Lecture 15 Advertising Content

Lecture Plan Celebrities Humor Comparative Advertising Advertising Regulation Model of comparative advertising

ADVERTISING CONTENT

Celebrities ~ 25% of ads have celebrities in them The general belief among advertisers is that advertising messages delivered by celebrities: provide a higher degree of appeal, attention and possibly message recall than those delivered by non-celebrities. affect the credibility of the claims made, increase the memorability of the message, and may provide a positive effect that could be generalized to the brand Despite the potential benefits they can provide, celebrity advertising increases the marketers' financial risk. Using celebrities can be an unnecessary risk unless they are very logically related to the product

Endorsement by a “Celebrity Expert”

Risks of Using Celebrities The celebrity may overshadow the product being endorsed The celebrity may overshadow the product being endorsed The celebrity may be overexposed, reducing his or her credibility The celebrity may be overexposed, reducing his or her credibility The target audience may not be receptive to celebrity endorsers The target audience may not be receptive to celebrity endorsers The celebrity’s behavior may pose a risk to the company

Any examples of risky endorsements?

What does empirical research say about celebrity endorsement effect? Elberse and Jeroen (2011) look at stock market valuation and sales data for a number of athlete endorsements. With a celebrity endorsement stocks go up roughly 0.25%, on average. Sales, on the other hand, go up by an average of 4%. These sales boosts can be recharged by a career triumph -- a Grand Slam for Roger Federer, an Olympic Gold Medal for Michael Phelps. A caveat: The sales benefits diminish with each win, while the stock-return effects stay constant; investors, it seems, are more impressed with an athlete's staying power than consumers.

What does empirical research say about celebrity endorsement effect? Derdenger et al. (2017) look at the introduction of Titanium golf drivers and performance of celebrity golfers in major tournaments. Wins in golf tournaments act as unplanned TV exposure and affect awareness about the new products TV advertising affects both awareness and preferences Unplanned exposure accounts for 23% of sales Planned TV ad exposure accounts for 30% of sales This suggests that firms should coordinate TV advertising spending as unplanned exposure is a substitute for planned advertising in the early stages of a product life-cycle

What does empirical research say about celebrity endorsement effect? So, what accounts for this celebrity effect? Endorsements could be a signal of quality But the modern consumer is sophisticated. They know money's changing hands. At a deeper level, we seem to crave connection to the famous and the powerful.

What does empirical research say about celebrity endorsement effect? Newman, Diesendruck and Bloom (2011) look at why people are willing to pay exorbitant amounts of money for objects once owned by famous people. E.g., President Kennedy's golf clubs or even Saddam Hussein's Rolex Resale Appeal? That's circular reasoning. Why does the next person want to buy it? Study tested how much people would be willing to pay for various objects that had been handled by either a celebrity the participants admired or someone famous they considered evil.  For likeable celebrities, the more handling of the object the more it was worth to people. In contrast, with evil celebrities, the more the person touched the object or used it, the less people wanted anything to do with it.

Message Appeal Options Comparative Ads Comparative Ads Fear Appeals Fear Appeals Humor Appeals May be especially useful for new brands Often used for brands with small market share Frequently used in political advertising May stress physical danger or threats to health May identify social threats: disapproval or rejection May backfire if the level of threat is too high They can attract and hold attention They are often the best remembered They put the consumer in a positive mood

Fear Appeals Fear has facilitating effects and inhibiting effects. Facilitation = motivation to approach/avoid something Inhibition = discouragement from approaching/avoiding something Moderate fear appeals work best by encouraging facilitation and minimizing inhibition. Too much fear: the audience tunes out the message Low credibility or elaboration of harmful consequences is hedonically unpleasant. Too little fear: the audience isn’t motivated enough to do anything.

Humor Appeals: Pros and Cons

Pros and Cons of Using Humor Aids attention and awareness Aids attention, awareness and repeat attention Does not aid persuasion in general Does not aid persuasion in general May aid retention of the message May aid retention of the message May harm recall and comprehension May harm recall and comprehension Creates a positive mood and enhances persuasion Creates a positive mood and enhances persuasion May harm complex copy registration May harm complex copy registration May aid name and simple copy registration May aid name and simple copy registration Does not aid source credibility Humor is not universal May serve as a distracter, reducing counterarguing May serve as a distracter, reducing counterarguing Is not effective in bringing about sales Good “universal” humor is hard to produce! Company seen as clever – carries over to products May wear out faster than non-humorous ads

Humor and Ad effectiveness Gelb and Zinkhan: Humor was negatively related to advertising recall Positively related to brand attitude Not directly related to purchase probability or choice behavior Any effect that humor may have on purchase probability or choice behavior appears to be mediated through brand attitude.

Comparative Advertising Definition: Mentioning/showing the competitor in your ad by way of comparison (and typically how we are better) History: Early 80’s FTC lifts the ban on CA to enhance the provision of choice-making information to consumers. Legal issues: Advantages must be substantiated Used offensively (attack) or defensively (“fight back”) Great for newly launched products with small (or zero) market share that offer a distinct edge over the competition. The confusion aspect: Which brand was advertised???!, though consumers may remember attributes advertised.

Comparative Advertising, cont. Political ads Negative information tends to outweigh positive information Typically more effective to besmirch the opponent than to praise one’s self. Exception: Negative tit-for-tat exchanges (“mudslinging”) usually wind up helping neither candidate. Too much attacking results in negative perceptions of the attacking brand.

Negative Political Ads: Research Not much evidence that that negative campaigning is an effective means of winning votes. It tends to be more memorable and stimulate knowledge about the campaign. There is no reliable evidence that negative campaigning depresses voter turnout. Though it does slightly lower feelings of political efficacy, trust in government, and possibly overall public mood.

Current Regulatory Issues Affecting U.S. Advertisers Tobacco advertising Consumer Privacy Advertising to children

Regulatory Aspects of Advertising Areas of advertising regulation: Deception and unfairness Representation or omission that can mislead Judged from perspective of consumer Advertising to children

Some TV Network Guidelines for Children’s Advertising Must Not Over Glamorize Product Must Not Over Glamorize Product No Exhortative Language, Such As “Ask Mom to Buy” No Exhortative Language, Such As “Ask Mom to Buy Generally No Celebrity Endorsements Generally No Celebrity Endorsements Can’t Use “Only” or “Just” in Regard to Price Can’t Use “Only” or “Just” in Regard to Price No Costumes or Props Not Available With the Toy No Costumes or Props Not Available With the Toy No Shots Under One Second in Length

Key Regulatory Agents Government Regulation Federal Trade Commission (FTC) Wide range of regulatory programs and remedies Federal Communications Commission (FCC) Food and Drug Administration (FDA) Bureau of Alcohol, Tobacco, and Firearms

Federal Regulation of Advertising in North America Federal Trade Commission (FTC) http://www.ftc.gov/ Defining deception Comparative advertising Defining unfairness Investigating violations Remedies for unfair or deceptive advertising Consent decree Corrective advertising Cease-and-desist order

Key Regulatory Agents--FTC FTC Programs and Remedies Advertising Substantiation Program Affirmative Disclosure Consent Order Cease and Desist Order Corrective Advertising Control of Celebrity Endorsements

Lanham Act The Lanham (Trademark) Act (title 15, chapter 22 of the United States Code) is a piece of legislation that contains the federal statutes of trademark law in the United States. The Act prohibits a number of activities, including: trademark infringement, trademark dilution, false advertising.

Suing a competitor under the Lanham Act False statements have been made about advertiser’s product or your product False statements have been made about advertiser’s product or your product Elements Required To Win a False Advertising Suit Under the Lanham Act The ads actually deceived or had the tendency to deceive a substantial segment of the audience The ads actually deceived or had the tendency to deceive a substantial segment of the audience The deception was “material” or meaningful and is likely to influence purchasing decisions The deception was “material” or meaningful and is likely to influence purchasing decisions The falsely advertised products or services are sold in interstate commerce The falsely advertised products or services are sold in interstate commerce You have been or likely will be injured as a result of the false statements, either by loss of sales or loss of goodwill

Key Regulatory Agents (con’t) Industry Self-Regulation National Advertising Review Board (NARB) State and Local Better Business Bureaus Ad Agencies and Associations Media Organizations

Sources of NAD Cases Competitor Challenges 66% 15% 5% 14% NAD Monitoring Local BBB Challenges Consumer Challenges 20 40 60 80

NAD Review http://www.asrcreviews.org/category/prs/

Key Regulatory Agents (con’t) Internet Self-Regulation No industry-wide trade association has emerged to date Global Dialogue on Electronic Commerce (GBDe) is emerging as a governing body Little progress has been made to address consumers’ complaints

OPTIONAL and not on the test! Modeling Comparative Advertising (optional material – Prof. J. Liaukonyte’s research)