1. Consumer Behavior & Public Policy

2. Why the Concern? Advertising -- communication by an identified sponsor about its goods or services, meant to inform or persuade using a mass media vehicle  Inherently one-sided  Somewhat intrusive  Advocative Should advertising be used only to inform? Should advertising be used to persuade?

3. Why the Concern? Advertising decisions and executions are often made by an agency external to the firm (Ad agency)  Will the ad agency use the same ethical standards that the firm would use? FTC has decided that in some cases, the answer may be “NO” Moreover, FTC has decided that in order to maintain a fair and competitive playing field, certain ad rules must be followed So advertising is regulated  BUT HOW MUCH? HOW SHOULD IT BE DONE?

4. Why the Concern? Advertising continuum Information Persuasion Embellishment Deception Consumer is protected (by law) from deception. What about embellishment?

5. Regulation of Ads Deceptive practices are monitored and laws are enforced by the Federal Trade Commission (FTC) Protects consumers from fair and unethical practices Protects competition

6. Regulation of Ads How does the FTC determine whether ads are deceptive (CB has helped) Deceptive Ads have 3 components  Ads which have the capacity to deceive consumers (i.e., consumers form beliefs about the advertised brand which cannot be substantiated by the advertiser)

7. Regulation of Ads Components of deceptive advertising  Ads have the capacity to deceive in a material manner (i.e., unsubstantiated beliefs are important in terms of consumer’s buying behavior)

8. Regulation of Ads Deceptive advertising -- components of law  Ads have the capacity to deceive consumers acting reasonably (consumers are acting with care and credulousness)

9. Regulation of Ads Deceptive advertising -- punitive actions  Cease & desist orders  Corrective ads Do they work? -- Listerine case  Fine & retribution

10. Advertising & Children Issue 1  Can children distinguish ads from programs? Those aged 7 or less can not Should advertisers be allowed to target such kids?

11. Advertising & Children Issue 2  If children are exposed to ads, do they have the defenses to deal with them? Not those less than the age of 8 (although, this may be changing – media education programs exist in most schools) Defenses seem to emerge for kids aged 8 - 12 Should advertisers be allowed to target such kids? All kids?

12. Advertising & Children Issue 3  Do programs which feature toys as characters negatively affect kids?  Parents think so: Unfairly influence kids’ choices  Kids think products will be like those in the show Often lead children to act in an antisocial manner Leads kids to play less creatively

13. Advertising & Children Public Policy Actions  Stations must provide 3 hours of educational television per day  Stations must provide “commercial identifiers”  Restrictions on certain ads during “toy-based programs” No advertising for toys that are related to the program