1. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 LESSON 1.5 Advertising and Consumer Decisions GOALS ► Describe different types of advertising. ► Explain how you can recognize deceptive advertising. Slide 1

2. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 KEY TERMS  advertising – a paid form of communication sent out by a business about its product or service.  puffery – innocent exaggeration in advertising. (Note: Puffery is legal, Deceptive advertising is not).  deceptive advertising – advertisements that contain factually incorrect statements Slide 2

3. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Why advertise?  To encourage consumers to buy their products so they can make a profit  Different ads try to influence consumers in different ways (make you aware of new products or features, to show you their product is better than a competitor, etc.) Slide 3

4. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Types of Advertising 1. Brand advertising – designed to cause you to remember a particular brand name. 2. Informative advertising – designed to influence you to buy a product by educating you about the product’s benefits. 3. Comparative advertising – designed to convince you to buy the advertised product instead of a targeted competing product. 4. Defensive advertising – designed as a counter-attack to respond to claims made by other companies. 5. Persuasive advertising – designed to appeal to your emotions to influence you to buy. Slide 4

5. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Puffery ► The following advertising claims use puffery: "Coke is it." "The best part of waking up is Folger’s in your cup." "Hoover makes the most powerful vacuum cleaner in America.“ “World’s best hamburger.” “Our service can’t be beat.” ► Consumers do not take puffery seriously Slide 5

6. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Weasel Words ► A "weasel word" is used in advertising to make a claim look legitimate to the casual listener or reader. ► a medication that claims to "help control acne" does not actually claim to stop or cure acne ► "Help" and "control" are weasels. ► Commonly used weasel words include: "helps", "acts", "works", "can be", "up to", "as much as", "refreshes", "comforts", "fights", "the feel of", "looks like", "tastes like", and "strengthened". Slide 6

7. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Puffery and Weasel Words are Legal ► The dictionary says “deception” refers to a form of trickery involving the selling of goods or services to consumers. ► But puffing and weasel words are generally not considered deceptive in the eyes of the law. ► It is assumed that most “reasonable consumers” know a seller will exaggerate a bit. Slide 7

8. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 What is Deceptive? ► Advertisements that contain factually wrong statements are clearly deceptive. ► Free offers are deceptive if you actually have to buy something else to receive it and the advertise doesn’t explain ► Ads claiming “better than ….” must be backed up by facts otherwise they are considered deceptive Slide 8

9. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Who are the regulators? ► The Federal Trade Commission (FTC) regulates unfair and deceptive practices on a case-by-case basis and occasionally with industry-wide regulations. ► Can require that advertisers prove their claims. If an advertiser says that “tests prove” or “physicians recommend,” they must be able to show test results or the statements from doctors. ► The agency also requires that this information be available to any consumer who asks for it. ► If ad is deceptive – FTC can order the ad to be stopped or corrected and may fine the company Slide 9

10. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 1 Papa Johns vs. Pizza Hut ► 1998 –ads stated Papa John's "won big time" in taste tests over Pizza Hut. Other ads in the campaign alleged Papa John's sauce and dough were better than Pizza Hut's because they were made with fresh tomatoes and filtered water. ► Pizza Hut filed a lawsuit against Papa Johns ► Court initially agreed with Pizza Hut and ordered Papa Johns to stop using the slogan “Better ingredients, Better pizza.” and awarded Pizza Hut $467,619 in damages ► Papa Johns appealed and the verdict was overturned. ► Court of Appeals said there was no evidence that customers relied on the "Better ingredients. Better pizza" slogan to base their pizza-buying decision Slide 10