A small business can fail, even with the best products and services on the market, if customers are not aware of the business and its offerings. Advertising is a key component of marketing that involves promoting a product by communicating with customers through various media, such as newspapers, TV, radio and the Internet. Advertising can be beneficial for businesses, but it also has some notable drawbacks.
The primary purpose of advertising is to give information to customers that will attract them or persuade them to purchase products and services. Advertisements can use many different strategies to achieve this goal, such as appealing to the emotions of consumers, drawing comparisons between competing products, and emphasizing how products and services benefit customers. Businesses often advertise sales and special deals, like "buy one get one free" promotions, to increase sales. A successful advertising campaign can increase revenue and profit.
Advertising gives businesses an opportunity to establish a brand and increase brand awareness among customers. Attracting new customers is important, but building a base of loyal customers that keep coming back to buy products and services is necessary for a business to succeed in the long term. Advertisements provide a stage for businesses to use company logos, slogans and other identifying trademarks to build brand recognition and remind customers of the benefits of their products and services to generate repeat business.
Producing advertisements costs time and money. A single television commercial aired during popular TV programs or special events can cost tens of thousands of dollars. Even low-cost advertising methods, such as placing ads in local newspapers, on local radio programs, and on the Internet, can be costly for small businesses. In addition, there is no guarantee that an advertisement will be successful in generating enough additional revenue to cover the costs, so advertising can reduce profit.
Advertising raises several legal issues that can result in costly penalties. The U.S. Federal Trade Commission says that the Federal Trade Commission Act requires advertisements to be truthful and non-deceptive, and have evidence to back up their claims. Misleading consumers or omitting important information can lead to penalties, including cease and desist orders to prevent advertisements, civil penalties that can range from thousands to millions of dollars, and corrective advertising aimed at correcting the misinformation.