Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion Ethical Evaluating the Social, Ethical, and Economic Aspects of Advertising and Promotion Ethical McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising and Promotion Viewpoints Creates consumer needs, wants Promotes materialism, insecurity, and greed More propaganda than information Provides information Creates jobs Encourages higher standard of living Promotes competition Proponent arguments Critic arguments Helps new firms enter a market

Ethics in Advertising and Promotion Not all issues can be regulated A marketing or promotion action may be legal but not ethical Marketers must decide the appropriateness of their actions Ethics: Moral principles and values that govern the actions and decisions of an individual or group.

Benetton’s “Death Row” Ad Offensive

Advertising and Untruthful or Deceptive General mistrust of advertising among consumers. Many do not perceive ads as honest or believable General mistrust of advertising among consumers. Many do not perceive ads as honest or believable Abuses involving sales promotions such as contests, sweepstakes, premium offers Unethical and/or deceptive practices involving mail order, telemarketing and other forms of direct marketing Unethical and/or deceptive practices involving mail order, telemarketing and other forms of direct marketing Internet scams and abuses

Advertising as Offensive or in Bad Taste Sexual appeals Sexual appeals Objectionable products Shock ads

COMPARATIVE ADVERTISING Comparative advertising is advertising where one party advertises his goods or services by comparing them with the goods or services of another party. Other party is usually his competitor or the market leader of that good or service

Social Advertisement It is a process for influencing human behaviour on a large scale, using marketing. Principles for the purpose of social benefit rather than for commercial profit. Social advertisement sells a behaviour change to a targeted group of individuals

Features non commercial aimed for societal benefit performed by government, NGOs, or big corporate use of big and popular people

Social Causes Quit smoking Don’t smoking Polio Environment Examples:- wear a life safety jacket while boating pregnant woman should avoid alcohol wear car seat belts which reduces injuries in accident if you smoke then quit

Puffery Advertising or other sales representations, which admire the item to be sold with opinions, or exaggerations, vaguely and generally, stating no specific facts.” Using claims or descriptions to exaggerate (“puff up”) a product’s reputation or appeal 1. New 2. Unique 3. Extra-strength 4. Super-strength

Stereotyping Stereotyping means over simplified idea of the typical characteristics of a person or a thing Stereotyping is presenting a group of people in an unvarying pattern that lacks individuality. a. Gender Discrimination b. Color Discrimination c. Age Discrimination d. Religious Discrimination e. Sexual orientation d. Ethnic discrimination

GENDER DISCRIMINATION ADVERTISEMENT

Advertising to children is the act of marketing or advertising products or services to children, as defined by national legislation and advertising standards Rules on advertising to children have largely evolved in recent years In the United Kingdom, Greece and Belgium advertising to children is restricted and in Quebec, Sweden and Norway advertising to children under the age of 12 is illegal. Advertising to Children

Advertising and Children Children's TV Watching Behavior Children ages 2-11 watch an average of 22 hours of TV per week and see 30,000 commercials per year 80% of all advertising targeted to children falls in four product categories: Toys, cereal, candy & fast food restaurants 80% of all advertising targeted to children falls in four product categories: Toys, cereal, candy & fast food restaurants

Perspectives on Ads for Children Advocates Argue That Children: Marketers Argue Children: Lack the knowledge and skills to evaluate advertising claims Cannot differentiate between programs and commercials Cannot differentiate between programs and commercials Must learn through socialization Must learn through socialization Must acquire skills needed to function in the marketplace

Social and Cultural ConsequencesConsequences Does advertising encourage materialism? Does advertising encourage materialism? Does advertising make people buy things they don’t need? Does advertising make people buy things they don’t need? Is advertising just a reflection of society? Is advertising just a reflection of society?

Do Advertisers Control the Media? They must report the news fairly and accurately to retain public confidence Advertisers need the media more than the media need any one advertiser Media maintain separation between news and business departments “The Wall”

U.S. Government Discourages Drug Use

Role of Advertising in the Economy Makes consumers aware of products and services Provides consumers with information to use to make purchase decisions Encourages consumption, fosters economic growth

Economic Impact of Advertising Effects on Consumer Choice Differentiation Brand Loyalty Effects on Consumer Choice Differentiation Brand Loyalty Effects on Product Costs and Prices Advertising as an expense that increases the cost of products Increased differentiation Effects on Product Costs and Prices Advertising as an expense that increases the cost of products Increased differentiation Effects on Competition Barriers to entry Economies of scale Effects on Competition Barriers to entry Economies of scale

Summarizing Economic Effects Change consumers’ tastes Reduces competition Lowers sensitivity to price Builds brand loyalty Advertising Equals Market Power Leads to higher prices Leads to fewer choices Results in higher profits

Summarizing Economic Effects Provides useful information Pressure for lower prices Increases price sensitivity Increases competition Advertising Equals Information Forces inefficient firms out Pressure for high quality