Established companies, such as Coca Cola and McDonalds do not need to waste profits on advertising as they already have a vast and loyal customer base.
Commercial advertising is a significant marketing communication that links companies to customers. Common companies, especially multinational corporations, spend massive funds on advertising every year. Annual report of McDonald’s demonstrates that the advertising costs of McDonald's were $787.5 millions in 2012 (McDonald's Inc. 2012). Meanwhile, these super companies also have already possessed a vast and loyal customer base, which can ensure their sales revenue and profits. In 2008, McDonald’s owned 30,000 branch stores in more than 100 countries, offering food for 52 million consumers per day (de Mooij 2009: 29). This essay will focus on the marketing field and analyze the positive reference of advertising to market shares, brand awareness and customer loyalty. It will also evaluate the presented debates and evidence to prove that with vast and loyal customers, established companies also need to invest a considerable amount of money in advertising.
On economic aspect, advertising is likely to be one of the most important tools of marketing communications, which can help the company to maintain and enlarge the market shares. There are two important concepts, share of market (SOM) and share of voice (SOV), whose relationship can measure relative marketing effectiveness. Shimp (2010: 172) defines brand’ SOM as ”the ratio of one brand’s revenue to total category revenue” and brand’ SOV as ”the ratio of a brand’s advertising expenditures (its [ad spend]) to total category advertising expenditures”. Shimp (2012: 172) also points out higher SOVs can contribute to higher SOMs for a brand. For example, table 1 and table 2 in the appendix illustrate advertising expenditures of top-10 wireless phone brand and top-10 beer brand in 2002 (Shimp 2010: 172). The data show that, in general, share of market is directly proportional to the share of voice. They can interact. In fact, companies have not ignored the expenditures on advertising. Furthermore, the expenditures trend
On economic aspect, advertising is likely to be one of the most important tools of marketing communications, which can help the company to maintain and enlarge the market shares. There are two important concepts, share of market (SOM) and share of voice (SOV), whose relationship can measure relative marketing effectiveness. Shimp (2010: 172) defines brand’ SOM as ”the ratio of one brand’s revenue to total category revenue” and brand’ SOV as ”the ratio of a brand’s advertising expenditures (its [ad spend]) to total category advertising expenditures”. Shimp (2012: 172) also points out higher SOVs can contribute to higher SOMs for a brand. For example, table 1 and table 2 in the appendix illustrate advertising expenditures of top-10 wireless phone brand and top-10 beer brand in 2002 (Shimp 2010: 172). The data show that, in general, share of market is directly proportional to the share of voice. They can interact. In fact, companies have not ignored the expenditures on advertising. Furthermore, the expenditures trend
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