The Power of Advertising: Exploring its Impact on Brand Switching, Market Growth

Advertising & Markets: A Collection of Seminal Papers, J.C. Luik and M.J. Watterson, Oxford: NTC Publications, Ltd. Reviewed by Thomas C. O'Guinn Does brand advertising increase total category demand? And if it does who cares? Well, regulators appear to care, as do those opposed to further restrictions on commercial speech. There is a reason that anyone would possibly care about such a quintessentially academic question: Answers to this question have become standard-issue regulatory rhetoric. I am sure you are familiar with them in one form or another. They are usually articulated as: "Our advertising only encourages existing (users, owners, drinkers, smokers, etc.) to buy our brand, and nothing more," vs. "Your advertising gets x number of new (users, owners, drinkers, smokers, etc.) every day." At the heart of these statements is a fundamental question: What is the nature and extent of brand advertising's effects on markets, particularly mature markets? The answer has enormous significance for regulators and commercial speech advocates. Advertising that can be shown to increase product consumption, especially by underage/unlawful users, becomes a huge target in the sights of regulators. Thus, the extent of advertising's impact has become a central question where the free speech rights of advertisers are in play. In order to step outside the familiar and emotional for a moment, let's consider brand advertising's effect on something a little less controversial: bar soap. For the purpose of this exercise, assume there are some well-known risks to long-term bar soap usage. Now, if bar soap brand advertising only encourages adult bathers to choose between brands of bath soap, once the decision to use bath soap at all has been made, then one could argue for minimal state interest in restricting soap advertising. After all, this position holds that other factors (social, hygienic, olfactory, etc.) have led to initiation and continued use (i.e., regular bathing with soap). However, if Ivory and Dial's advertising, for example, actually induces young consumers to start using soap, then some might argue that restrictions (even bans) on bar soap brand advertising are entirely justified. Of course, this issue is typically debated in the case of tobacco and alcohol. To my knowledge, there is not yet a bar soap ad ban being considered, nor is there any known harm from typical soap use. While soap and cigarettes are obviously different in many important aspects, the underlying question of advertising's effect on mature markets deserves some scrutiny outside the emotional rhetoric that typically accompanies it. Advertising & Markets is a collection of 20 academic papers that addresses this issue. The attention was sorely needed: Everyone thinks he or she knows the answer to the advertising effects question, particularly where cigarettes and alcohol are concerned. However, up until now there has been no one source to which to turn for the accumulated science on the topic. This volume seeks to remedy this problem. Eighteen of Advertising & Markets' 20 chapters are articles previously published in the International Journal of Advertising between 1982 and 1996. Two new chapters by the two editors introduce the volume.

IJA is a peer reviewed journal published in Oxford on behalf of the Advertising Association of London. Its editorial office is housed at the London Business School. It is a respected international business journal. John Luik most recently worked as a senior associate at the Niagara Institute. M.J. Waterson is research advisor to the UK Advertising Association. The contributors are prominent academic and policy researchers from the United States, UK, Australia, and Korea. Advertising & Markets is divided into three sections. The first section addresses the general advertising and market demand question, the second deals specifically with alcohol, and the third with tobacco. In some real sense Luik and Waterson could be considered radical; at least they do something that is (sadly) fairly radical these days: They actually give scientific data the center stage in their search for an answer. While the phrase "research clearly shows" is one of the most commonly uttered in legislative and policy circles, in truth it is rarely backed up by anything other than wishful thinking, and the usually correct belief that no one will really check the asserted "facts." Advertising & Markets changes that; it takes the question square-on and reports the data as they fall. This is very refreshing. While the contributors are not unanimous in their conclusions, Waterson's review (Chapter 2) reflects the book's overall take-away: "The evidence suggests that brand advertising expenditures, in aggregate, are most unlikely to have any impact on the size of mature consumer markets such as food, drink, or tobacco markets, whether by accident or design. Government policies which aim to reduce smoking or drinking prevalence by instituting advertising bans are therefore unlikely to have any impact." This conclusion is based on extensive review and compilation of the econometric literature. It does, of course, run counter to common lay and legislative views of advertising's effects. This has more to do with the peculiar history of advertising than anything else: Born of Barnum and patent medicine hyperbole, visible reminder of capitalist excess in the Depression, and the mind-control boogie man of the paranoid '50s, advertising's "power" is either grossly overstated or horribly misunderstood. It can certainly be powerful, but very rarely in the way many regulators seem to believe. Advertising & Markets is a good resource. It is not perfectly balanced, but does seem generally fair. Because it is econometric, it is subject to the limitations of an economic analysis (considerable), and has its share of math symbols that send many into a virtual brain lock. The larger and more general question of advertising's macro effects is much more complex than econometric analyses can comfortably address. Furthermore, advertising's effects can never really be separated from their historical and social context, no matter what economists believe. Still, this is a valuable volume for anyone attempting to fairly join this issue, or for anyone wishing to be informed. Thomas C. O'Guinnis Professor of Advertising and Business Administration, Research Professor, Institute of Commercial Research, University of Illinois at Urbana-Champaign. He is a leading researcher in the field of consumer behavior, and the co-author of a new text book, Advertising (O'Guinn, Allen, and Semenik, South-Western). He also consults on various advertising and marketing issues. 119 Gregory Hall, 810 S. Wright, Urbana, Illinois, 61801. t-oguinn@uiuc.edu, 217-351-2991.