports of advertising research are published each year, mainly in the JAR.
Not all this research is beyond criticism. Much of it is done by practitioners whose training in the social sciences and ancillary disciplines has been acquired on the job. In the face of time and cost limitations, methodological standards relax, When this happens, advertising research often merits the charge (Forrester 1958) that it is itself nothing more than advertising.
The primary basis for these political considerations is the organizational structure of the advertising industry. Nowhere in business, perhaps, has accurate evaluation been so inhibited by the organizational structure of the process to be evaluated. Advertising is bought for a manufacturer by an agent, and this agency has usually been responsible for the evaluation of advertising effectiveness. Someone has remarked that this is like having the fuel salesman evaluate the furnace. The fact remains that it has not always been in the best interest of the advertising agency to institute adequate research designed to evaluate advertising effectiveness. The agency has little to gain and much to lose. Instead of such evaluative research, it typically performs only those studies which are necessary to aid its own current decision making and that of the client. Such research is done only when needed and can rarely be accumulated for future guidance. Thus, the ultimate promise of any type of research —its self-liquidation through accumulation of permanent knowledge—is almost by definition denied in the advertising realm.
As most advertising research is designed to aid some decision, it is possible to classify the types of research according to the decision each is designed to help make. For example, decisions about what to say come under the heading of motivation research; decisions about how to say it, under copy research; where, when, and how often to say it, media research; and how much to spend, sales research.
The postwar transition from a war production economy to a consumer economy heightened advertisers’ interest in the motives of their target audiences. By the early 1950s the business community had learned from clinical psychologists that consumers were governed in part by unconscious motives, or at least by motives they had trouble expressing to ordinary interviewers. Depth interviews, projective tests, and the other paraphernalia of the clinical psychologist became popular tools in advertising research. By 1955 the public became interested in whether it was in fact being sold by advertising against its will. Popular books exploited this fear on the part of the book-buying public and ultimately received a quiet rejoinder from more realistic students of human behavior. John Dollard, at the second annual conference of the Advertising Research Foundation, in a frequently anthologized paper entitled “Fear of Advertising,” said: Nor do I fear research into unconscious motives, sometimes called motivation research, as an important factor in mass subversion by advertising. My reasons are as follows: many unconscious motives are stark and ugly and cannot be used in advertising appeals. Furthermore, unconscious motives are tricky; they are likely to come in conflicting pairs of desire and disgust, and one cannot evoke the desirable member of the pair without also evoking its linked opposite. It should be noted also that people are not immediately prone to carry out the unconscious motives which they do have. There are strong forces built into the personality which operate against most unconscious motives. Looking at the matter from a quite different standpoint, it has yet to be proved that unconscious motives can be steadily identified or that, if this were done, they are of superior effect in devising advertising themes. At the moment, the notion of using hidden factors in motivation to influence behavior on a mass scale is still in the status of a bright idea or a horrible fantasy, however you prefer to look at it; but it is not a reliable and valid instrument available to advertisers. (Dollard 1956, p. 7)
As public and professional expectations grew more realistic, motivation research gradually ceased to be regarded as the search for exploitable unconscious motives. Instead it became redefined more modestly as the study of those psychological variables which might be related to the consumer’s purchase of products or services. Put another way, motivation research became the study of relationships between the psychological attributes of a brand or product (its “image”) and the psychological attributes of the consumer (his “personality”). If markets can be segmented, so the argument runs, according to psychological as well as demographic variables, then it should be possible to fashion advertising appeals which are unusually effective in causing sales among the appropriate population segments.
Perhaps the largest body of data on which these hypotheses have ever been tested became available at the J. Walter Thompson advertising agency in 1959, when the Edwards Personal Preference Test was administered to a sample of over three thousand households (Koponen 1960). The Edwards test provided scores on 15 personality traits for the male and female head of each household, while a purchase diary indicated amounts and brands of various products purchased. A prior experiment had shown that a subgroup selected for its scores on certain traits bought more of a mail-order product than did an unselected control group, in response to a direct-mail advertisement using appeals designed specifically to satisfy that particular subgroup’s psychological needs. Neither group bought very much, however, and the results were deemed statistically significant but practically unimportant.
So, in fact, were the relationships found between personality variables and purchase behavior using the J. Walter Thompson data on beer, coffee, tea, and toilet tissue. Although brand loyalty, store loyalty, and amount purchased do correlate significantly with certain demographic and personality traits of the 8,900 subjects in the sample, these correlations are too small to give practical guidance. It seems safe to conclude that until more discriminating personality scales are developed, perhaps for the specific purpose of predicting purchase behavior, psychological market segments will not be significantly more useful to the advertiser than demographic market segments.
Having learned the needs of his prospects and chosen general appeals or themes by which to reach them, the advertiser must then determine how best to execute those themes. Which copy, headlines, illustrations, music, etc., will best communicate his message? Studies answering questions of this sort have traditionally made up the bulk of advertising research and are still called —even in the age of television—copy research.
Reviews and collections of recent copy research appear elsewhere (Lucas & Britt 1963; National Industrial Conference Board 1963; Twedt 1965). The common implication of many of these studies is that the respondent’s verbal testimony about exposure to advertising cannot be taken at face value. Commercial services report the proportion of a sample who on being shown an advertisement claim to have noted it (the recognition method) or who, on being shown a brand advertised in a magazine they have read, can “play back” enough of the advertisement to indicate convincingly that they have in fact seen it (the aided recall method). The simultaneous popularity and questionability of these techniques led to the largest purely methodological investigation ever conducted in copy research, the five-volume Printed Advertising Rating Methods Study, or PARM (Advertising Research Foundation 1956–1957). The PARM study found, among other things, that recognition scores did not decrease as the time since reading increased, as one would expect if memory loss were occurring. This suggests not that the respondent was “recognizing” the advertisement he had actually seen but the likelihood that this was the kind of advertisement he would have noted, given the opportunity. Other studies find that respondents claim to recognize control advertisements that they could not have seen. The extent of misclaiming was directly related to the respondent’s reports of past reading behavior, his interest in the product advertised, and other personal characteristics. It may be concluded that while these claims perhaps have some value as projective data describing the respondent, they are substantially useless as reports of prior exposure.
They may also be useless as predictors of future behavior. Haskins (1964), in a review of 28 studies, has shown that factual recall of advertising can change without corresponding changes in behavior or other attitudes. He concludes that what is retained by respondents may have nothing to do with their subsequent purchases. Ramond (1965) has shown that such failure of attitude change to predict or coincide with behavioral change may be an artifact of the methods commonly used to measure these changes.
As verbal behavior became increasingly suspect, nonverbal behavior became increasingly popular as a measure of copy effectiveness. Laboratory methods, themselves suspect for their artificiality, found increasing favor as they began to measure relatively involuntary responses to advertising. These included visual recognition, skin moisture, pupillary dilation, and even the rate at which someone would press a pedal to maintain a television picture and sound. No measure has been found completely free from conscious cognitive influences, but the trend of current copy research seems to indicate that such is the goal.
Having decided what to say and how to say it, the advertiser must then decide where, when, and how often to say it. Surveys and analyses that guide these decisions are known as media research and have as their aim the selection of the audiences for advertising placed in media. They should not be confused with studies that are intended to determine the audiences of only the media themselves.
A comprehensive bibliography of U.S. media research may be found elsewhere (Ramond 1964a), along with a comparison of U.S. and European approaches. For example, there is much variety and controversy in U.S. media research. In the United States no single method has been hammered out for use in an industry-wide study, whereas this has been done in France, Britain, and Sweden (Ramond 1964b). All of these studies have been influenced by the work of the Advertising Research Foundation’s (ARF) Audience Concepts Committee as expressed in its booklet, Toward Better Media Comparisons (Advertising Research Foundation . . . 1961). The committee maintains that to understand the transmission of advertising through media one must count or measure at six stages: vehicle distribution, vehicle exposure, advertising exposure, advertising perception, advertising communication, and consumer response— usually sales.
Vehicle distribution is a count of things, namely, the number of physical units through which advertising is distributed. In broadcast media these are receiving sets in use; in print media, number of copies sold.
Vehicle exposure is a count of people, those whose open eyes or ears were confronted by the vehicle: for broadcast media, by the ongoing program; for print media, by the open page.
Advertising exposure is a count, not of things or people, but of events. These events are also confrontations of open eyes or ears by a turned-on set or an open page, but only where the set or page is carrying a commercial or advertisement.
The fourth, fifth, and sixth stages of the model are perception, communication, and response. There is both a conceptual and an operational difference between these stages and the previous three.
Distribution and exposure measures can in principle be—and have in practice been—objectively defined to the satisfaction of many if not all. In dealing with perception and communication of advertising, however, we face the problem of separating the effect of the medium from the effect of the advertising message itself. So far no research supplier has come forward with any measure of these stages which is as objective, repeatable, and intuitively compelling as those of distribution and exposure.
Actually, perception and communication may be defined by an infinite number of responses. Though a perception may be defined as that which is seen, heard, or in some way received by a sense organ, our knowledge of whether it has been received must be derived from the response of the receiving person. He must somehow translate his private observation into a public gesture. Reports of recognition, recall, or attitudes are possible classes of responses which might define perception or communication of advertising. But note that whatever definition is used, it will require not only that the consumer see or hear the advertising but also that he remember something about it until he is asked to report it. Thus the number of possible definitions is further multiplied by the number of cues or aids to memory which could be used.
While the ARF Audience Concepts Committee made no recommendations concerning operational definitions of perception and communication, it did suggest a conceptual distinction. Perception is defined as an all-or-none phenomenon: it either occurs or does not occur. There are no degrees of perception.
But communication involves more than merely seeing an advertisement. For example, an advertisement can add to the consumer’s knowledge, change his attitude, or make him resolve to purchase the product advertised. It may change his beliefs, make some more prominent than others, or even evoke moods in which his judgments operate differently. Thus one must recognize degrees of communication. One may merely count perceptions, but one must measure communication in a more complex way. The goal in counting perceptions is to extract from each the effect of memory, but the goal in measuring communication is to learn the degree of remembering. Thus, although perception and communication differ conceptually, in practice they both require measures that isolate and distinguish the effect of advertisement-plusmedium from memory, and the effect of the advertisement from that of the medium.
We now come to the final stage of response to advertising, and from the advertiser’s point of view by far the most important. Response at this stage is necessary to justify any advertising at all. Other measures are satisfactory only insofar as they are related in some way to sales. However, sales are the outcome of a great many factors other than advertising. Not only are the personal factors, the attitudes, beliefs, perceptions, and so forth of each individual important, but external factors such as price, market conditions, changing tastes, etc., are also operative.
Theoretically, the way to estimate the sales response to an advertising unit is to arrange for tests with all factors that could possibly influence sales—except for advertising—held equal or randomized. In one area the advertising unit would be displayed, in the other it would not, and the difference in sales in the two areas would be measured. Practically, experiments of this kind turn out to be very difficult. In the first place, if we try to choose markets that are identical in all the relevant characteristics, we usually find some discrepancy between the markets on a variable which we feel sure will affect the outcome of the experiment decisively. Again, we may list what we think are the relevant variables in order to account for their effects, but we never know whether we have been able to identify them all. Even with an exhaustive list of market variables, we may find that the nature of our advertising unit is such that it may act differently in the two markets because of the different psychological characteristics of their inhabitants, or the differing media habits in the two markets. Perhaps the ultimate objection to research designed to attribute sales gains to single advertising units is the very small effect which any one advertising unit may have. Sales tests have been applied mainly to the evaluation of campaigns, not of individual messages.
No amount of research into motivation, copy, or media will tell the advertiser what, if anything, his advertising has done to influence the sales of his product. For this information he must conduct sales research, wherein he isolates the contribution to sales of his advertising expenditures. Many advertisers have done so, in the United States and elsewhere, despite the difficulties enumerated in the previous section. The most comprehensive recent review and bibliography is Martin Mayer’s booklet for ARF, The Intelligent Man’s Guide to Sales Measures of Advertising (Mayer 1965). Others include Dominick (1960), the National Industrial Conference Board (1962), Palda (1963) and Ramond (1965).
Properly designed marketing experiments are used to avoid many of the above difficulties (Banks 1965). Proper design requires, among other things, that extraneous influences on sales be dealt with: controllable factors should be controlled; uncontrollable but measurable factors should be measured and accounted for statistically in the analysis; and enough experimental units should be used in each treatment to permit accurate estimates of their variability. From experiments published, we may conclude that when the following conditions are met the sales effects of advertising can be estimated with accuracy, speed, and economy:
(1) The product or the brand has no substitute now or in the foreseeable future. The number of competing products or brands is small, and it is unlikely to be made obsolete by technology during the period of experimentation.
(2) The buyers of the product or brand (a) can be unambiguously defined; (b) can be easily reached by advertising and interviewers; (c) are geographically concentrated; (d) are temporally concentrated—the shorter the selling season the better; (e) spend little time “in the market.”
(3) The lot size of the purchase is constant from purchase to purchase by the same buyer and the same from buyer to buyer.
(4) Price is constant over time, markets, amount purchased, etc.
(5) Channels of distribution are many. The more channels of distribution to the consumer the less likely he will be frustrated in an advertisinginduced attempt to buy.
(6) Levels of distribution are few. The more wholesalers, dealers, and distributors there are between producer and consumer, the more individuals who must decide before purchase can occur, and the more individuals who must be influenced by advertising.
(7) The influence of personal selling is constant over time and over markets.
(8) Technical services provided by competitors do not differ.
(9) The copy platform is constant and unambiguous. The fewer the copy points, the easier it is to tell if communication has occurred.
(10) Special promotions are not undertaken. (11) Packaging is distinctive and constant. (12) The producer is the only advertiser of the brand, i.e., there is no cooperative or local advertising.
(13) Competitors are slow to respond to changes in marketing strategy and maintain more or less the same marketing policies.
(14) Competitors’ advertising and marketing policies are relatively constant over markets.
(15) Potential sales can be accurately estimated for small geographical units, e.g., counties or census tracts, and during short time periods such as weeks or months. This follows from several of the previous desiderata.
(16) Government controls over product design, price, competition, and advertising are minimal or at least unchanging.
Clearly not all of these conditions can be met by most advertisers. Meeting them, moreover, does not guarantee a conclusive experiment but only the avoidance of certain common errors. Experimentation is increasingly popular, not because it always works, but because in many cases it is the only way to have a chance of getting unambiguous measures. In marketing as elsewhere in business, chance plays its inevitable role. Part of this role, however, can be made manifest by the experiment itself.
As published experiments accumulate, the conditions under which the sales effects of advertising can be accurately estimated will become clearer. Until then the prudent advertiser will determine for himself whether his own circumstances augur well or ill for this valuable form of marketing control.
Charles K. Ramond
Advertising Research Foundation 1956–1957 A Study of Printed Advertising Rating Methods. 5 vols. New York: The Foundation.
Advertising Research Foundation, Audience Concepts Committee 1961 Toward Better Media Comparisons. New York: The Foundation.
Advertising Research Foundation 1965 Are There Consumer Types? New York: The Foundation.
Banks, Seymour 1965 Experimentation in Marketing. New York: McGraw-Hill.
Dollard, John 1956 Fear of Advertising. Pages 1-9 in Advertising Research Foundation, Proceedings of the Second Annual Conference. New York: The Foundation.
Dominick, Bennet A. 1960 Research in Retail Merchandising of Farm Products: Appraisal of Methods and Annotated Bibliography. Washington: U.S. Department of Agriculture, Market Development Research Division, Agricultural Marketing Service.
Forrester, Jay W. 1958 The Relationship of Advertising to Corporate Management. Pages 75–92 in Advertising Research Foundation, Proceedings of the Fourth Annual Conference. New York: The Foundation.
Haskests, Jack B. 1964 Factual Recall as a Measure of Advertising Effectiveness. Journal of Advertising Research 4, no. 1:2–8.
HRB-Singer, Inc., State College, Pennsylvania 1962 The Measurement and Control of the Visual Efficiency of Advertisements. New York: Advertising Research Foundation.
International Advertiser. → See especially 1965, Volume 6, no. 10.
Koponen, Arthur 1960 Personality Characteristics of Purchasers. Journal of Advertising Research 1:6–12.
Lucas, Darrell B.; and Britt, Steuart H. 1963 Measuring Advertising Effectiveness. New York: McGraw-Hill.
Mayer, Martin 1961 The Intelligent Man’s Guide to Broadcast Ratings. New York: Advertising Research Foundation.
Mayer, Martin 1965 The Intelligent Man’s Guide to Sales Measures of Advertising. New York: Advertising Research Foundation.
National Industrial Conference Board 1962 Measuring Advertising Results. By Harry D. Wolfe et al. New York: The Board.
National Industrial Conference Board 1963 Pretesting Advertising. By Harry D. Wolfe et al. New York: The Board.
Palda, Kristian S. 1963 Sales Effects of Advertising: A Review of the Literature. Journal of Advertising Research 4, no. 3:12–16.
Ramond, Charles K. 1964a Operations Research in European Marketing. Journal of Marketing Research 1, no. 1:17–24.
Ramond, Charles K. 1964b Trends in U.S. Media Research. European Society for Opinion Surveys and Market Research, Commentary (Special Supplement): 35–43.
Ramond, Charles K. 1964c Marketing Science: Stepchild of Economics. Pages 662-675 in Stephen Greyser (editor), The Marketing Concept in Action. Chicago: American Marketing Association.
Ramond, Charles K. 1965 Must Advertising Communicate to Sell? Harvard Business Review 43, no. 5:148–158.
Twedt, Dik Warren 1965 Consumer Psychology. Annual Review of Psychology 16:265–294.
"Advertising." International Encyclopedia of the Social Sciences. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/advertising
"Advertising." International Encyclopedia of the Social Sciences. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/advertising
Over the course of the twentieth century, child consumers have played an increasingly important role in the economies of developed nations. Children's consumer clout is especially pronounced in the United States, where, according to early-twenty-first-century estimates, children spend or influence the spending of up to $500 billion annually. Advertisers in turn spend hefty sums to capture the consumer allegiance and nagging power of children. Thanks to the power of television, advertising to children in the twenty-first century has become a ubiquitous practice across the globe. It is, however, by no means a recent phenomenon.
A market for children's goods–books, toys, clothing, and furniture–had existed since at least the eighteenth century, but market awareness of children as consumers first emerged in the United States during the 1870s and 1880s, when national advertisers began supplying retailers with colorful trade cards and advertising jingle books based on parodies of Mother Goose rhymes. Corporations hoped that child shoppers would digest the advertising messages on the backs of trade cards and bring the advertisements to their mothers' attention, but advertisers' primary goal was to stimulate sales at the point of purchase. If a mother had neglected to specify a brand when she sent her child on a shopping errand, an alluring trade card displayed on a store countertop might decide the issue. Children prized trade cards for their luxurious color images–a novelty made possible by advances in chromolithography printing. Collecting the cards in scrapbooks was a favorite childhood pastime, especially among girls. Advertisers encouraged this hobby by producing a set or series of collectible trade cards, and children reveled in the status that an unusual card or fine collection conferred on its owner.
At the turn of the twentieth century, the advertising trade largely dismissed children as members of the buying public, but readily embraced the notion that children constituted the future buyers of tomorrow. Theorists of advertising psychology such as Walter Dill Scott argued that buying was in-fluenced less by rational arguments than by unconscious decision making, including "suggestions" that advertisers implanted in the consumer's mind. The plasticity of young minds, Scott surmised, made children especially valuable targets of advertising. If repeatedly exposed to trademarks and brand names, children could, imperceptibly and unconsciously, acquire brand preferences that would last a lifetime.
Such psychological insights hardly constituted a revolution in children's advertising, but they did suggest, contrary to what some Victorians supposed, that the concept of a sheltered childhood was not inherently at odds with children's exposure to the world of commerce. The whole notion that children possessed a consumer consciousness long before they possessed purchasing power circulated broadly in turn-of-the-century advertising iconography. In magazine advertisements and trade cards read by adults and children alike, admakers depicted children as product endorsers, discriminating shoppers, and voracious consumers. These images traded on new cultural ideals of childhood that prized children as much for their spunk and savvy as their innocence.
These middle-class cultural ideals of the spunky child paved the way for even bolder departures in advertising during the 1920s. By then, advertisers conceived of middle-class children not just as buyers of tomorrow but as buyers of today and selling agents within the home. They recognized children as a more definable and viable group of consumers partly because modern childhood itself had become more organized around peer activities. Compulsory schooling, agesegregated classrooms, and the rise of youth organizations like the Boy Scouts and the Girl all elevated the salience of peer interactions. The fact that the Boy Scouts, Girl Scouts, and Camp Fire Girls published their own magazines provided advertisers a ready means of reaching boys and girls with common interests. Indeed, advertisers frequently capitalized on these peer affiliations by suggesting that their products could be used to earn scouting merit badges or enhance camping experiences. Transformations within the middle-class family also contributed to advertisers' enthusiasm for cultivating child consumers. Owing partly to their own middle-class backgrounds, admen and adwomen sensed new opportunities in the democratization of the urban middle-class companionate family, which unlike its Victorian predecessor, granted children greater latitude for self-expression and, in many cases, their own allotment of spending money.
Children's magazine publishers such as St. Nicholas, Boy's Life, and American Boy played an important role in promoting advertising to children as a worthy long-term and short-term investment. American Boy placed numerous ads in advertising trade journals, touting the exuberance of boy consumers and their influence over family purchasing, thanks in part to boys' expertise on new consumer technologies such as cars, radios, cameras, and batteries. AmericanBoy 's promotional efforts paid off handsomely. During the mid-1910s, American Boy began to swell with ads for bicycles, erector sets, rifles, and breakfast cereals. By 1920 annual advertising revenues for the magazine had reached half a million dollars. By the middle of that decade, American Girl and Everygirl's, magazines published respectively by the Girl Scouts and the Camp Fire Girls, had also attracted advertisers who sought both to cultivate the loyalty of future housewives and to boost present sales.
In the early twentieth century, advertisers and magazine publishers alike initiated numerous games, contests, and educational ventures to teach children an appreciation of advertising and train them in brand-conscious shopping. Publishers' investment in this project was at least as deep as advertisers' because magazines now depended more on advertising revenues than subscription sales for their survival. To gain credibility as a profitable advertising medium, American Boy and Scholastic, the national weekly for secondary school students, ran a series of columns explaining why their readers should trust in advertisers and the superior economic value of advertised goods over unbranded goods. Juvenile magazine publishers also won advertisers' confidence by sponsoring contests and games that trained children to pay close attention to advertising.
The public schools provided advertisers with another promising venue for raising brand consciousness. Though ostensibly limited by the conventional boundaries of the school curriculum, advertisers spared little effort in getting their messages into the classroom and via the classroom into the home. They offered free booklets, exhibits, charts, and other "enrichment" materials that promised to transform run-of-the-mill lessons into livelier fare. Because restrictive school budgets often curtailed the use of visual aids, teachers and teaching organizations proved remarkably receptive to corporate-sponsored innovations in the curriculum. In the late 1920s, for example, teachers in some 70,000 schools across the country used Cream of Wheat's graded contest devices, prizes, and breakfast charts to encourage regular consumption of hot breakfast cereals. Although editorialists criticized advertisers for diverting "school facilities to its own selfish purposes," schools provided no substantive counterpoint to the claims of modern advertising until the mid-1930s, when the consumer education movement got underway.
Early-twentieth-century juvenile advertisers struggled to strike the right balance in addressing children's desires and parents' concerns. Overt parental appeals that linked children's consumption to nutrition and achievement often appeared in children's advertising. Yet juvenile advertising in the 1920s and 1930s was remarkably bold in its efforts to empower children within a consumer democracy. Advertisements in children's magazines literally instructed children how to lobby their parents for new purchases, supplying them with sales ammunition that appealed to pressing parental concerns. While Canadian broadcast advertising trade guidelines in the 1970s advised advertisers not to "directly urge children to… ask their parents to make inquiries or purchases," early-twentieth-century American advertisers exhibited no such compunctions (quoted in Kline 1993). With boldfaced headlines like "Please–Father–Please," advertisements routinely sanctioned begging and the old childhood standby–buttering up mom and dad.
During the interwar years, advertisers also sought to cultivate children's consumer loyalty and interest by addressing their concerns about popularity and personal appearance. As high school enrollments ballooned and adolescents began spending more time in the company of their peers, adjusting to the norms and expectations of age-based peers became an adolescent preoccupation. Even as they presented purchasable solutions to problems of peer approval and image control, advertisers exacerbated adolescent insecurities by reminding teens of their susceptibility to impersonal judgments. Advertisements for products like Postum cereal and Keds shoes encouraged a greater preoccupation with physical appearance in both boys and girls, but advertisers' messages to girls were especially contradictory. They celebrated the athletic girl as emblematic of the post-Victorian gender freedoms modern girls enjoyed, but they narrowed the scope of feminine aspirations and feminine achievement by making peer acceptance and beauty, rather than athletic performance, the ultimate rewards of bodily discipline. If girls purchased their product, advertisers repeatedly counseled, they were sure to garner more dates–a reassuring promise in the newly emerging public culture of dating, where popularity was measured by the frequency and variety of dates one commanded.
With the advent of children's radio programs in the 1930s, advertisers, no longer limited to the typically urban, middle- and upper-middle-class readers of juvenile magazines, made children's consumer culture a truly national phenomenon. Millions of Depression-era children satisfied yearnings for autonomy and recognition when they joined radio-inspired clubs like Little Orphan Annie's Secret Circle or Post Toasties' Junior Detective Corps and received "free" premiums in exchange for proofs of purchase. Armed with secret passwords, decoding devices, and mysterious languages impervious to adult comprehension, children embraced the privileges of club memberships as a road to empowerment. Membership in such clubs, however, also afforded many children their first lessons in consumer disappointment, when long-awaited premiums failed to live up to advertisers' hype. Children exercised their own limited form of consumer payback in choosing cash contest prizes over dubious premiums and in mocking exaggerated advertising claims. Though some parents complained about broadcasters' advertising excesses, including their practice of inserting ad pitches into story lines, radio paved the way for perhaps even greater advertising intrusions in the television age.
During the postwar years, the spread of affluence and permissive child rearing in the United States gave children greater economic power, while the advent of television gave advertisers new means to reach children en masse. Despite some initial doubts about television's viability as an advertising medium, advertisers enthusiastically took to the airwaves once they became convinced that popular programs like The Howdy Doody Show and The Mickey Mouse Club could deliver a captivated audience. Radio, however, still had the greater impact on the youth market, as baby boomers accounted for eighty percent of rock and roll record sales during the 1950s.
Advertisers' investment in nurturing children's consumer appetites grew along with the expansion of children's own discretionary funds. In 1960, according to a survey by Seventeen magazine, the average teenage girl had a weekly income of $9.53. By 1999, the typical weekly allowance for thirteen-to fifteen-year-olds ranged from $30.50 to $34.25, with girls receiving on average three to four dollars more than boys. Supplementary earnings typically doubled the weekly yield for teenage boys and girls. Though younger children aged ten to twelve received only a modest five to six dollar boost to their weekly income from earnings, allowances on average swelled their weekly take by an additional twenty-one to twenty-two dollars. According to one 1996 estimate, allowances accounted for more than a third of the $89 billion in spending money at children's disposal. Children's collective consumer clout was weighty, indeed.
In the last two decades of the twentieth century, the barriers between children and the market all but disappeared in the United States. Not only did children's media consumption become more difficult to monitor in families with both parents in the workforce–now the American norm–but parental restraints became more difficult to enforce. Parental acquiescence, of course, also contributed to the commercialization of childhood. Advertisers' work was made easier when many American children enjoyed personal televisions and computers with Internet access in their own private bedrooms. Still, the most vigilant parents could at best exercise limited control over children's exposure to commercial messages. Even in public schools, a morning viewing of the Channel One news service exposed children to a daily dose of commercials along with reports on current events. Indeed, what began as a marriage of convenience between under-funded public schools and advertisers in the 1920s grew into a virtually irresistible collaboration, thanks to the anti-tax movement of the last quarter of the twentieth century and voters' reluctance to approve school bond measures. Cash-strapped public schools welcomed the additional revenues– an exclusive contract with soda companies could net millions, while a restricted arrangement with a computer company could yield a new supply of "free" computers. In return for their largesse, corporations were rewarded with an advertising venue that reached masses of children far more cheaply than television.
Children's advertisers have added some new spices to old recipes for marketing success. The tradition of weaving product endorsements into children's entertainment programming, a technique first perfected on radio, was taken to new lengths with the advent of toy-based television programs like The Smurfs, Strawberry Shortcake, and He-Man in the 1980s–a marketing ploy the toy industry cynically defended by asserting that children needed preformulated story lines to help them play. This strategy also harkened back to the Depression-ridden 1930s, when toymakers revitalized sagging sales by creating licensed character toys that revolved around children's celebrity idols such as Mickey Mouse, Shirley Temple, Buck Rogers, and Superman.
Much like their early twentieth-century predecessors, contemporary marketers judge the effectiveness of children's advertising by the so-called "nag factor"–the aim being to maximize the nag until the parental gatekeeper yields. But where earlier advertisers were more cautious about upsetting the balance of power within the family–winning parental goodwill, after all, was the goal of winning juvenile good-will–late twentieth- and early twenty-first century advertisers have pushed the limits of those boundaries. The promises of self-improvement and edification that appeased previous generations of parents have given way to a children's advertising culture in which hedonism, antiauthoritarianism, and kid power reign supreme. Today's kids, as Ellen Seiter puts it, are "sold separately," with appeals designed more to increase the nag factor than to placate the parental gatekeeper.
To acknowledge contemporary marketers' greater investment in creating a distinct children's fantasy culture, however, is not to romanticize the early twentieth century as some utopian moment in children's consumer culture. Far from it. The Pokemon fad of the 1990s, in fact, can be viewed as a direct descendant of the children's radio clubs of the 1930s. Just as the promise of special premiums from Little Orphan Annie and Jack Armstrong got children to pester their parents for more Cocomalt or Wheaties, the Pokemon craze led children to plead for the precious trading cards that would help them capture all 150 Pokemon characters, the mythical "pocket monster" creatures featured in the popular animated kids' television show and video game. While in each case clever market tie-ins with radio idols or popular television shows provided the building blocks for the craze, the appeal of joining a distinct kids' world fueled the fad. Radio club members decoded secret messages to which only their peers were privy, while Pokemon traders became experts in Pokemon lore, memorizing the names, special fighting skills, and point values of each Pokemon.
In the decades since the 1950s, this privileging of children's culture has contributed to greater age segmentation within the children's market. The often fuzzy distinctions between teenagers and children that typified advertising in the interwar years have evolved into clearly delineated categories ranging from toddlers to kids to 'tweens to teens. Marketers also expend more time and money gathering data about their various child audiences. Information formerly gleaned from contest data, children's advertising testimonials, and a smattering of personal interviews now comes to advertising agencies through the more scientific channels of surveys and focus groups. During the 1990s, advertisers found more deceitful means to acquire information about children's tastes by requiring children to provide critical personal data–including name, sex, age, e-mail address, favorite television show, and favorite musical group–before they could enter certain websites. In response to indignant parents and media watch groups, the Federal Trade Commission made it illegal in 1998 to solicit personal information from preteens online without parental permission. Nevertheless, children's advertisers still hold high hopes that the Internet's virtual mall might become as popular a hangout as the neighborhood shopping mall.
Although politicians and consumer advocacy groups have pressured media companies and advertising firms to exercise more restraint and responsibility in promoting violent products and films to children, these limited external controls have done little to rein in a capitalist culture resistant to infringements on free markets and commercial free speech. Indeed, savvy child consumers themselves have discovered avenues of resistance only within the parameters of consumerism itself. One of these avenues is Zillions, a magazine for kids published by Consumer Reports that teaches children the basics of product testing and comparative shopping. Children have also turned consumerism into a language of protest, marketing their own anticorporate sentiments through self-styled Internet zines (self-published magazines) and fashions. Yet such protests have not prevented advertisers from extending their global message. Thanks to rapid commercialization and China's one-child-only birth control policy, Shanghai's singletons have become sufficiently acculturated to consumer abundance and global tastes that they readily grasped the moral dilemma of Toy Story –a Disney tale, told from the perspective of animated toys, about how easily children lose interest in a favorite old toy when a new one arrives. Consumerism paradoxically allows children more control over fashioning independent identities, but it also increasingly binds them to a global commercial culture.
See also: Consumer Culture; Media, Childhood and the.
Cross, Gary. 1997. Kids' Stuff: Toys and the Changing World of American Childhood. Cambridge, MA: Harvard University Press.
Davis, Deborah S., and Julia S. Sensenbrenner. 2000. "Commercializing Childhood: Parental Purchases for Shanghai's Only Child." In The Consumer Revolution in Urban China, ed. Deborah S. Davis, pp. 54-79. Berkeley: University of California Press.
Forman-Brunell, Miriam. 1993. Made to Play House: Dolls and the Commercialization of American Girlhood, 1830-1930. New Haven, CT: Yale University Press.
Garvey, Ellen. 1996. The Adman in the Parlor: Magazines and the Gendering of Consumer Culture, 1880s to 1910s. New York: Oxford University Press.
Jacobson, Lisa. Forthcoming. Raising Consumers: Children, Child-rearing, and the American Mass Market in the Early Twentieth Century. New York: Columbia University Press.
McNeal, James. 1987. Children as Consumers: Insights and Implications. Lexington, MA: Lexington Books.
Palladino, Grace. 1996. Teenagers: An American History. New York: Basic Books.
Seiter, Ellen. 1993. Sold Separately: Parents and Children in Consumer Culture. New Brunswick, NJ: Rutgers University Press.
"Advertising." Encyclopedia of Children and Childhood in History and Society. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/children/encyclopedias-almanacs-transcripts-and-maps/advertising
"Advertising." Encyclopedia of Children and Childhood in History and Society. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/children/encyclopedias-almanacs-transcripts-and-maps/advertising
Advertising is often thought of as the paid, nonpersonal promotion of a cause, idea, product, or service by an identified sponsor attempting to inform or persuade a particular target audience. Advertising has taken many different forms since the beginning of time. For instance, archaeologists have uncovered walls painted in Rome announcing gladiator fights as well as rock paintings along Phoenician trade routes used to advertise wares. From this early beginning, advertising has evolved to take a variety of forms and to permeate nearly every aspect of modern society.
The various delivery mechanisms for advertising include banners at sporting events, billboards, Internet Web sites, logos on clothing, magazines, newspapers, radio spots, and television commercials. Advertising has so permeated everyday life that individuals can expect to be exposed to 1,500 to 3,000 different messages each day. While advertising may seem like the perfect way to get a message out, it does have several limitations, the most commonly noted ones being its inability to focus on an individual consumer's specific needs, provide in-depth information about a product, and be cost-effective for small companies.
FORMS OF ADVERTISING
Advertising can take a number of forms, including advocacy, comparative, cooperative, direct mail, informational, institutional, outdoor, persuasive, product, reminder, point-of-purchase, and specialty advertising.
Advocacy advertising is normally thought of as any advertisement, message, or public communication regarding economic, political, or social issues. The advertising campaign is designed to persuade public opinion regarding a specific issue important in the public arena. The ultimate goal of advocacy advertising usually relates to the passage of pending state or federal legislation. Almost all nonprofit groups use some form of advocacy advertising to influence the public's attitude toward a particular issue.
One of the largest and most powerful nonprofit advocacy groups is the American Association of Retired Persons (AARP). The AARP fights to protect social programs such as Medicare and Social Security for senior citizens by encouraging its members to write their legislators, using television advertisements to appeal to emotions, and publishing a monthly newsletter describing recent state and federal legislative action. Other major nonprofit advocacy groups include the environmental organization Green-peace, Mothers against Drunk Driving, and the National Rifle Association.
Comparative advertising compares one brand directly or indirectly with one or more competing brands. This advertising technique is very common and is used by nearly every major industry,
including airlines and automobile manufacturers. One drawback of comparative advertising is that customers have become more skeptical about claims made by a company about its competitors because accurate information has not always been provided, thus making the effectiveness of comparison advertising questionable. In addition, companies that engage in comparative advertising must be careful not to misinform the public about a competitor's product. Incorrect or misleading information may trigger a lawsuit by the aggrieved company or regulatory action by a governmental agency such as the Federal Trade Commission (FTC; see the FTC's statement of policy regarding comparative advertising at http://www.ftc.gov/bcp/policystmt/ad-compare.htm).
Cooperative advertising is a system that allows two parties to share advertising costs. Manufacturers and distributors, because of their shared interest in selling the product, usually use this cooperative advertising technique. An example might be when a soft-drink manufacturer and a local grocery store split the cost of advertising the manufacturer's soft drinks; both the manufacturer and the store benefit from increased store traffic and its associated sales. Cooperative advertising is especially appealing to small-store owners who, on their own, could not afford to advertise the product adequately. For examples of cooperative advertising programs, see the John Wiley & Sons, Inc. (http://www.wiley.com/WileyCDA/Section/id-10671.html) and the New Mexico Department of Tourism (http://www.newmexico.org/go/loc/department/page/dept-coop-advertising.html) Web sites.
Brochures, catalogs, flyers, letters, and postcards are just a few of the direct-mail advertising options. Direct-mail advertising has several advantages, including detail of information, personalization, selectivity, and speed. But while direct mail has advantages, it carries an expensive per-head price, is dependent on the appropriateness of the mailing list, and is resented by some customers, who consider it junk mail.
In informational advertising, which is used when a new product is first being introduced, the emphasis is on promoting the product name, benefits, and possible uses. Thus, informational advertising is used early in the product life cycle. Car manufacturers used this strategy when sport-utility vehicles were first introduced.
Institutional advertising takes a broad approach to advertising, concentrating on the benefits, concept, idea, or philosophy of a particular industry. Companies often use it to promote image-building activities, such an environmentally friendly business practices or new community-based programs that it sponsors. Institutional advertising is closely related to public relations, since both are interested in promoting a positive image of the company to the public. As an example, a large lumber company may develop an advertising theme around its practice of planting trees in areas where they have just been harvested. A theme of this nature keeps the company's name in a positive light with the general public because the replanting of trees is viewed positively by most people. For example, the idea that "The Future Is Growing," is noted on the Weyerhaeuser (http://www.weyerhaeuser.com) Web site.
Billboards and messages painted on the sides of buildings are common forms of outdoor advertising, which is often used when quick, simple ideas are being promoted. Since repetition is the key to successful promotion, outdoor advertising is most effective when located along heavily traveled city streets and when the product being promoted can be purchased locally. Only about 1 percent of advertising is conducted in this manner. For more information on outdoor advertising, see the Lamar Advertising Company Web site at http://www.lamaroutdoor.com/main/home/default.cfm. Lamar Advertising Company is among the largest in the United States.
Persuasive advertising is used after a product has been introduced to customers. The primary goal is for a company to build selective demand for its product. For example, automobile manufacturers often produce special advertisements promoting the safety features of their vehicles. This type of advertisement could allow automobile manufacturers to charge more for their products because of the perceived higher quality the safety features afford. Both Ford Motor Company (http://www.ford.com) and General Motors Corporation (http://www.gm.com) provide extensive information regarding product safety on their Web sites.
Product advertising pertains to nonpersonal selling of a specific product. An example is a regular television commercial promoting a soft drink. The primary purpose of the advertisement is to promote the specific soft drink, not the entire soft-drink line of a company.
Reminder advertising is used for products that have entered the mature stage of the product life cycle. The advertisements are simply designed to remind customers about the product and to maintain awareness. For example, detergent producers spend a considerable amount of money each year promoting their products to remind customers that their products are still available and for sale. Reminder advertising is often used during the maturity stage of the product life cycle.
Point-of-purchase advertising uses displays or other promotional items near the product that is being sold. The primary motivation is to attract customers to the display so that they will purchase the product. Stores are more likely to use point-of-purchase displays if they have help from the manufacturer in setting them up or if the manufacturer provides easy instructions on how to use the displays. Thus, promotional items from manufacturers who provide the best instructions or help are more likely to be used by the retail stores. For more information regarding point-of-purchase advertising, see the Point-of-Purchase Advertising International Web site (http://www.popai.com//AM/Template. cfm?Section=Home).
Specialty advertising is a form of sales promotion designed to increase public recognition of a company's name. A company can have its name put on a variety of items, such as caps, glassware, gym bags, jackets, key chains, and pens. The value of specialty advertising varies depending on how long the items used in the effort last. Most companies are successful in achieving their goals for increasing public recognition and sales through these efforts. For more information about specialty advertising, see the Specialty Advertising Association of California Web site (http://www.SAAC.net).
The objectives of advertising are to reach specific customers during a particular time frame and get them to buy a particular product. A company that advertises usually strives to achieve one of four types of advertising objectives: trial, continuity, brand switching, and switchback. Which of the four advertising objectives is selected usually depends on where the product is in its life cycle.
The purpose of the trial objective is to encourage customers to make an initial purchase of a new product. Companies will typically employ creative advertising strategies in order to cut through other competing advertisements. The reason is simple—without that first trial of a product by customers, there will not be any repeat purchases.
Continuity advertising is a strategy to keep current customers using a particular product. Existing customers are targeted and are usually provided new and different information about a product that is designed to build consumer loyalty.
Companies adopt brand switching as an objective when they want customers to switch from competitors' brands to their brands. A common strategy is for a company to compare product price or quality in order to persuade customers to switch to its product brand.
Companies subscribe to this advertising objective when they want to get back former users of their product brand. A company might highlight new product features, price reductions, or other important product information in order to get former customers of its product to switch back.
Once an advertising objective has been selected, companies must then set an advertising budget for each product. Developing such a budget can be a difficult process because brand managers want to receive a large resource allocation to promote their products. Overall, the advertising budget should be established so as to be congruent with overall company objectives. Before establishing an advertising budget, companies must take into consideration other market factors, such as advertising frequency, competition and clutter, market share, product differentiation, and stage in the product life cycle.
Advertising frequency refers to the number of times an advertisement is repeated during a given period to promote a product's name, message, and other important information. A larger advertising budget is required in order to achieve a high advertising frequency. Estimates have been put forward that a consumer needs to come in contact with an advertising message three times before it will be remembered.
Competition and Clutter
Highly competitive product markets, such as the soft-drink industry, require higher advertising budgets just to stay even with competitors. If a company wants to be a leader in an industry, then a substantial advertising budget must be earmarked every year. Examples abound of companies that spend billions of dollars on advertising in the United States alone in order to be key players in their respective industries (e.g., Ford Motor Company, Johnson & Johnson, and McDonald's Corporation).
Desired market share is also an important factor in establishing an advertising budget. Increasing market share normally requires a large advertising budget because a company's competitors frequently counterattack with their own advertising blitz. For example, when General Motors Corporation initiated an employee pricing for everyone campaign, both DaimlerChrysler and Ford Motor Corporation established similar offers. Successfully increasing market share depends on advertisement quality, competitor responses, and product demand and quality.
How customers perceive products is also important to the budget-setting process. Product differentiation is often necessary in competitive markets where customers have a hard time differentiating between products. For example, product differentiation might be necessary when a new laundry detergent is advertised. Since so many brands of detergent already exist, an aggressive advertising campaign would be required. Without this aggressive advertising, customers would not be aware of the product's availability and how it differs from other products on the market. The advertising budget is higher in order to pay for the additional advertising.
Stage in the Product Life Cycle
New product offerings require considerably more advertising to make customers aware of their existence. As a product moves through the product life cycle, fewer and fewer advertising resources are needed because the product has become known and has developed an established buyer base. Advertising budgets are typically highest for a particular product during the introduction stage and gradually decline as the product matures.
SELECTING THE RIGHT ADVERTISING APPROACH
Once a company decides what type of specific advertising campaign it wants to use, it must decide what approach should carry the message. A company must decide on such items as frequency, media impact, media timing, and reach.
Frequency refers to the average number of times that an average consumer is exposed to the advertising campaign. A company usually establishes frequency goals, which can vary for each advertising campaign. For example, a company might want to have the average consumer exposed to the message at least six times during the advertising campaign. This number may seem high, but in a crowded and competitive market, repetition is one of the best methods to increase the product's visibility and to increase company sales. The more exposure a company desires for its product, the more expensive the advertising campaign. Thus, often only large companies can afford to have high-frequency advertisements during a campaign.
Media impact generally refers to how effective advertising will be through the various media outlets (e.g., television, Internet, print). A company must decide, based on its product, the best method to maximize consumer interest and awareness. For example, a company promoting a new laundry detergent might fare better with television commercials rather than simple print ads because more consumers are likely to see the television commercial. Similarly, a company such as Mercedes-Benz, which markets expensive products, might advertise in specialty car magazines to reach a high percentage of its potential customers. Before any money is spent on any advertising media, a thorough analysis is done for each one's strengths and weaknesses in comparison to the cost. Once the analysis is done, the company will decide which media outlet is best to use and will embark on its advertising campaign.
Another major consideration for any company engaging in an advertising campaign is when to run the advertisements. For example, some companies run ads during the holidays to promote season-specific products. The other major consideration for a company is whether it wants to employ a continuous or pulsing pattern of advertisements. Continuous refers to advertisements that are run on a scheduled basis for a given period. The advantage of this tactic is that an advertising campaign can run longer and might provide more exposure over time. For example, a company could run an advertising campaign for a particular product that lasts years with the hope of keeping the product in the minds of customers.
Pulsing indicates that advertisements will be scheduled in a disproportionate manner within a given time frame. Thus, a company could run thirty-two television commercials over a three- or six-month period to promote the specific product is wants to sell. The advantage with the pulsing strategy is twofold. The company could spend less money on advertising over a shorter period but still gain the same recognition because the advertising campaign is more intense.
Reach refers to the percentage of customers in the target market who are exposed to the advertising campaign for a given period. A company might have a goal of reaching at least 80 percent of its target audience during a given time frame. The goal is to be as close to 100 percent as possible, because the more the target audience is exposed to the message, the higher the chance of future sales.
Once the advertising campaign is over, companies normally evaluate it compared to the established goals. An effective tactic in measuring the usefulness of the advertising campaign is to measure the pre- and post-sales of the company's product. In order to make this more effective, some companies divide up the country into regions and run the advertising campaigns only in some areas. The different geographic areas are then compared (advertising versus nonadvertising), and a detailed analysis is performed to provide an evaluation of the campaign's effectiveness. Depending on the results, a company will modify future advertising efforts in order to maximize effectiveness.
Advertising is the paid, nonpersonal promotion of a cause, idea, product, or service by an identified sponsor attempting to inform or persuade a particular target audience. Advertising has evolved to take a variety of forms and has permeated nearly every aspect of modern society. The various delivery mechanisms for advertising include banners at sporting events, billboards, the Internet, logos on clothing, magazines, newspapers, radio spots, and television commercials. While advertising can be successful at getting the message out, it does have several limitations, including its inability to focus on an individual consumer's specific needs, provide in-depth information about a product, and be cost-effective for small companies. Other factors, such as objectives, budgets, approaches, and evaluation methods must all be considered.
see also Advertising Agencies; Promotion
Boone, Louis E., and Kurtz, David L. (2005). Contemporary marketing 2006 (12th ed.). Eagan, MN: Thomson South-Western.
Brierley, S. (2002). The advertising handbook (2nd ed.). New York: Routledge.
Churchill, Gilbert A., Jr., and Peter, Paul J. (1998). Marketing: Creating value for customers (2nd ed.). New York: Irwin McGraw-Hill.
Farese, Lois, Kimbrell, Grady, and Woloszyk, Carl (2002). Marketing essentials (3rd ed.). Mission Hills, CA: Glencoe/McGraw-Hill.
Kotler, Philip, and Armstrong, Gary (2006). Principles of marketing (11th ed.). Upper Saddle River, NJ: Pearson Prentice-Hall.
Pride, William M., and Ferrell, O. C. (2006). Marketing concepts and strategies. New York: Houghton Mifflin.
Richards, Barry, MacRury, Iain, and Botterill, Jackie (2000). The dynamics of advertising. Amsterdam: Harwood Academic.
Semenik, Richard J., and Bamossy, Gary J. (1995). Principles of marketing: A global perspective (2nd ed.). Cincinnati: South-Western.
Special report: Leading national advertisers. (2002, June 24). Advertising Age.
Tellis, G. J. (2004). Effective advertising: Understanding when, how, and why advertising works. Thousand Oaks, CA: Sage.
Allen D. Truell
"Advertising." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/finance/finance-and-accounting-magazines/advertising
"Advertising." Encyclopedia of Business and Finance, 2nd ed.. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/finance/finance-and-accounting-magazines/advertising
ADVERTISING. Whether trying to alter spending patterns or simply alert buyers to a firm's existence, business has for centuries turned to advertising. As the type of media has changed, so too has advertising's form. But aside from a fundamental post–World War I shift in the perception of advertising's power, its function is the same today as it was in 1700: Advertising aims to boost sales.
Buyers purchase a product presumably because they perceive a need or desire for it. They decide from whom and what brand to purchase. Awareness of their choices and an evaluation of which option is "best" influences their decisions. Until the twentieth century, advertising sought only to convey information. But modern advertising seeks to "create demand" by influencing buyers' perceived needs or desires.
Before "Modern" Advertising
In the American colonial period, advertisements were primarily signboards on inns, taverns, coffeehouses, and the like. Travelers needed information about inns, but locals did not need advertisements in order to find the blacksmith.
The first newspaper to appear continuously, the Boston News-Letter, was established in 1704. It contained sporadic advertisements. Real estate advertisements, rewards for runaway apprentices, and notices of slaves for sale were all common, as were announcements of sale of cordage, wine, and cloth. These advertisements were limited to text; they contained no photographs or drawings.
Benjamin Franklin founded the Pennsylvania Gazette in 1728. The Gazette included more advertisements than did any other colonial newspaper, with up to half the pages devoted to advertising. Franklin is credited with introducing the use of large-point headings, using white space to separate the advertisements from the text, and, after 1750, including illustrations.
Over the next century, there was little subsequent change in advertising. Advertisements provided information about goods for sale, arrivals and departures of ships, and stagecoach schedules. Print advertisements were confined primarily within column rules; advertisements spanning more than one column were yet to come.
In the 1860s, newspaper circulation increased, and magazine and periodical advertising began. Advertising volume increased markedly. Multicolumn display advertisements were designed; their first use was to call attention to the transcontinental railroad bonds that were being sold to the public. By the 1870s, multicolumn advertisements were common.
Along with advertising, publicity also works when it comes to boosting sales. The similar effects of advertising and free publicity were illustrated in the 1870s by American showman P. T. Barnum, who sought new patrons for his circus show. Barnum owned a field near railroad tracks over which passenger trains passed. To attract the attention of train passengers, he put an elephant to work plowing the field. Newspapers ran articles about the elephant. The publicity generated such enthusiasm for his show that others sought to emulate his free-publicity-as-unpaid-advertising success.
Industrialization and Advertising
Diffusion of steam power in the 1850s paved the way for a wave of technological change in the 1870s and 1880s. The American system of mass production characterized much of American manufacturing by 1890. Increased mechanization generated increased fixed costs, creating an economic incentive to build large factories that could enjoy economies of scale in production but which were dependent on mass demand. The transcontinental railroad allowed relatively low-cost shipment of goods, making regional or national markets economically feasible. Telegraph wires allowed low-cost and fast nationwide transmission of information. Manufacturers created brand names and sought to familiarize buyers nationally with their product. Where a housewife had once ordered a pound of generic baking powder, now she was encouraged to insist on known quality by requesting only Royal Baking Powder. Similar national advertising campaigns were undertaken in the 1880s and early 1890s by, among others, Corticelli Best Twist Silk Thread, Quaker Oats Company, and Procter & Gamble's Ivory soap.
Manufacturers believed that buyers were primarily interested in the quality of the product; competition by price was uncommon. National firms included drawings of sprawling factories and factory owners in their advertisements; the larger the factory and thus the more successful the firm, the higher quality the merchandise could be presumed to be. Singer Sewing Machines, Steinway Pianos, and McCormick Harvesters and Reapers all produced advertisements of this sort.
Following industrialization, seasonal or cyclical declines in demand could drive firms to bankruptcy because the now high fixed costs continued unabated even when sales and production dropped. The need to maintain demand became especially apparent during the 1893–1897 economic depression. Many businesses failed; many more came close. Businesses needed methods to insulate themselves from cyclical downturns in sales and production. Advertising was one tactic they employed.
The U.S. population increased from 31 million in 1860 to 76 million in 1900. Only 20 percent of the population lived in urban areas in 1860, increasing to nearly 40 percent by 1900. The need for easy provision of consumer goods increased as more people therefore lived divorced from the land. Standardized production and transportation improvements further contributed to the development of the department store. Stores such as R. H. Macy and Company of New York City, John Wanamaker's of Philadelphia, and Marshall Field of Chicago, all established by 1870, advertised regularly in newspapers. Rural families turned to mail-order catalogs—in essence, large books filled cover-to-cover with advertisements. Montgomery Ward's first catalog was issued in 1872; Sears, Roebuck and Co. entered the field in 1893.
By 1900, advertising in newspapers was supplemented by advertising on streetcars, on billboards, and in magazines. Full-page advertisements, especially in women's magazines, sought to influence women's choices. Ladies' Home Journal, established in 1883 by Cyrus H. K. Curtis, led the way. The Crowell Publishing Company founded Women's Home Companion. William Randolph Hearst began Cosmopolitan, Good Housekeeping, and Harper's BAZAAR. Between 1890 and 1905 the monthly circulation of periodicals increased from 18 million to 64 million.
Development of Advertising Agencies
Advertising agents were middlemen in 1850: they bought advertising space from newspapers and resold it at a profit to a company seeking to place an advertisement. Beginning in about 1880, N. W. Ayer and Son of Philadelphia offered its customers an "open contract" under which Ayer would be the company's sole advertising agent and, in exchange, would price advertising space at cost plus a fixed-rate commission. The idea caught on. Manufacturers were soon blocked from buying advertising space without an agent. In 1893, the American Newspaper Publishers Association agreed to not allow discounts on space sold to direct advertisers. Curtis Publishing Company, publishers of Ladies' Home Journal, inaugurated the same practice in 1901, and other magazine publishers soon followed suit. The cost-plus-commission basis for the agency was accepted industry wide in 1919, with the commission standardized at 15 percent.
Until the 1890s, conceptualization and preparation of advertising copy were the responsibility of the firm placing the advertisement. But as companies followed N. W. Ayer & Son's cost-plus-commission pricing policy, agents could no longer compete with each other on price; they needed some other means of distinguishing their services from those of competing agents. Advertising agents—soon to be known as advertising agencies—took on their modern form: writing copy; creating trademarks, logos, and slogans; and overseeing preparation of artwork. Ayer hired a full-time copywriter in 1892; Procter and Collier of Cincinnati did so by 1896; Lord & Thomas of Chicago did so by 1898. By 1910, advertising agencies were universally characterized by the presence of full-time copywriters and artists.
Advertising slogans that lasted nearly 100 years came from these advertising specialists. Ivory soap's slogan "99-44/100% Pure" appeared in 1885; Prudential's "Rock of Gibraltar" started in 1896; and N. W. Ayer and Son suggested the brand name "Uneeda" to the National Biscuit Company (later Nabisco) in 1900. Trademarks such as the Morton Umbrella Girl made famous by Morton Salt did not become common until after 1905, when federal legislation allowed the registration of trademarks for a period of 20 years with provision for renewal.
Advertising men were widely seen as no better than P. T. Barnum's sideshow barkers falsely hawking two-headed freaks rather than professionals presenting dignified, honest, and compelling images of bath soap. One step in convincing others that advertising was a profession to be taken seriously was the 1917 formation of the American Association of Advertising Agencies. The Association crafted broadly defined industry standards. Thereafter, the industry was quickly afforded the respect it desired. In 1926, President Calvin Coolidge addressed the Association's annual convention. For its ability to create mass demand, he credited advertising with the success of the American industrial system.
Modern advertising—advertising with the goal of creating desire for a product where none previously existed—began in the early twentieth century. With the blessing of leaders in the advertising industry, academic psychologists had begun applying principles of psychology to advertising content in the late 1890s. In 1901, psychologist Walter Dill Scott, speaking on the psychology of advertising, addressed a gathering of businessmen. His book The Theory of Advertising appeared in 1903. Advertisers were initially skeptical of Scott's thesis that psychological principles, especially the concept of suggestion, could be effectively applied to advertising.
An ongoing conflict thus arose in the early twentieth century between two types of advertising: "reason-why" and "atmosphere" advertising. Dominant in the late nineteenth century, reason-why advertising consisted of long, detailed discourses on the features of a product. Atmosphere advertising reflected psychology's influence; it emphasized visual imagery that evoked emotions. The conflict between the two types of advertising was especially intense in the decade before World War I (1914–1918). In 1909, the advertisers of Colgate toothpaste took the conflict directly to consumers, giving them the opportunity to decide "Which Is the Better Ad?"—the one that offered a detailed explanation of the health advantages of Colgate toothpaste, or the one that used illustrations to associate the use of Colgate with a happy family life.
Most practitioners and advertisers were won over by about 1910. Psychologists were judged correct; advertising could change needs and desires. After 1910, most advertising copy emphasized buyers' needs and desires rather than the product's objectively described characteristics. Advertising's success during World War I fully settled the issue. American advertisements sounded a patriotic pitch as they sought to sell Liberty and Victory Bonds, raise money for the Red Cross, and more. Some advertising historians even credited the industry with shortening the war.
By the mid-1920s, the two types of advertising peacefully coexisted. Reason-why copy was deemed appropriate for industrial advertising where decision-making rested on a "rational" profit motive. Atmosphere advertising dominated consumer goods advertising; with increasing standardization of consumer products eliminating many of the real differences between brands, the emphasis of advertising shifted to the "imagined" advantages.
A number of advertising textbooks appeared in the 1920s, authored by professors of psychology whose academic affiliations were often with schools of business. Surveys sought to ascertain the fundamental wants or desires of human beings. A typical list would include appetite, love, sexual attraction, vanity, and approval by others. Atmosphere advertisements emphasized how a product could satisfy these desires.
Advertisers increasingly looked upon themselves as quite set apart from the consumers who saw their ads. Copywriters were male. Consumers were female. Roland Marchand, author of Advertising the American Dream (1985), found that advertisers in the 1920s and 1930s were predominantly male, white, Christian, upper-class, well-educated New Yorkers who frequently employed servants and even chauffeurs, and whose cultural tastes ran to modern art, opera, and symphonies. They saw their audience as female, fickle, debased, emotional, possessing a natural inferiority complex, having inarticulate longings, low intelligence, and bad taste, and being culturally backward. The copy and visual imagery created by these advertising men often emphasized the woman's desire to be loved or her desire to be a good mother.
Ironically, just at the time advertisers sought increased respect through formation of their own professional association, the advertisements they were writing conveyed ever more disrespect for their readers. Many advertising historians note the post–World War I change in advertising's tone. Frederick Lewis Allen, author of the renowned history of the 1920s Only Yesterday (1931) wrote:
"[In the 1920s], no longer was it considered enough to recommend one's goods in modest and explicit terms and to place them on the counter in the hope that the ultimate consumer would make up his or her mind to purchase.… [T]he copywriter was learning to pay less attention to the special qualities and advantages of his product, and more to the study of what the mass of unregenerate mankind wanted—to be young and desirable, to be rich, to keep up with the Joneses, to be envied. The winning method was to associate the product with one or more of these ends, logically or illogically, truthfully or cynically. …" (pp. 141–2)
Advertising is often charged with creating a culture of consumerism in which people define themselves by the goods they buy. Certainly the first big boom in advertising volume and the rise of consumerism are coincidental: Consumerism first characterized the United States in the early twentieth century; advertising volume increased at an annual rate of nearly 9 percent between 1900 and 1920. Moreover, it was in this period that advertising first began emphasizing the ability of goods to meet emotional needs and, more to the point, first began its efforts to create needs where none had previously been felt.
Television and Beyond
The function of advertising has remained constant since the advent of modern advertising but its form has evolved as new forms of media have appeared. Radio broadcasting began in 1922 and with it, radio advertising. By 1930, 40 percent of households owned a radio; more than 80 percent owned one by 1940. Radio advertising expenditures doubled between 1935 and 1940 to $216 million in 1940.
Television began in the 1950s and quickly found its way into almost everyone's living room: 11 percent of households owned a television in 1950 but 88 percent owned one just a decade later. Television advertising expenditures increased nearly tenfold between 1950 and 1960, reaching $1.6 billion by 1960.
Outdoor advertising increased with paved mileage. In the decade after World War II (1939–1945), outdoor advertising expenditures, adjusted for inflation, increased 5 percent annually as paved mileage in the United States increased 3 percent annually. One of the more famous billboard campaigns, begun in 1925, was for Burma-Shave, a brushless shaving cream manufactured by the American Safety Razor Company. Their jingles appeared one line per sign over the course of a mile or more, always ending with the name of the product:
If you think
Through some thistles
The introduction of the videocassette recorder (VCR) led to more changes in advertising. New in 1980, by 1990 over two-thirds of U.S. households owned a VCR. Viewers could fast-forward through commercials when watching taped shows, presenting a new challenge to advertisers. "Product placement" was the result. Firms now paid to have their products used in television shows and films. The practice was spurred by one phenomenal success: the use of Reese's Pieces candy in the 1982 film E. T. The Extra-Terrestrial had increased candy sales by over 65 percent. By 2000, product placement was pervasive.
|SOURCE: 1900–1970, U.S. Bureau of the Census, Historical Statistics of the United States: Colonial Times to 1970, Series T444. 1990, 2000, U.S. Census Bureau, Statistical Abstract of the United States: 2001, Table 1271.|
|Amount||Average rate of growth|
|(billions of dollars)||(percent)|
The most recent media development, the Internet, was advertisement-free until the first banner advertisements were sold in 1994. Ownership of computers and use of the Internet are both increasing rapidly; by 1999, 34 percent of adults nationwide claimed access to the Internet or an online service. Internet advertising increases apace.
Consumer objections to advertising and its tactics have resulted in legislation, lawsuits, and voluntary restraint. The 1914 Federal Trade Commission Act empowered the Federal Trade Commission (FTC) with the authority to regulate "unfair methods of competition." The 1938 Wheeler-Lea Amendment extended the FTC's powers to "unfair or deceptive acts or practices." The detrimental effects of billboards on the countryside inspired the federal Highway Beautification Act in 1965, which regulated placement of billboards near interstate highways. The "Joe Camel" campaign for Camel cigarettes introduced by R. J. Reynolds in the 1970s resulted in a 1990s federal lawsuit because of the campaign's alleged attempt to hook kids on smoking. A voluntary ban on television advertising by the Distilled Spirits Council of the United States was just one part of its Code of Good Practice regarding marketing and advertising, first adopted in 1934. Political advertising, with the goal of swaying voters rather than consumers, enjoys First Amendment protection but does face some constraints under state laws and under the Federal Communications Commission's Equal Access Law as well as the Federal Election Campaign Act.
Data on advertising expenditure and employment in the industry is summarized in the annual Statistical Abstract of the United States, available online and in any reference library. As seen in Table 1, advertising expenditure has had several periods of rapid growth: the 1910s, 1950s, and 1980s. Advertising volume in 2000 was just over 2 percent of gross domestic product. Over 400,000 people worked in advertising in 2000, a nearly threefold increase since 1980. Approximately 40,000 establishments provided advertising and related services in 2000, about one-third of which had paid employees.
What constitutes an advertisement has changed over time: a name on a wooden signboard; an information-packed display in a newspaper; a full-color glossy advertisement in a magazine; a beautiful blonde singing about a new Chevrolet; candy scattered in a wood for an extraterrestrial alien; logos on the side of coffee mugs; Nike swooshes on professional sports team uniforms; pop-up advertisements on the Internet. The changes will continue as media opportunities develop.
Fox, Stephen. The Mirror Makers: A History of American Advertising and Its Creators. New York: Morrow, 1984.
Laird, Pamela Walker. Advertising Progress: American Business and the Rise of Consumer Marketing. Baltimore: Johns Hopkins University Press, 1998.
Marchand, Roland. Advertising the American Dream: Making Way for Modernity, 1920–1940. Berkeley: University of California Press, 1985.
Norris, James D. Advertising and the Transformation of American Society, 1865–1920. New York: Greenwood Press, 1990.
Pope, Daniel. The Making of Modern Advertising. New York: Basic Books, 1983.
Presbrey, Frank. The History and Development of Advertising. Garden City, N.Y: Doubleday, 1929.
Scott, Walter Dill. The Theory of Advertising: A Simple Exposition of the Principles of Psychology in Their Relation to Successful Advertising. Boston: Small, Maynard and Company, 1903.
"Advertising." Dictionary of American History. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/advertising
"Advertising." Dictionary of American History. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/advertising
Jay Cooke (1821–1905) was the foremost investment banker in the United States during the mid-nineteenth century. He pioneered new ways of mobilizing the savings of Americans for productive ends, most significantly to fund the Union effort during the American Civil War (1861–1865). For this reason he was known as the "Financier of the Union."
Born in Sandusky, Ohio, Cooke attended public school until the age of 14. He then ended his formal education and took a job as a clerk in a general store. In 1838 he obtained work with his brother-in-law's canal transport company in Philadelphia, but the firm failed shortly after Cooke's arrival in the city. Cooke returned to Sandusky. Two years later he was lured back to Philadelphia by a job offer as an office boy with banker F. W. Clark. Cooke worked in the Clark banking house from 1839 to 1857. He rose quickly in the firm, and in three years, at the age of twenty-one, he became a partner.
F.W. Clark's profits derived from dealing in "domestic exchange." This meant the firm bought and sold bank notes from various parts of the country, pricing them according to risk. The nation in those days had no official government currency except metallic money. Private bankers provided the paper medium of daily exchange. With the bank notes of so many banks in circulation, a banker had to be shrewd when it came to judging the worth of paper that often purported to be "good as gold."
In the 1850s Cooke began to invest his own money in ventures outside of banking. One of his investments included a land speculation deal in Iowa and Minnesota that involved obtaining land from the government at prices below $1.25 an acre. The land was then resold to incoming farmers at $3.00 and $4.00 an acre. The land speculation scheme made Cooke very wealthy.
Growing restless as a junior partner at F.W. Clark and Company, Cooke left the firm in 1857. For the next few years he devoted his attention to private investing, particularly in railroads. He decided to reenter the banking business on the eve of the American Civil War. On January 1, 1861, he opened Jay Cooke and Company.
When Abraham Lincoln (1809–1865) took office he found the U.S. Treasury nearly empty. In order to finance the Union effort in the Civil War, the government was faced with three methods: taxation, borrowing, or printing paper money. Unlike the opposing Confederate States of America, Lincoln chose to borrow money to pay the war, a strategy that worked largely because of the efforts of Jay Cooke. Conversely, the Confederate government in Richmond chose to print paper money. This created an inflation rate of 5000 percent by the end of the war.
The traditional method of government finance was to offer government bonds to private bankers at competitive auction. In 1861 many bankers were unsure whether the Union would survive to pay the debt. Secretary of the Treasury Salmon P. Chase insisted on selling the bonds at par (one hundred cents on the dollar), but most bankers considered them to be too risky at that price. Cooke approached Chase and proposed marketing bonds directly to the public. Chase initially rejected the idea. But as the war turned against the Union in the summer of 1862, he became more receptive. He appointed Jay Cooke and Company as sole agent to sell $50 million in government bonds at 6 percent interest. The bonds were due in 20 years but the government could redeem them in five; hence, they were popularly called "5-20s."
Cooke promised one million dollars worth of daily sales in 5-20s. He also took a fee of 1/2 percent on the first $10 million he sold and 3/8 percent on the remaining bonds. His strategy exceeded all expectations. In 1865 he repeated his earlier success by helping the government finance a new issue of bonds. These were the so-called "7-30s" (bonds due in 30 years but redeemable in seven).
After the war Jay Cooke and Company engaged in further government debt financing, but by 1869 the government finance business had wound down and opportunities for profit appeared elsewhere. Cooke agreed to be the banker and agent for the Northern Pacific Railway Company. The rail line was projected to connect Lake Superior with Puget Sound on the Pacific coast, promising to become the largest construction project in U.S. history.
Originally financing for the Northern Pacific was earmarked to build the line westward. To finance further construction and service the debt, money was raised from fees charged to traffic along the first completed sections of the track and from the sale of a congressional land grant worth $50 million. With great difficulty Cooke managed in 1870 to raise $5 million for construction. He then initiated a public campaign to sell $100 million in Northern Pacific bonds at 7.3 percent interest. His goal was to raise enough money from small investors to complete construction of the railroad, but the results were disappointing. He only sold about $16 million worth of bonds in 1871 and 1872. Like major American and European bankers, small investors, were wary despite the high interest rate offered and regardless of Cooke's reputation for reliability.
Poor sales of Northern Pacific bonds and a tightening of the money market forced Jay Cooke and Co. to declare bankruptcy in 1873. Cooke lost most of his vast fortune and spent the next several years trying to satisfy his creditors. In 1880 he resumed business as an investor in Western mining ventures and was able to make a second fortune before his death.
Jay Cooke changed the nature of investment banking by reaching out to hundreds of thousands of Americans and asking them to invest their small holdings to support the Union cause during the Civil War. In the following century Wall Street would follow Cooke's lead by devoting itself to attracting the savings of the individual investor.
Clearly, Cooke's ideas created more than a new way of doing business on Wall Street. His innovative financing methods also kept the U.S. government afloat during crisis. In fact, without the millions of dollars invested by individuals of modest means, the financing of government debt and major industries in the late nineteenth and twentieth centuries might well have been unimaginable.
See also: Bonds, Salmon P. Chase, Inflation
Gates, Paul Wallace, ed. The Fruits of Land Speculation. New York: Arno Press, 1979.
Gordon, John Steele. "Paying for War." American Heritage, March 1990.
Hammond, Bray. Sovereignty and an Empty Purse: Banks and Politics in the Civil War. Princeton, New Jersey: Princeton University Press, 1970.
Larson, Henrietta M. Jay Cooke: Private Banker. Cambridge, Massachusetts: Harvard University Press, 1936.
Minnigerode, Meade. Certain Rich Men. New York: G.P. Putnam's Sons, 1927.
Oberholtzer, Ellis Paxton. Jay Cooke: Financier of the Civil War. Philadelphia: George W. Jacobs and Co., 1907.
Trescott, Paul B. Financing American Enterprise: The Story of Commercial Banking. New York: Harper and Row, 1961.
"Cooke, Jay." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/cooke-jay
"Cooke, Jay." Gale Encyclopedia of U.S. Economic History. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/cooke-jay
Advertising is a form of mass media designed to promote a specific product, service, or idea on behalf of a business or organization. Advertisers ordinarily use media such as television, radio, print (magazines, newspapers, and billboards), sponsorship of cultural and sporting events, and the Internet.
From the Industrial Revolution to the mid-twentieth century, advertising in the United States and Europe was generally straightforward and usually included an image and description of the product’s function, price, and location to be purchased. According to William M. O’Barr in his 2006 article “Representations of Masculinity and Femininity in Advertising,” ads were primarily directed toward women because they were responsible for the majority of consumer purchases, the exception being “big ticket” products like cars and major appliances. Since World War II, however, industries have increasingly courted the adult male consumer, and with the advent of youth culture, children, teenagers, and young adults have been targeted as well.
A common strategy for advertisers is to make the consumer feel as though the given product will remedy a specific problem or insecurity. Designers prey on a modern culture obsessed with status, self-enhancement, youth, body image, and gender identity, the latter being a favored theme now aimed at both men and women. Critics such as John Kenneth Galbraith (1969) and Christopher Lasch (1978) charged that advertising functions to create desires that previously did not exist and that advertising serves to promote consumption as a way of life.
A dialectical relationship exists between consumers and advertisers where ads face heavy skepticism and scrutiny, while at the same time receive access and appreciation in the form of high revenue, lavish award ceremonies, and TV programs devoted to airing successful commercials. In the United States, argued Michael Schudson in his 1984 book Advertising, the Uneasy Persuasion: Its Dubious Impact on American Society, the culture is amenable to advertising that is “more pervasive and more intrusive than in any other industrialized country” (p. 128). Millions watch the United States’s Superbowl programming not for the content of the football game, but rather just to see the premier of new, multimillion-dollar ads.
A crucial difference between previous eras and today is advertising’s saturation. In U.S. and European cities a conservative estimate of people’s daily exposure to ads is 250 messages a day, while others suggest that that number is closer to 5,000 messages a day. This ubiquity creates a more skeptical and desensitized audience. As a result marketers go to greater lengths to make their products stand out.
Advertisers now use more diverse and insidious mediums such as stickers on food, social networking websites like YouTube, motion sickness bags, and space within public schools. Guerrilla marketing practices like “product placement”—where the intended audience is unaware that they have been exposed to an advertisement, while the desired impression of the given product remains—are now everyday tactics. In 2007 blinking electronic signs promoting a television show were surreptitiously planted on highways and bridges in Boston and mistaken for terrorist bombs.
Given the use of more sophisticated technology and the expansion of the Internet, marketers can better assess the effectiveness of their pitches and the return on investment. Sophisticated techniques like data mining help identify (and subsequently create) niche consumption desires. Additionally hyperspecialized media outlets enable advertisers to target more precise demographics. For example advertisers now design ads for gay men and air them on gay-oriented cable television channels like “Here TV” and “Logo.” Targeted marketing and reliable measurements of effectiveness are the holy grail of companies seeking to reduce costs.
In an era of global capitalism, advertising agencies work for clients all over the world and target niche demographics in nearly all continents. Successful advertising for multinational corporations hinges on the familiarity with local habits, symbols, and cultural differences. According to Marieke K. de Mooij in the 2005 publication Global Marketing and Advertising: Understanding Cultural Paradoxes, for a global brand like McDonald’s — a company that sells its food via more than 30 thousand distribution points, in 119 countries, serving 47 million customers a day—particular attention must be paid to local culture for the pitch to be successful. For example, advertising for McDonald’s in France tied into “Asterix and Obelisk,” the most famous historical cartoon of the nation (Mooij 2005).
As more advertising proliferates in the globalized context, we are likely to see new, unforeseen forms of consumer reluctance and resistance. Companies will surely continue to manage this dialectic for their own financial advantage.
SEE ALSO Consumerism; Galbraith, John Kenneth; Goodwill; Hidden Persuaders; Internet; Markets; Media; Television; Veblen, Thorstein; Want Creation; Wants
Galbraith, John Kenneth. 1969. The Affluent Society. 2nd ed. Boston: Houghton Mifflin.
Lasch, Christopher. 1978. The Culture of Narcissism: American Life in an Age of Diminishing Expectations. New York: W. W. Norton.
Mooij, Marieke K. de. 2005. Global Marketing and Advertising: Understanding Cultural Paradoxes. 2nd ed. Thousand Oaks, CA: Sage.
O’Barr, William M. 2006. Representations of Masculinity and Femininity in Advertising. Advertising and Society Review 7 (2).
Schudson, Michael. 1984. Advertising, the Uneasy Persuasion: Its Dubious Impact on American Society. New York: Basic Books.
"Advertising." International Encyclopedia of the Social Sciences. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/advertising-0
"Advertising." International Encyclopedia of the Social Sciences. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/advertising-0
From 1862 to 1873 Jay Cooke (1821-1905) was the outstanding merchant banker in the United States. During the Civil War he made possible the sale at par of hundreds of millions of dollars' worth of Union government bonds to the American public.
Born at Sandusky, Ohio, on Aug. 12, 1821, Jay Cooke was the son of a frontier lawyer and politician. He stopped his schooling at 14 and worked as a clerk in his own community and in St. Louis, Mo. He arrived in Philadelphia in 1839; from that time on his activities were virtually always associated with this city, which he made the leading financial center of the country for a brief time. He learned banking in the firm of E. W. Clarke and Company, where he worked until 1857. In 1861 Cooke set up his own banking house, a partnership, Jay Cooke and Company, engaging in the characteristic activities of private or merchant bankers: dealing in gold; buying and selling the notes of state banks; trading in foreign exchange; and acting as "note" broker, that is, the discounting of commercial paper.
The outbreak of the Civil War gave Cooke his great opportunity, and his many fruitful ideas pushed him to the top of the business. Salmon Chase, the secretary of the Treasury and a fellow Ohioan, sought to sell the Treasury's first issues of war bonds and notes through banks and failed (at this time it was customary to dispose of public securities by competitive bidding). Cooke persuaded Chase to appoint him a special "fiscal agent." Using the then unheard-of methods of advertising and personal solicitation by salesmen all over the country, Cooke sold at par (from October 1862 to January 1864) more than $500 million of the 6 percent bonds to as many as 1 million individual investors and country bankers. As fiscal agent, Cooke played another important role: he supported the price of government securities in the New York money market. "Pegging the market" from this time on became a necessary part of such financing. In January 1865 Cooke was called again to handle a large issue of 3-year Treasury notes bearing 7.3 percent interest; in 6 months he sold more than $600 million.
By the end of the war Cooke had three banking houses, each with a separate group of partners, in Philadelphia, New York, and Washington. In 1870 a similar bank was set up in London, and the next year all were brought together as a single partnership. Cooke expanded (and overexpanded) into many fields. He had been friendly to the National Banking Act of 1863 and obtained charters for national banks in Washington and New York; the national banks were the prime source of Cooke's strength.
To these banks and to small investors at home and abroad Cooke, now an investment banker, sold participation in state and railroad loans; the largest loans went to the great land-grant Northern Pacific Railroad, which was chartered to run from Duluth, Minn., to Tacoma, Wash. In this connection Cooke introduced two new ideas into banking: the establishment of banking syndicates as underwriters to handle particular issues, and the active participation by bankers in the affairs of the companies they were helping finance. Thus, Cooke became the banker and fiscal agent of the Northern Pacific in 1869, and he made short-term loans to the railroad out of his own house's resources—a fatal step.
In 1870, although Cooke was responsible for the proposal, he was only one (and a lesser participant) of the investment banking houses taking part in the great refunding operations of the Civil War loans. Congress authorized the sale of $1.5 billion worth of Treasury securities of various types bearing 4 to 5 percent interest in exchange for the higher-priced wartime issues. J. S. Morgan and Company, and Drexel, Morgan and Company, and their English connections now had their opportunity, and they pushed Cooke into the background.
End of an Empire
Meanwhile, Cooke's troubles with the Northern Pacific Railroad were piling up. In addition to making loans to the railroad, he undertook the underwriting of its initial issue of first-mortgage bonds. But sale of these bonds moved slowly, and the firm of Jay Cooke and Company continued to make advances to the railroad out of the demand liabilities of its customers; this was a risky business. All the western rails required large funds for building and improvements, and when the national economy turned downward in early 1873, investment markets dried up. Cooke's banks and his associated houses were caught in illiquid form—they could not meet the demands of their depositors—with the result that on Sept. 18, 1873, the New York office of Jay Cooke and Company shut its doors, as did the banks with which it was associated.
This started the large-scale Panic of 1873; one of its results was the complete collapse of the Cooke financial empire and the end of Cooke's influence in the money markets; his personal fortune was wiped out. Later in the 1870s he invested a small sum in a silver mine which turned out to be a bonanza, and Cooke was able to sell his holdings for $1,000,000, thus assuring a comfortable old age. He died on Feb. 16, 1905, in Philadelphia.
The best biography of Cooke is Henrietta M. Larson, Jay Cooke: Private Banker (1936). An earlier work, drawing extensively on private papers, is Ellis Paxson Oberholtzer, Jay Cooke: Financier of the Civil War (2 vols., 1907). Indispensable to an understanding of the role and early development of merchant and investment banking in the United States is Fritz Redlich, The Molding of American Banking: Men and Ideas (1951). □
"Jay Cooke." Encyclopedia of World Biography. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/jay-cooke
"Jay Cooke." Encyclopedia of World Biography. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/jay-cooke
Cooke, Jay (1821-1905)
Jay Cooke (1821-1905)
Background. The Union’s preeminent financier through the Civil War and into the 1870s was born on the western frontier. His father, Eleutheros Cooke, was a prominent lawyer and eventually congressman in Ohio, but the “Western Reserve” (which eventually became the state of Ohio) was during the period of Cooke’s youth rugged and isolated. Cooke received his training in “high finance” by working at a series of commercial apprenticeships that took him gradually east, to the money markets he would one day dominate. He entered business at the age of fourteen as a clerk in his hometown of Sandusky, then moved to Saint Louis in 1836. When his employers there went under in the Panic of 1837, he relocated again, to Philadelphia where he found a clerkship with a canal packet line.
Philadelphia Banker. When he reached Philadelphia, Cooke had arrived at what was then still the financial capital of the country. In 1839 he changed jobs and put himself right at the heart of the money market when he joined the firm of E. W. Clark & Company, an unincorporated bank that functioned (like others in the city) as a kind of currency clearinghouse, buying up the notes of other, often distant banks at a discount and sending them back to the home institution for redemption. The work required a keen eye for counterfeits and an ability to keep track of which banknotes from where had what values—a complicated business in an economy that circulated innumerable currencies, notes, and other forms of money. After the Panic of 1857, Cooke retired from the firm.
Union Finance. By the time Cooke reentered business in 1861, new financial challenges and opportunities were forming. The outbreak of the Civil War caught the federal government at a bad time, fiscally speaking. The country had run deficits for four years since 1857—the longest stretch of deficit finance since the War of 1812. Secession intensified the pressure, draining gold from the treasury and undercutting the government’s credit rating. Soon the government was having trouble meeting even its ordinary peacetime expenses. The incoming secretary of the treasury, former Ohio governor Salmon Chase, had worked with Cooke’s brother, Henry, in Ohio politics and quickly adopted Cooke as an informal financial adviser. Initial issues of short-term bonds yielded lackluster results, but when Union defeat at the first Bull Run in July 1861 began to make the scale of the upcoming war clearer, Cooke first secured a $2 million infusion from Philadelphia bankers, on the security of three-year notes bearing interest of 7.3 percent (“seven-thirties”), then together with Chase brokered an agreement from the Associated Banks (a New York group) for $50 million more, again in seven-thirties. Thereupon Cooke returned to Philadelphia and converted his office into an agency promoting and subscribing the public securities of the Union.
Marketing the War Effort. Salmon Chase was determined to make war finance a broad, democratic, and propagandistic campaign, and Cooke adapted his financial promotions to this end. Anticipating twentieth-century war finance, Chase and Cooke (to borrow an anachronistic phrase) not only used the war to sell the bonds, but used the bonds to sell the war. Cooke orchestrated a massive public-relations campaign that ultimately enlisted more than 600,000 subscribers, perhaps as many as a million, and sold over $1 billion worth of securities. He grossed commissions of about $4 million for this service, though he also paid heavy advertising expenses and ran the agents himself; net profit probably came to about $700,000.
Postbellum Expansion and Bust. After the war Cooke converted his operations back to a general banking business, based in Philadelphia and opening branches in New York in 1866 (by which time the latter city had supplanted Philadelphia as the nation’s financial capital), and in London in 1870. He became involved in many enterprises during this period of heady national economic expansion, most notably (and disastrously) the Northern Pacific Railroad. Construction on this railroad, projected to link Duluth on Lake Superior to Tacoma on the Washington coast, reached as far as the Missouri River from the east before Cooke’s finances collapsed on 18 September 1873— in part because of unrelated failures in European financial markets. As Cooke went under, he pulled down enough affiliates with him to set off a general economic panic. In later years he managed to recover some of his holdings, and to develop a second fortune in western mining and other investments. The 1873 collapse, however, gave J. P. Morgan, his chief rival, the opportunity to supplant Cooke as the high financier of the federal government.
Henrietta M. Larson, Jay Cooke: Private Banker (Cambridge, Mass.: Harvard University Press, 1936).
"Cooke, Jay (1821-1905)." American Eras. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/news-wires-white-papers-and-books/cooke-jay-1821-1905
"Cooke, Jay (1821-1905)." American Eras. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/news-wires-white-papers-and-books/cooke-jay-1821-1905
In the early days of human spaceflight in the 1960s, public curiosity about astronauts was fueled by regular headlines in the media. Products selected for the space program were perceived to be exceptional, and promoters were quick to exploit this by playing up the fascination and mystery surrounding spaceflight. A crystallized, dehydrated, orange-flavored beverage called Tang was touted as "what the astronauts drink," and sales skyrocketed as the public clamored to have what the astronauts had. With the space age, thus, came space-themed advertising.
Consumers are bombarded daily with multimedia advertisements, coaxing people to buy, choose, or react to a myriad of products and services. Advertisers are hired to promote these products and services to specific markets based on a careful calculation of a target population's propensity to consume. To appeal to this possibility, advertisers strive to stay in the mainstream of the target audience in fashion, entertainment, food, and new technology by implanting a brand with a message that is crafted to be remembered by the recipient. Over the years, space themes have been used as a backdrop for many new products.
Before humans were orbiting Earth, space-themed advertisements were uncommon because the general public did not connect with outer space. Now, in the early twenty-first century, with discussion of futuristic orbiting hotels and launch adventure trips within the realm of technological possibility, space as a backdrop or theme for advertising is well-established.
Some fantastic concepts have been considered for advertising in space. For example, one firm considered using an Earth-based laser to beam messages onto the Moon. They soon realized this was impractical, however, because the images needed to be about the size of Texas to be visible to earthlings!
Pizza Hut, Inc., contracted with a Russian launch firm to affix a 9-meter-high (30-foot-high) new corporate logo on a Proton rocket carrying aloft a service module to the International Space Station and scheduled for launch in November 1999. Advertising the event prior to the launch date gave Pizza Hut international recognition, and the company expected 500 million people to watch the live televised event. The launch was planned to coincide with a release of Pizza Hut's transformed millennium image; the launch, however, was postponed for eight months because of technical problems.
Pepsi, the soft drink company, paid a large sum of money so that Russian cosmonauts would unveil a newly designed brand logo on a simulated "can" during missions to the Russian space station Mir in May 1996. The company has also pursued smaller scale promotional ventures in the U.S. space program since 1984.
NASA and other outer space agencies have researched the profitability of permitting advertising through the display of logos on space hardware, such as the International Space Station. While there is a market for such advertising, studies suggest that demand would not necessarily be sustained beyond the novelty of the first few paying customers.
Space.com, one of several space-related web sites that appeared in the dot-com boom of the late 1990s, derived significant revenue from advertising banners at the web site. Interestingly, the advertising content tended to relate to very down-to-Earth necessities—credit cards, cars, goods and services—and not space merchandise or otherworldly creations.
see also Commercialization (volume 1); International Space Station (volumes 1 and 3); Mir (volume 3).
Damon, Thomas. Introduction to Space: The Science of Spaceflight. Malabar, FL: Orbit Book Company, 1989.
National Aeronautics and Space Administration. Office of Advanced Concepts and Technology. Spinoff 93. Washington, DC: U.S. Government Printing Office, 1994.
Reynolds, Glenn H., and Robert P. Merges. Outer Space: Problems of Law and Policy. Boulder, CO: Westview Press, 1989.
United States Space Foundation. Space: Enhancing Life on Earth. Proceedings Report of the Twelfth National Space Symposium. Colorado Springs, CO: McCormick-Armstrong, Printers, 1996.
Weil, Elizabeth. "American Megamillionaire Gets Russki Space Heap!" New York Times Magazine, 23 Aug. 2000.
"Advertising." Space Sciences. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/science/news-wires-white-papers-and-books/advertising
"Advertising." Space Sciences. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/science/news-wires-white-papers-and-books/advertising
The ethics and psychology of advertising began to be discussed and techniques studied more seriously. The First World War saw one of the most famous posters of all time—‘Your Country needs YOU’—and from the 1920s, when agencies were introduced, the industry began to put its house in order (Advertisement Regulation Act, 1925). Codes of standards, especially after the Second World War, encouraged greater sobriety, and techniques changed. Hoardings became less used and sandwich-men almost disappeared. The advent of commercial television (1955), followed by radio advertising (1972), proved pervasive. A renewed debate began on the propriety of some forms of advertising, and restrictions were placed upon tobacco promotion in particular. The industry established its own Advertising Standards Authority in 1962. In a free market economy, competitive advertising remains of crucial importance and, with the exception of the British Broadcasting Corporation, supports most of the media.
A. S. Hargreaves
"advertising." The Oxford Companion to British History. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/advertising
"advertising." The Oxford Companion to British History. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/advertising
Jay Cooke, 1821–1905, American financier, b. Sandusky, Ohio. He founded Jay Cooke & Company, which marketed the huge Civil War loans of the federal government. He later turned to railroad bonds and in 1870 undertook to raise $100 million for the Northern Pacific and financed construction to Bismarck, N.Dak. The burden proved to be too great and continuing the financing became impossible. In 1873, Cooke's New York branch closed its doors and helped to precipitate the Panic of 1873.
See biographies by E. P. Oberholtzer (1907, repr. 1968) and H. M. Larson (1936, repr. 1968); M. Minnigerode, Certain Rich Men (1927, repr. 1970).
"Cooke, Jay." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/cooke-jay
"Cooke, Jay." The Columbia Encyclopedia, 6th ed.. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/cooke-jay
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
INTERPUBLIC GROUP INC.
JWT GROUP INC.
LEO BURNETT COMPANY, INC.
THE OGILVY GROUP, INC.
SAATCHI & SAATCHI PLC
YOUNG & RUBICAM, INC.
"Advertising." International Directory of Company Histories. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/advertising
"Advertising." International Directory of Company Histories. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/advertising