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| In economic theory, there are four fundamental assumptions of free-market economics: self-interest, complete information, many buyers and sellers, and absence of externalities. Given these principles, there are a number of functions and effects of advertising in a free economy. It identifies and differentiates products; communicates information about them; induces nonusers to try products and users to repurchase them; stimulates products' distribution; increases product use; builds value, brand preference, and loyalty; and lowers the overall cost of sales. The greatest impact on the evolution of advertising has been economic. In ancient times when most people could not read or write, there was little need for advertising. Marketers used symbols on signs to advertise their products. As the world expanded, urban populations soared, and manufacturing and communication technologies developed, as did advertising. Printing was the first major technology to affect advertising; cable TV and the Internet are the most recent. With changing economies and increased competition, advertising has evolved from the preindustrial age through the industrializing and industrial ages to the postindustrial age. Since World War II, advertisers have used a variety of strategies, such as product differentiation, market segmentation, and positioning, to set their products apart. Recently the advertising industry experienced a period of retrenchment and reevaluation, but the future offers new opportunities for advertisers and agencies that can harness the interactive revolution and develop deep relationships with their customers. As a social force, advertising has helped improve the standard of living in the United States and around the world. Advertising makes us aware of the availability of products, imbues products with personality, and enables us to communicate information about ourselves through the products we buy. Through its financial support, advertising also fosters the free press and the growth of many nonprofit organizations. However, advertising has also been severely criticized over the years for its lack of honesty and ethics. This has given rise to numerous consumer movements and a plethora of laws that now regulate the practice of advertising. |