1. & Advertising Society n Today, we can discuss and debate the material in Chapter 3. n Economics l The effect of advertising on our economy n Ethics l The effect of advertising on our society n Regulation l Our attempts to manage those effects

2. The American Economy - Three Unique Influences: n “Caveat Emptor” l Commerce is a two-way street n Tolerance l Philadelphia Quakers l Immigration of people and ideas n The Marketplace of Ideas l Competition is OK l This includes the media

3. 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

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

5. 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?

6. 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?

7. 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

8. 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., children) 3) Acquisitiveness lWhat is the overall effect? lDoes it make us more materialistic? No single ad, but ads overall.

9. 5 Controversial Issues: 1) Puffery"Nothing beats a Bud” 2) DecencySexual innuendo, violence 3) StereotypingHousewives, women, seniors, racial groups 4) ChildrenViolence, dangerous acts, unhealthy habits, overall materialism 5) ControversialCondoms, alcohol, fashion Productsconsumer credit

10. An Ethical Thought: “All of us who professionally use the mass media are shapers of society. We can brutalize it. Or we can help lift it onto a higher level. ” -Bill Bernbach

11. Controversy as Opportunity n Puffery vs. Irony n Stereotyping as Context n Social Tension gets Attention n Anti-Tobacco Marketing l The Story Behind “Truth”

12. Puffery vs. Irony n HULU - “Alec Baldwin”

13. Stereotyping as Context n Dove “Real Beauty”

14. Social Tension Gets Attention n Nike “If You Let Me Play”

15. The Story Behind “Truth” The Tobacco Industry’s “Don’t Smoke” Ad Campaign was… l “Don’t smoke ‘till you’re an adult.” l What’s a big reason teens smoke? l Right. Pretty clever, hm? n Legal agreement said “Ads can’t vilify the tobacco industry.” l The tobacco industry knew this could be effective strategy. l CP+B got the account - and…

16. The Story Behind “Truth” Truth “Bodybags”

17. Ads for Discussion:

32. 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.)

33. Regulatory Power From Low to High: 5. Private Policy l Companies regulating their own behavior 4. Governmental Regulation l States, FTC, Legislation, Supreme Court 3. Media/Self-Regulatory Forces l Media Forces, NAB, Industry Groups 2. Organized Market Forces l Boycotts, bad publicity, media pressure 1. Natural Market Forces l If no good, consumers won’t buy it again

34. 5 FTC 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

35. 4 Possible Remedies for Deceptive Ads: 1) Consent Decree 2) Cease & Desist 4) Consumer RedressFTC mandates reimbursement FTC asks advertiser to stop FTC mandates new ads to correct false perceptions 3) Corrective Ads FTC gets court order to force advertiser to stop

36. 6 Government Regulatory Groups: 1) FDA Packaging and labeling 2) FCCBroadcast advertising 3) Postal ServiceMagazines, direct mail 4) ATFLiquor labeling, advertising 5) Patent OfficeTrademarks 6) Library of Congress Copyrights

37. 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 n Compliance is strictly voluntary

38. Questions on Regulation n Does regulating advertising mitigate the negative effects it has on our economy? l On our society? l Did the TV ban on liquor have a positive effect? u 1996 - “gentlemen’s agreement” ended u Now, broadcast media looking for more revenue n Does regulating advertising extend the benefits it has on our economy? l On our society? l Who should do the regulating?

39. 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?

40. One More Question… n What do you think of this advertising?

41. Think.