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Advertising

In 1998, $351 billion world wide Source: The Penguin Atlas of Media and Information, Penguin, 2001.

Average Expenditure per person: $300 or more in the US ( which has 43% share of world market)

Canada ( which has 1.9% share of world ad market) averages between $100 and $199 Almost equal 6 way split: radio,TV,mags, news, cinema, outdoor

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Learning Objectives

What is advertising? What are its economic characteristics? Three views of advertising Typical Regulation of Advertising What are its effects?

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Definition

Persuasive message to buy, sell or change behavior

Biagi: involves payment to place message and identification of sponsor as well as selling of goods and services

Also involves the latin meaning of take note or consider– that is the goal is to be noticed

Fleras argues there are structural, functional and ideological elements to the definition ( text: 176)

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Definition Cont’d

One element of the 4 Ps of marketing ( production, pricing, promotion, etc)

An indirect or third party form of financing the media Used to be the dominant form of media financing– still is

in television,mags and newspapers But in 1990 in electronic media direct consumer payment

( subs, pay per view) exceeded ads Central to consumer culture: establishing the codes,

cultural norms, expectations of consumption, and market signalling

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Main Forms of Financing the Media

Advertising Direct Subscription ( cable,

newspapers, etc) Transaction Revenues Licence Fees ( BBC) Taxes ( CBC/ matched by Ads)

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Role of Advertising

Principal sources of revenue for: newspapers, radio, television, magazines

Not books, film, sound recording, or telecommunication

Uncertain but growing role in the Internet

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Economic Functions of Advertising

Generating profits by selling products or services

Fostering brand name recognition Establishing corporate ‘good will’ or

corporate image for social responsibility

Supporting the economic status quo

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Social History of Advertising

Earliest known ad 1000 BC offered a “whole gold coin” for the return of a runaway slave

Only began in mass form with the printed press after Gutenberg

Associated with the rise of mass production techniques in capitalism especially in 20th century

Needed to stimulate mass demand, synchronize or aggregate demand with oversupply

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Economic Characteristics

A function of the gross domestic product: tied to business cycle

Segmented by global/national/local markets

Newspapers and Radio: mostly local retail

TV mostly national/ international

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Economic Paradox

Just under half of world advertising spending is from US

Yet 2/3rds of world population cannot afford the goods the US advertises

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Economic Characteristics 2

Ad rates rise in condition of monopoly/oligopoly

Ubiquitous Less than 5% of all TV signals are non

commercial Few magazines, news or other sources are

without ads

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Economic Characteristics 3

Mainstream, ad supported media exist to make money from advertisers

Content and style are often reshaped to comply with demands of ads in a highly segmented market How? Ads laid out first on a newspaper,

then text How? Media often reposition to appeal to a

better market segment ( eg. Jake)

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Theories of Advertising

Neo liberal or pro market view Reform Liberal or pro regulation view Critical or anti consumption view

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Neo Liberal/Pro Market View

Implicit model of the rational consumer, maximizing self interest

Individual recognises wants, searches, evaluates and purchases

Advertising aids in the consumer’s search Serves essential market communication

function in the exchange of messages between buyer and seller

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Neo Liberal cont’d

Stigler and the Chicago school of economists argue that ads reduce search time: make the consumers ‘foraging’ more efficient

Permit better aggregation of demand, thus facilitate economies of scale

Decrease unit distribution costs To the extent ads persuade someone to buy,

provide employment, ensures investment in production is profitable

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Neo Liberal cont’d

Problem: are sales linked to advertising or the business cycle?

Neo liberal studies argue that sales depend on disposable income, not advertising

Advertising thus mediates market forces, but does not create them ( limited effects thesis)

Consumer is sovereign

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The Reform View

Eg. Galbraith et al Sees from a social welfare standpoint, that advertising is

not productive, but wasteful and inflationary Advertising creates ‘false wants’ Promotes hypermaterialism/ hedonism/ environmental

degradation Point to evidence that ads have not grown as a % of the

GNP over time as sign that ads are not ‘productive’, or ‘dynamic’ engine

Furthermore argue that ads ‘buy’ consumer loyalty: the bigger will win, so oligopolies emerge, reducing market competition

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Reform Cont’d

Refute thesis of consumer sovereignty Refutation is easiest in ad-supported

media, where intermediate demand of advertiser creates valuation: not viewers

Argues needs are created: an oligopoly of producers control demand

Thus the state must play a central role in regulating ads or ‘policing persuasion”

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The Critical Perspective

Eg: Adbusters Sees Advertising as central to the power structure of capitalism Goes beyond the reformers, arguing for ‘culture jamming’ Voluntary simplicity, preservation of the environment, anti-

materialism In particular, looks at the system of ownership and control of the

advertising agencies and notes 5 out of the big 8 are American These huge companies( WPP group, Thompson, Ogilvie and

Mather) integrated to Public Relations Firms which service big business and big government

A Seamless Web of the Persuasion Society

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The ‘Problem’ of Advertising

Business pay for ads on shows Shows on TV ( main channels 100% supported by

ads) or newspapers ( 80% supported by ads) are not the product

The product is ad time or space sold to advertisers What advertisers buy is the access to audiences No direct price signal between consumer and editor

or media No direct cues as to likes/dislikes or customer

preference

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Fleras’ Argument About Advertising being the Message

Irony ( Fleras, p. 177): content or programming exists to deliver audiences to advertisers

“ Ads cannot be considered interruptions when market values prevail; they are the very foundation for programming in connecting audiences with consumerism”

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The Myth of Consumer Sovereignty in Ads

No direct signal between consumers and media providers In fact, share of conventional TV audiences is declining

but ad sales increasing NOT ALL CONSUMERS ARE EQUALLY VALUED:

SOME ARE DISCOUNTED, AND SOME ARE PREMIUM Advertisers’s desire to reach the attractive youth

consumer segment explains ‘Friends’, recent rise of Reality shows Also explains exclusion of the low spenders: blacks, hispanics

or old in the US which are less attractive ad segments Explains exclusion of poor, old and visible minorities in most ad

markets in Canada

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The Myth of the Free Ad Lunch

Costs of ads passed on to consumers: affect 10-15% of cost of goods.

Current estimates of ads in Canada suggest ad spending of about $900 to reach each hhld: this is paid by all, even the poor, whether they want the ads or not

Such hidden, indirect payment is not known to consumers

Explains why they prefer ad supported, so called ‘free’ media to pay per view or other services on the Internet: they are unaware they are already ‘taxed’ by the manufacturers and distributors of consumer goods

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The Canadian Small Market Problem

Canada has half the per capita size of ad spending as the US– tougher market for Canadian cultural industries Overspill of US ads vitiates demand Segments of the industry: ( health, law etc) are either

publicly owned, or prevented from advertising Retail sector in Canada has not been as competitive

In TV, if US programs are more popular: Canadian businesses prefer advertising on US shows, weakening indigenous production markets ( a vicious circle) thus weakening competition, and leading to increase in market dominance and higher US ad rates

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Policy Responses to small market problem

Income Tax Act prohibits spending on US media as an allowable business expense in Canada

This is intended to protect ‘diversion’ of ad money south of the border

Regulations: ( Canadian Radio-television and Telecommunications Commission) create rules like the “ simultaneous substitution rule” which allows Canadian stations who have bought the rights to a program to insert their ads sold against it in the imported US signal

Tax money used to subsidize public/non commercial media ( CBC, community TV)

As well, tax money increasingly being used to ‘advertise’ in public sector areas Public health issue: allow, like the US pharmaceutical

manufacturers to advertise to Canadians?

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Attack under Globalization

Before 1999, Canada’s Magazine Policy prevented ‘split runs’ ( except for Time Canada and Readers’ Digest)

Goal was to prevent US media companies getting around the Income Tax Act by publishing ‘virtual’ editions which could scoop Canadian ad spending without producing Canadian editorial

As well, Canadian magazines were allowed to mail free to their customers ( unlike US mags) ( see Stoffman, cited in Fleras, p. 208)

US launched a trade protest under the World Trade Organization on the grounds that magazines offended the rules of free trade:

National Treatment rule: despite exemption of cultural services from NAFTA

Canada lost. Instructed to strike down legislation: had to create new ones, and offer subsidies to Canadian magazine sector

FREE TRADE IN AD SERVICES ON US AGENDA

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Classic Forms of Regulation

Truth in advertising: deceptive advertising may be a criminal or civil offense ( but intent must be established as well as proof of harm)

Prohibition or strict regs on Ads for hazardous goods ( drugs, tobacco, liquor etc)

Policing Ads directed at children Ad free zones promoted for very young children, since children

cannot distinguish between an ad and a program Pre airing censorship: to prohibit violence or other anti social

contents Other types of ad regulation

Gender portrayal etc.

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The Terms of the Regulation Debate

What is permitted Who is permitted When and Where it is permitted To whom

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Regulation Around the World

Various levels of constraint around the world Sexual violence against women in ads is banned around

the world except Argentina, Paraguay and Thailand Some categories of products/behaviors are deemed

offensive and thereby restricted in certain countries: Sanitary products Toilet paper Undergarments Undue attention to breasts or buttocks Physical intercourse: hetero or same sex

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Canadian Ad Institutions

The Canadian Advertising Foundation ( CAF)

Advertising Standards Council Receive complaints and preclear ads

directed at children

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Issues in Advertising

Recent ad issue concerns: Historically, ‘patronage’: control of media content

through sponsorship ( Disney) Increasingly: ad clutter: more than time allotted ( 18

minutes out of every hour) Sound /noise offense Product placement: eg. American Idol Difficulty in measuring ad impacts

Catholic Church in BC protesting VanCity ad representing a gay couple ( as part of a resistance to revision of Canadian marital laws to include same sex couples).

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Marketing Surveillance Society Thesis

Movement to e-commerce on line allows single source, integrated market research intelligence, new levels of custom advertising to markets of one

See www.redsherriff.com An internet tracking company which downloads a hidden

Javascript on to y our browser when you visit one of their affiliated sites

Can track where you visit, how long you stay, what you bought and create a full virtual data shadow

Sell it to business who will design a marketing applet to bombard you

Consumer mobility– tracking and ad campaign design now central to new forms of market/advertising

Privacy, issues of ‘informed consent’ and other concerns

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Rhetorical Techniques of Ads ( see Fleras, 202-203)

1. Shock/Humour/Novelty: to get attention

2. Repetition 3. Visual Style Codes: 4. Ubiquity

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Social Psychology of Ads

Maslov’s hierarchy of basic human needs: NOT directly observable:

survival, physiological sustenance personal safety social belonging self esteem self actualization aesthetic, expressive needs

higher level needs become salient when survival needs are met

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Effects of Ads

Saturation See now more than 500 ads a day/182,000 a day Very low levels of recall

Avoidance Use remote control to dodge ads Tape and fast forward

Defensive Industry Response: Integration Fool consumer by integrating commercial and content: product

placement, seamless infomercials ‘advertorials’ Issue of ‘due process’: are consumers aware of what is an

appeal and what is not?

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Effects Cont’d

Socio-Cultural Used to identify ‘in’ and ‘out ‘ groups Create ideal role models stereotyping

Psychological Behavioral: induce a buy Attitudinal: like the product/associate with attributes—lifestyle

appeals Cognitive: recognize, evaluate what is needed

Political Political advertising is more often using conventional ad

appeals ( celebrity/spectacle positioning )

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Content Effects

Drive to placate advertisers: indirect economic censorship ( Politically Incorrect case during Attack on America)

Interrupt content: in newspapers, articles are blocked around ads: more ads, shorter news holes; drives the pyramid style of presentation…drive format and medium expectations

Create high aesthetic standards:4 1.3 million per 15 second ad / Superbowl exceeds even the highest budgets films …shape novelty/innovation/ imitation trends

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Ideological Effects

Advertising defines what is important or desirable Draws attention to certain aspects of reality while

ignoring others ( Fleras, 171) it is a discourse about ‘reality’

“Manufacture of Discontent” where the only solution is through Buy Buy Buy

As a system of persuasion, advertising is propoganda (Fleras, 211)

Have we become citizens of shopping malls?

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Recommended Sources

Benjamin Singer (1995) “Advertising” A Sociocultural Force” in Communications in Canadian Society, 4th ed., Toronto: Nelson.pp. 123-138, Richard Jackson Harris (1999), “Advertising” in A

Cognitive Psychology of Mass Communication: 3rd ed., Mahwah NJ: Lawrence Erlbaum Associates, pp. 71-95.

Leiss, Kline, Jhally: Advertising as Social Communication

Frank: Liberation Marketing Klein : No Logo