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CHAPTER 18
ADVERTISING REGULATION AND ETHICAL,
SOCIAL, AND ECONOMIC EFFECTS OF ADVERTISING
Chapter Overview
The purpose of this final chapter is to evaluate the social, ethical and economic aspects of advertising.
Advertising is a very powerful and influential force in our society, and this text would not be complete
without considering the various perspectives and criticisms regarding its social and economic effects. The
first section of the chapter focuses on the regulation of advertising in Canada. This is followed by a
discussion of the various criticisms of advertising from an ethical and societal perspective. Attention is
then given to appraising the effects of advertising on the economy including its effect on consumer
choice, competition, and product costs and prices. Perspectives regarding the economic effects of
advertising are summarized by considering two principal models or schools of thought: the Advertising =
Market Power and Advertising = Information perspectives. It should be noted that the primary focus in
this chapter is on social and economic aspects of advertising as this is the promotional mix variable that is
the subject of the most concern, controversy, and regulation.
Learning Objectives
1. To be familiar with the advertising regulation system in Canada.
2. To evaluate the ethical perspectives of advertising.
3. To understand the social effects of advertising.
4. To examine the economic role of advertising and its effects on consumer choice, competition, and
product costs and prices.
Chapter and Lecture Outline
I.
INTRODUCTION
Because of its high visibility and pervasiveness, along with its persuasive character, advertising has been
the subject of a great deal of controversy and criticism. Various parties and scholars have attacked
advertising for a variety of reasons including its excessiveness, the way it influences society, the methods
used by advertisers, its supposed exploitation of consumers, and its effect on our economic system. The
role of advertising in society is a controversial one and a discussion of the area would not be complete
without considering the various regulations affecting advertising and the criticisms regarding its social
and economic effects as well as some of the responses to these charges.
II.
ADVERTISING REGULATION IN CANADA
Regulation occurs through government and self-regulation. The key regulatory bodies and regulations
include:
A. Canadian Radio-Television and Telecommunications Commission (CRTC) – It regulates over
5900 broadcast media organizations and its regulations cover:

advertising limits on television stations

infomercials
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224

900 numbers

alcohol and drug advertising
B. Regulation of Tobacco Advertising – Health Canada regulates the advertising of tobacco products
in traditional media.
C. Quebec Regulations on Advertising to Children – In this province it is illegal to direct
commercial messages to persons younger than 13 years of age.
D. Advertising Standards Council – The mandate of this industry body is to create and maintain
community confidence in advertising. The ASC’s activities encompass:
1. Canadian Code of Advertising Standards – the Code is used as the criteria to assess
whether a complaint is legitimate
2. Gender Portrayal Guidelines – these attempt to ensure that women and men are portrayed
appropriately in advertising
3. Complaint process – the ASC’s Standards Division handles consumer complaints, special
interest group complaints and trade disputes
4. Complaints report – each year the ASC publishes a comprehensive complaint report
5. Clearance process – the ASC provides clearance services for advertisements for alcohol,
cosmetics, non-prescription drugs and food. It also provides these services for ads
directed to children outside Quebec.
III.
ADVERTISING AND PROMOTION ETHICS
While many laws and regulations determine what advertisers can and cannot do, not every issue is
covered by a rule or guideline. In many situations, advertisers must make decisions regarding appropriate
and responsible actions based on ethical considerations rather than what is legal or within industry
guidelines. Ethics are moral principles or values that govern the actions and decisions or an individual or
group. While a particular action or practice may be within the law, this does not necessarily mean it is
ethical. Ethical issues must be considered in making integrated marketing communication decisions as a
lapse in ethical standards or judgment can result in actions that are highly visible and can be damaging to a
company’s reputation and image.
Advertising is subject to considerable criticism because it is judged by a variety of groups with different
norms, values, and ethical standards. Arguments on both sides of controversial ethical and social issues
will be presented in this chapter. However, students may have to draw their own conclusions as to which
position is right or wrong.
IV.
ETHICAL EFFECTS OF ADVERTISING
Much of the controversy over advertising stems from the ways it is used by many companies as a selling
tool and because of the impact advertising has on society’s tastes, values, and lifestyles. There are a
number of criticisms of specific techniques used by advertisers as well as charges against its impact on
society in general.
A.
Advertising as Untruthful or Deceptive—One of the major attacks against advertising is that
many ads are misleading or untruthful and end up deceiving consumers. The issue of what
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225
constitutes deception is a very difficult one. However, a concern of many critics is the extent to
which advertisers are deliberately untruthful or misleading in their advertising. Most large
companies are unlikely to risk their reputation and image or subject themselves to prosecution by
various regulatory groups by making overtly false or misleading advertising claims. Many of the
companies involved in outright fraud or deception are often smaller, local companies or those
using direct mail to advertise their products and services. However, national advertisers will often
test the limits of various industry and governmental rules and regulations and make claims that
may give their brands an advantage in highly competitive markets.
Critics of advertising often question whether consumers are receiving proper information to make
an informed choice since advertisers usually only present information that is favourable to their
brands. Many critics feel that advertising should be primarily informative in nature and not be
permitted to use puffery or embellished messages. Others argue that advertisers should have the
right to present the most favorable case for their products and services. They note that most
consumers can protect themselves from being persuaded against their will and that various
regulatory bodies and mechanisms are sufficient to keep advertisers from deceiving or misleading
consumers.
B.
Advertising as Offensive or in Bad Taste—Another common criticism of advertising, particularly
by consumers, is that ads are offensive, tasteless, irritating, boring obnoxious, and so on.
1. Sources of distaste—consumers can be offended or irritated by advertising in a number of
ways. Some are offended that a product or service is even advertised at all (such as
contraceptives or personal hygiene products). A research study of prime time commercials
found a strong product class effect with respect to the type of ads consumers perceived as
distasteful or irritating. Another way advertising can offend consumers is by the type of
appeal or the manner of presentation. Ads that use fear appeals or exploit consumer anxieties,
such as fear of social rejection, are often the target of criticism.
2. Sexual appeals—the type of advertising appeals that have received the most criticism for
being offensive or in poor taste are those using sexual appeals and/or nudity. These
techniques are often used as ways of gaining consumers’ attention and in some cases may not
even be appropriate to the product being advertised. Even if the sexual appeal is appropriate
for the product, many people may still be offended. Advertisers who use nudity and sexual
suggestiveness argue that their ads are not offensive and are consistent with contemporary
values and lifestyles that are more accepting of this type of advertising. Another common
criticism of sexual appeals is that they can be demeaning to women (and men as well) by
depicting them as sex objects.
3. Advertisers also complain about the double standard that exists for TV programs and
commercials, noting that even the most suggestive commercials are bland compared with
what is shown in many television programs. The networks argue, however, that they have to
scrutinize commercials more carefully because they encourage people to imitate behaviors,
whereas programs are merely meant to entertain. Because of the clutter problem, it is likely
that advertisers will continue to use sexual appeals to gain the attention of consumers.
C.
Advertising and Children—One of the most controversial topics advertisers must deal with is the
issue of advertising to children. Sources have estimated that children between the ages of 2 and
11 watch an average of 15.5 hours of television a week. Concern has also been expressed over
marketers’ use of other promotional vehicles and techniques such as radio ads, point-of-purchase
displays, premium offers, and the use of commercial characters as the basis for television shows.
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Arguments can be presented on both sides of this controversial issue. First, arguments against
advertising to children include:
 Children, especially young ones, are vulnerable to advertising because they lack the
necessary experience and knowledge to understand and evaluate the purpose of
persuasive advertising appeals.

Children cannot differentiate between commercials and television programs, do not
perceive the selling intent of commercials, and cannot distinguish between fantasy
and reality.
Arguments in favor of advertising to children include:

Advertising is a part of life and children must learn to deal with it as part of the
consumer socialization process of acquiring the skills needed to function in the
marketplace.

Greater market knowledge of the marketplace gives teens a basis on which to evaluate
ads and makes them more likely to recognize the persuasion techniques used by
advertisers.
The Broadcast Code for Advertising to Children recognizes the debate to find a balance between these tow
points of view.
V. SOCIAL EFFECT OF ADVERTSISING
Concern is often expressed over the impact of advertising on society, particularly with respect to its
influence on values and lifestyles. Opinions regarding the value of advertising as an important social
influence agent are often very negative and it is criticized for a number of reasons.
A. Advertising Encourages Materialism—many critics claim that advertising has an adverse effect on
consumer values by encouraging materialism, which refers to a preoccupation with material things
rather than intellectual or spiritual concerns. Advertising can create materialism in many ways such
as:
 creating needs rather than showing how a product or service fulfills them
 surrounding consumers with the images of the good life and suggesting that acquisition of
material possessions leads to contentment and happiness and adds to the joy of living
 suggesting that material possessions are symbols of status, success, and accomplishment and/or
will lead to greater social acceptance, popularity, sexual appeal, and so on.
The criticism of advertising on the basis of creating materialism assumes that materialism is
undesirable and done at the expense of non-materialistic goals. Even if one assumes that materialism
is undesirable, there is still the issue of whether advertising is responsible for creating and
encouraging these values. This brings up the classic argument as to whether advertising is a major
force contributing to society’s values, such as materialism, or whether advertising merely reflects or
mirrors the values of society and does not mold or shape them.
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B. Advertising makes people buy things they do not need—another common criticism of advertising is
that it has the power to manipulate consumers and make them buy things they do not need. Persuasive
advertising which plays on consumers’ emotions, anxieties, and social and psychological needs and
desires is viewed as undesirable. This type of advertising is seen as going beyond basic needs or
necessities in appeals to sell products and services. Only informational advertising, which reports
factual, functional information such as price performance, and other objective criteria, is viewed as
acceptable and desirable.
Defenders of advertising offer a number of rebuttals to these criticisms. They argue that a substantial
amount of advertising is essentially informational in nature and that it is difficult to separate
desirable, informational advertising from undesirable, persuasive advertising. They also note that
most lower-level needs in our society are satisfied and it is natural for consumers to be concerned
with higher order needs, and for advertising to appeal to these wants and desires. They also note that
advertising cannot make consumers do things against their will and they can defend themselves
against advertising. Consumers do have a choice and can ignore ads for products and services that
they do not really need.
C. Advertising and stereotyping—advertising is often accused of creating and perpetuating stereotypes
thorough its portrayal of certain groups including women and ethnic minorities.
1. Women—Advertising has received a great deal of criticism for its stereotyping of women. Critics
charge that advertising generally depicts women as being preoccupied with beauty, household
duties, and/or motherhood or shows them as decorative objects or sexually provocative figures.
Critics also argue that advertisers have failed to acknowledge the changing role of women in
society. While sexism and stereotyping of women still exist, advertising’s portrayal of women is
improving in many areas as many ads recognize the changing role of women in our society and
the importance of portraying them realistically.
2. Visible minorities—recent Canadian trends and commentaries by practitioners suggest that the
portrayal of minorities – particularly Chinese, South Asians and Blacks can be improved in
Canadian advertising even though there has been an improvement in the recent past.
D. Advertising and the media—the fact that advertising plays such an important role in financing the
media has led to concern on the part of many that advertisers can influence or even control the media.
1. Arguments supporting advertiser control of the media:
 The media’s dependence on advertising revenue makes them susceptible to various forms of
influence such as exertion of control over editorial content, biasing editorial opinions,
limiting coverage of controversial topics or stories, and influencing the program content of
television.

Newspapers and magazines receive 70 percent of their total revenue from advertising,
whereas commercial television and radio derive nearly all of their income from advertising.
Thus, the media may be reluctant to carry stories detrimental to companies who purchase
large amounts of advertising time or space.
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
There have been several situations where advertisers have brought pressure to the media and
influenced content or programming decisions. Some of these situations have been in response
to pressure or the threat of boycotts from consumer groups opposed to program content.
2. Arguments against advertiser control:
 It is in the best self-interest of the media that advertisers not influence them too much. To
retain public confidence, they must report the news fairly and accurately and not be perceived
as biased or attempting to avoid controversial issues. Media executives point to the vast
amount of topics they cover and the investigative reporting they do as evidence of their
objectivity.

It can be argued that advertisers need the media more than the media need any individual
advertiser, particularly when the medium reaches a large audience or does a good job of
reaching a specific market segment.
The Canadian media. are basically supported by advertising and allow consumers to enjoy them
for a fraction of what it would cost without advertising. Although not perfect, a system of
advertising-supported media provides us with the best option for receiving information and
entertainment and is probably more desirable than the alternatives of paying higher subscription
costs, pay-per-view, or having government-supported media.
E. Summarizing the Social Effects of Advertising—Negative opinions regarding advertising have been
around just as long as the field itself, and it is very unlikely that they will ever disappear. It is
important that the advertising industry remains cognizant of, and continually addresses the various
issues and concerns over, the effects of advertising on society. Advertising is a very powerful
institution, but it will only remain so as long as consumers have faith and trust in the ads they see and
hear every day.
It is important to note that advertising and other integrated marketing communication tools, such as
direct marketing and public relations, are also used to promote worthy causes and to deal with
problems facing society such as drunk driving, drug abuse, and the AIDS crisis.
VI.
ECONOMIC EFFECTS OF ADVERTISING
Considerable attention has been given to examining the economic impact of advertising. Advertising
plays an important role in a free-market system such as that found in Canada and other countries by
making consumers aware of products and services and providing them with information that can be used
to make purchase decisions. However, advertising’s economic role goes beyond this basic function of
information provision as it is a very powerful force that can affect the functioning of an entire economic
system. It is viewed by many as a positive force that encourages consumption and fosters economic
growth. On the other hand, many critics of advertising view it as having detrimental economic effects by
not only failing to perform its basic function of information provision adequately, but also adding to the
costs of products and services and discouraging competition. A number of major issues regarding the
economic effects of advertising are considered.
A.
Effects on Consumer Choice—Some critics argue that advertising has a negative effect on
consumer choice as large advertisers use their power to limit our options to a few well-advertised
brands. Economists argue that advertising is used by large national advertisers to achieve
differentiation and brand loyalty, usually at the expense of smaller brands. These large companies
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often end up charging a higher price and are able to achieve a more dominant position in the
market than smaller companies that cannot compete against their large advertising budgets. When
this occurs, advertising restricts choices and becomes a substitute for competition based on price
or product quality.
Defenders of advertising argue that it does not create brand monopolies and reduce the
opportunities for new brand or product introduction. The opportunity to advertise gives
companies the incentive to develop new brands and improve existing ones. Advertising is
instrumental in helping companies inform consumers about their new products.
B.
C.
Effects on Competition—One of the most common criticisms economists have with advertising
concerns its effect on competition. They argue that large firms with huge advertising budgets
create a barrier to entry, which makes it difficult for other firms to enter the market. This in turn
leads to less competition and higher prices. Large advertisers enjoy certain competitive
advantages such as economies of scale in advertising, particularly with respect to factors such as
media costs.
While advertising may have an anticompetitive effect on a market, there is no clear evidence that
advertising alone reduces competition, creates barriers to entry and thus increases market
concentration. Defenders of advertising note that it is unrealistic to attribute a firm’s market
dominance solely to advertising as there are a number of other factors to consider such as price,
product quality, distribution effectiveness, production efficiencies, and competitive strategies.
While market entry against large established competitors is difficult, companies with a quality
product offered at a reasonable price find that advertising actually facilitates their market entry by
make it possible to communicate with consumers.
Effects on Product Costs and Prices—A major area of debate among economists, advertisers,
consumer advocates and policymakers concerns the effects of advertising on product costs and
prices. Critics offer several reasons why advertising results in higher prices:



The large sums of money spent on advertising and promotion are an expense that is passed on
to consumers in the form of higher prices
Advertising increases product differentiation and adds to the perceived value of the product in
the mind of the consumer, which allows advertised brands to command premium prices
There are often large differences in prices between national brands and private label brands
that are physically and functionally similar, which is evidence of the added value created by
advertising. Consumers pay higher prices for this added value.
Proponents of advertising offer several counter-arguments to the claim that advertising increases
prices:
 Price insensitivity and brand loyalty can be created by a number of non-advertising factors
such as product quality, packaging, favorable usage experience and market position
 Advertising can actually result in lower costs by helping firms achieve economies of scale in
product and distribution and helping stimulate demand among mass markets
 Advertising can make a market more competitive, which often leads to greater price
competition. Several studies have found lower consumer prices in markets permitting
advertising for a product versus those that did not.
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D.
Summarizing Economic Effects—Economists’ perspectives regarding the effects of advertising
can be divided into two principal models or schools of thought, each of which makes different
assumptions regarding the influence of advertising on the economy:
1. Advertising Equals Market Power—This model reflects traditional economic thinking and
views advertising as a way of changing consumers’ tastes, lowering their sensitivity to price,
and building brand loyalty among buyers of advertised brands. This results in higher profits
and market power for the large advertiser, reduces competition, and leads to higher prices and
fewer choices for consumers. Proponents of this viewpoint are generally negative in their
assumptions regarding the economic impact of advertising.
2. Advertising Equals Information—This model takes a more positive viewpoint of
advertising’s economic effects, as it views advertising as providing consumers with useful
information, increasing their price sensitivity, which moves them toward lower-priced
products, and increasing competition in the market. Advertising is viewed as a means of
communicating with consumers and telling them about a product and its major features and
attributes. More informed consumers put pressures on firms to lower prices and improve
quality. Proponents of this model assume that the economic effects of advertising are
favorable and view it as contributing to efficient and competitive markets.
These two perspectives take very divergent views regarding the economic impact of advertising
as shown in Figure 18-3. It is unlikely that the debate over the economic effects of advertising
will be resolved soon. Many economists will continue to take a negative view of advertising and
its effects on the functioning of the economy, while advertisers will continue to view it as an
efficient way for companies to communicate with their customers and an essential component of
our economic system.
Teaching Suggestion
In this final chapter we evaluate advertising from a societal, ethical and economic perspective.
Advertising is a very powerful institution in Canada and has been the target of considerable criticism
regarding its social and economic impact. Much of the criticism of advertising concerns the specific
techniques and methods used by advertisers, as well as advertising’s effect on societal values, tastes,
lifestyles and behaviour. We examine these various criticisms of advertising along with the responses of
advertisers to these attacks. It is important to recognize that there are usually two sides to each of these
issues and we try to recognize the arguments of the critics as well as of the advertising industry. For
example, one of the classic debates over the social impact of advertising concerns the issue of whether
advertising is responsible for creating undesirable consumer values, such as materialism, or whether
advertising merely reflects or mirrors the values of society rather than molding or shaping them.
Arguments can be made on both sides of this issue and it makes an interesting topic for student
discussion. A very good exchange of arguments regarding this issue can be found in articles by Richard
W. Pollay, “The Distorted Mirror: Reflections on the Unintended Consequences of Advertising,” Journal
of Marketing, April 1986 and Morris B. Holbrook, “Mirror, Mirror on the Wall, What’s Unfair in the
Reflections on Advertising,” Journal of Marketing, July 1987 and a rejoinder by Pollay, “On the Value of
Reflections in ‘The Distorted Mirror,” which also appeared in the July 1987 issue of JM. Stephen Fox’s
book, The Mirror Makers: A History of American Advertising and Its Creators (New York: Morrow
1984) also provides an excellent discussion of arguments concerning the impact of advertising on society.
Numerous controversial issues regarding advertising are raised in this chapter and can be used as a basis
for discussion or debate. These include the issues of target promotional programs to schools, advertising
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231
to children, advertising’s portrayal of women, and the ability of large advertisers to exert influence on, or
even control over, the media.
Answers to Discussion Questions
1. Explain why you agree or disagree with the rulings of the rulings of the ASC presented in this chapter
regarding the Yves Saint Laurent fragrance ad and the Ford Focus ad.
The answers to this question are subjective. Arguments for or against should be based on students’
interpretation of Clause 14 of the Code and principles of the Guideline.
2. Discuss the role of ethics in advertising and promotion. How do ethical considerations differ from
legal considerations?
While many laws and regulations determine what advertisers can and cannot do, not every issue is
covered by a rule or guideline. Ethics involve the use of moral principles and values in evaluating a
decision or action. Ethical considerations are very important in advertising as the use of a particular
type of ad or the targeting of a specific group may be legal but may not be ethical. Ethical issues must
be considered in making advertising and promotion decisions as a lapse in ethical standards or
judgment can result in actions that are highly visible and often very damaging to a company’s image
or reputation.
Ethical considerations differ from legal considerations in that ethics involves individual or group
moral principles or values and can be very subjective while legal considerations are generally much
more objective. Legal considerations can be enforced through the regulatory process while ethical
problems can only be remedied by voluntary actions of those who are responsible for the unethical
actions.
3. Nike has received some criticism for the violence in the ending to the commercials for the Air Cross
Trainer II that appear on its “Whatever.Nike.com” website. Do you think these commercial endings
are too violent or do you agree with the company’s vice president of marketing who argues that teens
can keep them in perspective?
Nike developed a very creative advertising campaign for the Air Cross Trainer II that has been
recognized as an excellent example of combining TV advertising with the Internet. The commercials
feature athletes such as sprinter Marion Jones and baseball star Mark McGwire in dramatic situations.
For example, the spot featuring Jones shows simulates the viewer chasing her through a
neighborhood and culminates with an airborne chain saw plummeting toward the camera. The spot
featuring McGwire is set on a cruise ship and simulates the viewer being chased by McGwire after
hitting him with a baseball. As each spot ends the screen fades to black, and the words “Continued at
Whatever.Nike.com appear. The commercials urge viewers to turn from their TV sets to their
computers to select their own ending to the spots. In the ending for one of the spots the viewer dies.
In three others the viewer has an arm severed, teeth knocked out, or suffers a facial injury that sends
a nurse screaming out of the emergency room. Nike has received some criticism for the violent
endings to the spots that were used on the website. However, the company’s VP of marketing has
defended the campaign noting that: “clearly what we are trying to do is intrigue people to turn a 60second experience with our product into a 30-minute experience by lingering on the Web site.” He
also argues that teens have a sense of humour about thing and can be sarcastic without losing
perspective. You might ask students their opinions of the Nike ads and whether they feel the endings
to the spots were too violent.
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4. Evaluate the arguments for and against advertising to children. Do you feel restrictions are needed for
advertising and other forms of promotion targeted to children?
There are numerous arguments that are offered by those individuals or groups opposed to advertising
to children. They argue that children, especially young ones, are vulnerable to advertising because
they lack the necessary experience and knowledge to understand and evaluate critically the purpose of
persuasive advertising appeals. They also argue that many preschool children cannot differentiate
between commercials and television programs and do not perceive the persuasive, selling intent of
commercials, and cannot distinguish between reality and fantasy. It has also been argued that
advertising directed toward children creates materialism, stifles creativity, creates conflict between
the parent and child, and hinders the development of moral and ethical values. In addition to
advertising, marketers use various other forms of promotion to target children such as premium offers
and entertaining web sites on the Internet. self-regulatory groups as well as government agencies have
passed guidelines and legislation to ensure that control the use of these promotional tools in
marketing toward children.
Numerous arguments can be offered in favor of advertising to children. It can be argued that
advertising is a part of life and children must learn to deal with it as part of the consumer socialization
process. Advertising serves as an information source and teaches children the consumption skills
necessary to function in the marketplace. It is also argued that it is the responsibility of the parents to
help children interpret advertising, to monitor the shows their children watch and ultimately to decide
whether or not to purchase a particular product for their children.
5. A common criticism of advertising is that it stereotypes women. Discuss the ways this might occur.
Do you think the Airwalk ad shown in Exhibit 18-4 is suggestive and symbolizes sexual submission?
Advertising has received a tremendous amount of criticism for stereotyping women. Critics argue that
advertising generally depicts women as being preoccupied with beauty, household duties and/or
motherhood and has failed to acknowledge the changing role of women in society. Another concern
is that many ads portray women as decorative objects or sexually provocative figures. The Airwalk ad
has been criticized by some women’s groups who argue that it shows a submissive and sexually
available woman. A critic argued that the ads contain a number of symbolic cues that are sexually
suggestive and combine to reinforce an image of the woman’s sexual submission to the man. Some of
these cues include the heart shaped box indicating love; the color red which symbolizes romantic
passion; the heavy lipstick which is sexually suggestive as is the tight slinky red dress. A more
detailed interpretation of the ad can be found in an article by Aaron C. Ahuvia in the Journal of
Advertising, Spring 1998 on p. 150. You might want to ask students their opinions of the ad and then
read them the interpretation to them.
6. With which position do you agree? “Advertising determines Canadian consumers’ tastes and values
and is responsible for creating a materialistic society” or “Advertising is a reflection of society and
mirrors it tastes and values”
This question presents the classic dilemma of whether advertising is responsible for creating
materialistic values in consumers or whether it merely reflects or mirrors the values of society rather
than molding or shaping them. Those who agree with the first position argue that advertising
encourages materialistic values by seeking to create needs rather than merely showing how a product
or service fulfills them; surrounding consumers with images of the good life and suggesting that the
acquisition of material possessions leads to contentment and happiness and adds to the joy of living;
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and suggesting that material possessions are symbols of status, success and accomplishment and/or
will lead to greater social acceptance, popularity, sexual appeal and so on.
Those supporting the second position argue that consumers’ values are defined by the society in
which they live and value systems are the result of extensive long-time socialization or acculturation.
They argue that advertisers develop ads in response to prevailing values and are thus reflecting tastes
and values rather than molding or shaping them.
7. Discuss how advertising can impact consumer choice, as well as its impact on product costs and the
prices paid for products and services.
Some critics argue that advertising has a negative impact on consumer choice, as large advertisers use
their power to limit consumers’ options to a few heavily advertised brands. They argue that
advertising is used to achieve differentiation and brand loyalty, which occurs at the expense of
smaller brands. Defenders of advertising argue that it does not create brand monopolies and reduce
opportunities for new companies and/or brands to enter the market. The opportunity to advertise
gives companies the incentive to introduce new brands and improve existing ones. Advertising is
viewed as playing a critical role in informing consumers about new products and making it possible
for new companies to enter the market. Thus, it helps expand consumer choice rather than limiting it.
Arguments that advertising increases the costs of products and services include the fact that the large
sums of money spent on advertising constitute a business expense that must be covered and thus is
passed on to consumers in the form of higher prices. Advertising can also result in higher prices by
increasing product differentiation and adding to the perceived value of the product in the mind of the
consumer. Brands that have achieved high levels of differentiation or perceived value can command a
premium price. Proponents of advertising argue that it can actually result in lower costs of products
and services by helping firms achieve economies of scale in production, distribution and marketing by
stimulating demand among mass markets. Advertising can also lead to lower prices by making a
market more competitive, which usually leads to greater price competition. Studies of several
industries have shown that advertising results in lower consumer prices.
8.
Discuss the two major perspectives of the economic impact of advertising: “advertising equals market
power” and “advertising equals information.”
The Advertising Equals Market Power perspective reflects traditional economic thinking and views
advertising as a way of changing consumers’ tastes, lowering their sensitivity to price, and building
brand loyalty among buyers of advertised brands. This results in higher profits and market power for
large advertisers, reduces competition in the market, and leads to higher prices and fewer choice
alternatives for consumers. High prices and excessive profits give advertisers even more incentive to
advertise their products and output is restricted compared with conditions of perfect competition.
Proponents of this model are generally negative in their perspective regarding the economic impact of
advertising.
The Advertising Equals Information perspective views advertising as providing consumers with
useful information, increasing their price sensitivity which moves them toward lower-priced products,
and increasing competition in the market. Advertising is viewed as a means of communicating with
consumers and telling them about a product and its major features and benefits. More informed and
knowledgeable consumers results in pressure on companies to provide high quality products at lower
prices, and efficient firms remain in the market, whereas inefficient firms leave as new entrants
appear. Proponents of this model assume that the economic effects of advertising are favorable and
view it as contributing to more efficient and competitive markets.
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Additional Discussion Questions (not in text)
9. Should networks run commercials from the HIV prevention campaign developed by the Centers for
Disease Control and Prevention that promote the use of latex condoms or are they inappropriate for
TV? Defend your position.
The Centers for Disease Control and Prevention HIV prevention campaign is targeted at sexually
active young people and urges them to use latex condoms to prevent the transmission of the HIV
(AIDS) virus. This campaign has prompted strong protest from conservative and religious groups
who argue that the government should stress abstinence in preventing the spread of AIDS among
young people rather than promoting the use of condoms. They also strongly object to the running of
these ads on television since it is an intrusive medium and the ads may be seen before parents would
have time to change the channel. Proponents of the campaign argue that the spread of HIV among
young people will soon become an epidemic and young people must become aware of the importance
of protecting themselves by using condoms. Many of the commercials from the CDC’s HIV
prevention campaign are on the video that accompanies the text. Instructors should consider showing
these ads and having a class discussion on the topic. Since students are in the audience being targeted
by the campaign, it will be interesting to hear their reactions to the ads and their opinions as to
whether they are appropriate for television.
10. Find examples of three ads that you find irritating, offensive, or in bad taste. Discuss the basis of your
displeasure with these ads.
This assignment should not be too difficult as nearly everyone is probably irritated or offended by
advertising in some way. The source of irritation may be in the fact that the product is even advertised
or it may be based on the type of appeal or manner of presentation. Students should asked to provide
specific explanations for the basis of their displeasure with the ads they choose.
11. A common criticism of advertising is that it stereotypes women. Discuss how advertising might
stereotype men as well. Find an example of an ad that does this.
Advertising has received a tremendous amount of criticism for stereotyping women. Critics argue that
advertising generally depicts women as homemakers or mothers and has failed to acknowledge the
changing role of women in society. They also note that many ads portray women as decorative objects
or sexually provocative figures. While advertising is often criticized for its depiction of women,
critics argue that men are often portrayed negatively as well. Some ads poke fun at men’s
shortcomings while others use reverse sexism. Critics argue that men are often portrayed as
insensitive, as chauvinists, as sexists and as narrow-minded. Several companies have been criticized
for using ads that take slaps at men. For example a print ad for the clothing accessory Bodyslimmers
used a headline that read “While you don’t necessarily dress for men, it doesn’t hurt, on occasion, to
see one drool like the pathetic dog that he is.” Another example is a print ad for Liz Claiborne shoes
that used the tagline, “Aren’t there enough heels in you life?” The American Floral Marketing
Council was also criticized for using a negative image to portray men in its point-of-purchase ad
campaign. A poster from the campaign featured a floral arrangement in front of some rocks, resting
on nuts and bolts, with the tagline, “Romancing a stone? Send him flowers.” Students should be asked
to find other examples of ads that might be portraying men in a negative manner.
12. Many advertisers complain that the regulatory bodies and TV networks scrutinize commercials more
closely than the shows. Do you think that commercials should be held to higher standards than
programs? Why or why not?
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Advertisers often complain about the double standard that exists for commercials versus TV
programs, noting that even the most suggestive commercials are bland compared with the sex and
violence that appears in many television programs. They argue that the regulatory bodies and
networks should be more willing to accept commercials that use techniques such as partial nudity or
suggestiveness, given what appears in the programs. The networks argue that they have to scrutinize
commercials more carefully because advertising encourages people to imitate behaviors, whereas
programs are merely meant to entertain. Network executives also note the complaints of parents who
are concerned about their children seeing certain ads, since they cannot always be there to change the
channel or turn off the set when a suggestive or provocative ad comes on TV.
IMC Exercise
Find several ads that you feel are examples of negative social consequences of advertising discussed
in the text such as the following:

Ads that are offensive or in poor taste because of the product or service they advertise, the type of
appeal they or the manner of presentation used.

Ads that may have an adverse effect on consumer values by encouraging materialism.

Ads that encourage consumers to purchase a product that they really do not need.

Ads that stereotype women, men, an ethnic groups such as Chinese, South Asians and Blacks or
some other group such as the elderly.
Be prepared to explain why you feel these ads are examples of negative advertising. How do you
think the advertisers might justify the use of the ads you have chosen?
IMC Comprehensive Project
As a final part of their IMC Comprehensive project, students should be asked to evaluate their
advertising and promotional campaigns from a social and ethical perspective. The specific assignment
for this chapter is as follows:
IMC Project Assignment for Chapter 18
By now you should have developed a completed integrated marketing communications plan for the
product or service you chose to promote. The final part of your project requires that you evaluate your
IMC plan from a social and ethical perspective. Do you feel you can defend your advertising and
promotional plan from a social and ethical perspective. Are there any potential negative social
consequences of your advertising and promotional plan? Could any particular group find your
advertising offensive or in poor taste?
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