chapter 18 advertising regulation and ethical, social, and economic effects of advertising

Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Chapter Objectives

• To be familiar with the advertising regulation system in Canada

• To evaluate the ethical perspectives of advertising


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


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)


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


CRTC

• Advertising aspects regulated:– Advertising Limits– Infomercials– 900 numbers– Alcohol and drugs

• Not covered:– False and misleading ads– Internet


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)


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


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


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


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


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


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


Ethical Effects of Advertising

• Advertising as Untruthful or Deceptive

• Advertising as Offensive or Bad Taste

• Advertising and Children


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


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)


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


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


Social Effects of Advertising

• Advertising Encourages Materialism

• Advertising Makes People Buy Things They Don’t Need

• Advertising and Stereotyping

• Advertising and the Media


Advertising Encourages Materialism

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


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


Advertising Makes People Buy Things they Don’t 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


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


Advertising and Stereotyping

• Visible Minorities– Imbalance of visible minorities in advertising,

consumers not exposed as frequently to them


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



• Arguments supporting advertising control– Media’s dependence on advertiser’s support makes

them susceptible to various forms of influence



– 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



• 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


Economic Effects of Advertising

• Effects on Consumer Choice

• Effects on Competition

• Effects on Product Cost and Price


Effects on Consumer Choice

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



• 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



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


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


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


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


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

chapter 18 advertising regulation and ethical, social, and economic effects of advertising

Documents

social effects of advertising

acceptable advertising

advertising regulation

economic role of advertising

misleading ads internet

telecommunications act

health canada regulations

broadcasting act