IV. Speaking Out
Model 1 Who pays?
Laura: Hey!
Bob: Hey! Look, this is a cool TV commercial. “Things go better with Coke!”
Laura: I think the Pepsi commercial is just as attractive: “The choice of a new generation!”
Bob: Yeah, but the competitors are just canceling out each other’s efforts.
Laura: That’s quite true. They both spend piles of money to increase their market shares, but neither gains.
Bob: I’m afraid the extra costs of advertising will be passed on to the consumers.
Laura: I hear that the advertising produces a good image of a product, and that leads to consumer brand loyalty.
Bob: What do you mean by consumer brand loyalty?
Laura: It means consumers are loyal to a certain product and keep buying it. Also, they’re willing to pay more.
Bob: It seems contradictory. In other words, more sales mean lower production costs, but more advertising means higher costs to the consumer. In the end the winner is of course the company.
Laura: That’s true!
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