Why advertising might be particularly an important variable in determining the extent of a firm's market power

Topic: BusinessMarketing
Sample donated:
Last updated: February 15, 2019

Advertising is evidently one of the most commonly used forms of enhancing marketing in the modern society.

This has been closely attributed to the fact that it can effectively address a large audience. Indeed, the practice is found to have sufficient importance in determining the marketplace power share of a firm. This is because it serves to introduce new products developed by an organisation to the general public (American Business Media, 1999).

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Just to appreciate here is the fact that customers can only engage in purchasing products they have either used before or have heard of. This makes advertising important as it functions to introduce different brands of the same products while defining the unique qualities of each.However, marketing can have negative implications on the market share of a business. This is because some forms of advertisement practices have social and economic implications on the costs. By virtue of being an expensive practice, advertising results into increased customer product prices (Platania, 2010). Still, the practices can negate societal expectation by using obscene material. All these can compromise the acceptability of the advertised products at the market.

This essay gives a discussion on how advertising practice is an important variable in determining the extent of a firm’s market power.Advertising has the advantage of increasing market demand for company products (Sylvester, ; Sutherland, 2000, p. 21). The main aim of any firm of to maximise profit. This calls for the firm to have a sustainable customer base for its products. Advertising on the other hand functions to inform customers of the nature and advantages of purchasing the products of a particular firm (Sylvester, ; Sutherland, 2000, p.

21). With increased market for its products, a firm stands a better chance of expanding to meet market demands, thus consequently gaining its market dominance through increased customer loyalty. Therefore, advertising is crucial in enabling an organisation to realise a competitive advantage in the marketplace over its competitors.Another advantage of advertising to the company is that it leads to enhancement of the quality of products to reflect market demands (McKay, 2006). Some forms of advertisement entail direct interaction with the target audience. This means that the firm has the opportunity of hearing the concerns of the customers in relation to the products. According to the underlying principles of advertising practices, a customer responsive analysis is necessary as it allows investors to acknowledge any new and/or innovative products the customer demands (Hood, 2005, p.

67). This can be important in tailoring firm productions to meet market demand, a factor that greatly boosts the market power of the firm.Advertising is found to increase customer relations in a firm (McKay, 2006). The loyalty of customers to the products of a particular firm is dependent on the customer relation practices of the company.

It is worth to state here that customers are the ultimate reason behind the sustainable prosperity of any business. Still, satisfied customers are a crucial public influence luring other customers to purchase the products of their favourite company (American Business Media, 1999). Since advertising leads to the interaction of customers and investors, it serves to enhance customer relations thus promoting loyalty, a factor that greatly improves the firm’s market power (American Business Media, 1999).The reputation of an organisation is termed as the most important marketing tool for its products. Effective advertising practices have been found to have a positive impact on the reputation of an organization (Hood, 2005, p.

41). This is because; advertising seeks to engage the general public in appreciating and thus purchasing the products of a firm. Based on this reasoning, a firm that engages in advertising its new and innovative products does not only gain market for the products but above all markets its image.

This is quite important in realizing the acceptability of the firm by the general public. Therefore, effective advertising practices are crucial in strengthening the reputation as they instil the sense of quality and reliability of the organisation products (Hood, 2005, p. 41).Nevertheless, advertising can have negative implications on the market power share of the organization. First, advertising practices are quite expensive to the investment (Platania, 2010).

This is because it is a source of increased operational cost for the organization. Just to appreciate this claim, investors are levied by the government for using public space for advertisements such as installing signboards. On the other hand, advertisement through the mass media also dictates for payments. Based on the fact that the advertising industry is increasing becoming a common investment by many, then it means that the cost of advertising are much high to sustain such businesses.Given the fact that businesses are out to maximise profits for their investments, advertising can result into increased prices for firm products.

This is because the additional cost incurred by organisations during advertisement is bound to be transferred to the customers (Hood, 2005, p. 48). It is worth to acknowledge the fact that the purchasing power of customers is not only determined by quality and loyalty but to a bigger extent product prices. Therefore, with other similar products costing less, an organisation can evidently loose its customers due to advertisement. This is quite detrimental to the sustainable customer pool competitive advantage of the organisation in the marketplace.Another possible negative implication of advertising practices is that it can tarnish the reputation of the firm in the general public. Some advertisements have a negative perception from the target audience (American Business Media, 1999).

It is a common practice for company adverts to involve sex models. Although such a practice can be well taken by some fraction of the community, some might develop a negative worldview of the organization. This is further compromised when such models are used in irrelevant products.

Therefore, failure by the firm to take into consideration the possible perception their adverts will receive from the various audiences might significantly negate its reputation and thus its market power.Still on reputation, it is a common claim by businesspeople that buffing is normal and necessary for the sustainable success of any business. Due to this reason, some firms use advertisement as a way of giving the target customers an enticing impression for their products which are false by principle (Platania, 2010). Just to be appreciated is the fact that customers are out to get the best. This means that purchasing advertised products, only to appreciate later of the wrong quality can lead to long term loss of customer base by the firm. This greatly compromises the market power share of the organisation.In conclusion therefore, although advertisement plays an important role in enhancing the competitive market power of a firm, it can also be a source of failure to the firm. To ensure that a firm benefits sufficiently from its advertising practices, a number of factors must be taken into consideration.

One, the long term acceptability of company products is only nurtured by ensuring that product adverts are reflective of the actual quality or nature of the product. Another aspect is ensuring clear consideration of the target audience and their expectations to mitigate poor perception of the company by the public. All in all, effective advertising still remain a potential source of promoting the market power of an organisation.

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