Advertising

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9th June 2011.
Advertising
Advertising is a very imperative source of communication, for the companies to have a good place in the market and to beat imperfect and perfect competition. It gives a mean through which company can market their products effectively. Advertising focuses on, the hierarchical model known as hierarchy of effects model which has five levels of ; Awareness, Knowledge, Liking, Desire and Purchase.
Initially, awareness is created in the customers about the product by acknowledging them about the features of the product. If advertising is effectively done customers start liking the product making the product more preferable to them amongst the same category of products offered by other competitors. This preference creates a desire to buy the product and within a blink of an eye the customer buys the product. These levels show how effective advertising can make the company attain their vital goal of selling the products and getting loyalty from customers in return, as an additional core benefit. Above all the main purpose of advertising is to deliver effective and factual information of how the product is beneficial to everyone.
Due to the above reasons the successful companies consider it as the first and foremost option for productive spending. It is done through various ways of Digital Advertising such as Television Advertising, Radio Advertising and Online Advertising. It is also done thorough physical advertising ways such as celebrity endorsement, street advertising, in -store advertising by offering various sales promotions and press advertising which is done through magazines, journals and newspapers .During advertising ethical issues should also be considered such as the features introduced in the advertisement should really be there otherwise it might cause serious damages such as lack of customer loyalty, government intervention and etc. Every company has to advertise, whether it practices oligopoly, monopoly or perfect competition.
The imperfect competition will be discussed in this essay by discussing its types which are mainly Oligopolistic and Monopolistic competition. The Kinked-Demand Curve is used to Analyze rigidity of price by Oligopolistic firms and Monopolistic firms because they have the similar advantage of having control over the market .Thus, there are two segments used in this curve joined by a sharp twist .These segments differ in elasticity; first segment is more elastic due to price increases and the second segment is less elastic due to less price increases. These differences occur because of Independent decision making present in these firms. The Kinked demand graph used is shown as below;
From the above graph, it is obvious that due to control over price the companies try to equate their marginal revenue with marginal cost resulting in equilibrium which gives prominent rise in net income of the company. However in the initial stages the cost is higher than profit earned but later on as the sales increase and customer`s desire increase`s to buy the same product then eventually profit earned increases by a great percentage.
Oligopolistic firms are those who occur as the major sellers of the product and are very few in the market. These firms are independent who trade without intervention of governme...