Role Of Advertising In Successful Operation Of Insurance Agencies


In the recent times, the business executives of insurance companies have associated the term advertising with reputation. Publicity and reputation play a vital role in the industrial organization. The main reason behind this is the interrelation between publicity and reputation and its contribution towards industrial organizations. In general, the advertisements by any business organization lead to increased revenue for the firm thus, leading to rising in reputation. The producers mainly use advertising to deliver information to the target market or consumers regarding particular products or services. Moreover, advertising could be made with a series of practices, which include in-store promotion, product placements, exhibitions and direct mail. The advertising expenditure is the cost of production and transfer of a healthy to the consumer. The seller in the form of an insurance agency often increases this value with the intention of enhancing the product sales. One can find a variety of insurance packages by going through

Role Of Advertising In Successful Operation Of Insurance Agencies

Why has the emergence of advertising propelled the growth of insurance agencies?

In microeconomics, the producers often use this tool to attract the consumers by depicting real contrasts between the products or services of the competitors. Therefore, from the perspective of industrial economics, the importance of advertising and promotion could change based on the market structure. On the other hand, in case of perfect competition, advertising does not have any influence on the product pricing of an organization. By visiting one can find a wide variety of advertisement techniques so that the insurance packages can appeal to the customers. This is because the demand function of an organization is perfectly elastic and it could sell many units of the product at the real price. This is ascertained between the demand and supply interaction in the market. Moreover, under the market structure, all the firms have the perfect information, which eradicates the advertising needs. However, the perfect competition does not exist in reality and herein the importance of advertising comes into play.

The effect of advertising in the recent year’s market structure

In monopoly market structure, the scope of advertising increases, however, it is still limited. This is because the demand function of the monopolist is inelastic in nature, which reduces the competition level due to market barriers to entry. In this context, the monopolist sets the price in this market structure for maximizing the business profitability. However, advertising could be used to increase the demand of the overall market. Also, advertising is of utmost importance in such a market structure, since the monopolist does not have any competitor in the market.

On the other hand, in oligopolistic market structure, the firms tend to avoid the competition regarding pricing. Instead, the companies prefer to involve in the non-pricing competition like research and development and advertising.

The scope of advertising increases significantly in this type of market structure to boost up the industry demand and drawing consumers at the expenditures of rivals. There is a strong linkage between the spending on advertising and disposable income. This is because, with the increase in national income, the disposable income of the households tends to grow.