Advertising and Sales Promotion | ICSE Class 10 Commercial Studies Notes

This note covers advertising and sales promotion for ICSE Class 10 Commercial Studies: the meaning and importance of advertising, its merits and demerits, how advertising differs from publicity, the advertising agency and its functions, social advertising media with examples, the meaning and techniques of sales promotion, and how advertising differs from sales promotion.

What is advertising and why is it important?

Advertising is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or service. It is perhaps the most commonly used tool of promotion. The most common modes of advertising are newspapers, magazines, television and radio.

Definition: advertising. Advertising is an impersonal, paid form of communication used by an identified sponsor to promote goods or services, informing prospects about a product and persuading them to buy it.

Why a firm must communicate with the market

A firm may produce a good quality product, price it appropriately and make it available at convenient selling points, yet the product may not sell well. There is a need for developing proper communication with the market.

In the absence of communication, customers would not be able to know about the product and how it can satisfy their needs and wants, or may not be convinced about its utility and benefits. Advertising supplies that communication at mass scale.

Importance of advertising

Advertising matters to three groups. For the firm, it helps introduce new products, creates and increases demand, builds the brand image and goodwill of the firm, prepares the ground for salespeople and helps the firm meet competition.

For consumers, it gives information about products, their uses, prices and where to buy them, so that buyers can compare and choose, and it brings new and improved products to their notice.

For society, it creates employment in advertising agencies and the media, its revenue keeps newspapers, television channels and websites running at low cost to readers and viewers, and social advertising spreads messages on health and civic duties.

The three features of advertising

1. Paid form: the sponsor has to bear the cost of communicating with the prospects.
2. Impersonality: there is no direct face-to-face contact between the prospect and the advertiser, so advertising creates a monologue and not a dialogue.
3. Identified sponsor: advertising is undertaken by some identified individual or company, who makes the advertising efforts and also bears the cost of it.

Note: Advertising is one element of the promotion mix, the combination of promotional tools used by an organisation to achieve its communication objectives. The four tools are advertising, personal selling, sales promotion and publicity.

What are the merits of advertising?

Advertising, as a medium of communication, has the following merits:

1. Mass reach: advertising is a medium through which a large number of people can be reached over a vast geographical area. For example, an advertisement message placed in a national daily reaches lakhs of its subscribers.
2. Enhancing customer satisfaction and confidence: advertising creates confidence amongst prospective buyers as they feel more comfortable and assured about the product quality and hence feel more satisfied.
3. Expressiveness: with the developments in art, computer designs and graphics, advertising has developed into one of the most forceful media of communication. With the special effects that can be created, even simple products and messages can look very attractive.
4. Economy: advertising is a very economical mode of communication if a large number of people are to be reached. Because of its wide reach, the overall cost of advertising gets spread over numerous communication links established, so the per-unit cost of reach comes low.

These merits explain why firms spend substantial amounts of money on the promotion of their goods through tools such as advertising, personal selling and sales promotion techniques like price discounts and free samples.

Worked example 1. A firm can pay ₹5,00,000 for an advertisement in a national daily that reaches 25,00,000 readers, or ₹40,000 for a notice in a local paper read by 1,00,000 people.

Which advertisement has the lower cost of reaching one reader, and which should the firm choose if it wants the widest reach at the lowest per-person cost?

Answer: National daily: ₹5,00,000 ÷ 25,00,000 = ₹0.20 per reader. Local paper: ₹40,000 ÷ 1,00,000 = ₹0.40 per reader. The national daily costs half as much per reader, so the firm should choose the national daily; this is the economy merit of advertising at work.

What are the demerits of advertising?

Though advertising is one of the most frequently used media of promotion, it attracts a lot of criticism.

The opponents of advertising say that the expenditure on advertising is a social waste as it adds to the cost, multiplies the needs of people and undermines social values. The main criticisms, with the reply of its supporters, are:

Adds to cost, and the reply

1. Adds to cost: advertising unnecessarily adds to the cost of the product, which is ultimately passed on to the buyers in the form of high prices. An advertisement on TV for a few seconds, for example, costs the marketers several lakhs of rupees. The supporters reply that advertising increases demand, higher demand leads to higher production and economies of scale, and so the per-unit cost of production comes down. The expenditure adds to the total cost but the per-unit cost falls, which lessens the burden of consumers rather than adding to it.

Social values and confused buyers

1. Undermines social values: advertising is said to promote materialism and breed discontent among people as they come to know about new products and feel dissatisfied with their present state of affairs. Some advertisements show new life styles which do not find social approval. The reply is that advertising informs buyers about new products which may be improvements over existing ones, and the final choice to buy or not to buy rests with the buyers.
2. Confuses the buyers: so many products are advertised, making similar claims, that the buyer gets confused about which one is true and which one should be relied upon. For example, competing brands of detergent powder make similar claims of whiteness or stain-removing ability, and competing brands of toothpaste make similar claims of whiteness of teeth or feelings of freshness. The supporters argue that buyers are rational and can clear their confusion by analysing the information provided, though this criticism cannot be completely overruled.

Inferior products and false claims

1. Encourages sale of inferior products: advertising does not distinguish between superior and inferior products and persuades people to purchase even the inferior products. In fact superiority and inferiority depend on quality, which is a relative concept; the desired level of quality depends on the economic status and preferences of the target customers. No advertisement should, however, make a false claim about the quality of a product, and a firm making false claims can be prosecuted.

Note: The criticism is not one-sided. The opponents call advertising a social waste; the proponents argue that it increases reach, brings the per-unit cost of production down and adds to the growth of the economy.

How is advertising different from publicity?

Advertising and publicity are both tools of the promotion mix, but they work differently. Advertising is a paid form of communication in which an identified sponsor bears the cost of reaching prospects.

Publicity is the fourth tool of promotion, listed alongside advertising, personal selling and sales promotion, and it is not paid for by the sponsor in the same way.

Why the distinction matters to a marketer

Advertising can be planned, budgeted and repeated, while publicity depends on others.

Word of mouth, which works like publicity because nobody is paid to spread it, carries great weight: even for purchases like cars, mobile phones and home loans, many buyers rely on references from their friends and relatives.

Worked example 2. A small firm has ₹60,000 to spend on promotion. A newspaper advertisement costs ₹50,000 and reaches 2,00,000 readers. A press release about the firm's new product costs nothing but the editor may or may not print it.

The firm wants a message it can control and repeat. Should it buy the advertisement or rely on the press release?

Answer: The press release is publicity: it is free but the firm cannot control whether it appears or what it says. The advertisement is paid but the firm controls the message and the timing.

Since the firm wants a controlled, repeatable message and can afford ₹50,000, it should choose the advertisement and keep ₹10,000 in reserve.

What is an advertising agency and what does it do?

An advertising agency is a specialised firm that plans, prepares and places advertisements for its clients. A business that wants to advertise but lacks the staff, the creative skill or the media contacts engages an agency, which works for a fee or commission.

Definition: advertising agency. An advertising agency is a professional organisation that plans, creates and places advertisements for client firms, and advises them on the choice of media and the promotion budget.

Planning, creating and selecting the media

1. Planning the campaign: studying the client's product, market and objectives, and deciding what the advertisement should say and to whom.
2. Creating the advertisement: preparing the copy, the artwork, the layout and, for broadcast media, the script and visuals.
3. Selecting the media: advising on the choice of newspapers, magazines, television or radio, and on the timing and frequency of insertion.

Placing, evaluating and other services

1. Placing the advertisement: booking space or time in the chosen media on behalf of the client.
2. Research and evaluation: testing the advertisement before release and checking its effect after release.
3. Other services: helping with packaging, sales promotion schemes and public relations where the client needs them.

The agency thus performs for the advertiser the whole range of tasks that advertising involves, from the first idea to the final placement, and leaves the sponsor to bear the cost of the communication.

Worked example 3. A maker of toilet soaps has a promotion budget of ₹8,00,000. It can either employ two in-house staff costing ₹2,00,000 a year in all and buy media space itself for ₹6,00,000, or engage an agency that charges a fee of ₹1,50,000, covering the creative work, and buys the same media space for ₹6,00,000.

If the firm works in-house, it must also buy creative work worth ₹50,000. Which route should it choose?

Answer: In-house: ₹2,00,000 staff + ₹6,00,000 media + ₹50,000 creative = ₹8,50,000, which exceeds the budget. Agency: ₹1,50,000 fee + ₹6,00,000 media = ₹7,50,000, leaving ₹50,000 within budget. The firm should engage the agency, since it stays within ₹8,00,000 and gains specialist creative and media skills.

What is social advertising and what media does it use?

Social advertising is advertising that promotes a social cause or a desirable behaviour rather than a product for profit.

Its aim is to inform and persuade people to act in the interest of society, for example to take a vaccination, save a girl child, donate blood or keep the environment clean.

Definition: social advertising. Social advertising is advertising by a government, a public body, a non-profit organisation or a company to promote a social cause or change behaviour for the good of society, rather than to sell a product for profit.

Why non-profit organisations need it

Marketing activities are equally relevant to non-profit organisations such as hospitals, schools, sports clubs and social and religious organisations.

It helps these organisations in achieving their goals such as spreading the message of family planning, improving the literacy standards of people and providing medication to the sick.

Ideas themselves can be marketed, such as polio vaccination, care of the aged (HelpAge India), family planning, donation of blood (Red Cross) and donation of money on Communal Harmony Flag Day (National Foundation for Communal Harmony).

The media used for social advertising

The media used for social advertising are the same as those used for commercial advertising:

1. Newspapers and magazines: printed messages and public-service columns.
2. Television and radio: short films and jingles, often broadcast free or at concessional rates for social causes.
3. Outdoor media: posters, hoardings and wall paintings in public places.
4. Digital media: websites, social media posts and SMS campaigns.
5. Direct contact: street plays, camps and talks by health workers and volunteers.

Note: well-known Indian examples. Government campaigns such as Pulse Polio (polio drops for young children), Swachh Bharat (cleanliness), Beti Bachao Beti Padhao (protecting and educating the girl child) and Jaago Grahak Jaago (consumer awareness) are all social advertising.

Social media as an advertising medium

Social media are websites and apps on which users create and share content and connect with one another, such as Facebook, Instagram, YouTube, X (formerly Twitter), LinkedIn and WhatsApp. Firms, governments and non-profit bodies use them as an advertising medium in two ways: paid advertisements shown to chosen groups of users, picked by age, place or interest, and the organisation's own pages and posts, which users can like, share and comment on.

Unlike a newspaper or television advertisement, a social media message can be aimed at a narrow group, its reach can be counted, and it allows a two-way conversation with the audience. Examples are a clothing brand running a paid Instagram advertisement for college students in one city, a video advertisement played on YouTube before other videos, and a blood bank posting a donation appeal on Facebook and X that followers share with friends.

What is sales promotion and what are its techniques?

Sales promotion refers to short-term incentives which are designed to encourage the buyers to make immediate purchase of a product or service.

These include all promotional efforts other than advertising, personal selling and publicity, used by a company to boost its sales. Sales promotion is usually undertaken to supplement other promotional efforts such as advertising and personal selling.

Definition: sales promotion. Sales promotion means short-term incentives, other than advertising, personal selling and publicity, offered to customers, middlemen or salespersons to encourage immediate purchase and boost sales.

The three groups the techniques address

Companies use sales promotion tools specifically designed for three groups:

1. Customers: free samples, discounts and contests.
2. Tradesmen or middlemen: cooperative advertising, dealer discounts, and dealer incentives and contests.
3. Sales persons: bonus, salesmen contests and special offers.

Sales promotion includes only those activities that are used to provide short-term incentives to boost the sales of a firm.

Common techniques of sales promotion

1. Free samples: small quantities given free to induce people to try a product, such as a sachet of a new shampoo.
2. Discounts and price-off offers: the product is sold below its list price for a limited period, such as 10 per cent off during a festival sale.
3. Rebates and refunds: part of the price is returned to the buyer, for example on producing proof of purchase.
4. Quantity gifts and product combinations: extra quantity free in the same pack, such as 20 per cent extra, or a second product free with the first, such as buy one, get one free.
5. Premiums or free gifts: a gift offered with the product, such as a mug with a jar of coffee.
6. Coupons: certificates that entitle the holder to a stated saving on the purchase of a product.
7. Contests and lucky draws: buyers take part in a contest or a draw and may win prizes.
8. Exchange offers: an old article, such as an old mobile phone or television, is accepted as part payment for a new one.
9. Easy finance: the product is sold on instalments, sometimes at zero per cent interest.
10. Demonstrations, fairs and exhibitions: the product is shown in use to attract and convince buyers.

Merits and limitations of sales promotion

Its merits are attention value (the use of incentives attracts the attention of people), usefulness in a new product launch (it induces people to break away from their regular buying behaviour and try the new product), and synergy in total promotional efforts (it supplements personal selling and advertising and adds to the overall effectiveness of promotion).

Its limitations are that frequent reliance on sales promotion reflects a crisis, giving the impression that the firm is unable to manage its sales or that there are no takers of its product, and that it may spoil the product image.

Worked example 4. A firm sells a shampoo at ₹120 a bottle and normally sells 1,000 bottles a month, earning ₹40 profit a bottle.

It offers a scheme of "20% extra free" for one month and sells 1,500 bottles, but the extra quantity costs it ₹15 a bottle in filling and packing.

Did the scheme raise total profit, and should the firm repeat it every month?

Answer: Normal profit = 1,000 × ₹40 = ₹40,000. Scheme profit = 1,500 × ₹40 − 1,500 × ₹15 = ₹60,000 − ₹22,500 = ₹37,500.

Total profit fell by ₹2,500, so the firm should not repeat the scheme every month; it should use it only occasionally, since frequent reliance on sales promotion also spoils the product image.

How is advertising different from sales promotion?

Advertising and sales promotion are both tools of the promotion mix, but they differ in purpose, duration and the response they seek.

Why a firm needs both tools

The distinction is practical. Advertising builds awareness over time and creates a monologue with the prospect; sales promotion adds a reason to act now.

A firm that relies only on sales promotion may give the impression that it is unable to manage its sales, while a firm that advertises without any incentive may find that buyers postpone the purchase.

Worked example 5. A firm launches a new biscuit. It spends ₹3,00,000 on television advertising and offers a "buy one, get one free" pack for the first month, which costs it ₹1,00,000.

Sales in the first month are 50,000 packs at ₹20 each, against a target of 30,000 packs. The firm can afford only one more promotional step next month. Should it repeat the free pack or increase advertising?

Answer: Revenue = 50,000 × ₹20 = ₹10,00,000, against a target of 30,000 × ₹20 = ₹6,00,000, so the launch exceeded target.

The free pack is a short-term incentive and repeating it every month would spoil the product image and suggest a crisis. The firm should increase advertising next month to build lasting awareness, and keep the free pack for occasional use.

Glossary

• Advertising: An impersonal, paid form of communication by an identified sponsor to promote goods or services and persuade prospects to buy.
• Publicity: A promotional tool in which the message about a product or firm is carried without the sponsor paying for it.
• Advertising agency: A specialised firm that plans, creates and places advertisements for client businesses.
• Social advertising: Advertising that promotes a social cause or desirable behaviour rather than a product for profit.
• Sales promotion: Short-term incentives, other than advertising, personal selling and publicity, used to encourage immediate purchase.
• Promotion mix: The combination of promotional tools (advertising, personal selling, sales promotion and publicity) used to achieve communication objectives.
• Sponsor: The identified individual or company that makes the advertising effort and bears its cost.
• Impersonality: The absence of direct face-to-face contact between the prospect and the advertiser.
• Monologue: A one-way communication in which the advertiser speaks to prospects without a dialogue.
• Mass reach: The ability of advertising to reach a large number of people over a vast geographical area.
• Free sample: A small quantity of a product given free to induce a customer to try it.
• Dealer discount: A reduction in price offered to middlemen to encourage them to stock and push a product.
• Sales contest: A competition among sales persons or dealers, with prizes, to boost sales over a set period.
• Economies of scale: The fall in per-unit cost of production that comes from producing a larger quantity.
• Social media advertising: Advertising through websites and apps such as Instagram, YouTube or Facebook, aimed at chosen groups of users.

Common errors and misconceptions

• Misconception: Advertising and publicity are the same thing. Correct: Advertising is paid for by an identified sponsor, while publicity is carried without the sponsor paying for the message.
• Misconception: Advertising is a dialogue with the customer. Correct: Advertising is impersonal and creates a monologue, not a dialogue.
• Misconception: Advertising always raises the price paid by the consumer. Correct: It adds to total cost, but by raising demand and production it can bring the per-unit cost down.
• Misconception: Sales promotion and advertising are the same tool. Correct: Sales promotion offers short-term incentives and usually supplements advertising and personal selling.
• Misconception: Sales promotion is aimed only at customers. Correct: It is also aimed at middlemen (dealer discounts, contests) and sales persons (bonus, contests).
• Misconception: Social advertising sells products for profit. Correct: It promotes a social cause or behaviour, such as polio vaccination or blood donation.
• Misconception: An advertising agency only makes the pictures for an advertisement. Correct: It plans the campaign, creates the advertisement, selects and books the media, and evaluates the result.

Exam-style questions with model answers

Q1. Define advertising and state any two of its features. [3 marks]

1. Advertising is an impersonal form of communication which is paid for by the marketers (sponsors) to promote some goods or service.
2. Paid form: the sponsor has to bear the cost of communicating with the prospects.
3. Impersonality: there is no direct face-to-face contact between the prospect and the advertiser, so advertising creates a monologue and not a dialogue.

Q2. State any two merits of advertising. [2 marks]

1. Mass reach: a large number of people can be reached over a vast geographical area; a message in a national daily reaches lakhs of subscribers.
2. Economy: because of its wide reach, the overall cost is spread over numerous communication links, so the per-unit cost of reach comes low.

Q3. Explain any three demerits of advertising. [4 marks]

1. Adds to cost: advertising adds to the cost of the product, which is passed on to buyers as high prices; a few seconds on TV costs several lakhs of rupees.
2. Undermines social values: it is said to promote materialism and breed discontent, and some advertisements show life styles that do not find social approval.
3. Confuses the buyers: many products make similar claims, as with competing detergent powders claiming whiteness or stain removal, so the buyer is confused about which to rely on.
4. Encourages sale of inferior products: advertising does not distinguish between superior and inferior products, though a firm making false claims about quality can be prosecuted.

Q4. Distinguish between advertising and publicity on any three bases. [3 marks]

1. Payment: advertising is paid for by the sponsor; publicity is carried without the sponsor paying for the message.
2. Sponsor: advertising has an identified sponsor who makes the effort and bears the cost; publicity has no such paying sponsor.
3. Control: the advertiser decides the message and the media; in publicity the firm does not control what is said or where it appears.

Q5. What is an advertising agency? State any four of its functions. [5 marks]

1. An advertising agency is a specialised firm that plans, creates and places advertisements for its clients, working for a fee or commission.
2. Planning the campaign: studying the client's product, market and objectives and deciding what the advertisement should say and to whom.
3. Creating the advertisement: preparing the copy, artwork, layout and, for broadcast media, the script and visuals.
4. Selecting the media: advising on newspapers, magazines, television or radio and on the timing and frequency of insertion.
5. Placing the advertisement: booking space or time in the chosen media on behalf of the client.
6. Research and evaluation: testing the advertisement before release and checking its effect after release.

Q6. What is social advertising? Give any three examples of the media or causes used. [4 marks]

1. Social advertising is advertising that promotes a social cause or desirable behaviour rather than a product for profit.
2. Cause: polio vaccination, promoted as an idea to the public.
3. Cause: donation of blood through the Red Cross, and donation of money on Communal Harmony Flag Day for the National Foundation for Communal Harmony.
4. Media: newspapers and magazines, television and radio, outdoor posters and hoardings, digital media, and direct contact through camps and street plays.

Q7. Define sales promotion and explain any three of its techniques. [5 marks]

1. Sales promotion refers to short-term incentives designed to encourage buyers to make immediate purchase of a product or service; it includes all promotional efforts other than advertising, personal selling and publicity.
2. Free samples: small quantities given free to customers to induce them to try a new product.
3. Discounts and price-off offers: a reduction in price for a limited period to encourage immediate purchase.
4. Exchange offers: an old article is accepted as part payment for a new one.
5. Dealer discounts and dealer contests: incentives offered to middlemen to stock and push the product.
6. Bonus and salesmen contests: incentives offered to sales persons to boost their selling effort.

Q8. Distinguish between advertising and sales promotion on any three bases. [3 marks]

1. Nature: advertising is a continuing communication effort; sales promotion is a temporary incentive offered for a limited period.
2. Purpose: advertising informs prospects and persuades them to buy; sales promotion induces an immediate purchase.
3. Relation: advertising works on its own as a tool of promotion; sales promotion is usually undertaken to supplement advertising and personal selling.

Q9. "Advertising is a social waste." Examine this criticism and the reply of its supporters. [5 marks]

1. The criticism: expenditure on advertising adds to the cost of the product, which is passed on to buyers as high prices.
2. The criticism: it multiplies the needs of people and undermines social values by promoting materialism.
3. The reply: advertising increases demand, and higher demand leads to higher production and economies of scale.
4. The reply: as total cost is divided by a larger number of units, the per-unit cost of production comes down.
5. Conclusion: the expenditure adds to total cost but the per-unit cost falls, which lessens the burden on consumers rather than adding to it.

Key takeaways

• Advertising is an impersonal, paid form of communication by an identified sponsor to promote goods or services.
• Its three features are paid form, impersonality and an identified sponsor; it creates a monologue, not a dialogue.
• Merits include mass reach, customer confidence, expressiveness and economy of per-unit reach.
• Demerits include added cost, undermined social values, confused buyers and encouragement of inferior products.
• Publicity differs from advertising because the sponsor does not pay for the message and does not control it.
• An advertising agency plans, creates, places and evaluates advertisements for its clients.
• Social advertising promotes a cause, such as polio vaccination or blood donation, not a product for profit.
• Sales promotion means short-term incentives aimed at customers, middlemen and sales persons.
• Sales promotion usually supplements advertising and personal selling rather than replacing them.

Test yourself

What are the three features of advertising?

Paid form, impersonality and an identified sponsor. The sponsor bears the cost, there is no face-to-face contact, and the advertiser is identified.

Why is advertising called a monologue?

Because there is no direct face-to-face contact between the prospect and the advertiser, so the message travels one way, from advertiser to prospect.

Name two common modes of advertising.

Newspapers and magazines, and television and radio. These are the most common modes of advertising.

Give one example of social advertising.

A campaign for polio vaccination such as Pulse Polio, an appeal for blood donation through the Red Cross, or the Swachh Bharat cleanliness campaign.

What is a free sample?

A small quantity of a product given free to a customer so that the customer tries it and is induced to buy the full product.

To which three groups are sales promotion tools addressed?

Customers (free samples, discounts, contests), middlemen (cooperative advertising, dealer discounts, dealer contests) and sales persons (bonus, contests, special offers).

State one limitation of sales promotion.

Frequent reliance on it reflects a crisis, giving the impression that the firm cannot manage its sales or that there are no takers of its product.

Give two examples of social media used for advertising.

Instagram and YouTube; Facebook, X (formerly Twitter), LinkedIn and WhatsApp are also used to reach chosen groups of users.

Name two functions of an advertising agency.

Creating the advertisement (copy, artwork, layout) and selecting and booking the media on behalf of the client.