Social, Ethical, and Regulatory Aspects of Advertising and Promotion 4 1 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Social Aspects of Advertising Advertising Educates Consumers PRO Advertising informs CON Advertising is superficial and intrusive Advertising improves living standards PRO Ads lower the costs of products (How can this be?) CON Ads are wasteful and help only some Is there “information” in this ad? © Courtesy Apple Computers Inc.; Ad Agency TBWA Chiat Day,LA; Photographer: Matthew Welch, Model Emory Livers/LA Models 4

Critics of advertising feel that advertising is superficial because many ads carry little actual product information. Do you think advertising is superficial? Courtesy, Sketchers USA, Inc.

Social Aspects of Advertising Advertising Affects Happiness and Well-Being CON Ads create needs PRO Ads address a wide variety of basic human needs CON Ads promote materialism PRO Ads reflect society’s priorities 4

Critics feel advertising promotes materialism. Reprinted with permission from Hidesign

Social Aspects of Advertising Advertising: Demeaning and deceitful, or liberating and artful? CON Ads perpetuate stereotypes PRO Advertisers are more sensitive now CON Ads are often offensive PRO Ads are a source of liberation CON Ads deceive via subliminal stimulation PRO Advertising is art 4

Do you think this ad perpetuates stereotypes? © 1995 Lever Brothers Company "ALL" Laundry Detergent. Courtesy of Lever Brothers Company.

Do you think this ad perpetuates stereotypes Do you think this ad perpetuates stereotypes? Or is this advertising as art? ©Courtesy of Lachman Imports

Social Aspects of Advertising Advertising has a Powerful Effect on the Mass Media PRO Ads foster a diverse and affordable mass media that provides information and exposure on important issues. CON Advertising affects and controls programming. “Branded Entertainment” blurs entertainment and persuasion. And, controversial issues do not attract advertisers. 4

Ethical Aspects of Advertising Ethics are the moral standards against which behavior is judged. Key areas of debate regarding ethics and advertising are: Truth in advertising Advertising to children Advertising controversial products Remember “primary demand?” (Chapter 1) How has food become a “controversial product” in advertising? 4

Ethical Aspects of Advertising Truth in Advertising Deception is making false or misleading statements, but puffery (commercial exaggeration) is legal. Cannot legislate against emotional appeals 4

Ethical Aspects of Advertising Advertising to Children – Issues Advertising promotes superficiality and materialism in children Children are inexperienced and easy prey Persuasion to children creates child-parent conflicts But, what does the literature say about kid’s abilities to process persuasive information relative to the claims above? 4

Ethical Aspects of Advertising Advertising Controversial Products Critics question “targeting” minorities Aren’t there positive aspects of targeting? Tobacco, alcohol, gambling and lotteries are product categories of greatest concern How does the concept of “primary demand” provide insights here? What does the literature say about advertising’s impact on these product categories? Doesn’t the government advertise gambling through state lotteries? 4

Regulatory Aspects of Advertising Areas of advertising regulation: Deception and unfairness Representation or omission that can mislead Judged from perspective of consumer Misrepresentation must be “material” Competitive issues Vertical cooperative advertising Comparison advertising Monopoly power Advertising to children 4

Government Regulation Key Regulatory Agents Government Regulation Federal Trade Commission (FTC) Wide range of regulatory programs and remedies Federal Communications Commission (FCC) Food and Drug Administration (FDA) U.S. Postal Service Bureau of Alcohol, Tobacco, and Firearms 4

Government: FTC Programs and Remedies Key Regulatory Agents Government: FTC Programs and Remedies Advertising Substantiation Program Consent Order Cease and Desist Order Affirmative Disclosure Corrective Advertising Control of celebrity endorsements, testimonials, and now blogging 4

Government: State Regulation Key Regulatory Agents Government: State Regulation No extensive policing powers Most ads and promotions are “inter-state” not “intra-state” State Attorney Generals office is main office for regulation States rely mainly on federal agencies for regulation of advertising and promotion 4 17

Industry Self-Regulation Key Regulatory Agents Industry Self-Regulation National Advertising Review Board (NARB) State and Local Better Business Bureaus Ad Agencies and Associations Media Organizations 4

Internet Self-Regulation Key Regulatory Agents Internet Self-Regulation No industry-wide trade association has emerged to date, exceptions: Anti-spam COPPA Some international organizations Global Business Dialogue on Electronic Commerce (GBDe) is emerging as a governing body Little progress has been made to address consumers’ complaints on on privacy (e.g. Facebook) 4

Consumers as Regulatory agents Key Regulatory Agents Consumers as Regulatory agents Consumerism: Grass roots consumer movements Consumers Organizations Consumer Federation of America Consumers Union Consumer Alert Commercial Alert 4

Regulation of Other Promotional Tools Direct/Mobile Marketing and e-Commerce Privacy Behavioral targeting, GPS tracking Spam = 30 million messages/minute, 100 billion/day worldwide “Phishing” as insidious spam Contests/Sweepstakes Telemarketing Sales Promotion Premiums, Trade Allowances Product/Brand Placement Public Relations Copyright Infringement Defamation (slander and libel) 4

Check Your Understanding An established cereal manufacturer is being investigated by the FTC for claims that its oatmeal can repair damaged arteries and prevent heart disease. Its executives are aware that if the claims are found to be false, the firm may receive the FTC’s most severe penalty, which involves ordering corrective advertising. issuing a cease-and-desist order. ruling on advertising substantiation. dissolving the corporation. 4

Check Your Understanding Which of the following claims demonstrates puffery in advertising? "Only Crest Earns the Dental Seal of Approval Among All Major Brands!" "Ford Trucks Have Lower MPG than Chevy Trucks!" "Tide Beats Cheer in Sales 8th Year in a Row!" "World’s Best Cup of Coffee Served with a Smile Here!" 4