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New Media and Mass Communication
ISSN 2224-3267 (Paper) ISSN 2224-3275 (Online)
Vol.27, 2014

Effects of Advertising on Consumer Buying Behaviour: With
Reference to Demand for Cosmetic Products in Bangalore, India Akwasi Ampofo
University of Madras, Chepauk, Chennai 600005. Email: [email protected] Abstract
The study seeks to examine the effects of advertising on consumer buying behaviour considering demand for cosmetic products by residents in and around Nagarabhavi, Bangalore. Using a sample of 100 respondents of mostly the young, we ran regressions and found that advertising does influence expenses incurred on cosmetics products but much influence on the purchase of cosmetic products results from one’s income or pocket money available, and other factors like price of the product, the brand and other people’s recommendation concerning the product.

We concluded that, advertising satisfies the needs of the firm and the wishes of consumers. Its role cannot be replaced by any other means. Therefore firms must strategize and know when and where they should advertise. The consumers need to be informed about products and until that is done, the products of firms will still be in stores with no demand for them.

JEL Classification: M37, D12
Keywords: Advertising--impact, Consumer behaviour--Bangalore, Cosmetic products—demand, Cosmetics demand—Bangalore
1.0 Introduction
Consumers are final end user of products. They keep the production cycle moving. Consumers do play a vital role in the economic system of any nation, thus, any nation will face crisis if consumers don’t have the effective demand for goods produced.

Consumers demand different commodities based on their taste and preference for them. Awareness of good influences consumers purchase of that good. Other factors that influence one‘s taste and preference for a good are psychological and environmental. Taste and preference for a good change overtime. Awareness of a product, thus, advertisements, play a role in influencing the taste and preference of consumers’ choice. Consumers are known to be rational with regard to their purchases, wanting to maximize their satisfaction when it comes to consumer goods. A consumer will therefore not purchase a commodity whose price is above the additional satisfaction that he derives from the good. How much of a good demanded, depends on the satisfaction the consumer gains from spending extra money on the good. Rational consumers will spend on a good till their gains equal the cost they pay for the product. Thus where MUP=MCP (Sloman and Wride, 2007) Advertising is the mass publicity of a product. It involves creating awareness of a product’s uses and benefits to others. Doing this makes a product available to those in need of them and this satisfies the needs of the advertiser; increasing sales.

According to Cohen, advertising is a business activity that employs creative techniques to design persuasive communication in mass media that promote ideas, goods, and services in a manner consistent with the achievement of the advertiser‘s objective, the delivery of consumer satisfaction and the development of social and economic welfare. (Cohen, 1988)

From Cohen’s definition, it can be found that advertising satisfies 3 objectives; to increase sales of the firms, to guarantee consumers a great deal of service and finally to ensure the social and economic welfare of society. Advertising is seen in various ways. One encounters them mostly while watching television, reading magazines and newspapers, surfing the internet, and on the radio or even simply while walking down the street (Sharma and Sharma, 2009). Advertising has thus, a stimulating influence on the purchasing behaviour of the consumers. Advertising are most effective on products that have intrinsic qualities. These qualities are not known at the time of purchase and it takes one to discover this upon using the product. Also, when there is a substantial chance of differentiating a product, it best suits to advertise on that product. Again, when there is a strong emotional purchasing motive such as to protect health or enhance social position, it pays to advertise on such a product. These conditions make the demand for the product more inelastic. The more emotions consumer attach to a product, they more they tend to be insensitive to its price. This is of importance to firms as they can earn high sales in pricing their products (Borden, 1942).

Advertising on food, clothing, durables and household items tend not to yield higher sales. Consumers are not affected much by the publicity on such items as they consume such products on a daily basis. The higher the consumption of a product, the less effective is advertising on them. Advertising thus tend to have a less marginal effect on such items (P. Doyle, Nov., 1968)

Advertising has a long term dynamic effect on consumers’ purchase and sales of producers. A firm’s reason for 48

New Media and Mass Communication
ISSN 2224-3267 (Paper) ISSN 2224-3275 (Online)
Vol.27, 2014

advertising is to create awareness of a product. This has effect on current and future sales of firms as consumers tend to respond to the advertisement in the long run. This dynamic effect of advertising explains that firms usually advertise a product the most at the entry. (Sharma and Sharma, 2009) Producers often advertise their product with the intention of increasing their sales which allows the firms to gain economies of scale and keep prices down. It also makes their products well known on the market. Also, advertising is necessary when introducing new products on the market. Without it, firms would find it difficult to break into market in which there are established brands.(Sloman and Wride, 2007) Advertising increases output, but increased output in turn increases production cost and this must be taken into consideration when comparing the cost and benefit of extra money of advertisement. The correct decision is to increase advertising until the marginal revenue from an additional money from advertisement, is just equal to the full marginal cost of that advertisement. That full marginal cost is the sum of the money spent directly on the advertisement and the marginal production cost that results from the increased sales that advertisement brings about. Thus the firm should advertise where MRA=MCA. (Pindyck and Rubinfield, 1995) Indian consumer market is one of the fastest growing markets in the world with a very high increase in the demand for luxury goods and personal care products. According to reports by Beauty Mart, the personal care products specifically, the beauty industry in India, is growing at a rate twice that of the US and Europe. The cosmetics market alone is growing about 15% to 20% annually, making it the right place for investors to channel their resources. The cosmetic products market have seen a 60% growth over the past five years. (Beauty Mart, 2013)

The quest of this research was to find if this massive growth in the cosmetic market is as a results of the advertisement made on the cosmetic products or other factors. As stated previously, advertising affect products that are believed to have an intrinsic quality that is not known at the time of purchase. One of such products is cosmetics. It isfor this reason that we have chosen this product as a case study.

1.1 Statement of the problem
Advertising is essentially to fulfil the traditional desire of firms to reach the ever increasing population so that their products may receive optimum exposure. The role of advertisement; to increase sales revenue and profits of the local firms and increase the demand for goods, has been falling apart. (Sundarsan, 2007). Most increase in product sales, especially, cosmetic products have been attributed to other factors like taste; long term use of a product and users unwillingness to switch products. This has raised numerous questions as to why cosmetic firms still do advertise their products.

Advertising has been a subject for debate either on one pretext or another for decades at the beginning of the 19th century. People showed little interest but it later became a fertile topic for research at the turn of the 19th century. (Sharma and Sharma, 2009).

This study therefore seeks to find out the role advertising play in the consumer buying behaviour of cosmetic products with emphasis to its users in and around Nagarabhavi, Bangalore. We are considering cosmetic product because we believe it satisfies the conditions of commodities on which it is effective to advertise. There are a lot of cosmetic products which are differentiated but serve the same purpose. Again these products are believed to have intrinsic qualities which can only be known after it has been used and lastly, some consumers attach strong emotions to the end products of these good and use it to improve their social status.

1.2 Objectives
The general objective of the study was to find out if there is any effect of advertising on consumer buying behaviour of cosmetic products in Bangalore.
In our quest to achieve the general objective, the following specific objectives were set and formulated to guide in data collection and analysis:
i. To know the extent to which purchases of consumers are based on advertisement. ii. To find the age and social group that is influenced by advertised cosmetic products. iii. To find out the motives and reasons of consumers for demanding advertised cosmetic products. iv. To know the other factors influencing consumer purchase besides advertisements The study continued with review of literature on advertising and the consumer buying behaviour. It then followed with the methodology employed in the study. The findings and results were then presented which was followed by conclusion and recommendations for cosmetic firms. 2.0 Literature Review

In reviewing previous works on the subject matter, so many views cropped up with others adding new knowledge to the subject.
2.1 Issue of Advertising in Economics: The Overview
Advertising has been a subject discussed over centuries ago, but prior to the 20th Century, this subject was not as


New Media and Mass Communication
ISSN 2224-3267 (Paper) ISSN 2224-3275 (Online)
Vol.27, 2014

important as it seems now. The reason been that, in the 19th century, economist were busy trying to develop the theory of perfect competitive markets, this theory assumed that, there was perfect information in the market and that, consumers had fixed preference for their products which were homogenous in nature. It was then thought of as a waste of resource and an increase in cost of production for one to advertise on products because consumers were not in any way going to respond to that. (Bagwell, 2001) Also, there was no large scale production until the late 19th century when numerous inventions cropped up. The advancement in transportation and technology, made producers rethink their decision to improve their capacity and thus, ensure publicity of their products. (Bagwell, 2011) After these happenings, advertising then became an important area for economist to research into. An early reflection was given by Alfred Marshall (1890, 1919). In his works, “Principles of Economics” and “Industry and Trade”. He marks out two roles played by advertising. To him, advertising might be useful in providing information to consumers which will help them satisfy their wants. He termed this as a constructive role played by advertising. The second role he calls a combative role played by advertising may provide less information to consumers leading them to shift among products. Marshall gave an insight to the role of advertising but less can be said of its fusion to microeconomics. (Bagwell, 2011)

Chamberlin in his work “The Theory of Monopolistic Competition” came up with new ways of looking at advertising. He modelled the expenditure of a firm as a “selling cost” that expands a firm’s demand for a differentiated product. In his work, he describes a market structure in which there are many firms producing and selling similar but not identical products. In this market, Chamberlin believes that advertising may provide consumers with information about their wants but also adds that, it can be persuasive and alter one’s demand for another. Advertising when informative makes consumers responsive to price changes and thus increases the demand elasticity for the product but a persuasive advert will create brand loyalty making the demand for a good inelastic(Bagwell, 2011).

Scale economies play a central role in Chamberlin’s work and he believes that, such economies may exist in production and advertising as well.
Chamberlin then concluded that, the effects of advertising cannot be determined by theory alone, thus where a firm’s demand curve is tangential to its U-shaped average cost of production and selling, but by also considering the extent to which advertising is whether informative or persuasive and also whether scale economies exist. (Bagwell, 2011)

After this insight by Chamberlin, there came into exist...

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