2Chapter OverviewExplains the principles of free-market economics, the functions and effects of advertising, advertising as an economic tool, and the impact of advertising.
3Chapter ObjectivesExplain the role of competition in free-market economicsDiscuss the functions advertising performs in a free marketUnderstand branding and its benefitsIdentify milestones in advertising historyDiscuss how the role of advertising has changedExplore advertising’s impacts on society
4Coke Polar Bear Commercial Coke Polar Bear Football Commercial Coke Border Commercial Coke India Commercial
5Q. 1. What are four principles of Free-Market Economics?
6Assumptions of Free Market Economics Self - InterestComplete InformationMany Buyers & SellersAbsence of Externalities (Tata Nano)
7Q. 2. What are the various functions and effects of advertising in a free economy?
8Functions & Effects of Advertising Identify and differentiate products (branding)Communicate product features and availabilityInduce customers to try products and suggest reuseStimulate product distributionIncrease product useBuild value, brand preference, loyaltyLower overall cost of sales
9Personal Selling vs. Advertising Face-to-Face Sales Call = $170.00To reach 15 million people = $2.55 Billion30-second TV spot = $500,000.00Cost of advertising to 15 million people = $30.00
10Benefits of Strong Brands Premium pricingPrice war protectionIncreases new product successLeverage for negotiatingAttractive to partnersAid in dealing with crisisRecruit top talentGarner customer loyalty
12Evolution of Advertising PreindustrialIndustrializingIndustrialPostindustrialpre-18001980-present
13Preindustrial Age of Advertising During this era, few could readThen. . .Chinese invented paperGutenberg invented the printing press
14Industrializing Age of Advertising Producers needed mass consumption to match mass productionFor the first time, it cost less to buy a product than to make it yourselfTransportation breakthroughs facilitated distributionIncreased need for mass marketing techniques
15Industrial Age of Advertising Fresh markets for new, inexpensive brands of luxury and convenience goodsConsumer packaged goodsCatalogs mailed to rural areasRadio provides new mediumAdvertising becomes a profession
16Golden Age of Advertising The Product Positioning Era Post WWIIProduct differentiationAge of TelevisionMarket segmentationPositioning
17Postindustrial Age of Advertising Consumers became aware of environmental sensitivity
22Global/Interactive Age Advertising becomes a world-wide enterprise
23Global Interactive Age TV Remote ControlSatellite and CableTiVoPersonal computersSmart phonesThe Web—iTunes, Hulu
24Q.4. What are the effects of ethics on advertising?
25Advertising as a Social Force Improves standard of livingRaises awareness of product availabilityImbues products with personalityEnables us to communicate about ourselves by the products we buy
26Advertising Ethics and Effects Ethical advertising can . . .Foster free press and nonprofitsFoster understanding of social issues
27Advertising Ethics and Effects On the other hand, advertising can be dishonest and unethicalPufferyAdvertising to childrenAdvertising legal but unhealthful productsEncourage conformityGlorify Conspicuous consumption
28Effects of Unethical Advertising Results in laws, regulations, and agencies Pure Food and Drug Act Federal Trade Commission Act Better Business Bureau Association of National Advertisers American Advertising Federation
29Advertising Ethics and Effects Public service ads can shape attitudes