chapter

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinContemporary Advertising, 11e

Economic, Social, and Regulatory Aspects

of Advertising

Identifies and explains economic,social, ethical, and legal issues

advertisers must consider

Chapter

3

3-3

Chapter 3 Objectives

Classify two main types of social criticisms

Employ an economic model to discuss effects

Explain social responsibility and ethics

Understand how governments regulate

here and abroad

Discuss court rulings that affect freedom of speech

Describe how federal agencies regulate

Define the regulatory roles of state and local

governments

Discuss self-regulation

3-4

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 . . .

3-5Economic Impact:Principles

Self-interestComplete

information

Absence ofexternalities

Many buyers& sellers

3-6Economic Impact:Global

Bleustein-Blanchet:

Advertising expenditure is directly proportional to standard of living

Insert ex. 3-1, p. 58

Per capita ad spending

Position = 2.9” horiz., 1.5 vertical

Size = 4.6” TALL

Resolution: 300 dpi

3-7Economic Impact:Billiards Model

Insert ex. 3-2, p. 59, Advertising billiards

Position = centered horiz., 1.5” vertical

Size = 4.6” TALL

Resolution: 300 dpi

3-8Economic Impact:Four Affected Areas

ProductValue

-Communicates brand image

-Educates customers

-Associates w/ desirable image

3-9Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

-Communicates brand image

-Educates customers

-Associates w/ desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

3-10Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

Consumer Demand

-Communicates brand image

-Educates customers

-Associates w/ desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

Primary:

-Product Category

Secondary:

-Particular Brand

3-11Economic Impact:Four Affected Areas

ProductValue

Prices & Competition

Consumer Demand

Consumer Choice

-Communicates brand image

-Educates customers

-Associates w/ desirable image

Increase:

-Branding

-Ad costs

Decrease:

-Competition

-Efficiency

Primary:

-Product Category

Secondary:

-Particular Brand

Product differentiation

3-12Economic Impact:Abundance Principle

In 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

3-13Social 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

3-14

Public service announcement from Abbott Mead Vickers BDDO

Insert photo 3.9, p.66

“Think! Slow down” PSA

Position = 2.7” horiz., 1.5” vertical

Size = 4.6” TALL

Resolution = 300 dpi

Social Responsibility and Ethics

3-15

Social Responsibility and Ethics

Promotewell-being

Promoteharmony &

stability

Influenceelections

Drawcrowds to

events

Responsibleadvertising

can . . .

Ethical:morally right

Socially Responsible:what society views as best

3-16

Public service announcement from the Brain Injury Association of America

Insert photo 3.13, p. 71

Towel snowboarding ad

Position = 2.9” horizontal, 1.5” vertical

Size = 5.7” WIDE

Resolution = 300 dpi

Social Responsibility and Ethics

3-17

Ethics of Advertising

Insert ex. 3.3, p. 73

Levels of Ethical Responsibility

Position = 0.4” horizontal, 1.5 vertical

Size = 8.2” WIDE

Resolution = 300 dpi

3-18

How Government Regulates

State:governor,

attorney general,

departments

Municipal:mayor,

city manager,

police chief

National:Legislative, Executive,

Judiciary

3-19

International Regulation

Ad from Air Tahiti Nui

Insert photo 3.14, p. 77

Air Tahiti line drawing ad

Position = 2.9“ horizontal, 1.5“ vertical

Size = 5.7” WIDE

Resolution = 300 dpi

3-20Current U.S.Regulatory Issues

Tobacco Controversy

Consumer Privacy

Supreme Court: “speech” or “commercial speech”

Advertising to Children

3-21Federal 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

3-22Federal Regulation:FDA Disclosure

This ad for Revolution, a topical Parasiticide for Dogs and Cats, has a long disclosure

Insert photo 3.19a

Relpax woman

Position = 2.8” horiz., 1.5” vertical:

Size = 2.75 WIDE

Resolution = 300 dpi

Insert photo 3.19b

Relpax disclosure

Position: 5.9” horiz., 1.5” vertical

Size = 2.75 WIDE

Res = 300 dpi

3-23State & LocalRegulation

“Little FTC” consumer protection acts

Local govt. regulation:city & county consumer

protection agencies

National marketers comply with states’

laws

3-24NongovernmentRegulation

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

3-25Self-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)

3-26Self-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