Industrial Economics -
The Advertising Debate

Virginie GAUTHIER
Carine FERNANDEZ
Antonia HAVADI-NAGY 
Bettina SCHULTE 
Andreas LOREK

2001/2002

Table of Content

Introduktion  2

I. The Advertising debate  3
I.1. What is Advertising?   3
I.2. Why should we advertise   4
I.3. … and how much is useful?  4
I.4. Advertising in the market  5
I.5. How much has an enterprise to spend?  5
I.6. What are the different views of Advertising?  6
I.7. What are the consequences of Advertising?  6
a) on the market  7
b) on the product  8
I.8. Conclusion  9

II The French and German Advertising Market – an overview  10
II.1. Germany – one of the first members of Europe  10
II.2. Advertising and Society in Germany  10
II.3. Restrictions of the government  11
II.4. The Media Landscape  12
II.5. France – an important country in Europe  15
II.6. Socio-economic profile  15
II.7. Government’s restrictions  15
II.8. Advertising industry in France  16
II.9. The Media Landscape  17

III. The product Danone Actimel as example for different Advertising in Germany and France  20
III.1. Danone Group  20
III.2 France – home country of Danone  20
III.3. Danone GmbH – Danone in Germany  21
III.4. Actimel – one of the most successful products of functional food  21
III.5. Advertising for Danone Actimel  22
III.5.1. www.actimel.de - the German Internet presence  22
III.5.1.a. design and navigation  22
III.5.1.b. Content features  23
III.5.1.c. Conclusion  23
III.5.2. www.actimel.tm.fr - Actimel’s internet presence in France  24
III.5.2.a. design and navigation  24
III.5.2.b. content features  25
III.5.2.c. conclusion  25
III.5.3. www.actimel.dewww.actimel.tm.fr  26
III.5.4. an example for a French print advertisement  26
III.5.4. an example for a German television spot  26

Introduction

“Always Coca-Cola” who does not know this catch phrase? Advertising largely influences the consumer behaviour. The aim of advertising is to push the consumer to buy and for companies it is a good way to increase their benefits and to have a well-known brand name. The advertising debate deals with the way of seeing advertising: as a mean of persuasion or as a mean of information?

At first, we would analyse the meaning of advertising within the advertising debate part. Moreover, we will focus on the French and German advertising market. At last, we would compare, the different ways of Advertising in France and Germany of the product Danone Actimel.

I. ....... The Advertising debate

I.1. What is Advertising?

There are different views: for some economists, it is a waste of money, for others, it is really important for the market economy.
Advertising is useful when the potential market is important. There are different kinds of advertising:

[...]

The three goals of advertising are:

• to introduce a product on the market,
• to compare a product with another by highlighting this one,
• to inform the consumers.

Advertising is not the only way to promote a product; there are also other means as employing more salesmen, improving the packaging, extending the wholesale and increasing the margins. If you look at the table below, you can see that USA and UK are spending much more money on advertising than the other countries.

media distribution of advertising expenditures in 1999

[...]

Advertising could be combined with other kind of promotion so it could be a substitute or a complement. According to Doffman, advertising could influence the position of firms demand curve.

I.2. Why should we advertise …

Advertising is useful when the product is not well known in order to inform consumers about quality, characteristics or to push them to buy a product and of course to increase the sell of the company. Advertising permits to attract new consumers, keeping old ones and to prevent the entry from other competitors.

There are two points of view about advertising. On the one hand, the industrial economists do not consider that advertising has an effect on the demand curve. But on the other hand, the neoclassical ones think that advertising is useful in order to maximise company profits.

I.3. … and how much is useful?

Advertising is much more common in industrialised countries due to their purchasing power. The expenditure on advertising depends on the type of goods; for example, firms spend much more money in advertising for consumers’ goods than industrial goods.

Moreover, concerning the consumer goods, a company spends more money on nondurable goods. A company could make more margins thanks to advertising because it is the cheaper mean to promote a product.

The product and the market characteristics could influence the efficacy and the cost effectiveness of advertising. As the consumer goods market is huge and worldwide presence compared to the industrial goods market, which is smaller and more specific. So the firms spend more money in consumer one.

The consumer behaviour is different according to the kind of goods. For example, consumers do not pay attention to the information about non-durable goods but they need a lot of information concerning the durable goods. Moreover, for durable goods, the companies have to advertise more on the price than on the product itself. According to Stigler, the concept of search explains that the consumer choice could be better when they could find information about the price, the availability and the quality of the product. There are different kinds of research like magazines, exhibitions, and phone enquiries. But the problem is: if the consumers collect too much information, he will not find the lower price.

If the consumers are searching hardly for a lower price when the firm will have to reduce its investment on advertising in order to get a more competitive price on the market.
For usual goods, consumers do not search a lot of information and satisfy themselves with advertising in part for unknown characteristic product. 

Nelson divides the goods in two categories:

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