Business Economics · Impact of advertising on sales and demand

Types and Objectives of Advertising: Informative vs Persuasive

Updated 11 October 2026 · Fact-checked

Advertising is a firm's paid communication to influence buyers. **Informative** advertising gives facts about price, features or availability. **Persuasive** advertising tries to change tastes and build brand loyalty. Firms use both to raise demand, make demand less price-sensitive and compete without cutting price. In exams, classify the type, state the objective, then show the effect on demand.

Understand Types and Objectives of Advertising

Advertising is a form of non-price competition. Instead of cutting price, a firm tries to change how much buyers want its product. In demand and supply terms, successful advertising aims to shift the demand curve to the right and often to make it steeper, meaning less elastic.

Informative advertising gives buyers facts. It tells them a product exists, where to buy it, what it costs and what it does. It is common when a product is new or when buyers lack information. It can make markets work better, because buyers choose with more knowledge. Examples: a launch announcement for a new insurance plan, or a notice of a sale.

Persuasive advertising tries to change tastes and preferences. It stresses image, status or emotion and tries to build brand loyalty. The aim is to make buyers see the product as having no close substitute. This reduces price elasticity of demand, so the firm can charge a higher price with a smaller fall in sales. It is common in markets with similar products, such as soft drinks or toothpaste.

A related type is comparative advertising, which compares the firm's product directly with a rival's. Another distinction is generic advertising, where a whole industry promotes itself, versus brand advertising, where one firm promotes its own product. Most real adverts mix information and persuasion. Exams ask you to identify which element dominates.

Firms advertise for several objectives: raise sales and revenue, increase market share, launch a new product, build or defend a brand, reduce price elasticity, and deter new entrants by making the brand hard to copy. Advertising is also a cost. It raises average cost, so the gain in revenue must justify it. It is most important in monopolistic competition and oligopoly, where products are differentiated and firms avoid price wars.

Key rules to remember

Effect of successful advertising on demand: Advertising ↑ → demand curve shifts right (Q ↑ at each price); This is the basic result for any advertising that raises willingness to buy. It is a shift, not a movement along the curve.
Effect of persuasion on elasticity: Brand loyalty ↑ → |PED| ↓ (demand becomes less elastic); Persuasive advertising aims to make demand steeper. This lets the firm raise price with a smaller fall in quantity.
Price elasticity of demand: PED = (% change in quantity demanded) ÷ (% change in price); Use it to show why lower elasticity helps revenue when price rises.
Advertising elasticity of demand: AED = (% change in quantity demanded) ÷ (% change in advertising expenditure); Measures sales response to advertising. It is covered further in the advertising elasticity topic.
Net benefit test: Advertising is worthwhile if extra profit from extra sales > extra advertising cost; Advertising is a cost. Compare the gain with the spend.

How to solve Types and Objectives of Advertising questions

Use this method for definition, classification, application and evaluation questions on advertising.

1Read the question and identify the market: new product, mature product, or differentiated products with rivals.
2Classify the advertising: informative, persuasive, comparative, generic or brand. Say which element dominates if it is mixed.
3State the firm's objective clearly, such as launching a product, raising market share or building loyalty.
4Link the objective to demand: shift right, lower elasticity, or both. Draw or describe the demand curve effect.
5Link to market structure and non-price competition: explain why the firm avoids price cutting.
6Count the costs: advertising raises average cost and may be matched by rivals, cancelling the gain.
7Give a short judgement that depends on the case, such as the product, the market and the response of rivals.

Quickest way: Type, objective, demand effect, cost

When to use it: Use for multiple-choice questions and short written parts where you have only a few minutes.

Facts about price, features or availability: informative.
Image, emotion, status or loyalty: persuasive.
Naming and attacking a rival: comparative.
Informative aims to raise awareness and shift demand right. Persuasive aims to shift demand right and make it less elastic.
Add one cost point: spending raises costs and rivals may copy.

Common mistakes in Types and Objectives of Advertising

Treating informative and persuasive advertising as the same thing.
Real adverts usually contain both facts and appeals, so the labels blur.
Fix: Ask what the advert mainly does. Giving facts is informative. Changing tastes or building loyalty is persuasive.
Showing advertising as a movement along the demand curve.
Students confuse a price change with a change in tastes.
Fix: Advertising changes a non-price determinant, so the whole curve shifts. Only a price change moves along it.
Forgetting the effect on elasticity.
Students stop at the rightward shift.
Fix: For persuasive advertising, add that demand becomes less elastic because loyalty reduces substitution.
Saying advertising always raises profit.
Students focus on higher sales and ignore the cost.
Fix: State that profit rises only if extra revenue exceeds extra advertising cost, and that rivals may respond.
Calling advertising price competition.
Students link competition only with lower prices.
Fix: Advertising is non-price competition, along with quality, branding and service.
Assuming advertising matters equally in all market structures.
Students ignore the link with differentiation.
Fix: It matters most in monopolistic competition and oligopoly. In perfect competition products are identical, so individual firms gain little from it.

Worked examples

Example 1

A firm launches a new mobile app for paying insurance premiums. Its first campaign explains what the app does, how to download it and the fees. Identify the type of advertising and explain the firm's objectives and the likely effect on demand.

Show the solution

Type: the campaign gives facts about function, access and fees, so it is mainly informative.
Objective: make buyers aware of a new product and encourage first use, so it also builds early market share.
Demand effect: more people know the product and see a reason to buy, so demand shifts right.
Elasticity: informative advertising need not make demand less elastic; its main effect is awareness.
Cost: the firm should check that extra customers justify the spending.

Answer: The campaign is mainly informative. Its objectives are awareness, launch and market share. It shifts demand to the right, and the spend is justified only if the extra profit exceeds the cost.

Example 2

A soft-drink firm in an oligopoly runs adverts showing young celebrities enjoying its drink, with no information on price or ingredients. Explain the type of advertising, why the firm uses it instead of cutting price, and one limit on its success.

Show the solution

Type: the adverts stress image and emotion, so they are persuasive.
Objective: build brand loyalty and make buyers see the drink as different from rivals.
Demand effect: demand shifts right and becomes less elastic, because loyal buyers switch less when price rises.
Why not cut price: in an oligopoly, a price cut may be matched by rivals and start a price war that lowers everyone's profit. Advertising is a form of non-price competition.
Limit: rivals can also advertise, so the effects may cancel while all firms bear higher costs.

Answer: This is persuasive advertising. It aims to shift demand right and make it less elastic. The firm uses it to avoid a price war, but rival advertising and higher costs may limit the gain.

Exam tips

Always name the type of advertising before you discuss effects. Examiners reward correct classification.
When asked about effects, mention both the shift of the demand curve and the change in elasticity.
Link advertising to non-price competition and to market structure in any written answer.
In evaluation, mention cost and rival response. A one-sided answer loses marks.
In multiple-choice questions, look for key words: facts and features point to informative, image and loyalty point to persuasive.

Practice questions from Impact of advertising on sales and demand

Types and Objectives of Advertising: frequently asked questions

What is the difference between informative and persuasive advertising?

Informative advertising gives facts such as price, features and availability. Persuasive advertising tries to change tastes and build brand loyalty. Informative advertising mainly raises awareness, while persuasive advertising also aims to reduce price elasticity.

What are the main objectives of advertising in economics?

The main objectives are to raise sales and revenue, increase market share, launch products, build brand loyalty and reduce price elasticity. Firms may also use it to deter new rivals. The aim depends on the product and market.

Why is advertising called non-price competition?

Because firms compete by changing how buyers see the product rather than by changing its price. This is common where products are differentiated. It helps firms avoid price wars.

Does advertising always increase demand?

No. It may fail to change tastes, or rivals may advertise back and cancel the effect. Even when sales rise, profit rises only if the extra revenue exceeds the extra cost.