8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 1/25

Overview of Economic,

Social, & Regulatory

Aspects of Advertising

SBM 338

Lanny Wilke

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 2/25

What is Advertising?

³The structured and composed

nonpersonal communication of 

information, usually paid for andusually persuasive in nature, about

products (goods, services, and

ideas) by identified sponsors

through various media´ ±Arens &Schaefer (2007)

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 3/25

In English«

A structured form of communicationemploying both verbal and nonverbalelements that are composed to fill

specific space and time formatsTypically directed toward groups of 

people (mass communication).

Most is paid for by sponsors.

Usually persuasive.

Identifies the sponsor.

Reaches us through a channel of communication.

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 4/25

The Role of Advertising in Business

Part of the marketing process.

The only business function whose

primary role is to bring in revenue.

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 5/25

What is Marketing?

³an organizational function and a set

of processes for creating,

communicating, and delivering valueto customers and for managing

customer relationships in ways that

benefit the organization and its

stakeholders.´ -Arens & Schaefer (2007)

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 6/25

Advertising and the Marketing

ProcessDAGMAR

Awareness

ComprehensionConviction

action

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 7/25

Free Market Economics &

Advertising

Self-Interest

Complete Information

Many buyers and sellersAbsence of externalities (social

costs)

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 8/25

Functions & Effects of Advertising

in a Free Economy

Seven functions of advertising

To identify products and

differentiate them from others.To communicate information about

the product, its features, and its

place of sale.

To induce consumers to try new

products and to suggest reuse.

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 9/25

Seven functions of advertising

(contd)

To stimulate the distribution of theproduct.

To increase product use.

To build value, brand preference,and loyalty.

To lower the overall cost of sales.

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 10/25

The Evolution of Advertising as an

Economic Tool

The Preindustrial Age

The Industrializing Age

The Industrial Age

TheP

ostindustrial Age

The Interactive Age

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 11/25

Controversies About Advertising

Public criticism

Advertising¶s effect on prices

Promote or discourage competition?

Affect on overall consumer demand.

Effects on consumer choice and theoverall business cycle

Societal effects

More materialistic?

Forces us to buy things we don¶t need?

Reach us subliminally?

Debase our language?

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 12/25

The Economic Impact of 

Advertising

Effect on the Value of Products

Effect on Prices

Effect on Competition

Effect on Consumer Demand

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 13/25

The Economic Impact of 

Advertising (Cont¶d)

The Effect on Consumer Demand

Effect on Consumer Choice

Effect on the Business Cycle

The Abundance Principle

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 14/25

The Social Impact of Advertising

Deception in Advertising

The Subliminal Advertising Myth

The Effect of Advertising on Our 

Value System

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 15/25

The Social Impact of Advertising

(Cont¶d)

The Proliferation of Advertising

The Use of Stereotypes inAdvertising

Offensiveness in Advertising

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 16/25

Social Responsibility & Advertising

Ethics

Advertisers¶ Social Responsibility

Ethics of Advertising

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 17/25

Current Regulatory Issues Affecting

U.S. Advertisers

Freedom of Commercial Speech

The Tobacco AdvertisingControversy

The Issue of Advertising to Children

Consumer Privacy

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 18/25

Federal Regulation of Advertising in

North America

The U.S. Federal Trade Commission

Defining Deception

Defining UnfairnessComparative Advertising

Investigating Suspected Violations

Remedies for Unfair or DeceptiveAdvertising

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 19/25

Federal Regulation of Advertising in

North America (Cont¶d)

The Food and Drug Administration

(FDA)

The food we eat is safeThe cosmetics we (NO, NOT ME)

use won¶t hurt us

The medicines and therapeuticdevices we buy are safe and

effective.

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 20/25

Federal Regulation of Advertising in

North America (Cont¶d)

The Federal Communications

Commission (FCC)

Jurisdiction over radio, television,telephone, satellite and cable TV,

and the Internet

Responsible for protecting the

public interest and encouraging

competition

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 21/25

Federal Regulation of Advertising in

North America (Cont¶d)

The Patent and Trademark Office and

the Library of Congress

Registers and protects intellectualproperty.

Patents

TrademarksCopyrights

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 22/25

State and Local Regulation

By State Governments

By Local Governments

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 23/25

Non-government Regulation

The Better Business Bureau (BBB)

The National Advertising Review Council

(NARC)

Regulation by the Media

Television

Radio Magazines

Newspapers

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 24/25

Non-government Regulation

(Cont¶d)

Regulation by Consumer Groups

Self-Regulation by Advertisers andAd Agencies

8/8/2019 Class 1 - Overview of Economic, Social, And Regulatory

http://slidepdf.com/reader/full/class-1-overview-of-economic-social-and-regulatory 25/25

Government Restraints on

International Advertisers

Some foreign governments are more

authoritarian

Some restrict or ban ads for specific

products

Many countries prohibit puffery

Many European countries ban coupons,

premiums, free tie-in offers, etc. In Europe, TV ads must be kept

completely separate from the programs

and be clearly recognizable as such.