Document

Report
Chapter 3
The Big Picture: Economic and
Regulatory Aspects
William F. Arens
McGraw-Hill/Irwin
Michael F. Weigold
Christian Arens
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Overview
Identifies and explains economic, social, ethical,
and legal issues advertisers must consider
3-2
Chapter Objectives
Classify two types of social
criticisms of advertising
Use economic model to
discuss advertising effects
on society
Explain social
responsibility and ethics
Understand how
governments regulate
advertising
Discuss regulatory issues
affecting advertising
Describe how federal
agencies protect
consumers, competitors
Define regulatory roles of
state/local government
Discuss how other agencies
fight fraudulent and
deceptive ads
3-3
Advertising Controversies
Both economic and social concerns
Does advertising . . .
Affect product value?
Influence choices?
Cause higher or lower
prices?
Encourage materialism?
Make us buy things we
don’t need?
Promote or discourage
competition?
Affect us subliminally?
Debase language?
Affect demand?
Affect art and culture?
3-4
Free Market Economic Principles
Self-interest
Complete information
Many buyers and sellers
Absence of externalities
3-5
Q. 1. What is the impact of economics
on advertising?
Effect on Product Value
Advertising gives products
added value
3-7
Economic Impact: Billiards Model
3-8
Economic Impact: Affected Areas
Prices
Competition
Consumer pays-ads
small % of cost
Can reduce businesses
in industry
Mass production lowers
unit cost
Inhibit new
competitors
Gov’t price control
Regional and local
competition can work
Ads can support higher
or lower prices
3-9
Economic Impact: Affected Areas
Consumer
Demand
Consumer
Choice
Stimulates primary
demand
Encourages unique
products, services
Influences
selective demand
New, better brands
dominate
Influences
conquest sales
Wider choices for
consumers
3-10
Economic Impact: Affected Areas
Business Cycles
Advertising
contributes to the
increase
Advertising acts as a
stabilizing force
3-11
Q. 2. What are the two aspects of the
‘abundance principle?’
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)
3-13
Advertising Stimulations
Advertising
stimulates
Competition
(many buyers
Innovation
and sellers)
and new
products
Better
education
consumers
Healthy
economy
3-14
Q. 3. What are the aspects of the social
impact of advertising?
Social Impact: Criticisms
Short-term Manipulative Arguments
Long Manipulative Arguments
3-16
Q. 4. What are the components of the
short-term manipulative arguments?
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
3-18
An Example of Puffery
Claiming a
Yamaha
outboard
actually
leave a trail
in stormlashed
waters is
legal
because it is
unbelievable
3-19
An Example of Puffery
Claiming
Tabasco hot
sauce
causes corn
kernels to
pop is legal
because it is
unbelievable
3-20
Q. 5. What are the components of the
long manipulative arguments?
Social Impact Criticisms
Long-term Macro Arguments
Effects on Value System
Promotes
materialism
Manipulation
Incomplete
information
External societal
costs
3-22
Proliferation of Advertising
 Too much
 Clutters the different mediums
 Nuisance for customers
 Lower effectiveness for advertisers
 North American problem
3-23
Stereotyping
Stereotyping affects:
Minorities
Women
Immigrants
Disabled
Elderly
Others
Avoiding stereotypes =
embracing cultural diversity
3-24
Insensitivity
Whether or not an ad is labeled
insensitive depends on
Subjectivity
Geography
3-25
Social Impact in Perspective
Negative
 Incomplete
information
 Creates unwanted
externalities (e.g.
interferes with free
press)
 Biased
Positive
 Contributes to growth
and prosperity
 Rich information
source
 Offers information not
found in other sources
3-26
Social Responsibility and Ethics
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
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
An advertiser can act unethically or
irresponsibly… without breaking any laws!
3-29
Social Responsibility and Ethics
Public service
announcement
from the Ad
Council about
Multiple Sclerosis
3-30
Q. 6. Define Ethical Advertising.
Ethical Advertising
• Doing what the advertiser and the
advertiser’s peers believe is morally right in
a given situation.
3-32
Q. 7. Define Social Responsibility.
Ethical Advertising
• Doing what society views as best for the
welfare of people in general or for a specific
community of people.
3-34
Social Responsibility and Ethics
Ethical =
morally right
Promote
well-being
Draw
crowds to
events
Socially Responsible
= society views as best
Responsible
advertising
can...
Promote
harmony,
stability
Influence
elections
3-35
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
3-36
Q. 8. What are the levels of ethical
responsibility?
Levels of Ethical Responsibility
3-38
Q. 9. How does the government
regulate advertising?
How Government Regulates
National
Legislative, executive,
judiciary
State
Governor, attorney
general, various
departments
Municipal
Mayor, city manager,
police chief, courts,
city attorney
3-40
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
3-41
Current U.S. Regulatory Issues
Supreme Court: “speech” or
“commercial speech”
Tobacco Controversy
Advertising to Children
Consumer Privacy
3-42
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?
3-43
Q. 10. What are the various federal
advertising regulatory agencies?
Federal Regulation: Agencies
FTC
Deceptive,
unfair,
comparative
ads
FDA
Nutritional
Labeling &
Education
Act (NLEA)
FCC
Broadcast
media
licensing
Patent &
Trademark
Office
Intellectual
property
Library of
Congress
Copyrights
“works of
authorship”
3-45
Federal Regulation: Trademarks
Coca-Cola’s trademark look is retained through use of
similar letterforms and style, even with different alphabets
3-46
State & Local Regulation
Printer’s Ink guidelines:
untrue, deceptive,
misleading
“Little FTC” consumer
protection acts
National marketers
comply with
states’ laws
Local government
regulation:
city and county
consumer protection
agencies
3-47
Q. 11. What are the various
nongovernmental advertising
regulatory agencies?
Nongovernment Regulation
 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
 Self-regulation by advertisers
3-49
Self-Regulation: Agencies & Associations
Advertising
Agencies
Research and verify claims and
comparative data before use
Liable for misleading/fraudulent claims
May use in-house legal counsel
Industry-Wide
Associations
American Association of
Advertising Agencies (AAAA)
American Advertising Federation (AAF)
Assoc. of National Advertisers (ANA)
3-50
Self-Regulation: AAF Principles
3-51

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