Transcript Chapter 3
Chapter 3
The Big Picture: Economic and Regulatory Aspects
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Chapter Overview
Identifies and explains economic, social, ethical, and legal issues advertisers must consider
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Chapter Objectives Classify two types of social criticisms of advertising Explain social responsibility and ethics Discuss court rulings that affect freedom of speech Describe how federal agencies protect consumers, competitors Use economic model to discuss advertising effects on society Understand how governments regulate advertising Define regulatory roles of state/local government Discuss how other agencies fight fraudulent and deceptive ads
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Advertising Controversies Does advertising . . .
Affect product value?
Cause higher or lower prices?
Make us buy things we don’t need?
Affect us subliminally?
Affect demand?
Influence choices? Encourage materialism?
Promote or discourage competition?
Debase language?
Affect art and culture?
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Free Market Economic Principles Self interest Many buyers & sellers Complete information Absence of externalities
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Economic Impact: Global There is a positive relationship between advertising expenditures and personal wealth
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Economic Impact: Billiards Model
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Economic Impact:
Affected Areas
Product Value Prices & Competition
Implies quality Enhances image Educates consumers Ads paid for by consumer Promotes mass production Price drop or support
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Economic Impact:
Affected Areas
Consumer Demand Consumer Choice
Primary Product category Secondary Particular brand Encourages unique products, services New, better brands dominate Wider choices for consumers
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Abundance Principle
In an economy that produces more goods & services than can be consumed, advertising:
Keeps consumers informed about alternatives (
complete information
) Allows companies to compete more effectively (
self-interest
)
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Social Impact: Criticisms Short-term Manipulative Arguments Deception Unfair Practices Puffery False promises Incomplete descriptions False comparisons Bait-and-switch Visual distortions False demonstrations False testimonials Partial disclosure Small-print qualifications
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Social Impact: Criticisms Long-term Macro Arguments Stereotyping Offensive Proliferation Social impact
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An Example of Puffery Claiming a Yamaha outboard actually leave a trail in storm lashed waters is legal because it is unbelievable
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Social Responsibility and Ethics An advertiser can act unethically or irresponsibly… without breaking any laws!
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Social Responsibility and Ethics
Ethical =
morally right
Socially Responsible =
society views as best Promote well-being Draw crowds to events Responsible advertising can... Influence elections Promote harmony, stability
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Social Responsibility and Ethics Public service announcement from the Ad Council about Multiple Sclerosis
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Interrelated Components of Ethics Traditional actions of people in a society or community Philosophical rules society sets to justify past or future actions Attitudes, feelings, and beliefs of personal value system
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Levels of Ethical Responsibility
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How Government Regulates
National
Legislative, executive, judiciary
State
Governor, attorney general, various departments
Municipal
Mayor, city manager, police chief, courts, city attorney
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Pitfalls of International Regulation •Varies from country to country •Restrictions on what is
said
,
shown
,
done
•Bans on specific products •Time slot restrictions •Bans on coupons, premiums, tie-in offers •Prohibition of paid placements in shows •Arbitrary rulings •Pre-approval requirements
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Current U.S. Regulatory Issues Supreme Court: “speech” or “commercial speech” Tobacco Controversy Advertising to Children Consumer Privacy
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Speech: Central Hudson Test • Does the commercial speech at issue concern a lawful activity?
• Will the restriction of commercial speech serve the asserted government interest substantially?
• Does the regulation directly advance the government interest asserted?
• Is the restriction no more than necessary to further the interest asserted?
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Federal Regulation: Agencies FTC FDA FCC Patent & Trademark Office Library of Congress Deceptive, unfair, comparative ads Nutritional Labeling & Education Act (NLEA) Broadcast media licensing Intellectual property Copyrights “works of authorship”
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Federal Regulation: Trademarks Coca Cola’s trademark look is retained through use of similar letterforms and style, even with different alphabets
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State & Local Regulation Printer’s Ink guidelines: untrue, deceptive, misleading “Little FTC” consumer protection acts National marketers comply with states’ laws Local govt. regulation: city and county consumer protection agencies
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Nongovernment Regulation o Better Business Bureau (BBB) o National Advertising Review Council (NARC) o o National Advertising Division (NAD) National Advertising Review Board (NARB) o Regulation by the media o Regulation by consumer groups o Self-regulation
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Self-Regulation: Agencies & Associations Advertising Agencies Industry-Wide Associations Research and verify claims & comparative data before use Liable for misleading/fraudulent claims May use in-house legal counsel American Association of Advertising Agencies (AAAA) American Advertising Federation (AAF) Assoc. of National Advertisers (ANA)
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Self-Regulation: AAF Principles
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