Answer to Question #207503 in Microeconomics for vtg

Question

2.1 Differentiate between the main types of advertising and clearly indicate which one of the two types is commonly used within the liquor industry. Motivate your answer. (6)

2.2 How might advertising by a particular company affect that firm's sales and liquor demand overall?

Answer 1

(1) The main types of advertising are;

1.product advertising.

2.institutional advertising.

• Product advertising - this type of advertising is used to promote a product or service to the target market by completely focussing on its benefits. Pioneer advertising is a sub type of product advertising whose main focus is to create demand for a new product.
• On the other hand, institutional advertising is mainly used to improve a company's image instead of focusing on the promotion of an individual product. Advocacy advertising is a type of institutional advertising that is used by companies that that have had to make responses to media attacks based on controversies that have been brought about.
• Institutional advertising is commonly used in liquor industry, specifically the advocacy advertising type. This is because liquor business is prohibited or rather discouraged in most local communities. Hence, the key promotional strategy of the advertisement should be to show the community how the liquor industry supports and cares for them by caring about its constituents.

(2)

sales

An increase in the level of advertising itself may not necessarily lead to an increase in sales. The impact of advertising on sales is not large and it is so much less than that on the price , this is incase advertising actually affects sales.

demand

Consumers' expectations and awareness about the benefits of the company's products will be increased through advertising. This will result in more numbers of people who will be willing to buy the products for the right price. Advertising will ultimately increase demand by building up the desire for the product or desire for the given brand in the minds of the consumers.