Saturday, August 24, 2013

Fantasize About A World Without Advertising? Try Cuba

Fantasize About A World Without Advertising? Try Cuba

Surveys routinely show that consumers hate advertising. If given the
option, I'm sure a super-majority of consumers would choose a world
where advertising simply didn't exist. As it turns out, that world does
exist—it's called Cuba. However, Cuba's lack of advertising highlights
some important tradeoffs.

When I say Cuba doesn't have advertising, I'm obviously exaggerating a
bit. I just didn't see much advertising. No billboards. No television
ads (as far as I could tell—though cable channels originating outside
Cuba did have ads). No Internet ads (few Cubans can even afford Internet
access). No leafleting. About the only "advertising" I encountered was
store signage and oral pitches.

This ad-free environment may sound utopian, but consider the principal
reason why advertising is so scarce: because there aren't a lot of
things to buy, and not many people can afford to buy them. In effect,
the lack of advertising is correlated with the Cuban economy's consumer
activity. With only a thin layer of consumer activity, advertising isn't
needed and rarely could be profitable.

Cuba also doesn't have much advertising because there's little
competition in Cuba. The government effectively runs all of the retail
stores (other than mom-and-pop knick-knack stands), so there's no
inter-retailer competition and no need for retailers to advertise
against each other. The most visible private sector are the tourist
services like privately-run restaurants and transportation. Even then,
most of these services aren't high-margin or differentiated enough to
support advertising.

Manufacturers also don't advertise in Cuba. There aren't that many
domestic Cuba manufacturers of consumer goods, and due to government
control, they rarely compete with each other—and unless the government
subsidizes them, most Cubans can't afford the goods anyway. Foreign
manufacturers have little incentive to advertise as well; even when they
crack the tiny domestic market, often retailers only carry one choice.
So, for example, I visited a couple of government-run stores selling
appliances like refrigerators and dishwashers. Although the range of
different available goods was better and more technologically current
than I anticipated, typically the retailer offered only one
manufacturer's option for each good. (See photos 1 and 2). Thus, a Cuba
consumer who wants a 30 cubic foot refrigerator may only have one
choice—and the manufacturer's guaranteed sale eliminates the need for
advertising. Further, because of the lack of competition, the low sales
volume and the costs of importing the goods (none were manufactured in
Cuba), prices were high–at least as high as prices in California, and
far out of reach for all but the wealthiest Cubans.

So, how do you really feel about advertising? Consider two options:

Option A: an economy where advertising is unnecessary because there are
limited product choices, no competition either at the retailer or
manufacturer level, and a tiny consumer class able to buy the goods in
the market.
Option B: an economy overrun by advertising, much of which creates false
distinctions between products, manipulates consumer preferences, creates
consumerist anxieties about their perceived deficiencies, and increases
consumers' costs for the branded goods. At the same time, it has a
robust competitive market with a wide range of high-quality goods at
attractive prices, where advertising informs consumers of new product
offerings and features and helps competitors differentiate between
marketplace offerings so that consumers can find what they're looking
for and determine their reservation price accordingly.
I imagine many consumers would prefer a hypothetical option C, where
consumer get all of the benefits of a fiercely competitive market
without the "costs" of ubiquitous and sometimes-manipulative
advertising. But option C may be oxymoronic; one possibility is that
advertising is a precondition to fierce competition.

If Option A sounds attractive to you at all, get to Cuba pronto. Cuba
seems destined for Cancun-ification, in which case any advertising-free
charm it currently has will be erased completely.

Source: "Fantasize About A World Without Advertising? Try Cuba - Forbes"

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