2. Economic, Social, and Regulatory Aspects of Advertising
Chapter 3
Economic, Social, and Regulatory Aspects of Advertising
Identifies and explains economic, social, ethical, and legal issues advertisers must consider
Chapter Title

3. Chapter 3 Objectives Classify two main types of social criticisms
Employ an economic model to discuss effects
Explain social responsibility and ethics
Understand how governments regulate here and abroad
Discuss court rulings that affect freedom of speech
Define the regulatory roles of state and local governments
Describe how federal agencies regulate
Discuss self-regulation

4. Controversies Does advertising . . . Economic Societal
affect product value?
influence consumer choice?
make us buy things we don’t need?
make us more materialistic?
affect us subliminally?
discourage competition?
debase language?
increase prices?
affect art?
affect demand?

5. Economic Impact: Principles
Self-interest
Complete information
Many buyers & sellers
Absence of externalities

6. Economic Impact: Global
Bleustein-Blanchet:
Advertising expenditure is directly proportional to standard of living
Insert ex. 3-1, p. 58
Per capita ad spending
Position = 2.9” horiz., 1.5 vertical
Size = 4.6” TALL
Resolution: 300 dpi

7. Economic Impact: Billiards Model
Insert ex. 3-2, p. 59, Advertising billiards
Position = centered horiz., 1.5” vertical
Size = 4.6” TALL
Resolution: 300 dpi

8. Economic Impact: Four Affected Areas
Product Value
-Communicates brand image
-Educates customers
-Associates w/ desirable image

9. Economic Impact: Four Affected Areas
Product Value
Prices & Competition
-Communicates brand image
-Educates customers
-Associates w/ desirable image
Increase:
-Branding
-Ad costs
Decrease:
-Competition
-Efficiency

10. Economic Impact: Four Affected Areas
Product Value
Prices & Competition
Consumer Demand
-Communicates brand image
-Educates customers
-Associates w/ desirable image
Increase:
-Branding
-Ad costs
Decrease:
-Competition
-Efficiency
Primary:
-Product Category
Secondary:
-Particular Brand

11. Economic Impact: Four Affected Areas
Product Value
Prices & Competition
Consumer Demand
Consumer Choice
-Communicates brand image
-Educates customers
-Associates w/ desirable image
Increase:
-Branding
-Ad costs
Decrease:
-Competition
-Efficiency
Primary:
-Product Category
Secondary:
-Particular Brand
Product differentiation

12. Economic Impact: Abundance Principle
In an economy that produces more goods & services than can be consumed, advertising:
Allows more-effective competition
Self-interest
Complete information
Absence of externalities
Many buyers & sellers
Keeps consumers informed
Stimulates competition
Self-regulates to keep market free & open

13. Social Impact: Two Types of Criticism
Short-term manipulative arguments
Deception:
puffery, nonproduct facts, bias, inaccuracy
Subliminal
myth
Long-term macro arguments
Proliferation
Stereotyping
Offensive
Social impact
Impacts values

14. Social Responsibility and Ethics
Public service announcement from Abbott Mead Vickers BDDO
Insert photo 3.9, p.66
“Think! Slow down” PSA
Position = 2.7” horiz., 1.5” vertical
Size = 4.6” TALL
Resolution = 300 dpi

15. Social Responsibility and Ethics
Ethical: morally right
Socially Responsible: what society views as best
Promote well-being
Promote harmony & stability
Influence
elections
Draw
crowds to events
Responsible advertising
can . . .

16. Social Responsibility and Ethics
Public service announcement from the Brain Injury Association of America
Insert photo 3.13, p. 71
Towel snowboarding ad
Position = 2.9” horizontal, 1.5” vertical
Size = 5.7” WIDE
Resolution = 300 dpi

17. Ethics of Advertising Insert ex. 3.3, p. 73
Levels of Ethical Responsibility
Position = 0.4” horizontal, 1.5 vertical
Size = 8.2” WIDE
Resolution = 300 dpi

18. How Government Regulates
National:
Legislative, Executive,
Judiciary
State:
governor,
attorney general,
departments
Municipal:
mayor,
city manager,
police chief

19. International Regulation
Ad from Air Tahiti Nui
Insert photo 3.14, p. 77
Air Tahiti line drawing ad
Position = 2.9“ horizontal, 1.5“ vertical
Size = 5.7” WIDE
Resolution = 300 dpi

20. Current U.S. Regulatory Issues
Supreme Court: “speech” or “commercial speech”
Tobacco Controversy
Consumer Privacy
Advertising to Children

21. Federal Regulation: Agencies
FTC
FDA
FCC
Patent & Trademark Office
Library of Congress
Deceptive, unfair, & comparative ads
Nutritional Labeling & Education Act (NLEA)
Broadcast media licensing
Intellectual property
Copyrights “works of authorship”

22. Federal Regulation: FDA Disclosure
This ad for Revolution, a topical Parasiticide for Dogs and Cats, has a long disclosure
Insert photo 3.19a
Relpax woman
Position = 2.8” horiz., 1.5” vertical:
Size = 2.75 WIDE
Resolution = 300 dpi
Insert photo 3.19b
Relpax disclosure
Position: 5.9” horiz., 1.5” vertical
Size = 2.75 WIDE
Res = 300 dpi

23. State & Local Regulation
“Little FTC” consumer protection acts
National marketers comply with states’ laws
Local govt. regulation: city & county consumer protection agencies

24. Nongovernment Regulation
Better Business Bureau (BBB)
National Advertising Review Council (NARC)
National Advertising Division (NAD)
National Advertising Review Board (NARB)
Regulation by the media
Regulation by consumer groups

25. Self-Regulation: Agencies & Associations
Agency Responsibilities
Research and verify claims & comparative data before use
Liable for misleading or fraudulent claims
Some maintain in-house legal counsel
Industry-Wide Associations
American Association of Advertising Agencies (AAAA)
American Advertising Federation (AAF)
Association of National Advertisers (ANA)

26. Self-Regulation: AAF Principles
Insert ex. 3-6, p. 93, AAF Advertising Principles
Position = 0.4” horizontal, 1.5” vertical
Size = 8.2” WIDE
Resolution = 300 dpi