ADVERTISING IN BUSINESS There are wastes in advertising, but there are wastes everywhere in production, in distribution, in personal selling. Economy in the distribution side of business has lagged behind, but distinct advances have been made. Probably the chief sources of waste in advertising are : ( I) The lack of proper co-ordination between advertising and the other phases of a business—lack of co-ordination with distribution, personal sales, plans and production—advertising where there is no distribution, and the like.
(2) The use of inefficient methods—weak, unconvincing and ineffective appeals, poor presentation, ineffective technique, the use of too large space or too small space due to guessing instead of find ing the facts on which to build and plan. It has been estimated that if every piece of advertising material were made io% more effective it would mean a saving of $ioo,000,000 to the business interests of the United States.
(3) The use of advertising for commodities in circumstances in which returns are highly uncertain or for business ventures which are too hazardous.
(4) The excessive use of advertising in over-keen competition.
(5) The failure to make all advertising literally truthful and de pendable. Even if 96% or 97% of advertising were in the main trustworthy and meritorious, the remaining 3% or 4% would weaken the effectiveness of the rest.
(6) The use of advertising for illegitimate business, highly specu lative investments, financial frauds or for commodities of doubtful value or actually injurious to mankind.
Improvements are proceeding in all these directions. Funda mentally, these sources of waste are not peculiar to advertising, but due to the waste and inefficiency in business as a whole. The same sources of waste exist in oral selling—making plans on guesses instead of on facts, not being literally truthful and depend able in every instance, a lack of proper co-ordination with other phases of a business, the waste of time on the part of salesmen and excessive personal expenditure. Preliminary time studies show that the average salesman uses only about 15% to 5o% of his working time in actual selling. Fundamentally these wastes in oral as well as in printed selling are not to be laid upon these two aspects of business, but are due to conditions in business as a whole, to mistaken judgment, to ignorance and moral weakness.
The question is, Who pays for it, and how far different would be the price of commodities if this expenditure were entirely elim inated, and in what way would the methods of distribution and the cost of distribution be different? The critic assumes that this money is an economic waste and that prices are higher because of it.
A second argument is that advertising has considerably in creased the demand for, and the purchase of, luxuries and semi luxuries, such as cameras, beverages, automobiles, pianos, phono graphs, vacuum cleaners and so on.
A third argument is that advertising has been responsible to a considerable extent for the increasing and widespread use of pack ages, cartons, wrappers and labels .for a large variety of prod ucts. Advertising has been responsible to a very large extent for the development of standardized brands and trade-marked arti cles. These wrappers and containers cost money which sup posedly is not a part of the price paid for commodities bought in bulk. The argument is that all of this expenditure is added to the price of the product.
Averages of expenditures for advertising by a considerable num ber of firms in all lines of business show that actual figures are relatively small. Figures obtained by the Harvard Bureau of Business Research, and based on a considerable number of stores in each case, give the percentages of net sales expended for advertising for the years 1919 and 1920 in several lines of busi ness. The accompanying table furnishes the percentages.
The average expenditure for advertising on the part of retailers is approximately 3% or less. Certain types of stores, in particular department stores, expend over that amount, and, on the other hand, a very considerable proportion of retailers spend under that amount. Figures supplied by reliable sources show that the amount spent by manufacturers for advertising is from 2% to 3%, and that therefore the expenditure for advertising as a whole is probably not over 4% to 5%. It is therefore evident that while the total expenditure for advertising runs into large figures, the relative expenditure in proportion to the cost of a commodity is small. Id other words, if advertising played no part whatever in stimulating the sale of commodities, and if the cost of advertising were therefore directly added to the price of a commodity to the consumer, the price of an article would be almost inappreciably higher than it now is. An article selling at $1.00 would have to be sold at $1.04 or $1.05 if advertising were purely a dead expend iture of money. Although the actual expenditure for advertising is relatively small—probably not over 4% to 5% in the aggre gate—even this expenditure would be a serious waste if it pro duced no economic or social value. The 1% to 3% spent by retailers, or the 2% to 3% spent by manufacturers, would in many instances serve to make the difference between success and failure.
(2) Lowers the cost of production on account of increased volume.
(3) Lowers prices to the consumer and thereby raises the standard of living.
(4) As a by-product, aids in the education of the general public.
Data have been obtained from a number of national advertisers to show the effects advertising has had upon the cost of production and the cost of selling, and prices to the consumer. It is realized that changes in business conditions during the past few years and changes in distribution policies within the individual companies make it very difficult to eliminate the variable factors and to prove the effects of advertising. The data which have been collected, however, seemed to indicate conclusively that the first three results named above are brought about by advertising. . . .
In addition to the four results obtained by advertising which have been mentioned above, advertising often has the following beneficial effects for the manufacturer, dealer or consumer:— (I) Advertising aids in stabilizing production.
(2) Advertising aids in standardization and quality.
(3) Advertising aids in the simplification of products. (Elimina tion of unnecessary items in the line.) (4) Advertising helps to prevent fluctuation in prices.
Advertising has aided materially in the standardization of prod ucts and quality of goods. This has been brought about through the establishment of brand names and trade marks, which have become associated with uniform quantities and qualities in the mind of the public, until the recollection of a brand name of any number of specific products calls up the picture of a certain definite quantity and a certain recognized standard of quality, which the public has been educated to receive when it calls for a product by a specific trade-name. Although the establishment of standard packages has probably added to the cost of commodities to some extent, it has had certain other advantages. It has facili tated retailing, requiring less time on the part of assistants in the preparation of products for delivery to the consumer, and it has secured a more hygienic handling of goods, particularly foods.
The noteworthy advances made in the general level of living, in public taste, in personal and domestic conveniences, in the general use of cultural agencies, must be attributed in part to the use of the printed word in the form of advertising. Such products as automobiles and radios and the development in musical taste generally, vacuum cleaners, better-fitting clothes, better-construct ed and designed houses, better-painted houses, evidence the ad vance made in the level of living, due in a considerable measure to the insistent and continuous force of advertising. There is no doubt that we should very likely have most if not all of these improvements and conveniences without advertising, but probably not so many people would have had them so soon. Printed pub licity has no doubt helped to educate people to want more and better things in food, clothing, housing, personal comfort and enjoyment.
The almost universal reading of magazines and newspapers has been made possible largely, if not solely, through advertising, since more than three-fourths of the income of a periodical is derived from its advertising space. In this sense, the news paper or magazine is practically a by-product of advertising. The trifling sum which is now charged for a newspaper or magazine —in comparison with the large sum which such magazine or news paper would cost if it were not for the advertising which it carries —has made some form of reading matter available to even the poorest classes of persons. Advertising revenue has made possible the large-scale production of newspapers, magazines and periodi cals of all kinds, the social and educational value of which is beyond estimate.
It seems to have been found from experience that some prod ucts may be sold most economically primarily through personal salesmanship, that some products may be sold to certain classes of people most economically primarily through printed salesman ship, but that probably the great majority of products may be distributed most economically by varied proportions of personal and printed selling. So long as competition is believed to be a desirable factor in human welfare, just so long will competitive means be used. Critics of advertising perhaps may neglect the fact that if advertising were eliminated or abolished other compet itive methods would necessarily be substituted for it. If the use of advertising were eliminated, it is quite likely that its place would be taken in most instances by some form of personal selling, with its accompanying expense. The fact that numerous firms which have consistently and continuously used printed salesman ship over a long period of years have survived from early periods of business activity may be taken as some indication that adver tising has been found to be a fairly effective agency of business progress. (D. ST.)