Why do firms advertise? Should the government ban or restrict advertising?.

             Firms use a wide range of advertising as a tool to ultimately increase their profits in the short, medium or long run, by either being able to sell more products or to sell products at a higher price. The aim is to shift the demand curve in a beneficial way (Figure 1).

             The way a firm advertises is based on many factors; the product, the company and the market segment to name but a few. It also depends on the mediums available to them, such as newspapers, radio, television, cinema, posters, or even the logo on t-shirts. .

             The frame of advertisement is information. To get a message to the customer, may that be the features of a product, the .

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             price of it, the location of where to get it, or simply that it is 'cool" to have it. This mostly depends on the product. While Levi"s found it very beneficial in the late 80"s and early 90"s to advertise their product as being 'cool" and 'in", Volvo found their main selling point in the safety of their cars. Neither company would have been likely to increase profits had they reversed their strategies.

             What Levi"s was doing, in fact, was creating a brand. No actual information was given about the product, but an image was build around it, that the customer buying a jeans wanted to portrait when he wore it. This way of marketing is also known as persuasive advertising. This is often not based around an actual product rather than the entire company. .

             Not so for Volvo. Their way of advertising was (then, not so much now) mainly about pointing out specific features and the general characteristics. This is also known as informative advertising. However, most companies use both, persuasive and informative advertising for their products. .

             Another strategy is to try to create a strategic entry barrier. This means that by advertising a product in a certain way, it is made difficult or impossible for new producers to enter the market.