chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights...

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Transcript of chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights...

Page 1: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.
Page 2: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

chapter02

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

The Economic, Social and Regulatory Aspects

of Advertising

Page 3: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Chapter 2 Objectives

Discuss the impact of advertising on the

economy

Debate the validity of the various social criticisms

of advertising

Describe how government agencies regulate advertising to

protect both consumers and competitors

Explain the difference between social

responsibility and ethics in advertising

Discuss the activities of nongovernment

organizations in fighting fraudulent and deceptive

advertising

Page 4: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Controversies

Economic Societal affect product value?

make us morematerialistic?

increase prices?discourage

competition?

affect demand?

make us buy thingswe don’t need?

debase language?

affect art?

affect us subliminally?

influence consumerchoice?

Does advertising . . .

Page 5: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Principles

Self-interestComplete

information

Absence ofexternalities

Many buyers& sellers

Page 6: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Per Capita Ad Spending

Page 7: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Billiards Model

Page 8: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Four Affected Areas

ProductValue

-Communicates brand image

-Educates customers

-Associates w/ desirable image

Page 9: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

-Communicates brand image

-Educates customers

-Associates with desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

Page 10: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

Consumer Demand

-Communicates brand image

-Educates customers

-Associates with desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

Primary:

-Product Category

Secondary:

-Particular Brand

Page 11: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

Consumer Demand

Consumer Choice

-Communicates brand image

-Educates customers

-Associates with desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

Primary:

-Product Category

Secondary:

-Particular Brand

Product differentiation

Page 12: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Economic Impact:Abundance PrincipleIn an economy that produces more goods & services than can be consumed, advertising:

Self-interestComplete

information

Absence ofexternalities

Many buyers& sellers

Allows more-effective

competition

Stimulates competition

Keeps consumers informed

Self-regulates to keep market free & open

Page 13: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Social Impact:Two Types of Criticism

Short-term manipulative arguments

Deception:puffery, nonproduct

facts, bias, inaccuracy

Proliferation Stereotyping Offensive

Social impact Impacts values

Long-term macro arguments

Subliminalmyth

Page 14: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Average person views 500 to 1000 commercial messages

per day

The more ads a consumer views, the

less effective each one is

More media choices

equals more exposure to

ads

FCC has considered commercial

time limits on TV

The Proliferation of Advertising

Page 15: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Offensive Advertising

Tobacco Controversy

Consumer Privacy

Supreme Court: “speech” or “commercial speech”

Advertising to Children

Page 16: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Public service announcement from The U.S. Department of Health & Human Services

Social Responsibility and Ethics

Page 17: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Social Responsibility and Ethics

Promotewell-being

Promoteharmony &

stability

Influenceelections

Drawcrowds to

events

Responsibleadvertising

can . . .

Ethical:morally right

Socially Responsible:what society views as best

Page 18: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Leclerc addresses the issue of pollution

Social Responsibility and Ethics

Page 19: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Current U.S.Regulatory Issues

Tobacco Controversy

Consumer Privacy

Supreme Court: “speech” or “commercial speech”

Advertising to Children

Page 20: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Federal Regulation:Agencies

Nutritional Labeling & Education

Act (NLEA)

Broadcast media

licensing

Deceptive, unfair, &

comparative ads

FCCFTC FDA

Intellectual property

Patent & Trademark

Office

Copyrights “works of

authorship”

Library of Congress

Page 21: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Federal Regulation:FDA Disclosure

This ad for Revolution, a topical parasiticide for dogs and cats, has a long disclosure

Page 22: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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State & LocalRegulation

Different states have different regulations

governing advertising

Local govt. regulation:city & county consumer

protection agencies

National marketers comply with states’

laws

Page 23: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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NongovernmentRegulation

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

Page 24: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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Self-Regulation:Agencies & Associations

Research and verify claims &comparative data before use

Liable for misleading or fraudulent claims

American Association ofAdvertising Agencies (AAAA)

Agency Responsibilities

Industry-WideAssociations

Some maintain in-house legal counsel

American Advertising Federation (AAF)

Association of National Advertisers (ANA)

Page 25: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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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

Page 26: chapter 02 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Economic, Social and Regulatory Aspects of Advertising.

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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


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