&
Advertising Society
Economics
 The effects of advertising on our
economy
 Ethics
 The effects of advertising on our society
 Regulation
 Our attempts to manage those effects
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., kids).
3) Acquisitiveness
 What is the overall effect?
 Does it make us more materialistic?
5 Controversial Issues:
1) Puffery
"Nothing beats a Bud”
2) Decency
Sexual innuendo, violence
3) Stereotyping
Portrayals of housewives,
seniors, racial groups
4) Children
Violence, dangerous acts,
unhealthy habits
5) Controversy
Condoms, alcohol, fashion
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.)
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
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?