The Art of Advertising and the Economics of Happiness

Abstract

Advertising is one of the most important marketing tool used by all the companies. There are many aspects which a marketer keeps in mind while designing an ad campaign - product information, product images, impact of the ad on the people's perception of the product etc. Of all the parameters considered, one of the most important, yet not discussed, parameter is the impact of the ad on the happiness meter of an individual. Ad campaigns of almost all successful brands have succeeded in increasing the happiness meter of the people while they watch the video, resulting in better brand recall and hence, sales. This research paper discusses how could/will the business of advertising use economics of happiness? And, how might parts of the economics of happiness evolve to serve the needs of advertising?

Keywords: Economics of Happiness, Advertising

1. Introduction

1.1. Economics of Happiness

The measurement of economic performance of a country has been steadily changing from monetary to non-monetary aspects – from increasing per capita incomes to broad-based GDP growth, human development, sustainable environment, gender equity, development in freedom and empowerment, poverty reduction, equity in opportunities, and more recently, happiness.

The ‘economics of happiness’ is an approach to assess subjective welfare which combines the techniques used by economists and psychologists. Though analyzing the economics of happiness combines the techniques of economists and psychologists, the amount of empirical data available these days has helped economists and psychologists to carry out researches regarding the possible factors of happiness.

It has been observed that up to a certain threshold, an increase in incomes results in increases in happiness, but beyond a certain level, further increases in incomes do not lead to higher levels of happiness. One of the recent findings is that income does not always have the expected relationship with well-being. This paradox is currently observed in China. China has observed unprecedented growth in past two decades. Both GDP per capita and household consumption increased fourfold during this period, yet the satisfaction levels decreased during this period. This phenomenon was observed by Richard Easterline and he estimated that the satisfaction level dropped by 5%. The finding was substantiated by the increase in the suicide and mental illness among Chinese during this period.

Though income is one of the most important parameters in assessing an individual's happiness, other factors such gender, windfall, and impact of surroundings/environment also play a role in determining an individual's happiness. One such factor is the happiness people derive while they shop. A research conducted in the University of Michigan has revealed that shopping spree can make people three times happier by overcoming sadness and sparking motivation. The research further argues that retail therapy should not be dismissed as it can help a person feel more in control of their environment. Quite intuitively, providing happiness through the multifarious products & services for which consumers pay forms the crux of the retail therapy and associated marketing initiatives, with advertising at its cynosure.

Firms, through their marketing initiatives, try to provide instant gratification to the consumers, leading to a possible increase in the consumers' happiness. Advertising is one of the most commonly used medium by these firms. Advertising constantly demands our attention wherever we go and has always been criticized for its negative impact on the individuals and hence, society. Despite the negative impacts people talk about, advertising has a definite impact on the individual's level of happiness.

1.2. Advertising - Evolution and Influence on Happiness

Advertising as a concept is very old as the oldest known written advertisement is a 3000-year-old Babylonian tablet requesting the return of a slave. The impact of advertising on the consumers' mind improved significantly with the invention of printing by movable type. Both British newspaper and American newspaper, during the seventeenth century, started devoted ten out the sixteen newspaper columns to advertising.

Product used to be the main focus of advertising during this time period and the purpose of advertising was to educate the consumer the purpose of the product. This model was replaced in the 19th century by advertising that focused more on product imagery. As a result, people started viewing the product as an image and paying money for the image and not the utility. With the advent of sophisticated technologies, companies started coming with images that cater to