Advertising

1. 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 CMNS 130

2. Learning Objectives • What is advertising? • What are its economic characteristics? • Three views of advertising • Typical Regulation of Advertising • What are its effects? CMNS 130

3. 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) CMNS 130

4. 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 CMNS 130

5. Main Forms of Financing the Media • Advertising • Direct Subscription ( cable, newspapers, etc) • Transaction Revenues • Licence Fees ( BBC) • Taxes ( CBC/ matched by Ads) CMNS 130

6. 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 CMNS 130

7. 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 CMNS 130

8. 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 CMNS 130

9. 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 CMNS 130

10. 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 CMNS 130

11. 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 CMNS 130

12. 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) CMNS 130

13. Theories of Advertising • Neo liberal or pro market view • Reform Liberal or pro regulation view • Critical or anti consumption view CMNS 130

14. 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 CMNS 130

15. 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 CMNS 130

16. 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 CMNS 130

17. 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 CMNS 130

18. 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” CMNS 130

19. 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 CMNS 130

20. 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 CMNS 130

21. 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” CMNS 130

22. 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 CMNS 130

23. 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 CMNS 130

24. 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 CMNS 130

25. 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? CMNS 130

26. 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 CMNS 130

27. 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. CMNS 130

28. The Terms of the Regulation Debate • What is permitted • Who is permitted • When and Where it is permitted • To whom CMNS 130

29. 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 CMNS 130

30. Canadian Ad Institutions • The Canadian Advertising Foundation ( CAF) • Advertising Standards Council • Receive complaints and preclear ads directed at children CMNS 130

31. 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). CMNS 130

32. 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 CMNS 130

33. Rhetorical Techniques of Ads ( see Fleras, 202-203) • 1. Shock/Humour/Novelty: to get attention • 2. Repetition • 3. Visual Style Codes: • 4. Ubiquity CMNS 130

34. 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 CMNS 130

35. 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? CMNS 130

36. 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 ) CMNS 130

37. 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 CMNS 130

38. 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? CMNS 130

39. 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 CMNS 130