Advertisements are Responded to in Predictable Ways

The economic principle I examined was, “People respond to incentives in predictable ways”. There are many examples of how this economic principle can be applied to the real world. While studying advertising I found many examples of this principle. First, companies create incentives for their consumers through social media. Social media is the cheapest way to effectively advertise to a large audience. It is the cheapest way to advertise because it’s the easiest way to target specific audiences and certain demographics. This shows that through technology companies can target exactly who will be most interested in their product, leading to an increase in sales per view. Second, companies create incentives for consumers through bold and irrational claims.  Irrational advertising is when a company claims or shows that a product will do something for consumers that it will not actually do. Skechers used irrational advertising to sell thousands of shoes, convincing people the shoes would tone their legs and behind without any workout beyond their daily walking. The company even made claims about the shoes helping people lose weight.  Sketchers made millions of dollars before the FTC fined them and stopped the sale of the shoes. In many cases the FTC never comes to the consumers rescue. This demonstrates that if companies make bold claims about their product in advertising, consumers will listen and buy the product based on those claims. Third, repetition is used by companies to give consumers an incentive to buy their product. This means that messages are more effective when repeated. Overall, you can see that the placement and frequency of an advertisement greatly effects the influence an advertisement has on consumers.