Chap 22 Evaluating the Social Ethical and Economic Aspects of Advertising and Promotion...

8/6/2019 Chap 22 Evaluating the Social Ethical and Economic Aspects of Advertising and Promotion 1225871081804143 9

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Evaluating the Social, Ethical, and EconomicAspects of Advertising and PromotionEvaluating the Social, Ethical, and EconomicAspects of Advertising and Promotion

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McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.


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Advertising and Ethics Two Viewpoints

Adve r t i s i ng Adve r t i s i ng

Provides information

Encourages a standardof living improvement

Produces jobs

Promotes competition

Adve r t i s i ng Adve r t i s i ng

Creates needs and

faults More propaganda than

information

Promotes materialism

ProponentsProponents CriticsCritics


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Ethics in Advertising

Not all issues can be regulated

A marketing or promotion action may belegal but not considered ethical

Marketers must make decisions regardingthe appropriateness of their actions

Companies are scrutinized for their ethics

Ethics: Moral principles and valuesEthics: Moral principles and values

that govern the actions of andthat govern the actions of and

individual or groupindividual or group..


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Social and Ethical Criticisms of Advertising

Advertising as untruthful or deceptive

Advertising as offensive or in bad taste Advertising of personal products

Sexual appeals

Advertising and Children Social and Cultural Consequences

Making people buy things they dont need

Encouraging materialism Stereotyping

Advertisings influence on the media


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Social and Ethical Criticisms of Advertising

Advertising as untruthful or deceptive

General mistrust of ads

Deliberately untruthful or misleading vs. puffery

Problems often more at local level rather thannational

Advertising as offensive, in bad taste, orirritating

Advertising of personal products

Sexual appeals Suggestive, demeaning, raunchy

Shock advertising

M l f d B tt D th R


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Many people found Benettons Death Rowad campaign offensive


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Bijan used shock advertising to get attention

Source: Courtesy Bijan Designer for Men, Beverly Hills, California

American Advertising Federation


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American Advertising FederationAdvertising Principles

1. Truth

Advertising shall reveal the truth, and shall reveal significantfacts, the omission of which would mislead the public.

2. Substantiation

Advertising claims shall be substantiated by evidence inpossession of the advertiser and the advertising agency priorto making such claims.

3. Comparisons

Advertising shall refrain from making false, misleading, orunsubstantiated statements or claims about a competitor or

his products or service.4. Bait advertising

Advertising shall not offer products or services for saleunless such offer constitutes a bona fide effort to sell the

advertised products or services and is not a device to switchconsumers to other goods or services, usually higher priced.

American Advertising Federation


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American Advertising FederationAdvertising Principles

5. Guarantees and warranties

Advertising of guarantees and warranties shall be explicit, withsufficient information to apprise consumers of their principalterms and limitations or, when space or time restrictions

preclude such disclosures, the advertisement shall clearly revealwhere the full text of the guarantee or warranty can beexamined before purchase.

6. Price claims

Advertising shall avoid price claims that are false or misleading,or savings claims that do not offer provable savings.

7. Testimonials

Advertising containing testimonials shall be limited to those ofcompetent witnesses who are reflecting a real and honestopinion or experience.

8. Taste and decency

Advertising shall be free of statements, illustrations, orimplications that are offensive to good taste or public decency.


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Advertising and Children

Ch i ld r en ' s TV W at ch in g Behav io r Ch i ld r en ' s TV W at ch in g Behav io r

Children between ages 2-11 watch onaverage 21.5 hours of TV per week and maysee 22,000 commercials per year

Television is an important source ofinformation for children about products


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Advertising and Children

Som e st ud ies have show nSom e st ud ies have show nChildren lack experience and knowledge to evaluateadvertising critically

They can not differentiate between commercials andprogram (fantasy vs. reality)Children are vulnerable to advertising

w h i l e o t h e r st u d i es ar g u e w h i le o t h e r st u d i es ar g u e

Children must learn through the consumer

socialization process; need to acquire skills to functionin the marketplaceAcquired skills have helped teens evaluate ads and

recognize persuasion techniques

Social and Cultural Consequences of


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Social and Cultural Consequences ofAdvertising

Does advertisingDoes advertising encou r age consum pt i on encou r age consum pt i on ,, oror

merelymerely re f lec t re f lec t our societys need for it?our societys need for it?

Advertising and its related arts thus help develop the kind of manthe goals of the industrial system requireone that reliably spendshis income and works reliably because he is always in need ofmore

John Kenneth Galbraith

To blame advertising now for those most basic tendencies in

American history is to miss the pointThe people who have createdmodern advertising are not hidden persuaders pushing ourbuttonsthey are just producing an especially visible manifestation,good and bad, of the American way of life.

Stephen FoxThe Mirror Makers: A History of American Advertising and Its Creators

Social and Cultural Consequences of


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Social and Cultural Consequences ofAdvertising

Advertising makes people buy thingsAdvertising makes people buy things

they dont needthey dont need

Advertising may encourage materialismAdvertising may encourage materialism

Information versus persuasion dichotomy

Does advertising really have that muchpower?

Freedom of choice


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Advertising and Stereotyping

Portrayal of womenPortrayal of women

Gender stereotyping Portrayal of women as sex objects

Role portrayal of women to reflectchanging role in society

Blacks and Hispanics

GaysElderly

d d h d


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Advertising and the Media

Arguments supportingsupporting advertiser

control of the media

Arguments againstagainst advertiser

control of the media

Advertising pays the bills therefore they exertinfluence on the character,content, and coverage ofcertain issues.

To retain public confidence the media mustreport the news fairly and accurately. Advertisers need the media more than the media

needs any particular advertiser.

E i Eff t f Ad ti i


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Economic Effects of Advertising

Effects on consum er cho i ce consum er cho i ce Differentiation

Brand loyalty

Effects on c o m p e t i t i o n c o m p e t i t i o n Barriers to entry

Economies of scale

Effects on p r odu ct cost s and p r odu ct cost s and p r i ces p r i ces Advertising as an expense

Increased differentiation


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AdvertisingAdvertising

What is Advertisings Role in the Economy?

Advertising affects consumerpreferences and tastes,changes product attributes,and differentiates the product

from competitive offerings.

Advertising informsconsumers about productattributes but does notchange the way they value

those attributes.

Advertising = Market Power Advertising = Information

h d l h


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Consumer Buying BehaviorConsumer Buying Behavior


Consumers become brandloyal and less price sensitiveand perceive fewersubstitutes for advertisedbrands.

Consumers become moreprice sensitive and buy bestvalue. Only therelationship between priceand quality affects elasticityfor a given product.




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Potential entrants mustovercome established brandloyalty and spend relativelymore on advertising.

Advertising makes entrypossible for new brandsbecause it cancommunicate product

attributes to consumers.


Barriers to entryBarriers to entry

Advertising helps new companies such as


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d e s g e ps e co pa es suc asDaewoo enter the market

Source: Courtesy Daewoo Motor America, Inc.

Wh t i Ad ti i R l i th E ?


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Firms are insulated from

market competition andpotential rivals;concentration increases,leaving firms with more

discretionary power.

Consumers can compare

competitive offerings easilyand competitive rivalryincreases. Efficient firmsremain, and as the inefficientleave, new entrants appear;

the effect on concentration isambiguous.


Industry structure and market powerIndustry structure and market power

Wh t i Ad ti i R l i th E ?


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Firms can charge higher

prices and are not aslikely to compete onquality or pricedimensions. Innovation

may be reduced.

More informed consumers

pressure firms to lowerprices and improvequality; new entrantsfacilitate innovation.


Market conductMarket conduct



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High prices and excessiveprofits accrue to advertisersand give them even moreincentive to advertise theirproducts. Output is restricted

compared with conditions ofperfect competition.

Industry prices decrease.The effect on profits dueto increased competitionand increased efficiency

is ambiguous.

Advertising=Market Power Advertising=Information

Market performanceMarket performance

Do You Agree With Leo Burnett?


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Do You Agree With Leo Burnett?

It must be said that without

advertising we would have a fardifferent nation, and one that

would be much the poorer-not

merely in material commodities,

but in the life of the spirit.

These excerpters are from a speech given by Leo Burnett on the AmericanAssociation or Advertising Agencies 50th anniversary, April 20,1967

The American Advertising Federation


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promotes the value of advertising

Chap 22 Evaluating the Social Ethical and Economic Aspects of Advertising and Promotion...

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