Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

1
Chapter 18

• Advertising Regulation and Ethical, Social, and
  Economic Effects of Advertising

2
Chapter Objectives

• To be familiar with the advertising regulation
  system in Canada
• To evaluate the ethical perspectives of
  advertising

3
Chapter Objectives

• To understand the social effects of advertising
• To examine the economic role of advertising and
  its effects on consumer choice, competition, and
  product costs and prices

4
Advertising Regulation in Canada

• Canadian Radio-television and Telecommunications
  Commission (CRTC)
• Regulation of Tobacco Advertising
• Quebec Regulations on Advertising to Children
• Advertising Standards Council (ASC)

5
CRTC

• Mandate is to ensure the Broadcasting Act of 1991
  and Telecommunications Act of 1993 are upheld
  throughout Canada
• Make certain that all Canadians can receive
  broadcasting and telecommunications services

6
CRTC

• Advertising aspects regulated
• Advertising Limits
• Infomercials
• 900 numbers
• Alcohol and drugs
• Not covered
• False and misleading ads
• Internet

7
Regulation of Tobacco Advertising

• Restricted by Health Canada regulations on their
  use of traditional advertising media
• Sponsor various arts, cultural, and sporting
  events (will be discontinued in 2003)

8
Regulation of Tobacco Industry

• Print ads communicating sponsorships were only
  permitted advertising
• Underground marketing has emerged, communication
  of brands occurs through exclusive distribution
  in select bars, pubs and nightclubs

9
Quebec Regulations on Advertising to Children

• Consumer Protection Act of Quebec
• It is illegal to direct commercial messages to
  persons younger than 13
• Concerns the product, the way the ad is
  presented, and the time and place the ad is shown

10
Advertising Standards Council (ASC)

• Not-for-profit, self regulatory, industry body
  with mandate to create and maintain community
  confidence in advertising
• Represents advertisers media organizations and
  advertising industry suppliers

11
ASC

• Canadian Code of Advertising Standards
• Describes what is not acceptable advertising
• Pertains to the content of ads only
• Intention is to provide standards so that
  responsible and effective advertising results
• Gender Portrayal Guidelines
• Ensure that women and men are portrayed
  appropriately in advertising

12
ASC

• Complaint Process
• Handles complaints in three streams
• Consumer complaints from ordinary citizens who
  believe an ad is unacceptable
• Special interest groups from a demonstrated
  organization that expresses a unified viewpoint
• Trade disputes complaints from other advertisers

13
ASC

• Complaints Report
• Comprehensive annual report
• Identification of advertisers and the details of
  all complaints
• Clearance Process
• Alcohol
• Cosmetics
• Non-prescription drugs
• Ads directed towards children
• Food

14
Ethical Effects of Advertising

• Advertising as Untruthful or Deceptive
• Advertising as Offensive or Bad Taste
• Advertising and Children

15
Advertising as Untruthful or Deceptive

• Studies have shown a general mistrust of
  advertising among consumers
• Puffery advertising or sales presentations which
  praise the item to be sold with subjective
  opinions, superlatives, or exaggerations, vaguely
  and generally stating no specific facts

16
Advertising as Offensive or in Bad Taste

• Common criticism of advertisers by consumers is
  that ads are offensive, tasteless, irritating,
  boring or obnoxious
• More likely to dislike ads for products they do
  not use and brands they would not buy
• Type of appeal or presentation can also be
  offensive (especially sexual and/or nudity)

17
Advertising and Children

• TV is a vehicle through which advertisers can
  reach children easily
• Critics argue that young children are vulnerable
  to ads because they lack the experience and
  knowledge to understand and evaluate the purpose
  of persuasive appeals

18
Advertising and Children

• Others argue it is part of life and children must
  learn to deal with advertising as a part of life
• Consumer socialization process acquiring the
  skills needed to function in the marketplace

19
Social Effects of Advertising

• Advertising Encourages Materialism
• Advertising Makes People Buy Things They Dont
  Need
• Advertising and Stereotyping
• Advertising and the Media

20
Advertising Encourages Materialism

• Materialism A preoccupation with material things
  rather than intellectual or spiritual concerns

21
Advertising Encourages Materialism

• Critics believe advertising
• Creates needs rather than showing how a
  product/service fulfills them
• Surrounds consumers with images of good life, and
  suggests material possessions leads to happiness
  and adds to the joy of living
• Suggests material possessions are symbols of
  status, success and accomplishment

22
Advertising Makes People Buy Things they Dont
Need

• Some say advertising should just provide
  information useful in making purchase decision
  and should not persuade
• Persuasion criticized for fostering discontent
  among consumers and encouraging them to purchase
  products/services to solve deeper problems

23
Advertising and Stereotyping

• Women
• Has received a lot of attention through the years
• Criticized for stereotyping women and failing to
  recognize their changing roles
• Portrayals of women emphasize passivity,
  deference, lack of intelligence and credibility,
  and punishment for high levels of effort

24
Advertising and Stereotyping

• Visible Minorities
• Imbalance of visible minorities in advertising,
  consumers not exposed as frequently to them

25
Advertising and the Media

• Concern because advertising plays such a role in
  financing the media, advertisers may influence or
  control the media
• Economic Censorship the media avoids certain
  topics or even presents biased news coverage
  because of advertisers demands

26
Advertising and the Media

• Arguments supporting advertising control
• Medias dependence on advertisers support makes
  them susceptible to various forms of influence

27
Advertising and the Media

• Includes
• exerting control over editorial content
• biasing editorial opinions to favor the position
  of the advertiser
• limiting coverage of a controversial story that
  might reflect negatively on a company
• Influencing the program content of TV

28
Advertising and the Media

• Arguments against advertiser control
• Best interest of the media not to be influenced
  too much, so that they retain public confidence,
  must report news fairly and accurately without
  bias
• Advertisers need the media more than they need
  any individual advertiser, particularly when the
  audience is large or does a good job of reaching
  a specific market

29
Economic Effects of Advertising

• Effects on Consumer Choice
• Effects on Competition
• Effects on Product Cost and Price

30
Effects on Consumer Choice

• Some argue that large advertisers use their power
  to limit options to a few well advertised brands

31
Effects on Consumer Choice

• Economists argue advertising is used to
• Differentiation products or services of large
  advertisers are perceived as unique or better
  than competitors
• Brand loyalty enables large national advertisers
  to gain control of the market, at the expense of
  smaller brands

32
Effects on Consumer Choice

• Generally, advertising does not create brand
  monopolies or reduce the opportunities for new
  products to be introduced

33
Effects on Competition

• Power in the hands of large firms with huge
  advertising budgets creates a barrier to entry
  making it difficult for other firms to enter the
  market

34
Effects on Competition

• Large advertisers enjoy certain competitive
  advantages
• Economies of scale
• Sell more products/services and can allocate more
  monies to advertising
• No clear evidence that advertising alone reduces
  competition, reduces entry barriers or increases
  market concentration

35
Effects on Product Costs and Prices

• Critics say advertising increases the prices
  consumers pay for products and services through
• Large sums of money spent on advertising the
  consumer ends up paying for
• Increasing product differentiation and adding to
  the perceived value of the product

36
Effects on Product Costs and Prices

• Counterarguments
• Advertising may help lower the overall cost of a
  product
• Makes a market more competitive leading to
  greater price competition
• Means to market entry, stimulates product
  innovation, making market more competitive,
  keeping prices down