Why do businesses advertise?

Answer

Advertising is essential for informing and attracting potential customers. James F. Kelly, brand leader for PricewaterhouseCoopers, says that advertising is "a highly efficient way to say hello and offer a sense of ourselves to potential clients." Writing for Forbes, Kelly claims that advertising keeps a business's name in customers' minds, drives growth, builds the brand and has the potential to increase revenue.

The U.S. Small Business Association lists several benefits of advertising, including enhancing a business's reputation, establishing a distinct brand identity, encouraging and reminding existing customers and attracting new customers. The U.S. Small Business Association considers advertising essential for small businesses because print, Internet and television ads give business owners more control over their image. Ads can boost sales of a high-quality, lesser-known product. However, the U.S. Small Business Association warns that advertising is not a quick fix for failing businesses, substandard products or low sales.

Writing for Businessweek, Steve McKee claims that businesses that incorporate advertising costs and strategies as an essential part of doing business are often more successful than businesses that use advertising as a last-ditch effort. McKee, a marketing consultant specialist, further asserts that businesses should not rely on good service or superior products to gain customers. He advocates structuring advertising expenses into profit-and-loss statements and considers 5 percent of revenue a baseline starting point for an advertising budget.

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