1. The Economic, Social and Regulatory Aspects of Advertising
Lecture 3

2. What makes Advertising a “controversial concept”
Views of offensiveness vary from country to country.
For example, clothing retailer Bennetton uses the same ads all over the world and sometimes the ads impinge on customer beliefs of certain countries.
“A Kiss from God”—banned in Italy but won the Eurobest Award for Advertising in England.
What may have caused this?
p. 311

3. The Economic Impact of Advertising
“The economic effect of advertising is like the break shot in billiards or pool”.
The moment a company begins to advertise, it sets off a chain reaction of economic events. The extent of a chain reaction, although hard to predict, is related to the force of the shot and economic environment.
p. 312 Overall demand for a product or service at any point of time is fixed. The number of existing and potential customers provides an organisation with a specific size of business opportunity. A broader definition of market should be used to enable a business manager to consider all opportunities.

4. The Economic Impact of Advertising
Types of Economic Effects:
Effect on the Value of the Products
Effect on Prices
Effect on Competition
Effect on Consumer Demand
Effect on Consumer Choice
Effect on Business Cycle

5. The Economic Impact of Advertising
Effect on Value: Perceived Value issue. Advertising adds value to a brand by educating cusomters about new uses for a product. For example, Kleenex was originally advertised as a makeup remover but later as a disposable handkerchief (tissue).
Effect on Prices: What happens to prices if the advertising cost is too high?
Three Major Steps in Target Marketing
Today’s companies are moving away from mass marketing and product-variety marketing and towards target marketing. Target marketing can help sellers to find their marketing opportunities more efficiently. As a result of the increasing fragmentation of Australian mass markets into hundreds of micromarkets, each with different needs and lifestyles, target marketing is increasingly taking the form of Micromarketing—a form of target marketing in which companies tailor their marketing programs to the needs and wants of narrowly defined geographic, psychographic or behaviour benefit segments.
Three major steps in target marketing:
Market segmentation Dividing a market into direct groups of buyers who might require separate products or marketing mixes; the process of classifying customers into groups with different needs, characteristics or behaviour.
Market targeting Evaluating each market segment’s attractiveness and selecting one of more segments to enter.
Market positioning Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers; formulating competitive positioning for a product and creating a detailed marketing mix.

6. The Economic Impact of Advertising
Effect on Competition: It is true that intense competition does tend to reduce the number of businesses in an industry. However, some of the firms eliminated by competition may be those that served customers least effectively. E.g. Pizza Time and Pizza Lounge.
Effect on Consumer Demand and Choice: How dependant is this on persuasion employed through advertising? Give examples.
Effect on Business Cycle- this may take place during phases of business boom and bust. It may also occur during the 4 stages of a business life cycle: introduction, growth, maturity and post maturity.
Figure 10.1 Steps in Segmentation, Targeting, and Positioning, p.345
Figure 10.1 shows the three major steps in target marketing. The first is market segmentation, the second is market targeting, and the third is market positioning.

7. Social Impact of Advertising
Deception in Advertising
Puffery: refers to advertising tactics that cannot be labeled as true or false such as “best” “premier”. E.g., Tabasco Sauce

8. Social Impact of Advertising
The Use of Stereotyping in Advertising: This involves using racial elements in advertising. For example:
Intel launched a national campaign in 2007 that was almost unbelievable in its symbolism - but it was most definitely real. A white manager (master?) stands over six black athletes who bow in perfect symmetry before him. Though Intel claims 100% innocence, it’s baffling why the company’s advertising direction would include such powerful slave imagery.

9. Social Impact of Advertising
Offensiveness in Advertising: Tourism Campaign for Australia: “Where the bloody hell are you?”

10. Social Responsibility and Regulatory Aspects
Corporate Social Responsibility: states that it is the “continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families and the local community and society at large. (World Business Council for Sustainable Development 1999)