1998, Volume 1, Paper 17
ISSN: 2209-6612
Promotion : Albatross or salvation of the wool industry?
Dr. Alistair Watson – Freelance agricultural economist, Melbourne Victoria
Introduction
Wool promotion has existed in much the same form for the last thirty years. Compulsory levies are required to finance wool promotion. Involvement by Government is therefore needed to collect revenue from producers. This is what creates the public policy issue. Promotion of wool would not be a matter of concern if it were conducted by private firms in the wool industry. It is fundamental to the debate over wool promotion that the economics of generic promotion is different in principle and practice from the promotion of branded products by private firms.
Generic promotion is the cooperative effort to increase demand by producers of products, which are more or less homogeneous, and produced by numerous firms none of which have the incentive or ability to advertise on their own account. Generic promotion of wool and other agricultural products raises many difficult issues in both the execution and evaluation of promotion. By contrast, brand promotion, whereby private firms attempt to increase their profits by advertising and other means, is uncontroversial in the sense that private firms are more than capable of judging the costs and benefits to them of advertising and promotion.
Above all, advertising by private firms is a voluntary business decision. The essential economic function of advertising and promotion is to provide consumers with information, a crucial ingredient in the functioning of market economics. The widespread use of advertising demonstrates that creative and well-targeted campaigns are profitable.
However, not all firms advertise or promote their products in the same way. There is obviously considerable skill and experience in deciding when, how and especially how much, advertising should be undertaken by private firms. Not all this experience is relevant to the generic promotion of wool. Apart from the element of compulsion in wool promotion, wool has different characteristics as a product and the wool market is vastly different from other markets where branded products are advertised.
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