The Handbook of International Advertising Research

3

The Economic Effects of Advertising

How Research Can Untangle Them

John Philip Jones

Introduction

The subject of this chapter is controversial, and much of the debate that it generates falls into one of two types of error – and sometimes even into both! It either oversimplifies or it overcomplicates. In an attempt to steer a course between these alternatives, I shall cover the extensive ground by guiding readers gradually through the issues, basing my arguments exclusively on objective evidence.

Here as a start is a simple point: advertising costs a great deal of money. Media advertising throughout the world was estimated to cost US$450 billion in 2010 (Bradley, 2010). In the United States alone, it swallowed $152 billion, which amounts to $500 for every man, woman, and child in the country. The United States is a rich country. In India, a much less rich country, for example, advertising accounts for only a fraction of the American expenditure, yet the per capita amount – approximately $5 and growing – is still perceptible to the large number of Indian families who live on very low incomes. And advertising expenditure in India is likely to increase in lockstep with the growth of the Indian economy. In effect, advertising will be a driver of such growth and will continue to be a clear indicator of economic progress, as standards of living continue to improve. All these advertising expenditure figures represent real resources: expenditures that in a totalitarian regime could be spent ...