Showing posts with label Advertising. Show all posts
Showing posts with label Advertising. Show all posts

Saturday 7 November 2015

Are Profit-Motivated Businesses Bad For Society?

So in an article from a while ago we went through some of the benefits of privatisation- the main conclusion was that, in the main, privatisation leads to an increase in efficiency by replacing ambiguous, short termist political motives with one distinct motive- to make profit.

But this motive itself is one that is strongly debated over. Private businesses are pushed more than their state equivalents to turn over profits- but is this something that benefit those stakeholders outside of the company as well as those inside?

The pro-profit motive argument claims that free markets create environments that encourage profit-seeking competition. For example, in the British department store industry, which the state has little involvement in, competition is visible- Debenhams, John Lewis, House of Fraser and so on are competing to gain the highest profits. The contrary is perhaps visible in the British healthcare industry- the state-owned NHS dominates this market, and thus there is little (albeit growing) competition for profits in this sector.

Apple and Samsung's rivalry has brought
rapid advancements in mobile technology.
Though it is arguably not the only means to do so, market competition is key in bringing improvements and allocating resources efficiently in the economy. The global technology market has been a great example of this: Apple and Samsung have constantly been battling over the past 5-7 years over their mobile phones, and what has resulted is an unprecedented rapid development of mobile technology. Look at how far the iPhone, for example, has developed since its release in 2007. The current iPhone 6 is thinner, lighter and of better quality material than the original iPhone- yet it is decisively faster and more advanced. Competition with Samsung's 'Galaxy' phone drove Apple to proactively seek better technologies for every single generation of iPhone, which has brought us advancements in almost every aspect of the phone.
These companies have had to keep up with market demands- if they released a product few people liked (like the iPhone 5C), they would be damaged by it by a drop in their profits; they would by their competitors and over the long term marginalised, or even worse driven out of the market. RIM (producers of Blackberry phones) have seen this- they saw huge success in the 2000s but they failed to keep up when the iPhone came.
Apple and Samsung created huge advancements in the tech industry with the primary motive of chasing profits. They have shown the potential positive effects of profit-making motives.

However, this idea of competitive market democracy brought about by the importance of profits is not always appropriate.
An industry where there is a monopoly is one example of this- this company is desensitised to most activities of the market, because it has no competitors to protect itself against. More on the idea of the monopoly can be read in this past article.

Questions can also arise with regards to whether these motives work in certain areas of the economy. Healthcare, for example, is seen as something some see as a right to citizens of a developed country, rather than something they should have to pay for. Privatised healthcare in the USA has seen some rocky results. In principle it is a dangerous idea (what if you have a car accident and wake up to foot a bill you can't pay for?), and in reality it has followed suit. The cost of insurance (as these 21 graphs illustrate in detail) is far too much in comparison to other nations, meaning many in America aren't insured- and for these people a single health accident has the potential to destroy their lives not just health-wise but financially.
Private hospitals such as those in the USA face a dilemma- should their primary motive be to turn profits or heal patients? The answer is more often than not the former, resulting not just in the inflation of healthcare costs that we've seen but occasionally irresponsible behaviour- it's opened the door to doctors prescribing excess amounts of expensive medicines, suggesting unnecessary appointments; generally practices that are not so helpful to the patient but helpful to the hospital's finances.

The Big Mac: High margins, high calories.
Profit-seeking has had visible socially negative effects in the food industry- particularly in fast food. It is far easier for companies to cut down costs than to try to increase income, and born from this came much of the artificial junk food we see today. Healthy, organic food has become something of a premium in the food industry, as the influx of Big Macs, with their far higher profit margins, have dominated the fast food market. Seeking profits, companies such as McDonalds and Burger King have sacrificed quality in their products. They have sought to make a cheap (and not so cheerful) product that has damaging impacts on the healths of those who consume it, rather than making a product that adds genuine nourishment value to consumers. Financially, their current activity is incredibly sound- but in the real world? Not so much the case.

So while there is a valid argument for private profit-seeking opening up industries to market competition and all its benefits, this is something that is perhaps not applicable to the economy as a whole. With regards to healthcare, profit-seeking is a dangerous motive to have when the primary motive of any such establishment should be to cure their patients. Similar problems arise with fast food businesses, which damage the customer's health but bring in lucrative profits.
As it often is with economics, there is no straight answer. With different industries come different situations, and thus profit seeking has the potential to be both extremely beneficial and damaging to society as a whole.

Saturday 3 January 2015

3 Reasons Why Advertising Works (With Textbook Examples)

Advertising is perhaps the most omnipresent symptom of the modern global economic system. It is something that is not just pretty much unavoidable in one's regular daily life, but something that has grown to become far more than just a piece of material promoting a single product. Prominent pioneer of media studies Marshall McLuhan famously dubbed advertising "the greatest art form of the 20th century": look at the tearjerking recent Sainsburys ad, or Aleksandr Orlov from 'Compare the Market', and one could argue this claim to be applicable to today. 

Advertising has developed rapidly along all forms of media. Beginning largely in newspapers, ads moved onto our streets, onto our radios, onto our tv screens, onto the internet, and now, onto our smartphones and computer technology. 

The very fact that Britain's expenditure on advertising is set to hit £20bn next year shows that it is a method clearly relied upon by businesses to attract customers. Research suggests that on average, US supermarket sales increased by $89 per $1 spent on advertising

While many of us would attest that we are unaffected by advertising ("we know it's not real!"), one cannot deny that it does what it is intended to do: seduce us, make us want more- unleashing the consumers within us, as well as the money out of our pockets. 

So why exactly is advertising so effective? And furthermore, why is it so when most of us understand that advertisements are not always accurate representations of the real world/product? There are numerous answers to this of course, but let's have a look at three such reasons why advertising is so effective that even we are not always aware of its charm.

1. Personal Connection

A key to unlocking the minds of those a company is advertising to is the development of a close connection with the target audience. This creates trust, confidence and a love for the brand that simply cannot be bought.

One way in which this is done is by marketing their products as something the audience will genuinely like and lead to self betterment. Take 'Special K' cereal for example- this ad connects with women, by particularly attaching itself to the 'embrace yourself' movement. Many women (well, people in general) have worries about their size- and this ad allays those worries by spreading the message that size does not matter, that those potential customers watching are 'More than a number'. 

The advert does not actually feature anything related to cereal, it shows no more of the product than its logo, and it potentially goes against Special K cereal's appeal as a product consumed to lose weight- but this ad develops trust and admiration for the brand in the viewer that arguably is more powerful when it comes to buying decisions than the cereal itself. 

Another way a personal connection can be developed is by identifying with the viewer via a familiar face. Think George Clooney advertising Nespresso coffee, Taylor Swift advertising Diet Coke or Gary Lineker opening a pack of Walkers crisps; these are faces that people trust, admire, and brands can use them effectively to translate this trust with their products.

2. Exaggeration 

It goes without saying that a major way that advertisers rope us in is by simply exaggerating their product or service. 
Whether it's that internet provider's exaggeration of its download speeds or the over the top claimed health benefits of a familiar blackcurrant soft beverage, exaggeration is part and parcel of any modern advertisement, and it comes in many forms. 

Take a quick look at this Samsung Note advert, in particular the small text at the bottom of the screen beginning 0:04- "Screen images simulated... sequences shortened". This message must appear for legal reasons, but most people are unlikely to pay much heed to it- they will watch the entire ad thinking that all that watching-film-while-simultaneously-checking-emails action will be as buttery smooth in real life as in the video (if you've owned any multitasking smartphone of any sort you may understand that this is rarely the case). 

Another form of exaggeration that really needs little introduction is most commonly seen in fashion-related advertisements- that is the copious amount of editing of the bodies of the participants. Again, they exaggerate the effects of the product- unless the product they are selling is Photoshop, that is. 

But exaggeration is certainly only part of the art of advertising. Its effect is arguably dulled by the fact that most of us know it is there in almost every ad we see: a Lab42 survey of 500 consumers reported that just 3% of respondents described claims made in advertisements to be very accurate. 
So why are we still enticed by adverts when we know they are likely to be exaggerating? The next and final reason may perhaps be the most subtle yet significant.

3. Development of Inadequacy

This is the big one, that pretty much all the other advertising techniques culminate in. 

Advertisements make us feel incomplete, insufficient, inadequate. It's their job- to make us feel like we have a hole in our lives shaped exactly like their product.

This is a feature of every advert. Feeling hungry? Walkers' crisps will fill you up. Bad hair day? L'Oreal shampoo will ensure it never happens again. In need of entertainment? Buy a PS4.

But the most prominent, exaggerated use of this technique can be seen particularly in the advertising of upmarket, luxury products. This Mercedes 'Video Brochure' for example, promotes far more than just the car itself. Yes the car is indeed the main feature of the video but subtle things, like the house we are shown at the beginning that the 'owner' lives in, the 'owner's' clothes, the conveniently handsome young 'owner' himself.

The video promotes not just the car but the whole lifestyle, packaging the car as a part of it. Chances are, most people don't have a house that nice and clean, and aren't that photo (or video)-genic- and so we compare, we re-evaluate our own lifestyle in comparison with what we see on the screen and, unfortunately, many of us see our own as incomplete, inadequate, because we don't have a mansion or a luxury sports car.

One could ask- if most viewers of the promotional material can't afford to buy such an expensive product, why do companies like Mercedes bother with marketing? The answer is pretty straightforward, and it's why we see more adverts on TV from broader car companies like Mercedes rather than niche brands like Ferrari. One could call it the 'halo effect' of advertising, branding. We may take a look with our jaws dropped at the beauty of the Merc in the ad- and although we know we can't afford it, the company does sell cars at a considerably cheaper price, but ones that follow a similar design template. The S-Class Coupe in the video costs well over £100k, but the Mercedes C Class Coupe costs closer to £30k. So we may not be able to afford the former, but the latter may appear more attractive an option due to it being from the same carmaker. So the viewer may not buy the car directly advertised, but they'll still be more likely to buy a Mercedes. Ferrari don't sell cheap cars, so this halo effect is not present because if you can't afford one Ferrari model, you probably can't afford any of them.

The rose-tinted lifestyles presented in advertisements have the negative effect of constantly unsettling viewers, creating 'aspirations' that are often disguises for being unhappy with what may have previously been a perfectly comfortable life. You may have been happy with your 40 inch Sony TV, but when you see some celebrity showing off a 60 inch 4K curved-screen TV, your perception of your TV may completely change. You may therefore strive to be able to afford said 60 inch TV by working yourself harder while sacrificing social and family commitments, stressing more over finances, and generally in more of a rut. Should you finally make the purchase, after a few years your TV will soon inevitably be dwarfed by some new technology shown off on your TV. Your perception of your TV may change, and the deadly cycle of stress and consumption starts again.

Advertisements are not inherently dangerous. They can in fact be incredibly informative and entertaining, but that's not to say one should not be careful in assessing the impact of promotional material on our lives. Over-susceptibility to the bells and whistles of adverts can lead to dangerous consequences indeed.