Download Chap002 - Cal State LA

chapter
02
The Economic, Social
and Regulatory Aspects
of Advertising
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
2-3
Chapter 2 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
Describe how
government agencies
regulate advertising to
protect both consumers
and competitors
Discuss the activities of
nongovernment
organizations in fighting
fraudulent and deceptive
advertising
2-4
Controversies
Does advertising . . .
Economic
affect product value?
make us buy things
we don’t need?
Societal
influence consumer
choice?
make us more
materialistic?
affect us subliminally?
discourage
increase prices? competition? debase language?
affect art?
affect demand?
2-5
Economic Impact:
Principles
Self-interest
Complete
information
Many buyers
& sellers
Absence of
externalities
2-6
Economic Impact:
Per Capita Ad Spending
2-7
Economic Impact:
Billiards Model
2-8
Economic Impact:
Four Affected Areas
Product
Value
-Communicates
brand image
-Educates
customers
-Associates w/
desirable image
2-9
Economic Impact:
Four Affected Areas
Product
Value
Prices &
Competition
-Communicates
brand image
Increase:
-Educates
customers
-Ad costs
-Associates with
desirable image
-Branding
Decrease:
-Competition
-Efficiency
2-10
Economic Impact:
Four Affected Areas
Product
Value
Prices &
Competition
Consumer
Demand
-Communicates
brand image
Increase:
Primary:
-Branding
-Educates
customers
-Ad costs
-Product
Category
Decrease:
Secondary:
-Competition
-Particular
Brand
-Associates with
desirable image
-Efficiency
2-11
Economic Impact:
Four Affected Areas
Product
Value
Prices &
Competition
Consumer
Demand
-Communicates
brand image
Increase:
Primary:
-Branding
-Educates
customers
-Ad costs
-Product
Category
Decrease:
Secondary:
-Competition
-Particular
Brand
-Associates with
desirable image
-Efficiency
Consumer
Choice
Product
differentiation
2-12
Economic Impact:
Abundance Principle
In an economy that produces more goods &
services than can be consumed, advertising:
Allows moreeffective
competition
Stimulates
competition
Self-interest
Many buyers
& sellers
Complete
information
Keeps
consumers
informed
Absence of
externalities
Selfregulates to
keep market
free & open
2-13
Social Impact:
Two Types of Criticism
Short-term manipulative arguments
Deception:
puffery, nonproduct
facts, bias, inaccuracy
Subliminal
myth
Long-term macro arguments
Proliferation
Stereotyping
Social impact
Offensive
Impacts values
2-14
The Proliferation of Advertising
Average
The more ads More media
person views
a consumer
choices
500 to 1000
views, the
equals more
commercial
less effective exposure to
messages
each one is
ads
per day
FCC has
considered
commercial
time limits on
TV
2-15
Offensive Advertising
Supreme Court: “speech” or
“commercial speech”
Tobacco Controversy
Consumer Privacy
Advertising to Children
2-16
Social Responsibility and Ethics
Public service
announcement
from The U.S.
Department of
Health & Human
Services
2-17
Social Responsibility and Ethics
Ethical:
morally right
Socially Responsible:
what society views as best
Responsible
advertising
can . . .
Promote
well-being
Draw
crowds to
events
Promote
harmony &
stability
Influence
elections
2-18
Social Responsibility and Ethics
Leclerc
addresses the
issue of pollution
2-19
Current U.S.
Regulatory Issues
Supreme Court: “speech” or
“commercial speech”
Tobacco Controversy
Consumer Privacy
Advertising to Children
2-20
Federal Regulation:
Agencies
FTC
FDA
FCC
Patent &
Trademark
Office
Deceptive,
unfair, &
comparative
ads
Nutritional
Labeling &
Education
Act (NLEA)
Broadcast
media
licensing
Intellectual
property
Library of
Congress
Copyrights
“works of
authorship”
2-21
Federal Regulation:
FDA Disclosure
This ad for
Revolution, a
topical
parasiticide for
dogs and cats,
has a long
disclosure
2-22
State & Local
Regulation
Different states have
different regulations
governing advertising
National marketers
comply with states’ laws
Local govt. regulation:
city & county consumer
protection agencies
2-23
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
2-24
Self-Regulation:
Agencies & Associations
Research and verify claims &
comparative data before use
Agency
Responsibilities
Liable for misleading or fraudulent claims
Some maintain in-house legal counsel
American Association of
Advertising Agencies (AAAA)
Industry-Wide
Associations
American Advertising Federation (AAF)
Association of National Advertisers (ANA)
2-25
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
2-26
Government Restraints on
International Advertisers

Foreign governments often regulate advertising
more strictly than in the United States
Some governments ban specific products
 Many countries prohibit puffery
 Many European countries ban coupons,
premiums and free tie-ins
 Across Europe, paid product placements
in television programs are typically prohibited
