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The effect of advertising on cost of products

The effect of advertising on cost of products

How does a company become popular? Well, the obvious answer is advertising. With appropriate advertising, choosing a wonderful brand image, and getting a lot of attention is something that is a natural progression towards how to build up a particular brand. Now, is advertising entirely something that is necessary? Well, let’s put it this way, if the people do not know about your product, how are you going to create a demand about it? So, companies are willing to spend tons of money for advertising, and that in fact has an adverse effect on the overall pricing of the product.

Impact on the maximum retail price for products due to advertising

What is the basic cost of a toothbrush? Well, come to think of it, if you daily the production cost as well as the cost of the employees, the raw material used for the product and a whole lot more, you would find that it cost about $ .10. However, most toothbrushes that you come across normally cost you a dollar or more. Well, what is the reason for this exorbitant cost? Well, the obvious answer is advertising. For example, you normally pay a celebrity to endorse your products so that you would be able to ramp up your brand image for that particular toothbrush. Now, when it comes to the realization of the money, it needs to happen by channeling that particular amount in small proportions towards the overall cost of the toothbrush. So, when the company ramps up the cost of a single toothbrush to 1 dollar, it includes the advertising cost, as well as a profit margin and plans for further expansion. Now, there is a lot of competition amongst companies in order to provide a better product at the cheapest cost possible, while maintaining competitiveness. Well, all of that can be achieved through other forms of marketing as well. There is no appropriate need for you to spend tons of money only on TV ads, you could make use of red media and get them for a lower cost. However, the reach of those advertising methods will also be limited.

At this present moment, the cost of a product is totally dependent upon the initial investment recovery as well as the amount of money spent during the production and building a company. However, recently, most of the companies have taken to Internet advertising which ensures that the overall product cost is significantly reduced due to the massive reduction in the advertising cost. Well, this is definitely something to be proud of, as at the end of the day, the end result is the overall cost of the product being reduced to manageable proportions for the general people. So, advertising is not only about spending crazy tons of money behind celebrities, but also trying to ensure that the benefit of your popularity can be trickled down to the normal people so that it will be able to benefit them.

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