Advertising Society

 Economics
 The effects of advertising on our economy

&

 Ethics
 The effects of advertising on our society

 Regulation
 Our attempts to manage those effects

Power or Information?
Market Power
 Advertising  Persuades consumer to purchase one brand over another more often  Excess brand profits  Higher barriers to entry and more market power  More advertising leads to greater brand loyalty  Reduce quality/raise price  Reduced consumer sovereignty  Monopoly

Market Information
 Advertising  Increased consumer knowledge  More substitute products consumers can consider  Lower barriers to entry by new brands  Reduced market power for any individual brand  Better pricing/distribution more product innovation  Optimal brand profits, consumer choice, and price benefits

What do you think?

 Advertising = Market Power  Advertising = Market Information  Or both?

Some Economic Questions:

 How does advertising affect the price of a new car?  How does advertising affect the price of a latt from Starbucks?  How does advertising affect the way that you spend your money?

Some Economic Questions:

 Can ads make people buy things they dont want or need?  Can ads make people more materialistic?  Are the benefits of advertising worth the annoyance?

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

3 Ethical Issues:
1) Advocacy
 What does the advertising advocate?

2) Accuracy
 How accurate is the advertising?  Some of this depends on susceptibility of the audience (i.e., kids).

3) Acquisitiveness
 What is the overall effect?  Does it make us more materialistic?

5 Controversial Issues:
1) Puffery 2) Decency 3) Stereotyping 4) Children 5) Controversy "Nothing beats a Bud Sexual innuendo, violence Portrayals of housewives, seniors, racial groups Violence, dangerous acts, unhealthy habits Condoms, alcohol, fashion

Regulation - 2 Main Purposes Regulation - 3 Main Areas

 Purpose for advertising regulation
 To protect competition  To protect consumers from economic or physical harm

 Regulations are concerned with

 Deceptive or unfair content  How advertising is delivered  Protection of susceptible groups (kids, etc.)

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

4 Possible Remedies for Deceptive Ads:

1) Consent Decree 2) Cease & Desist FTC asks advertiser to stop. FTC gets court order to force advertiser to stop. FTC mandates new ads to correct false perceptions. FTC mandates reimbursement.

3) Corrective Ads

4) Consumer Redress

6 Government Regulatory Groups:

1) FDA 2) FCC 3) Postal Service 4) ATF 5) Patent Office Packaging and labeling Broadcast advertising Magazines, direct mail Liquor labeling, advertising Trademarks Copyrights

6) Library of Congress

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

 Compliance is strictly voluntary

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