The Economic, Social and Regulatory Aspects of Advertising

1. The Economic, Social and Regulatory Aspects of Advertising Lecture 3

2. What makes Advertising a “controversial concept” • Views of offensiveness vary from country to country. • For example, clothing retailer Bennetton uses the same ads all over the world and sometimes the ads impinge on customer beliefs of certain countries. • “A Kiss from God”—banned in Italy but won the Eurobest Award for Advertising in England. • What may have caused this?

3. The Economic Impact of Advertising • “The economic effect of advertising is like the break shot in billiards or pool”. • The moment a company begins to advertise, it sets off a chain reaction of economic events. The extent of a chain reaction, although hard to predict, is related to the force of the shot and economic environment.

4. The Economic Impact of Advertising • Types of Economic Effects: • Effect on the Value of the Products • Effect on Prices • Effect on Competition • Effect on Consumer Demand • Effect on Consumer Choice • Effect on Business Cycle

5. The Economic Impact of Advertising • Effect on Value: Perceived Value issue. Advertising adds value to a brand by educating cusomters about new uses for a product. For example, Kleenex was originally advertised as a makeup remover but later as a disposable handkerchief (tissue). • Effect on Prices: What happens to prices if the advertising cost is too high?

6. The Economic Impact of Advertising • Effect on Competition: It is true that intense competition does tend to reduce the number of businesses in an industry. However, some of the firms eliminated by competition may be those that served customers least effectively. E.g. Pizza Time and Pizza Lounge. • Effect on Consumer Demand and Choice: How dependant is this on persuasion employed through advertising? Give examples. • Effect on Business Cycle- this may take place during phases of business boom and bust. It may also occur during the 4 stages of a business life cycle: introduction, growth, maturity and post maturity.

7. Social Impact of Advertising • Deception in Advertising • Puffery: refers to advertising tactics that cannot be labeled as true or false such as “best” “premier”. E.g., Tabasco Sauce

8. Social Impact of Advertising • The Use of Stereotyping in Advertising: This involves using racial elements in advertising. For example: Intel launched a national campaign in 2007 that was almost unbelievable in its symbolism - but it was most definitely real. A white manager (master?) stands over six black athletes who bow in perfect symmetry before him. Though Intel claims 100% innocence, it’s baffling why the company’s advertising direction would include such powerful slave imagery.

9. Social Impact of Advertising • Offensiveness in Advertising: Tourism Campaign for Australia: “Where the bloody hell are you?”

10. Social Responsibility and Regulatory Aspects -Social Responsibility: • Corporate Social Responsibility: states that it is the “continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families and the local community and society at large. (World Business Council for Sustainable Development 1999)