chapter two the economic, social, and regulatory aspects of advertising mcgraw-hill/irwin essentials...
TRANSCRIPT
![Page 1: Chapter two The Economic, Social, and Regulatory Aspects of Advertising McGraw-Hill/Irwin Essentials of Contemporary Advertising Copyright © 2007 The McGraw-Hill](https://reader035.vdocuments.us/reader035/viewer/2022062409/56649cb45503460f949785b9/html5/thumbnails/1.jpg)
chapter twoThe Economic,
Social, and Regulatory Aspects of Advertising
McGraw-Hill/IrwinEssentials of Contemporary Advertising Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Objectives
Discuss the impact of advertising on the economy
Debate the validity of the various social criticisms of advertising
Explain the difference between social responsibility and ethics in advertising
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Objectives
Describe how government agencies regulate advertising to protect both consumers and competitors
Discuss the activities of nongovernment organizations in fighting fraudulent and deceptive advertising
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Economic Advertising Controversies
How does advertising affect the value of products?
Does it cause higher or lower prices?
Does it promote competition or discourage it?
How does it affect consumer demand?
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Societal Advertising Controversies
Does advertising make us more materialistic?
Does it force us to buy things we don’t need?
Does it reach us subliminally in ways we can’t control?
How does it affect art and culture of our society?
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Responsibility and Control For Advertising
What is the proper role for participants in the marketing process?
How much latitude should marketers have in the products they promote and how they advertise them?
What is the proper role of government? What laws should we have to protect
consumers?
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Exhibit 2-1 Per Capita Ad Spending
A country’s level of ad
spending is typically
proportional to its
standard of living
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Exhibit 2-2 Economic Effect of Advertising
The economic effect of advertising is like the opening break shot in billards
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Economic Effects of Advertising
Value of Products Prices Competition Consumer Demand
Consumer Choice Business Cycle Abundance Principle
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Added Value
Links brand image to the product Educates consumers about product
uses Satisfies psychic and symbolic wants
and needs
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Effect on Prices
Advertising is paid for by the buying consumer
Amount spent on advertising is typically small compared to total cost of product
Advertising is part of a mass-distribution system
In industries subject to price regulation, advertising has no effect on prices
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Effect on Consumer Demand
Stimulates primary demand
Influences Selective demand
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DeceptionDeception
Subliminal AdvertisingSubliminal Advertising
Value SystemValue System
Proliferation of AdvertisingProliferation of Advertising
Use of StereotypesUse of Stereotypes
OffensivenessOffensiveness
Social Impact of Advertising
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Deception in Advertising: Puffery
Levels of Puffery
– Best– Best possible– Better– Especially good– Good– Subjective
qualities
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Social Responsibility
Doing what society views as best for the welfare of people in general or for a specific community of people
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Advertisers’ Social Responsibility
Organizations like the AAF and the AAAA provide pro bono services for charitable organizations and public agencies.
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Current Regulatory Issues
Freedom of Commercial SpeechFreedom of Commercial Speech
Tobacco AdvertisingTobacco Advertising
Advertising to ChildrenAdvertising to Children
Consumer PrivacyConsumer Privacy
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When can commercial speech be regulated?
The Central Hudson test– Does the commercial speech at issue concern a
lawful activity?– Will the restriction of commercial speech serve the
asserted government interest substantially?– Does the regulation directly advance the
government interest asserted?– Is the restriction no more than necessary to further
the interest asserted?
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The Tobacco Advertising Controversy
Are restrictions on tobacco advertising a violation of the First Amendment?
The website, www.tobacco.org, features a history of tobacco advertising
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Advertising to Children
How far must advertisers go to ensure that children are not misled by ads?
Children’s Advertising Review Unit (CARU) reviews and evaluates child-directed advertising
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CARU’s Guidelines for Advertising to Children
Consider audience maturity
Realize power of imagination
Promote child-appropriate products only
Consider advertising as a learning tool
Support parent-child relationships
Avoid stereotyping Promote positive
behavior
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Regulating Organizations
Federal Trade Commission
Food and Drug Administration
Federal Communications Commission
Patent and Trademark Office
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The Federal Trade Commission
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What is Deception?
Any ad that contains misrepresentation, omission, or any other practice that can mislead a significant number of reasonable consumers is considered deceptive by the FTC
Unfair advertising occurs when a consumer is unjustifiably injured or there is a violation of public policy
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Commercial Break 2-A: Unfair and Deceptive Advertising Practices
False promises Incomplete
description False and
misleading comparisons
Bait-and-switch offers
Visual distortions and false demonstrations
False testimonials Partial disclosure Small-print
qualifications
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What information does the FTC consider?
Substantiation
Endorsements/Testimonials
Affirmative disclosure
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Remedies Enforced by the FTC
Consent decree Cease-and desist
order Corrective
advertising
Apple recently received a cease-
and-desist order to halt use of the
iPod commercial featuring singer,
Enimem.
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FDA’s Role in Advertising
The FDA strives to ensure that consumers have complete information by ensuring that products are labeled truthfully
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The FCC and Advertising
The FCC seeks to protect the public’s interest and to encourage media competition
It controls the airing of obscenity and profanity and can restrict the products advertised and the content of ads
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Patent and Trademark Office
Patents Trademarks
– ®
– ™ Copyright
– ©
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Other Sources of Regulation
State and local governments
Better Business Bureau
National Advertising Review Council
Regulation by media Regulation by
consumer groups Self-regulation
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Key Terms_1
Abundance principle Added value Affirmative disclosure Broadcast standards
department Cease-and-desist
order Comparative
advertising
Consent decree Consumer advocate Consumerism Copyright Corrective
advertising Deceptive
advertising Endorsements
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Key Terms_2
Ethical advertising Externalities Intellectual property Limen Patent Primary demand Privacy rights Puffery
Selective demand Social responsibility Stereotypes Subliminal
advertising Substantiation Testimonials Trademark Unfair advertising