Evaluating the social, ethical, and economic aspects of advertising and promotion

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Evaluating the Social, Ethical, and Economic
Aspects of Advertising and Promotion
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Advertising and Ethics Two Viewpoints
Proponents Critics
Advertising… Advertising…
¾ Provides information ¾ Creates needs and
¾ Encourages a standard faults
of living improvement ¾ More propaganda than
¾ Produces jobs information
¾ Promotes competition ¾ Promotes materialism
Ethics in Advertising
Ethics: Moral principles and values
that govern the actions of and
individual or group.
ƒ Not all issues can be regulated
ƒ A marketing or promotion action may be
legal but not considered ethical
ƒ Marketers must make decisions regarding
the appropriateness of their actions
ƒ Companies are scrutinized for their ethics
Social and Ethical Criticisms of Advertising
¾ Advertising as untruthful or deceptive
¾ Advertising as offensive or in bad taste
– Advertising of personal products
– Sexual appeals
¾ Advertising and Children
¾ Social and Cultural Consequences
– Making people buy things they don’t need
– Encouraging materialism
– Stereotyping
– Advertisings’ influence on the media
Social and Ethical Criticisms of Advertising
¾ Advertising as untruthful or deceptive
– General mistrust of ads
– Deliberately untruthful or misleading vs. puffery
– Problems often more at local level rather than
¾ Advertising as offensive, in bad taste, or
– Advertising of personal products
– Sexual appeals
ƒ Suggestive, demeaning, raunchy
ƒ Shock advertising
Many people found Benetton’s “Death Row”
ad campaign offensive
Bijan used shock advertising to get attention
Source: Courtesy Bijan Designer for Men, Beverly Hills, California
American Advertising Federation
Advertising Principles
1. Truth
Advertising shall reveal the truth, and shall reveal significant
facts, the omission of which would mislead the public.
2. Substantiation
Advertising claims shall be substantiated by evidence in
possession of the advertiser and the advertising agency prior
to making such claims.
3. Comparisons
Advertising shall refrain from making false, misleading, or
unsubstantiated statements or claims about a competitor or
his products or service.
4. Bait advertising
Advertising shall not offer products or services for sale
unless such offer constitutes a bona fide effort to sell the
advertised products or services and is not a device to switch
consumers to other goods or services, usually higher priced.
American Advertising Federation
Advertising Principles
5. Guarantees and warranties
Advertising of guarantees and warranties shall be explicit, with
sufficient information to apprise consumers of their principal
terms and limitations or, when space or time restrictions
preclude such disclosures, the advertisement shall clearly reveal
where the full text of the guarantee or warranty can be
examined 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 of
competent witnesses who are reflecting a real and honest
opinion or experience.
8. Taste and decency
Advertising shall be free of statements, illustrations, or
implications that are offensive to good taste or public decency.
Advertising and Children
Children's TV Watching Behavior
¾ Children between ages 2-11 watch on
average 21.5 hours of TV per week and may
see 22,000 commercials per year
¾ Television is an important source of
information for children about products
Advertising and Children
Some studies have shown…
ƒChildren lack experience and knowledge to evaluate
advertising critically
ƒThey can not differentiate between commercials and
program (fantasy vs. reality)
ƒChildren are vulnerable to advertising
…while other studies argue
ƒChildren must learn through the consumer
socialization process; need to acquire skills to function
in the marketplace
ƒAcquired skills have helped teens evaluate ads and
recognize persuasion techniques
Social and Cultural Consequences of
Does advertising encourage consumption, or
merely reflect our society’s need for it?
“Advertising and its related arts thus help develop the kind of man
the goals of the industrial system require—one that reliably spends
his income and works reliably because he is always in need of
John Kenneth Galbraith
“To blame advertising now for those most basic tendencies in
American history is to miss the point…The people who have created
modern advertising are not hidden persuaders pushing our
buttons…they are just producing an especially visible manifestation,
good and bad, of the American way of life.”
Stephen Fox
The Mirror Makers: A History of American Advertising and Its Creators
Social and Cultural Consequences of
¾Advertising makes people buy things
they don’t need
ƒ Advertising may encourage materialism
ƒ Information versus persuasion dichotomy
ƒ Does advertising really have that much
ƒ Freedom of choice
Advertising and Stereotyping
¾ Portrayal of women
ƒ Gender stereotyping
ƒ Portrayal of women as sex objects
ƒ Role portrayal of women to reflect
changing role in society
¾Blacks and Hispanics
Advertising and the Media
Arguments supporting advertiser
control of the media
¾Advertising pays the bills therefore they exert
influence on the character,content, and coverage of
certain issues.
Arguments against advertiser
control of the media
¾ To retain public confidence the media must
report the news fairly and accurately.
¾ Advertisers need the media more than the media
needs any particular advertiser.
Economic Effects of Advertising
ƒ Effects on consumer choice
ƒ Differentiation
ƒ Brand loyalty
ƒ Effects on competition
ƒ Barriers to entry
ƒ Economies of scale
ƒ Effects on product costs and
ƒ Advertising as an expense
ƒ Increased differentiation
What is Advertising’s Role in the Economy?
Advertising = Market Power Advertising = Information
Advertising affects consumer Advertising informs
preferences and tastes, consumers about product
changes product attributes, attributes but does not
and differentiates the product change the way they value
from competitive offerings. those attributes.
What is Advertising’s Role in the Economy?
Consumer Buying Behavior
Advertising = Market Power Advertising = Information
Consumers become brand Consumers become more
loyal and less price sensitive price sensitive and buy best
and perceive fewer “value.” Only the
substitutes for advertised relationship between price
brands. and quality affects elasticity
for a given product.
What is Advertising’s Role in the Economy?
Barriers to entry
Advertising = Market Power Advertising = Information
Potential entrants must Advertising makes entry
overcome established brand possible for new brands
loyalty and spend relatively because it can
more on advertising. communicate product
attributes to consumers.
Advertising helps new companies such as
Daewoo enter the market
Source: Courtesy Daewoo Motor America, Inc.