Chapter 4

Social, Ethical, and Regulatory Aspects of Advertising and Promotion

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Social Aspects of Advertising PRO CON

Advertising informs Advertising is superficial and intrusive

Advertising improves living standards PRO CON

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Ads lower the costs Is there of products (How can this be?) “information” in this ad? Ads are wasteful and help only some

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© Courtesy Apple Computers Inc.; Ad Agency TBWA Chiat Day,LA; Photographer: Matthew Welch, Model Emory Livers/LA Models

Advertising Educates Consumers

Do you think advertising is superficial? 4 3

Courtesy, Sketchers USA, Inc.

Critics of advertising feel that advertising is superficial because many ads carry little actual product information.

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Social Aspects of Advertising Advertising Affects Happiness and Well-Being CON PRO

CON PRO

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Ads create needs Ads address a wide variety of basic human needs Ads promote materialism Ads reflect society’s priorities

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Reprinted with permission from Hidesign

Critics feel advertising promotes materialism.

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Social Aspects of Advertising Advertising: Demeaning and deceitful, or liberating and artful? CON PRO

CON PRO

CON PRO 4 6

Ads perpetuate stereotypes Advertisers are more sensitive now Ads are often offensive Ads are a source of liberation

Ads deceive via subliminal stimulation Advertising is art

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© 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?

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©Courtesy of Lachman Imports

Or is this advertising as art?

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Social Aspects of Advertising Advertising has a Powerful Effect on the Mass Media

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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.

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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 10

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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

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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 12

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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 13

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Regulatory Aspects of Advertising Areas of advertising regulation: • Deception and unfairness o o o

Representation or omission that can mislead Judged from perspective of consumer Misrepresentation must be “material”

• Competitive issues o o o

Vertical cooperative advertising Comparison advertising Monopoly power

• Advertising to children 4 14

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Key Regulatory Agents Government Regulation

• Federal Trade Commission (FTC) – Wide range of regulatory programs and remedies

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• Federal Communications Commission (FCC) • Food and Drug Administration (FDA) • U.S. Postal Service • Bureau of Alcohol, Tobacco, and Firearms ©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.

Key Regulatory Agents Government: FTC Programs and Remedies

• • • • • •

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Advertising Substantiation Program Consent Order Cease and Desist Order Affirmative Disclosure Corrective Advertising Control of celebrity endorsements, testimonials, and now blogging

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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

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Key Regulatory Agents Industry Self-Regulation • • • •

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National Advertising Review Board (NARB) State and Local Better Business Bureaus Ad Agencies and Associations Media Organizations

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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 19

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Key Regulatory Agents Consumers as Regulatory agents

• Consumerism: Grass roots consumer movements

• Consumers Organizations Consumer Federation of America o Consumers Union o Consumer Alert o Commercial Alert o

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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 • Contests/Sweepstakes • Product/Brand Placement Public Relations • Privacy • Copyright Infringement • Defamation (slander and libel) 4 21

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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 a. ordering corrective advertising. b. issuing a cease-and-desist order. c. ruling on advertising substantiation. d. dissolving the corporation. 4 22

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Check Your Understanding

Which of the following claims demonstrates puffery in advertising? a. "Only Crest Earns the Dental Seal of Approval Among All Major Brands!" b. "Ford Trucks Have Lower MPG than Chevy Trucks!" c. "Tide Beats Cheer in Sales 8th Year in a Row!" d. "World’s Best Cup of Coffee Served with a Smile Here!" 4 23

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