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Advertising Society

s Economics
q The effects of advertising on our economy

&

s Ethics
q The effects of advertising on our society

s Regulation
q Our attempts to manage those effects

Power or Information?
Market Power
q Advertising q Persuades consumer to purchase one brand over another more often q Excess brand profits q Higher barriers to entry and more market power q More advertising leads to greater brand loyalty q Reduce quality/raise price q Reduced consumer sovereignty q Monopoly

Market Information
q Advertising q Increased consumer knowledge q More substitute products consumers can consider q Lower barriers to entry by new brands q Reduced market power for any individual brand q Better pricing/distribution more product innovation q Optimal brand profits, consumer choice, and price benefits

What do you think?


s Advertising = Market Power s Advertising = Market Information s Or both?

Some Economic Questions:


s How does advertising affect the price of a new car? s How does advertising affect the price of a latt from Starbucks? s How does advertising affect the way that you spend your money?

Some Economic Questions:


s Can ads make people buy things they dont want or need? s Can ads make people more materialistic? s Are the benefits of advertising worth the annoyance?

An Ethical Debate
s Ads destroy freedom of choice s Ads destroy democracy/media s Advertising warps social values s Ads give consumers more choices s Ads = freedom of speech s Ads simply reflect the real world

3 Ethical Issues:
1) Advocacy
q What does the advertising advocate?

2) Accuracy
q How accurate is the advertising? q Some of this depends on susceptibility of the audience (i.e., kids).

3) Acquisitiveness
q What is the overall effect? q Does it make us more materialistic?

5 Controversial Issues:
1) Puffery 2) Decency 3) Stereotyping 4) Children 5) Controversy "Nothing beats a Bud Sexual innuendo, violence Portrayals of housewives, seniors, racial groups Violence, dangerous acts, unhealthy habits Condoms, alcohol, fashion

Regulation - 2 Main Purposes Regulation - 3 Main Areas


s Purpose for advertising regulation
q To protect competition q To protect consumers from economic or physical harm

s Regulations are concerned with


q Deceptive or unfair content q How advertising is delivered q Protection of susceptible groups (kids, etc.)

5 FTC Concerns:
1) Deception 2) Comparisons 3) Endorsements 4) Demonstrations 5) Bait & Switch Must lead to material injury. Must substantiate with statistically significant data. Must be qualified; must use product. Must be accurately depicted. Product must be available.

4 Possible Remedies for Deceptive Ads:


1) Consent Decree 2) Cease & Desist FTC asks advertiser to stop. FTC gets court order to force advertiser to stop. FTC mandates new ads to correct false perceptions. FTC mandates reimbursement.

3) Corrective Ads 4) Consumer Redress

6 Government Regulatory Groups:


1) FDA 2) FCC 3) Postal Service 4) ATF 5) Patent Office Packaging and labeling Broadcast advertising Magazines, direct mail Liquor labeling, advertising Trademarks Copyrights

6) Library of Congress

2 Industry Watchdogs
1) NAD (National Advertising Division)
- Part of Better Business Bureau

2) National Advertising Review Board


- Represents advertisers and agencies - A division of the NAD

s Compliance is strictly voluntary

Big Questions
s What do you think is the biggest benefit of advertising? s What do you think is the biggest problem with advertising? s What do you think is the best example of bad advertising? s What do you think is the best example of good advertising?