& Advertising Society Today, we can discuss and debate the material in Chapter 3. Economics The effect of advertising on our economy Ethics The effect of advertising on our society Regulation Our attempts to manage those effects The American Economy Three Unique Influences: “Caveat Emptor” Commerce is a two-way street Tolerance Philadelphia Quakers Immigration of people and ideas The Marketplace of Ideas Competition is OK This includes the media Power or Information? Market Power Market Information 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 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 latté from Starbucks? How does advertising affect the way that you spend your money? Some Economic Questions: Can ads make people buy things they don’t 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 give consumers more choices Ads destroy democracy/media Ads = freedom of speech Advertising warps social values 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., children) 3) Acquisitiveness What is the overall effect? Does it make us more materialistic? No single ad, but ads overall. 5 Controversial Issues: 1) Puffery "Nothing beats a Bud” 2) Decency Sexual innuendo, violence 3) Stereotyping Housewives, women, seniors, racial groups 4) Children Violence, dangerous acts, unhealthy habits, overall materialism 5) Controversial Products Condoms, alcohol, fashion consumer credit An Ethical Thought: “All of us who professionally use the mass media are shapers of society. We can brutalize it. Or we can help it onto a lift higher level.” -Bill Bernbach Controversy as Opportunity Puffery vs. Irony Stereotyping as Context Social Tension gets Attention Anti-Tobacco Marketing The Story Behind “Truth” Puffery vs. Irony HULU - “Alec Baldwin” QuickTime™ and a H.264 decompressor are needed to see this picture. Stereotyping as Context Dove “Real Beauty” QuickTime™ and a H.264 decompressor are needed to see this picture. Social Tension Gets Attention Nike “If You Let Me Play” QuickTime™ and a Sorenson Video 3 decompressor are needed to see this picture. The Story Behind “Truth” The Tobacco Industry’s “Don’t Smoke” Ad Campaign was… “Don’t smoke ‘till you’re an adult.” What’s a big reason teens smoke? Right. Pretty clever, hm? Legal agreement said “Ads can’t vilify the tobacco industry.” The tobacco industry knew this could be effective strategy. CP+B got the account - and… The Story Behind “Truth” Truth “Bodybags” QuickTime™ and a Sorenson Video 3 decompressor are needed to see this picture. Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: Ads for Discussion: 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.) Regulatory Power From Low to High: 5. Private Policy Companies regulating their own behavior 4. Governmental Regulation States, FTC, Legislation, Supreme Court 3. Media/Self-Regulatory Forces Media Forces, NAB, Industry Groups 2. Organized Market Forces Boycotts, bad publicity, media pressure 1. Natural Market Forces If no good, consumers won’t buy it again 5 FTC Concerns: 1) Deception Must lead to "material injury” 2) Comparisons Must substantiate with statistically significant data 3) Endorsements Must be qualified, must use product 4) Demonstrations Must be accurately depicted 5) “Bait & Switch” Product must be available 4 Possible Remedies for Deceptive Ads: 1) Consent Decree FTC asks advertiser to stop 2) Cease & Desist FTC gets court order to force advertiser to stop 3) Corrective Ads FTC mandates new ads to correct false perceptions 4) Consumer Redress FTC mandates reimbursement 6 Government Regulatory Groups: 1) FDA Packaging and labeling 2) FCC Broadcast advertising 3) Postal Service Magazines, direct mail 4) ATF Liquor labeling, advertising 5) Patent Office Trademarks 6) Library of Congress Copyrights 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 Questions on Regulation Does regulating advertising mitigate the negative effects it has on our economy? On our society? Did the TV ban on liquor have a positive effect? 1996 - “gentlemen’s agreement” ended Now, broadcast media looking for more revenue Does regulating advertising extend the benefits it has on our economy? On our society? Who should do the regulating? 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? One More Question… What do you think of this advertising? QuickTime™ and a Cinepak decompressor are needed to see this picture. Think.