WHY HAVE COMMERCIALS FOR WELL-KNOWN PRODUCTS? (4-2004)

Advertising has always been an integral part of a free-
market economy. It’s what makes free TV free, and it makes 
newspaper and magazine subscriptions more affordable.

Advertising obviously works, or the biggest corporations in 
America wouldn’t spend hundreds of millions of dollars a 
year paying for it. But sometimes I wonder if they really 
need to advertise so much.

Although it costs companies megabucks to advertise, the 
cost is ultimately passed on to consumers in the form of 
higher prices for goods and services. That’s why a can of 
Pepsi or Diet Coke costs a lot more than a can of generic 
cola. The production costs are not that different.

And that’s why I often wonder why well-known brand names, 
such as the major soft drink brands, really need to 
advertise at all. It’s not as though people don’t realize 
their products are available. There are vending machines at 
almost every retail outlet with huge Coca-Cola or Pepsi 
logos all over them.

It’s not just the soft drink companies that probably could 
cut way back on the money they spend on commercials, and 
then pass the savings on to their customers. But they, 
along with beer companies, are probably the biggest 
offenders.

When my daughter was about 10 or 11 years old, after 
watching a Coke commercial on TV, she turned to me and 
asked, “Dad, why do they have Coke and Pepsi commercials 
all the time, since everybody already knows about them?”

I replied that companies like to keep their product’s 
identity on the public’s mind, especially when there are 
competing products like Coke and Pepsi. It seemed like a 
good enough answer at the time, but my daughter had a 
point, even at that tender age. And it’s a point that I had 
often pondered myself.

Although I realize product identification and brand 
recognition is important, I can’t help but believe that 
neither Coke nor Pepsi would lose much revenue if they 
suddenly stopped advertising, except for the point-of-
purchase ads that you see at the grocery store.

Even if sales did dwindle slightly, I can’t imagine the 
slide in sales would offset the savings that would come 
from eliminating TV ads. But then I’m no advertising 
executive. I’m sure the bean counters at the major soft 
drink companies have considered the options carefully, and 
they still provide for a hefty advertising budget. So 
perhaps my supposition is wrong.

It still seems to make sense to me, though. Companies 
shouldn’t advertise unless they have something new to say. 
If a soft drink company came out with a new flavor, for 
example, there would be a need to advertise it. But simply 
buying air time to pump more images at us of somebody 
drinking a Coke seems like a giant waste of money.

Personally, I don’t hold much of a preference for either 
major brand of cola. I buy the caffeine-free, diet variety 
of whatever brand is on sale at the time. And I don’t buy 
one or the other based on which one’s TV commercial I last 
saw. I really can’t imagine who would.