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Advertising is any paid form of nonpersonal presentation and promotion of products, services, or ideas' by an identifiable individual or organization. It flourishes mainly in free-market, profit-oriented countries. It is one of the most important factors in accelerating the distribution of products and helping to raise the standard of living. Advertising cannot turn a poor product or service into a good one. But what it can do — and does — is to create awareness about both old and new products and services. So there are three main objectives of advertising:

(1) to produce knowledge about the product or service;

(2) to create preference for it;

(3) to stimulate thought and action about it.

Many firms advertise their goods or services, but are they wasting economic resources? Some economists reckon that advertising merely manipulates consumer tastes and creates desires that would not otherwise exist. By increasing product differentiation and encouraging brand loyalty advertising may make consumers less price sensitive, moving the market further from perfect competition towards imperfect competition and increasing the ability of firms to charge more than marginal cost. Heavy spending on advertising may also create a barrier to entry, as a firm entering the market would have to spend a lot on advertising too.

However, some economists argue that advertising is economically valuable because it increases the flow of information in the economy and reduces the asymmetric information between the seller and the consumer. This intensifies competition, as consumers can be made aware quickly when there is a better deal on offer.

Product advertising is an important part of the marketing mix. Its aim is to increase sales by making a product or service known to a wider audience, and by emphasizing its positive qualities. A company can advertise in a variety of ways, depending on how much it wishes to spend and the size and type of audience it wishes to target. The different media for advertising include television, radio, newspapers, magazines, the Internet and direct mail. The design and organization of advertising campaigns is usually the job of an advertising agency.

Corporate advertising is not directly concerned with increasing sales of a particular product or service, but more with the brand image, or picture, a company wants to present to the public. Public relations (PR) experts specialize in organizing activities and events which generate positive publicity for companies. Unusual advertising campaigns sometimes get extra publicity for the company by way of media reports about the campaign.

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