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Economics
The effects of advertising on our economy
&
Ethics
The effects of advertising on our society
Regulation
Our attempts to manage those effects
Power or Information?
Market Power
Advertising Persuades consumer to purchase one brand over another more often Excess brand profits Higher barriers to entry and more market power More advertising leads to greater brand loyalty Reduce quality/raise price Reduced consumer sovereignty Monopoly
Market Information
Advertising Increased consumer knowledge More substitute products consumers can consider Lower barriers to entry by new brands Reduced market power for any individual brand Better pricing/distribution more product innovation Optimal brand profits, consumer choice, and price benefits
An Ethical Debate
Ads destroy freedom of choice Ads destroy democracy/media Advertising warps social values Ads give consumers more choices
3 Ethical Issues:
1) Advocacy
What does the advertising advocate?
2) Accuracy
How accurate is the advertising? Some of this depends on susceptibility of the audience (i.e., kids).
3) Acquisitiveness
What is the overall effect? Does it make us more materialistic?
5 Controversial Issues:
1) Puffery 2) Decency 3) Stereotyping 4) Children 5) Controversy "Nothing beats a Bud Sexual innuendo, violence Portrayals of housewives, seniors, racial groups Violence, dangerous acts, unhealthy habits Condoms, alcohol, fashion
5 FTC Concerns:
1) Deception Must lead to material injury.
2) Comparisons
3) Endorsements 4) Demonstrations 5) Bait & Switch
3) Corrective Ads
4) Consumer Redress
3) Postal Service
4) ATF 5) Patent Office
6) Library of Congress
2 Industry Watchdogs
1) NAD (National Advertising Division)
- Part of Better Business Bureau
Big Questions
What do you think is the biggest benefit of advertising? What do you think is the biggest problem with advertising? What do you think is the best example of bad advertising? What do you think is the best example of good advertising?