& Advertising Society nEconomics l The effects of advertising on our economy n Ethics l The effects of advertising on our society n Regulation l Our attempts to manage those effects

Power or Information? Market Power lAdvertising lPersuades consumer to purchase one brand over another more often l Excess brand profits l Higher barriers to entry and more market power l More advertising leads to greater brand loyalty l Reduce quality/raise price l Reduced consumer sovereignty l Monopoly Market Information l Advertising lIncreased consumer knowledge l More substitute products consumers can consider l Lower barriers to entry by new brands l Reduced market power for any individual brand l Better pricing/distribution more product innovation l Optimal brand profits, consumer choice, and price benefits

What do you think? n Advertising = Market Power n Advertising = Market Information n Or both?

Some Economic Questions: n How does advertising affect the price of a new car? n How does advertising affect the price of a latté from Starbucks? n How does advertising affect the way that you spend your money?

Some Economic Questions: n Can ads make people buy things they don’t want or need? n Can ads make people more materialistic? n Are the benefits of advertising worth the annoyance?

n Ads destroy freedom of choice n Ads give consumers more choices An Ethical Debate nAds simply reflect the “real world” n Ads = freedom of speech nAds destroy democracy/media nAdvertising warps social values

3 Ethical Issues: 1) Advocacy l What does the advertising advocate? 2) Accuracy l How accurate is the advertising? l Some of this depends on susceptibility of the audience (i.e., kids). 3) Acquisitiveness lWhat is the overall effect? lDoes it make us more materialistic?

5 Controversial Issues: 1) Puffery"Nothing beats a Bud” 2) DecencySexual innuendo, violence 3) StereotypingPortrayals of housewives, seniors, racial groups 4) ChildrenViolence, dangerous acts, unhealthy habits 5) ControversyCondoms, alcohol, fashion

9 Advertising Ethics nA set of moral principles that guide actions and create a sense of responsible behavior nSix key issues 1.Poor taste and offensive advertising 2.Stereotyping 3.Body and self image 4.Targeting children 5.Misleading claims and other message strategies 6.Controversial products

10 Advertising Ethics Poor Taste/Offensive nAdvertisers and media outlets must try to be sensitive to consumer objections nCreating guidelines for good taste is difficult nSex in advertising

11 Advertising Ethics Reinforcing Stereotypes nDiversity Issues nGender Roles nRacial and Ethnic Stereotypes nSenior Citizens Body and Self Image  Self-image advertising can contribute to self- improvement  Can also lead to dangerous practices  Advertising mirrors and shapes the standard of attractiveness

12 Advertising Ethics Children nOne of the most controversial topics in the industry nChildren are unable to evaluate advertising messages and make purchasing decisions

13 Advertising Ethics nMisleading Claims Advertising claims are unethical if they are false, misleading, or deceptive

14 Advertising Ethics Controversial Products nThough it is acceptable to advertise these products, it is still offensive to some

15 Determining What is Ethical nThe social ethic nThe professional ethic nThe personal ethic nThe “Golden Rule” nSocial responsibility motivates a business to make a positive impact on society

16 Determining What is Ethical nThe social ethic nThe professional ethic nThe personal ethic nIndustry standards help with a decision about what is ethically correct nA code of standards identifies how professionals should respond when facing an ethical dilemma

17 Determining What is Ethical nThe social ethic nThe professional ethic nThe personal ethic nPersonal judgment and moral reasoning rests on an intuitive sense of right and wrong nAdvertising professionals must be aware of industry standards as well as ethical questions

18 Advertising’s Societal Role nDoes advertising create a materialistic culture or does it simply reflect it? lCritics believe that advertising has the power to shape social trends and the way people think and act lAdvertising professionals believe advertising mirrors values rather than sets them nAdvertising can potentially shape and mirror values

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

TYPES OF REGULATIONS

Regulation - 2 Main Purposes Regulation - 3 Main Areas n Purpose for advertising regulation l To protect competition l To protect consumers from economic or physical harm n Regulations are concerned with l Deceptive or unfair content l How advertising is delivered l Protection of susceptible groups (kids, etc.)

6 Government Regulatory Groups: 1) Food Packaging and labeling 2) IBBroadcast advertising 3) Postal ServiceMagazines, direct mail 4) ATFLiquor labeling, advertising 5) Patent OfficeTrademarks and copyrights

23 Review and Regulation of Advertising Copyright Protection nTrademark nCopyright nOnly truthful commercial speech is protected, not misleading or deceptive statements

24 Advertising’s Regulatory Environment nRegulating deception nRegulating substantiation nRemedies for deception and unfair advertising nDeceptive advertising misleads customers by making claims that are false

25 Advertising’s Regulatory Environment nRegulating deception nRegulating substantiation nRemedies for deception and unfair advertising nThe advertiser should have a reasonable basis for making a product claim

26 Advertising’s Regulatory Environment nRegulating deception nRegulating substantiation nRemedies for deception and unfair advertising nConsent Decrees nCease-and-Desist Orders nCorrective Advertising nConsumer Redress nAdvertising Agency Legal Responsibility

27 Advertising’s Regulatory Environment Food and Drug Administration nOversees package labeling, ingredient listings, and advertising for food and drugs nWatchdog for drug advertising IB Ministry nCan issue and revoke licenses to broadcasting stations nCan ban messages that are deceptive or in poor taste

28 Advertising’s Regulatory Environment Other Regulatory Bodies nBureau of Alcohol, Tobacco, and Firearms nStates’ Attorneys General International Regulations nMarketing practices vary in legal and regulatory restrictions nInternational advertisers should have someone in the country who knows the local laws

29 Self-Regulation nSelf-discipline nIndustry self- regulation nSelf-regulation with outside help nMost advertisers and agencies have in- house review procedures nEvery element of a proposed ad should be evaluated by an in-house committee or lawyers

30 Self-Regulation nSelf-discipline nIndustry self- regulation nSelf-regulation with outside help

31 Self-Regulation nSelf-discipline nIndustry self- regulation nSelf-regulation with outside help nLocal Groups nConsumer Groups

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