Impact of Advertising on Consumer Purchase Behavior

It can be said that advertising is a subset “promotions” in the marketing mix decisions and promotions put simply involves the mass communication of the product offering to the target market (Jobber and Ellis-Chadwick, 2013). Other than the obvious reason of persuading customers to make purchases, it is imperative to promote the product offering in order to create an image of the product which becomes one of its differentiating factors (Doyle and Stern, 2006). Furthermore the promotion of a product offering is important to reinforce the information the customers already have about the product (Doyle and Stern, 2006). As mentioned earlier, advertising is one of the components of promoting a product offering and thus it is defined as “the paid presentation and promotion of products or services through mass media such as television, radio, newspapers and the internet”(Doyle and Stern, 2006).

Traditionally, advertising is carried out on the television, radio and in newspapers however disruptive technology like the internet and the phenomena it has made possible has changed advertising and the effect it can have on consumers particularly where it concerns their purchasing decisions (Jobber and Ellis-Chadwick, 2013). Illustrating this point, Google and Facebook have created new environments which are part of the networks to which the planet belongs and which operate at break-neck speed (Jobber and Ellis-Chadwick, 2013). Furthermore, the internet and social networks have also changed the way individuals communicate such that advertisements do not inherently have to be paid – a good review from one consumer to a group of others can be all the advertisement that a company would need (Jobber and Ellis-Chadwick, 2013). In addition to this, advertisements can now be interactive in such a way that the information on the product passed on to the consumer is more targeted and customised (Jobber and Ellis-Chadwick, 2013). Thus this paper will be exploring the impact of online advertisements on consumer purchasing behavior first by outlining the theories of how advertising works, then examining the effects online advertisements on consumer purchasing behaviour .

How Does Advertising Work?

There has been considerable debate on how advertising works however the general consensus has been that there can be no single all embracing theory that explains how all advertising works because they have varied tasks (Jobber and Ellis-Chadwick, 2013). For example advertising that attempts to make an instant sale by incorporating a return coupon that can be used to order a product is very different from corporate image advertisements that is aimed at reinforcing attitudes (Jobber and Ellis-Chadwick, 2013). Nevertheless, the competing views on how advertising works are the strong theory of advertising and the weak theory of advertising (Jobber and Ellis-Chadwick, 2013)– both theories are based on how they affect customers and their end results.

The strong theory follows that a customer passes through the stages of AIDA – awareness, interest, desire and action. This theory argues that advertising is strong enough to increase public’s knowledge and change their attitude and as a result it is capable of persuading new customers to purchase a brand (Jobber and Ellis-Chadwick, 2013)). This is called the conversion theory of advertising: non-buying customers are converted to buyers(Jobber and Ellis-Chadwick, 2013). The product has been criticised on two grounds; one there is little evidence that consumers experience a strong desire before making a purchase because in cases of inexpensive product a customer could very well purchase a brand on a trial basis without any strong conviction that the brand is superior (Jobber and Ellis-Chadwick, 2013). The second criticism is that the theory ignores what happens after action as advertisements in mature markets also targets already established customers of the brand (Jobber and Ellis-Chadwick, 2013).

The weak theory follows that a customer passes through awareness, trial and reinforcement – ATR (Jobber and Ellis-Chadwick, 2013). This ATR model or theory is widely supported in Europe with Ehrenberg (cited by Jobber and Ellis-Chadwick, 2013) explaining that advertising can work exactly the way the ATR model theorises as there is no need for strong emotions like desire and conviction before a first purchase is made. It could simply be a purchase for trial followed by reinforcements.

Consumer Purchase Behavior Theory

“Consumer behavior is the study of the processes involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires” (Solomon and Bamossey, 2006, p6). Schiffman and Kanuk (2007, p3) also take a similar approach defining consumer behaviour as the “behavior that customers display in searching for, purchasing, using, evaluating and disposing of goods and services they expect will satisy them”.

Early economists led by Nicholas Bellouni, John von Neumann and Oskar Morgenstern started to scrutinise the foundation of consumer making decisions (Richarme 2007). They approached the topic from an economic standpoint and focused only on the act of purchase and the most predominant model from this viewpoint is the “Utility Theory” (Richarme, 2007). The Utility Theory viewed consumers as entirely rational and self interested making their purchase decisions based upon the ability to maximise their use of their desired product whilst expending minimum effort (Richarme 2007). Another approach to consumer purchase theory is the psychodynamic approach which; the key tenet is that consumer behavior is determined by biological drivers rather than individual cognition or environmental stimuli (Bray 2008). Perhaps the most widely cited is the cognitive approach which views the consumer as an information procession (Ribeaux and Poppleton, 1978) who actively seeks and recieves environmental and social stimuli as informational inputs which subsequently aids decision making (Bray 2015).

Sheth et al (1991) propose that there are five consumption values influencing consumer purchase choices. The values are functional value, conditional value, social value, emotional value and epistemic value (Sheth et al, 1991). Three fundamental propositions are obvious in the proposed theory and these are:

1. Consumer choice is a function of multiple consumption values (Sheth et al, 1991).
2. The consumption values make different contributions in any given consumer purchase choice (Sheth et al, 1991).
3. The consumption values are independent (Sheth et al, 1991).

Online Advertisements and Its Impact on Consumer Purchasing Behavior

The beginning on online advertising was in 1994 when Hot Wire sold the first ad banner on their company’s website (Bakshi and Gupta, 2013). By year 2000 online advertising spending in the United States had reached $8.2 billion dollars with these numbers increasing to $12.7 billion as more people are connected to the internet and spend more time online (Bakshi and Gupta, 2013). This is a clear sign that online advertising has developed quickly in the last decade. Some of examples of online advertisements includes floating ads, expanding ads, wallpaper ads, trick banners, pop-ups and pop-unders (Bakshi and Gupta, 2013). Now these are the ones instigated by marketers or producers themselves. This paper however puts forward that if advertising (online advertising being no different) is a method of mass-communicating product benefits then online word of mouth or reviews may be considered as an additional method of online advertising albeit the marketers or producers would have very little control as to how such reviews are presented.

Online Reviews

Research has shown that consumer opinion and recommendations actually count towards purchase decision because product review allows consumers to get a feel for the product without making a trial purchase (Murphy, 2015). Recommendation sources according to Andreasen (1968) have a typology as follows: impersonal advocate (mass media), impersonal independent (consumer reports), impersonal advocates (sales clerk) and personal independents (friends) (Senecal and Nantel, 2004). Sencal and Nantel (2004) also report that consumers indicated that for their next purchase of durable goods they would be using first their personal independents as sources of recommendation.

This plays directly to customers’ need for information. Whilst customers could research products through search engines such as Google and Bing. It is never quite like having a first hand account from an unbiased user of the product. Statistics have shown that 80% of online shoppers would change their minds based on online reviews (Murphy, 2015). Supporting this is the fact that in a study carried out in India of the influencers of online purchase decisions, 93% of the respondents indicated that they considered online word of mouth much more reliable than all the other sources of information including the typical online ads (Bakshi and Gupta, 2013).

Thus it would logically follow that having bad reviews would correlate with poor sales whereas good reviews would mean good sales (Murphy, 2015). A case in point is the sale for a t-shirt on Amazon which shot up a staggering 2300% in 2009 after a joke review for the T shirt went viral on the the internet (Murphy, 2015). Till date the t-shirt which features three wolves howling at a full moon has garnered over 2000 reviews (Murphy, 2015). Another example is a study which showed that the biggest influencer for holiday shopping recommendations was from friends and family on social media with 63% swayed by Amazon reviews and 24% were from blogger endorsements (Morrison, 2014).

Social Media/Social Networks

Directly related to online reviews where it concerns online advertising are social networks which could be considered as the platform through which online reviews are exchanged albeit they should be considered separate elements and influencers (Morrison, 2014). Social network platforms such as Facebook which grew by 22% between October 2011 and November 2011 and Youtube which grew 67% percent between the same time frame are the new age medium of online advertising reaching millions of people at a go (Darban and Li, 2012). A study carried out between 2013 and 2014 found that 64% of respondents were convinced of what holiday gift to purchase by a social medium. Social media appears to be so effective that there is at least one social medium guiding consumers through their path to purchase. For example, 58% of respondents to the aforementioned study used Pinterest to find ideas and inspiration, 60% use Facebook to seek promotion whilst 48% share the the purchases they have made on Facebook inspiring others to also make purchases (Morrison, 2014). To this end, 11 out of 12 respondents confirmed that they have made purchases as a result of interacting with the producers on social media or interacting with their peers on social media and getting a sort of first hand advertisement of the product online (Darban and Li, 2012). In addition consumers have also indicated that they are able to communicate directly with producers via social media thus speeding up the purchase process as they also indicated that the length of time it sometimes takes to get the information they need from producers can put them off buying the product in the first instance (Darban and Li, 2012).

General Online Advertisements

In a study carried out on the effects of online advertisements on consumer buying behaviour of branded garments in Pakistan(Afzal and Rabbani Khan, 2015), it was interestingly discovered that there is no direct effect of online advertisements on the buying decisions of branded garmets whereas it was found that there is a significant indirect effect of online advertisements on consumer buying decisions because of advertising characteristics and consumer attitudes (Afzal and Rabbani Khan, 2015). Conversely, in another study carried out it was found that contrary to the the discovery of the study in Pakistan there was a direct link between online banner advertisements and the making of purchases or purchase decisions (Li and Leckenby, 2004) . Interesting another study showed that revenue garnered as a result of online banner ads (which attracted the most revenue) were on a high from 1998 when 56% of revenue made by the respondent company were from online banner ads. However, by the year 2001 these numbers had began falling until 2003 when it was only at 21% (Li and Leckenby, 2004). These studies did not give the reason as to the decline banner ads generated revenue. However the study in Pakistan had reported that consumers seemed to place more stock on word of mouth such as online reviews and a large percentage of the revenue generated by the participating companies were from loyal customers and refferrals (Afzal and Rabbani Khan, 2015). These go back to reiterate the points of discussion in the previous section of this paper as to the effectiveness of social media platforms and online reviews as a method of marketing. Thus it would appear that other methods or forms of online advertisement do not perform as well as social media platforms and online word of mouth it terms of being revenue generators.

The logical question to ask then is why this is so? The answer is not far-fetched and probably lies in the results of a study carried out on consumer perception of online advertisements (Priyanka, 2012). The options provided were entertaining, informative, irritation, credibility, interactivity and purchase. The respondents to these study were further adjusted for age in order to get a clear picture as to the age range of consumers and their perspective (Priyanka, 2012). Of the 100 respondents to the study, irrespective of age, 22 found online advertisements informative, 18 found them irritating whilst 18 respondents have made purchases because of online advertisements (Priyanka, 2012). Of those the respondents who made purchases 6 were between the ages of 41-50 whilst 5 respondents were of the older than 50 age group (Priyanka, 2012). In addition a very small percentage of this age group found online adverts credible which could mean that perhaps if they percieved online adverts as more credible they could be looking to making more purchases (Priyanka, 2012). Surprising this age group also found online adverts less irritating but also less informative (Priyanka, 2012). This could logically be reasoned to be as a result of the fact that most purchasers of this age actually want more information before they make purchases and are willing to suffer through online advertisements perhaps because they are not skilled in surfing social media platforms to gain more information of the product (the study also showed that only a very small percentage of the above 50 age group do not surf the internet or engage in online window shopping) (Priyanka, 2012).

Thus it would appear that forms of advertisement other than social media and online word of mouth walk a tight rope of being irritating and putting the consumer off thereby having a negative impact on consumer purchasing decisions.

Other Forms of Advertisements and its Impact on Consumer Purchase Behavior

In a study of 175 respondents carried out by Iqbal et al (2013) to determine the relationship between brand perception, advertising and consumer purchase behavior. Their findings, analysis and results showed that advertisements had a positive effect on brand perception and consumer purchase behavior, particularly in teenage consumers (Iqbal et al, 2013). Similarly Mel et al (cited by Malik et al 2014) argues that over time, advertisement plays a major role in influencing the consumer such that they become less price sensitive. In the same vein, Ackerbergm (cited by Malik et al, 2014) also argues that advertising is a great source of product learning for consumers. However image advertising and prestige advertising appears to have less significance in creating or instigating a learning process about the product (Malik et al, 2014). In other words, advertisements have a more positive effect on consumer purchase behavior if the advertisement includes informational content (Malik et al, 2014). Added to this is the fact that, it has been discovered that the more interactive an advertisement is the more it captivates the attention of the consumer and the more impact it actually has on consumer decision (Iqbal et al, 2013).

In comparison to online advertisements, the general consensus amongst scholars about traditional methods of advertisements appears to be that there is some positive impact on consumer purchase behavior ranging from product learning, to a decrease in price sensitivity and an increase in actual purchases (Kumar and Raju, 2013). This paper argues that perhaps this is due to the fact that producers or marketing managers have more control over traditional methods of advertisements. Wheresas with online advertisements, consumers are able to ignore the advertisements, pro-actively initiate the product learning process themselves thus controlling what they learn about the product which could be positive or negative.

Conclusion

This paper focused on the impact of advertisements (with a focus on online advertisements) on consumer purchase decisions. The strong and weak theories of advertisement were examined in order to determine the way in which advertisements work. Furthermore, some key elements of online advertising such as word of mouth by way of online reviews on social media platforms were examined in detail as well as their impact on consumer purchase decision. Finally online advertisements in general and how they influence consumer purchase decision was also examined. From the aforementioned examination and analysis, it can be concluded that online advertisements in whatever form can have either a positive or negative impact on consumer purchase decisions. Marketing managers appear to have very little influence on how the advertisements will impact consumer purchase behavior. Thus making the results inconsistent. Perhaps this is because the internet is such a fast-paced and volatile environment. In sharp contrast, it was discovered that traditional methods of advertisements have consistent (across various studies) positive impact on consumer purchase behavior. It can also be concluded that of all the forms of online advertisement, online reviews are perhaps the most volatile and prone to resulting in a negative impact on purchase decisions. Nevertheless, it is also quite likely to bring on the most amount of sales within a short period of time. It was discovered that consumers find some online adverts annoying which also influences their decision to allow the engagement of their attention and consequently their money in making the final purchase. In addition, it was also found that there are positive correlations between online adverts and consumer purchase behavior in that the online adverts triggers the customer’s interest in a product and eventually leads to a purchase.

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