Evan Davis on... advertising

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There was an advertising slogan for Stella beer. It described it as ‘reassuringly expensive’. It was a clever slogan for a beer that was actually quite cheap, trying to position it as upmarket. But actually the words ‘reassuringly expensive’ can perhaps be used to describe how advertising itself works. Now lots of research has, of course, been done into whether and how advertising does work and there are lots of theories about the psychology of persuasion and all of that, but economists have their own theory and it’s quite a clever one and I think it has something in it.

The theory goes like this: When I watch an advert I’m reassured by how much the advertiser has spent on it. I don’t believe what they say in the advert about the quality of the product or its merits, I’m not particularly impressed by the star they’ve got to feature in the ad or any particular quality of the advert itself, although all of that helps. What I really want to see is that the company have spent a lot of money on it. It doesn’t matter how they’ve spent the money, they just need to have spent a lot of money.

Why? Because if they’ve spent a lot of money they’re telling me something about how seriously they take their own product. They know more about it than I do and if they’re spending a lot of money on it they probably think it’s a worthwhile product. They wouldn’t invest all of that in a dud product. Why? Well if they invested all that in a dud product I would buy it, I will discover it’s a dud and I won’t buy it again and all that investment will have been wasted.

So it’s a theory of advertising based on a whole area of economics, labelled really ‘signalling theory’, the idea that a lot of what we do, a lot of our institutions and a lot of our habits are really like peacocks’ tails, they’re there to signal the strength of the bird rather than to do anything very functional. Advertising could indeed be one of those. It’s reassuringly expensive to see that manufacturers are willing to waste lots of money on their product, and if they’re willing to do that we’d better damn well go out and buy it.

That’s my view, you can join the debate with the Open University.