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VOL. LXXVII. No. 19 Published Every Satarday. Edward Lyman Bill, Inc., 383 Madison Ave., New York, N.Y. Nov. 10, 1923
Sjng~to~o~i:: ~~ent.
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Advertising an Economy, Not an Expense
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VERTISIKG, properly and intelligently handled, is one com~odity that pays for itself and in addition
creates economies in various other departments of the business that tend 10 enlarge materially the net
profit while at the same time reducing costs. The question is often asked: "\,i\; ho pays f or all the ad
vertising?" Certain types of manufacturers and retailers endeavor to capitalize on this question to their
own advantage by declaring to the public that they can offer various products at lower than normal prices be
cause they do not advertise and therefore save money. As a matter of fact, the wide and successfully adver
tised article is more than likely to offer a greater intrinsic value at the price than does the non-ad ve rtised
simply from the fact that it is produced in larger quantity and therefore more economically.
The function of advertising is to increase demand, and _as demand is increased factory production is
speeded up. The result is a material reduction in the cost of producing each unit for the reason that the fixed
overhead of a plant" increases in much smaller ratio than does the volume of output. In other words, doubling,the
production of a plant under ordinary circumstances may not increase the overhead cost more than 25 or 30 per
cent.
\,iYhcn this increased production is brought about through advertising, it means that the manufacturer
either keeps the same price on his products and puts the savings back into the husiness or into more advertising, or
else splits the increased profit with the dealer and the customer by lowering his prices. In these days of compe
tition the latter course is most generally the one pursued.
(;.eneral advertising, in addition to increasing production, also has the effect of broadening the field of
distribution. This serves to protect a manufacturer in a large measure from the more rigorou s effects of
periods of depression through spreading his distribution over a wide territory so that it is kept more or less
free fr om harm by sectional disturbances.
"\s a general thing, the well-advertised product proves beneficial to the dealer by brin&,ing business
directly to his store, business that may be considered additional to what he may develop through his personal
sales and publicity efforts. It also g-ives him a product of recognized quality which can be offered to the public
at a price comparing most favorably with any figure that can be set by the dealer in the unadvertised product
reg-ardless of how the latter may shave prices, and at the same time allows the dealer a more substantial margin of
profit.
It is significant also that widespread advertising carried on consistently over a period serves to estab
lish the reputation of the advertiser for the simple reason that unless the product offered measures up to the
advertised statements there are no repeat orders and no cumulative results. The cost ot his adve rtising in
proportion to increased sales, an additional cost forced through the necessity of getting new victims constantly,
would be prohibitive and force him to discontinue it, were his promises greater than what he gives .
It is also significant that an increasing number of concerns manufacturing products of recog-nized
merit are quoting national prices on their g-oods, not fixed prices that will conflict with the existing laws,
although this situation will soon he remedied , but prices that the manufacturer considers fair to both dealer
and ultimate buyer. This is a ph?-se of the national advertising situation as it has developed in the music trade
that is of particular int erest, for it sets a definite valuation before the prospect for his consideration and gives
the deal er the protection of the manufacturer's statement in naming his price. When he perhaps decides to cut
under the advertised price he is free to do so and stand the loss, but when he asks the advertised price the
customer feels that he is getting fair value for his money.
The fact that the national advertising in the music trade, and particularly in the piano trade, is on the
increase indicates that the members of the industry are cognizant of the fact that it is an investment well
worth the making.
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