Another opportunity for saving is in the cost of the goods to the dealer. Quantity pqrehases of ten mean extra discounts. The merchant who, thru advertis ing, is able to run up his sales, is in a position thereby to buy in larger quantities, to command lower prices, and to pass on this saving to bis customers.
Ineffective retail advertising is of value to no one. The store that gets no satisfactory returns from its advertising expenditure soon ceases to advertise or ceases to exist. Good retail advertising certainly does not increase the cost of goods to the public. Very few stores have ever raised their prices after they began to advertise, while there are countless cases of prices going down as the result of advertising. The buying public does not look for bargains in the quiet, non-advertising store, but in the big, busy, thor oly advertised retail establishment. Because of this fact store advertising cannot be charged with creating high prices.
4. Advertising and the manufacturer.—The manu facturer's advertising is that which is usually at tacked. The public sees hundreds of magazines carrying numerous pages of advertising; it sees bill boards and street-car cards everywhere; it cannot es cape the marvelous' electric signs that illuminate every 13roadway in the country; it learns that one back cover in colors on a popular periodical costs $10,000; and it jumps to the conclusion that here in deed is something tangible, something that must be charged with the high cost of living.
5. Reduction of manufacturing costs.—As in the case of retail advertising, we must differentiate be tween good and bad national advertising. Bad ad vertising is wholly a loss. The advertiser learns his lesson, takes his loss and gradually recoups by better methods, or he ceases to do business. The manu facturer is the loser, not his customers. Good na tional advertising, on the other hand, tends to keep prices down. It results in increased sales, and in creased sales often make it possible for the manufac turer to effect the ordinary economies of large scale production, lowered costs by reason of increased pur chases of raw material, better methods made possible by the employment of high salaried experts, complete division of labor with resulting increased efficiency, and the use of labor-saving machinery which is only profitable when the output is large. All of these and other savings may result in lower cost of the finished product.
6. Reduction of selling costs.—This is not, how ever, the most important effect of advertising. Some times the increased sales thru advertising do not de crease materially the cost of manufacture per unit, and sometimes there is a limit in production beyond which additional economies in manufacturing are im possible. Even in such cases advertising means a saving, for tho good advertising may not reduce the unit cost to manufacture, it always reduces the unit cost to sell.
The cost to is a big item in the price at which an article is sold. Every article must bear a propor tion of this cost. If the total selling expense is high and the sales small, the price must be fixed accord ingly; but if thru an expenditure for advertising the sales can be greatly increased, the proportion between selling expenses and sales may be so changed that the price can be brought down. Suppose, without ad vertising, a manufacturer can sell 10,000 units of his product at a selling cost of $5,000. Each article sold must bear a selling cost of fifty cents. Suppose, now, he adds an expense of $2,500 for advertising, and as a result sells 20,000 units. His total selling cost is increased to $7,500, but the unit selling cost is only thirty-seven and one-half cents. Here is the real economy of advertising, and it usually goes band in hand with a third saving—the lessened unit charge for overhead expenses. With an output of 10,000 articles, each article must bear its share of such ex penses as administration, interest on capital, etc. If the output is increased to 20,000, many of these charges will not be proportionately increased, and each article then will carry a smaller charge for the items of general expense.
7. Evidence of savings.—Thcse arc not mere theo retical savings effected thru advertising. The adver tising periodicals are filled with the testimony of manufacturers who have been able to keep down, or even to reduce prices, as a result of advertising, when large increases in the prices of raw materials would otherwise have forced prices up. Ivory soap is as widely and as expensively advertised as any commod ity in general use. Does anyone suppose that its present price, which has remained unchanged for almost half a century, could be maintained if it were not for the large scale production and the economies in marketing effected almost entirely thru its effec tive advertising? Good advertising does not really cost anything. It must be paid for but it is not an unproductive burden on anyone. To ask "Who pays for the advertising?" is like asking "Who pays the rent of the store?" or "Who pays the salary of the clerk behind the coun ter?" They are all selling expenses which are ab sorbed in the business, which are required by compe tition, and which often permit lower prices to the con sumer than would be possible without them. The question "Who pays for the advertising?" might be answered by another question, "Who pays the salary of the agricultural expert who shows a farmer how to double his corn crop without additional expenditure of anything except intelligence?" Good advertising is no more a burden to a manufacturer and his cus tomers than the salary of the expert is a burden to the farmer and his customers.