Advertising
What is Advertising
Advertising is a form of communication for marketing and used to encourage, persuade, or manipulate the audience to continue or take some new action. Most commonly, the desired result is to drive consumer behaviour with respect to a commercial offering.
Commercial advertisers often seek to generate increased consumption of their products or services through "branding," which involves associating a product name or image with certain qualities in the minds of consumers. Non-commercial advertisers who spend money to advertise items other than a consumer product or service include political parties, interest groups, religious organizations and governmental agencies. Nonprofit organizations may rely on free modes of persuasion, such as a public service announcement
Advertising is praised but also criticized by critics in their own ways. Advertising has many positive impacts along with its negative pictures. Advertising is something else. It is not related to studies, but it educates. It is not a journalist but gives all information. And it is not an entertaining device but entertains everyone.
- John O’ Toole , President of American Association of Advertising Agencies
The basic economic principles that guided the evolution of advertising also have social and legal effects. When they are violated, social issues arise and the government may take corrective measures. Society determines what is offensive, excessive, and irresponsible; government bodies determine what is deceptive and unfair. To be law-abiding, ethical, and socially responsible, as well as economically effective, advertisers must understand these issues.
Social role of Advertising:
There are some positive and some negative aspects of advertising on the social ground. They are as follows.
Deception in Advertising:
The relation between the buyers and sellers is maintained if the buyers are satisfied with what they saw in advertise and what they got after buying that product. If seller shows a false or deceptive image and an exaggerated image of the product in the advertisement, then the relation between the seller and buyers can’t be healthy. These problems can be overcome if the seller keep their ads clean and displays right image of the product.
The Subliminal Advertising:
Capturing the Minds of the consumers is the main intention of these ads. The ads are made in such a way that the consumers don’t even realizes that the ad has made an impact on their minds and this results in buying the product which they don’t even need. But “All ads don’t impress all consumers at all times”, because majority of consumers buy products on basis of the price and needs.
Effect on Our Value System:
The advertisers use puffing tactics, endorsements from celebrities, and play emotionally, which makes ads so powerful that the consumers like helpless preys buy those products.
These ads make poor people buy products which they can’t afford, people picking up bad habits like smoking and drinking, and buy products just because their favorite actor endorsed that product. This affects in increased the cost of whole society and loss of values of our own selves.
Offensiveness:
Some ads are so offensive that they are not acceptable by the buyers. For example, the ads of denim jeans showed girls wearing very less clothes and making a sex appeal. These kinds of ads are irrelevant to the actual product. Btu then there is some ads which are educative also and now accepted by people. Earlier ads giving information about birth control pills was considered offensive but now the same ads are considered educative and important.
But at the last, there are some great positive aspects which help * Development of society and growth of technologies * Employment * Gives choices to buyers with self interest * Welcomes healthy competition * Improving standard of living. * Give information on social, economical and health issues.
In their constant quest to attract consumers and associate products with “cool” or luxurious and hedonistic lifestyles, some advertisers have consistently pushed the boundaries of what is ethically and socially acceptable. American advertising has always embraced erotic suggestiveness while usually staying clear of full nudity and explicit sexuality. Campaigns that blur that distinction often arouse controversy and even protest. For two decades, the most notorious purveyor of sensual “cool” was Calvin Klein—beginning in the late 1970s with the “nothing comes between me and my Calvin’s” campaign featuring Brooke Shields and culminating in 1998’s “kiddie-porn” controversy. Klein’s racy advertisements provoked the ire of conservative groups but earned him the respect of edgier critics who viewed his campaigns as artistically ironic. In the end, the controversies benefited Klein, as the media firestorm provided free publicity for his brand name and underscored the sophisticated “cool” of the campaigns. Since the millennium, however, the mantle of “most controversial advertiser” has passed from Klein to trendy teen retailer Abercrombie and Fitch (A&F). A subsidiary of The Limited since 1988, A&F flirted with controversy in the early 1990s, when a black-and-white print ad, ostensibly featuring a father and son on a boating outing, was misinterpreted as a gay couple. Capitalizing on the angle, A&F hired iconic 1980s fashion photographer Bruce Weber, who had been responsible for some of the steamier Calvin Klein images, as the principal photographer for the A&F Quarterly, a hybrid catalog and lifestyle magazine, known as a “magalog.” According to Quarterly contributor Sean Collins, the magalog was intended as an “outside-looking-in fantasy version of college life” that parodied “the idealized life of leisure, while at the same time celebrating that ideal for its very unattainability.” The magazine originally featured pseudo-adult photographs of hunky, underdressed young adult men, but as it became increasingly popular in campus Greek culture, it began featuring under- and undressed women as well, in increasingly suggestive sexual situations. The publication’s articles, sexually explicit but often tongue-in-cheek, underscored this “sex and games” attitude. Although opposition always existed toward Weber’s erotic photographs, the explicit articles bred controversy, particularly as it was hard to see what they had to do with the clothing. A feature article on alcohol consumption, called “Drinking 101,” caught the attention of Mothers Against Drunk Driving, and the magazine’s 1999 issue “Naughty or Nice” prompted Illinois Lieutenant Governor Corinne Wood to call for a boycott of the retailer for “peddling soft porn in the guise of a clothing catalog.” In 2002–2003, the company faced two public relations problems regarding ethnically insensitive T-shirt designs and racial discrimination in hiring practices. So when controversy over the Quarterly broke out again, in December 2003, this time over an article on group sex, the company finally reformatted the magalog and introduced a new publication for summer 2004, A&F Magazine, which focused exclusively on artistic photographs of models wearing A&F clothing. The outcry over the Quarterly occurred in spite of the fact that the magalog was sold in a wrapper labeling it as “for over 18” and required identification to purchase. Although containing no full-frontal nudity and only marginally raunchier than magazines like Maxim and Stuff, the confusion of the soft-porn genre with conventional advertising seemed particularly distressing to conservative critics like the National Coalition for the Protection of Children and Families, who claim that the company uses “clothing to sell a sexual philosophy.” Especially since the target market is teens and young adults, the advertising is viewed as transgressing the proper place of marketing. Critics claim it reverses the conventional purpose of ads, using the clothing to sell the lifestyle rather than invoking the lifestyle to sell the clothing. But as with the Calvin Klein ads, the impact of controversy on brand-name recognition is sometimes worth the risk to the corporate image: Abercrombie and Fitch’s profits were up for the second quarter of 2004, and copies of the last issue of the A&F Quarterly fetch up to $100 on eBay. And although the lifestyle depicted may not be popular with certain groups, the clothes themselves have achieved the status of uniform among preppy suburban youth. In advertising, it seems generating controversy is a sure way to be seen.
The Many Controversies about Advertising
Advertising is one of the most visible activities of business. By inviting people to try their products, companies risk public criticism and attack if their advertising displeases or offends the audience or if their products don’t measure up to the advertised promise. Proponents of advertising say it’s therefore safer to buy advertised products because, when a company’s name and reputation are on the line, it tries harder to fulfill its promises (especially when it lists product benefits).
Advertising is both applauded and criticized not only for its role in selling products but also for its influence on the economy and on society. For years, critics have denigrated advertising for a wide range of sins—some real, some imagined.
John O’Toole, the late chair of Foote, Cone & Belding and president of the American Association of Advertising Agencies, pointed out that many critics attack advertising because it isn’t something else. Advertising isn’t journalism, education, or entertainment—although it often performs the tasks of all three. To go back to Albert Lasker’s original definition, advertising is salesmanship in print (or in today’s parlance, in the paid space and time of mass media). As a means of communication, advertising shares certain traits of journalism, education, and entertainment, but it shouldn’t be judged by those standards. Sponsors advertise because they hope it will help them sell some product, service, or idea.
Notwithstanding O’Toole’s articulate defense, many controversies still swirl around the whole field of advertising. Some of them focus on advertising’s economic role. For example, how does advertising affect the value of products? Does it cause higher or lower prices? Does it promote competition or discourage it? How does advertising affect overall consumer demand? What effect does it have on consumer choice and on the overall business cycle?
Other controversies focus on the societal effects of advertising. For instance, does advertising make us more materialistic? Does it force us to buy things we don’t need? Does it reach us subliminally in ways we can’t control? How does it affect the art and culture of our society? Does advertising debase our language?
From these economic and social controversies, new questions arise regarding the responsibility for and control of advertising. What is the proper role for participants in the marketing process? How much latitude should marketers have in the kinds of products they promote and how they advertise them? And what about consumers? Don’t they have some responsibility in the process? Finally, what is the proper role of government? What laws should we have to protect consumers? And what laws go too far and violate the marketer’s freedom of speech?
These are important questions, and there are no simple answers. But debate is healthy. This chapter addresses some of the major questions and criticisms about advertising, both the pros and the cons, and delves into the regulatory methods used to remedy advertisers’ abuses. the underlying principle of free-market economics—that a society is best served by empowering people to make their own decisions and act as free agents, within a system characterized by four fundamental assumptions: self-interest, many buyers and sellers, complete information, and absence of externalities (social costs).
This fundamentally utilitarian framework, derived from the goal of society to promote behaviors that foster the greatest good for the most people, offers a system of economic activity—free enterprise—that has accomplished that goal better than any other economic system in history. This is why societies around the world are increasingly adopting free-enterprise economics. Economic role of AdvertisingThe 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 the chain reaction, although hard to predict, is related to the force of the shot and the economic environment in which it occurred. It’s no coincidence that the level of advertising investment in a country is directly proportional to its standard of living. - Marcel BleusteinBlanchet, the father of modern French advertisingValue of Products:The advertised products are not always the best products in the market. There are some unadvertised products also present which are good enough. But advertising helps increase value for the products by showing the positive image of the product which in turn helps convincing customers to buy it. Advertising educates consumers about the uses of the products hence increasing its value in minds of the consumers. For e.g. mobile phones were first considered as necessity but nowadays the cell phones come with number of features which makes them mode of convenience for consumers.Why do most people prefer Coca-Cola to some other cola? Why do some people prefer Calvin Klein underwear to some other unadvertised brand? Are the advertised products functionally better? Not necessarily. But, in the mind of the consumer, advertising has given these brands added value. | |
Effect on Prices:
Some advertised products do cost more than unadvertised products but the vice versa is also true. But if there is more competition in the market for those products, the prices have to come down, for e.g., canned juices from various brands. Thus some professional like chartered accountants and doctors are not allowed to advertise.
But some products do not advertise much, and they don’t need much of it and even their prices are high but they are still the leaders in market as they have their brand name. e.g., Porsche cars
Effect on consumer demand and choices:
Even if the product is heavily advertised, it does not mean that the demand or say consumption rates will also increase. The product has to be different with better quality, and more variety than others. For E.g., Kellogg’s cornflakes have variety of flavors with different ranges to offer for different age groups and now also for people who want to loose weight thus giving consumers different choices to select from.
Effect on business cycle:
Advertising no doubt helps in employing more number of people. It increases the pay rolls of people working in this field. It helps collecting more revenues for sellers which they use for betterment of product and services. But there are some bad effects of advertisements on business cycle also. Sometimes, consumer may find the foreign product better than going for the national brand. This will definitely effect the production which may in turn affect the GDP of the country.
The economic aspects are supported by the Abundance Principle which says producing more products and services than the consumption rate which helps firstly keeping consumers informed about the options they have and secondly helps sellers for playing in healthy and competitive atmosphere with their self interest.
Value of Products
In the mid-1960s, a famous psychologist named Ernest Dichter asserted that a product’s image, created in part by advertising and promotion, is an inherent feature of the product itself. Subsequent studies showed that while an ad may not address a product’s quality directly, the positive image conveyed by advertising may imply quality. Moreover, by simply making the product better known, advertising can make the product more desirable to the consumer. In these ways, advertising adds value to the brand. That’s why people pay more for Bufferin than an unadvertised brand displayed right next to it—even though all buffered aspirin, by law, is functionally the same.
Advertising also adds value to a brand by educating customers about new uses for a product. Kleenex was originally advertised as a makeup remover, later as a disposable handkerchief. AT&T first promoted the telephone as a necessity and later as a convenience.
One advantage of the free-market system is that consumers can choose the values they want in the products they buy. If, for example, low price is important, they can buy an inexpensive economy car. If status and luxury are important, they can buy a fancy sedan or racy sports car. Many of our wants are emotional, social, or psychological rather than functional. One way we communicate who we are (or want to be) is through the products we purchase and display. By associating the product with some desirable image, advertising offers people the opportunity to satisfy those psychic or symbolic wants and needs.
In terms of our economic framework, by adding value to products, advertising contributes to self-interest—for both the consumer and the advertiser. It also contributes to the number of sellers. That increases competition, which also serves the consumer’s self-interest
Effect on Prices
If advertising adds value to products, it follows that advertising also adds cost, right? And if companies stopped all that expensive advertising, products would cost less, right?
Wrong.
Some advertised products do cost more than unadvertised products, but the opposite is also true. Both the Federal Trade Commission and the Supreme Court have ruled that, by encouraging competition, advertising has the effect of keeping prices down. That again serves the consumer’s self-interest. And that is why professionals such as attorneys and physicians are now allowed to advertise.
Sweeping statements about advertising’s positive or negative effect on prices are likely to be too simplistic.
We can make some important points, though: * As one of the many costs of doing business, advertising is indeed paid for by the consumer who buys the product. In most product categories, though, the amount spent on advertising is usually very small compared with the total cost of the product
*Advertising is one element of the mass-distribution system that enables many manufacturers to engage in mass production, which in turn lowers the unit cost of products. These savings can then be passed on to consumers in the form of lower prices. In this indirect way, advertising helps lower prices.
* In industries subject to government price regulation (agriculture, utilities), advertising has historically had no effect on prices. In the 1980s, though, the government deregulated many of these industries in an effort to restore free-market pressures on prices. In these cases, advertising has affected price—usually downward, but not always.
* In retailing, price is a prominent element in many ads, so advertising tends to hold prices down. On the other hand, national manufacturers use advertising to stress features that make their brands better; in these cases advertising tends to support higher prices for their brands.
Effect on Competition
Some observers believe advertising actually restricts competition because small companies or industry newcomers can’t compete with the immense advertising budgets of large firms. It’s 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. In other cases, competition is reduced because of mergers and acquisitions (big companies working in their own self-interest).
High costs may inhibit the entry of new competitors in industries that spend heavily on advertising. In some markets, the original brands probably benefit greatly from this barrier. However, the investments needed for plants, machinery, and labor are of far greater significance. These are typically the real barriers to entry, not advertising.
Advertising by big companies often has only a limited effect on small businesses because a single advertiser is rarely large enough to dominate the whole country. Regional oil companies, for example, compete very successfully with national oil companies on the local level. In fact, the freedom to advertise encourages more sellers to enter the market. And we’ve all seen non-advertised store brands of food compete very effectively with nationally advertised brands on the same grocery shelves.
Effect on Consumer Demand
The question of advertising’s effect on total consumer demand is extremely complex. Numerous studies show that promotional activity does affect aggregate consumption, but they disagree as to the extent. Many social and economic forces, including technological advances, the population’s educational level, increases in population and income, and revolutionary changes in lifestyle, are more significant. For example, the demand for CD players, cellular phones, and personal computers expanded at a tremendous rate, thanks in part to advertising but more to favorable market conditions. At the same time, advertising hasn’t reversed declining sales of such items as hats, fur coats, and manual typewriters.
As we shall discuss in Chapter 6, advertising can help get new products off the ground by giving more people more “complete information,” thereby stimulating primary demand—demand for the entire product class. In declining markets, when the only information people want is price information, advertising can influence selective demand—demand for a particular brand. But the only effect it will have on primary demand is to slow the rate of decline. In growing markets, advertisers generally compete for shares of that growth. In mature, static, or declining markets, they compete for each other’s shares—conquest sales.
Effect on Consumer Choice
For manufacturers, the best way to beat the competition is to make their product different. For example, look at the long list of car models, sizes, colors, and features designed to attract different buyers. And grocery shelves may carry more than 100 different brands of breakfast cereals—something for everybody.
The freedom to advertise encourages businesses to create new brands and improve old ones. When one brand reaches market dominance, smaller brands may disappear for a time. But the moment a better product comes along and is advertised skillfully, the dominant brand loses out to the newer, better product. Once again, the freedom to advertise promotes the existence of more sellers, and that gives consumers wider choices.
Effect on the Business Cycle
The relationship between advertising and gross domestic product has long been debated. John Kenneth Galbraith, a perennial critic of advertising, concedes that, by helping to maintain the flow of consumer demand (encouraging more buyers), advertising helps sustain employment and income. But he maintains that, despite declines in the value of the dollar, the U.S. trade deficit persists because advertising and marketing activities create consumer preference for certain foreign products. Historically, when business cycles dip, companies cut advertising expenditures. That may help short-term profits, but studies prove that businesses that continue to invest in advertising during a recession are better able to protect, and sometimes build, market shares. However, no study has shown that if everybody just keeps advertising, the recessionary cycle will turn around. We conclude that when business cycles are up, advertising contributes to the increase. When business cycles are down, advertising may act as a stabilizing force by encouraging more buyers to buy.
The Abundance Principle: The Economic Impact of Advertising in Perspective
To individual businesses such as Calvin Klein, the local car dealer, and the convenience store on the corner, advertising pays back more than it costs. If advertising didn’t pay, no one would use it. And the various news and entertainment media that depend on advertising for financial support would go out of business.
Advertising costs less for the consumer than most people think. The cost of a bottle of Coke includes about a penny for advertising. And the $20,000 price tag on a new car usually includes a manufacturer’s advertising cost of less than $400.
To the economy as a whole, the importance of advertising may best be demonstrated by the abundance principle. This states that in an economy that produces more goods and services than can be consumed, advertising serves two important purposes: It keeps consumers informed of their alternatives (complete information), and it allows companies to compete more effectively for consumer dollars (selfinterest). In North America alone, the U.S. and Canadian economies produce an enormous selection of products. Most supermarkets carry more than 30,000 different items. Each carmaker markets dozens of models.
And many suppliers compete for the consumer dollar. This competition generally results in more and better products at similar or lower prices. Advertising stimulates competition (many buyers and sellers). In countries where consumers have more income to spend after their physical needs are satisfied, advertising also stimulates innovation and new products. However, no amount of advertising can achieve long-term acceptance for products that do not meet consumer approval. Despite massive advertising expenditures, fewer than a dozen of the 50 best-known cars developed in the twentieth century are still sold today.
The Social Impact of Advertising
Because it’s so visible, advertising gets criticized frequently, for both what it is and what it isn’t. Many of the criticisms focus on the style of advertising, saying it’s deceptive or manipulative. Collectively we might refer to these as short-term manipulative arguments. Other criticisms focus on the social or environmental impact of advertising. These are long-term macro arguments.
The social aspect of advertising typically involves the last two principles: complete information and absence of externalities. In fact, social issue debates can be seen as instances where advertising tends to violate one or more of these basic economic principles. We can examine many issues from these two perspectives. Some of the most important are deception and manipulation in advertising, the effect of advertising on our value system, commercial clutter, stereotypes, and offensiveness.
Deception in Advertising
One of the most common short-term arguments about advertising is that it is so frequently deceptive. Professor Ivan Preston notes that the essence of a marketplace lies in the willingness of buyers and sellers to enter commercial transactions. Anything that detracts from the satisfaction of the transaction produces a loss of activity that ultimately hurts both parties. If a product does not live up to its ads, dissatisfaction occurs—and in the long term that is as harmful to the advertiser as to the buyer.
For advertising to be effective, consumers must have confidence in it. So any kind of deception not only detracts from the complete information principle of free enterprise but also risks being self-defeating. Even meaningless (but legal) puffery might be taken literally and therefore become deceptive. Puffery refers to exaggerated, subjective claims that can’t be proven true or false, such as “the best,” “premier,” or “the only way to fly.”
Under current advertising law, the only product claims—explicit or implied—that are considered deceptive are those that are factually false or convey a false impression and therefore have the potential to deceive or mislead reasonable people. But puffery is excluded from this requirement because regulators maintain that reasonable people don’t believe it anyway. Preston points out that since advertisers regularly use puffery and nonproduct facts to enhance the image of their products, they must think consumers do believe it. Nonproduct facts are not about the brand but about the consumer or the social context in which the consumer uses the brand.
An example is “Pepsi. The choice of a new generation.”
The fact is that advertising, by its very nature, is not complete information. It is biased in favor of the advertiser and the brand. People expect advertisers to be proud of their products and probably don’t mind if they puff them a little. But when advertisers cross the line between simply giving their point of view and creating false expectations, that’s when people begin to object. One problem is the difficulty of seeing the line, which may be drawn differently by different people. Papa John’s Pizza no doubt thought it was just puffing when it advertised “Better ingredients. Better pizza.” Pizza Hut saw it differently, though, and sued Papa John’s for deceptive advertising. A U.S. District judge agreed and awarded Pizza Hut close to half a million dollars in damages. The judge then ordered Papa John’s to stop using its “Better ingredients” slogan. This decision was later overturned on appeal, but the case still goes to show that there are limits on what an advertiser can safely puff. Preston points out, “Only puffs open to measurement lose their invisible shields. If Papa John’s says it has better dough, you can attack it. But if Papa John’s says it’s better overall, that’s OK. The bigger the lie, the bigger the protection. Isn’t that amazing?” For more on this story and on puffery, see the Ethical Issue: “Truth in Advertising: Fluffing and Puffing,”
Ivan Preston believes these kinds of problems can be avoided if marketers simply improve the kind of information they give in their advertising. He would require advertisers to have a reasonable basis for any claims they make, whether those claims are facts about the product, nonfacts such as “Coke is it,” or nonproduct facts. This, he believes, would contribute positively to our free market system. Ad Lab 3–A lists some other common deceptive practices
The Subliminal Advertising Myth
Wilson Bryan Key promotes the notion that, to seduce consumers, advertisers intentionally create ads with sexual messages hidden in the illustrations just below the limen—or the threshold of perception. He calls this subliminal advertising. His premise is that by embedding dirty words in the ice cubes in a liquor ad, for instance, advertisers can somehow make us want to buy the product. Over the years, many academic studies have completely debunked this theory. In fact, to date, no study has proved that such embedding exists or that it would have any effect if it did exist. Unfortunately, by promulgating this fiction, Key has been able to sell many thousands of books; worse, he has propagated a generation of consumers who believe in the poppycock of subliminal advertising.
The chord that Key has been able to touch on, though, is important to discuss: the widespread fear that advertisers are messing with our heads—manipulating us psychologically, and without our consent, into buying things we don’t want or need. This gets to the heart of the complete information principle because the criticism suggests that advertising does not give consumers information upon which to base rational decisions, but rather manipulates us through brainwashing. Consumers are, therefore, like captured prey, helpless in the jaws of marketing predators.
If this were true, it would be cause for great alarm and a congressional investigation. But, in fact, if we stop to think about it, we all know it’s not true. Marketers introduce thousands of new products to the marketplace every year. And every year—despite massive advertising expenditures—the vast majority of them fail. Why? Because of competition—many sellers are fiercely competing for the patronage of the same customers. Only some succeed. Most fail.
If you think about all the products you buy, how many involve a choice between different brands and different styles? And how many involve a decision based on price or convenience? Probably most. So how many of your purchases can you trace to having been helplessly manipulated? Probably none. You receive information from many different sources: friends and relatives, store displays, ads, packaging, and retail store clerks. At some point, you make a decision. In many cases, your decision is not to buy at all—to wait for either more information or more money. As always, the customer, acting in his or her own self-interest, is king.
The Effect of Advertising on Our Value System
A related long-term argument, often voiced by certain professional critics—sociologists, journalists, consumer advocates, and government regulators—is that advertising degrades people’s value systems by promoting a hedonistic, materialistic way of life. Advertising, they say, encourages us to buy more cars, more CDs, more clothing, and more junk we don’t need. It is destroying the essence of our “citizen democracy,” replacing it with a self-oriented consumer democracy.
Critics claim advertising manipulates us into buying things by playing on our emotions and promising greater status, social acceptance, and sex appeal. It causes people to take up harmful habits, makes poor kids buy $170 sneakers, and tempts ordinary people to buy useless products in the vain attempt to emulate celebrity endorsers. Again, they claim advertising is so powerful consumers are helpless to defend themselves against it.Once again, this argument exaggerates the power of advertising. In fact, most Americans express a healthy skepticism toward it. One study showed that only 17 percent of U.S. consumers see advertising as a source of information to help them decide what to buy. Perhaps that’s why more advertised products fail than succeed in the marketplace.
Still, this may be the most damning criticism of advertising because there’s no question that advertisers do indeed spend millions trying to convince people their products will make them sexier, healthier, and more successful. The very amount of advertising we witness every day seems to suggest that every problem we have can be solved by the purchase of some product.
Even if we assume that most people can willingly accept or reject an advertising message, they are still not getting the whole picture. After all, advertising is supported by marketers who want to sell their products, but nobody markets the opposite stance of why we don’t need to or shouldn’t buy a particular product at all. In this sense, consumers don’t have complete information, so our advocacy system has failed. This is an important issue of externalities, because the aggregate activities of the nation’s advertisers affect many people outside the immediate marketing transaction and create an unexpected cost to society.
The Proliferation of Advertising
One of the most common long-term complaints about advertising is that there’s just too much of it. In the United States alone, the average person may be exposed to 500 to 1,000 commercial messages a day. With so many products competing for attention (more than 30,000 in the average supermarket), advertisers themselves worry about the negative impact of excessive advertising. According to a recent study by the American Association of Advertising Agencies, ad clutter is still on the rise. In 2002, the amount of nonprogram time ranged from a low of 16 minutes per hour in prime time to nearly 21 minutes per hour in daytime, a day part that is particularly important to advertisers. The networks add to the problem themselves by jamming every possible moment with promotions for their shows. Too much advertising creates an externality not only for consumers (nuisance), but for the advertisers themselves—the more commercials that hit the consumer’s brain, the less effective paid advertising is. Conscious of this, Meredith Broadcasting Group cut 15 percent of its advertising inventory from local newscasts at its CBS-affiliate, WGNX Atlanta, and saw its household ratings go up 20 percent. Higher ratings, of course, means they can charge more for their remaining commercial time. Hopefully, other stations will follow suit.
While the clutter problem is irksome to viewers and advertisers alike, most people tolerate it as the price for free TV, freedom of the press, and a high standard of living. However, with the proliferation of new media choices, this externality is only likely to get worse. Virtually every popular website is cluttered with advertising banners, and our e-mail boxes are flooded with advertising messages on a daily basis. While the Federal Communications Commission exercises no jurisdiction over the Internet, it did consider reinstating commercial time limits on television. But, as of now, the only limits currently in force relate to TV programming aimed at children 12 and under—advertising may not exceed 10.5 minutes per hour on weekends and 12 minutes per hour on weekdays.
Clutter is not so evident in other countries. In France, for example, government-owned stations can carry no more than 12 minutes of commercials per hour. During movies there is only one 4-minute commercial break, although the government is considering changing that rule to allow two breaks.
In North America we should be so lucky. During election periods, the clutter problem gets worse, seriously devaluing an advertiser’s commercial. One year, in fact, after an unexpectedly large number of political ads ran during the fall election season, the Association of Canadian Advertisers urged its members to try to renegotiate the prices they had been charged for air time during that period.
The Use of Stereotypes in Advertising
Advertising has long been criticized for insensitivity to minorities, women, immigrants, the disabled, the elderly, and a myriad of other groups—that is, for not being “politically correct.” This long-term argument also addresses externalities because the very presence of advertising affects the nature of our culture and environment, even when we do not want it. This is ironic, because marketing and advertising practitioners are supposed to be professional students of the communication process and consumer behavior (a subject we cover in Chapter 5). But, in fact, they sometimes lose touch with the very people they’re trying to reach. This is one reason the discipline of account planning (discussed in Chapter 4) is growing so rapidly. Since the 1980s, national advertisers have become more sensitive to the concerns of minorities and women.
Latinos, African Americans, Asians, Native Americans, and others are now usually portrayed favorably in ads, not only because of pressure from watchdog groups, but also because it’s just good business; these consumers represent sizable target markets. Marilyn Kern-Foxworth, a Texas A&M professor and an expert on minorities in advertising, points out that positive role portrayal in some mainstream ads has had a positive effect on the selfesteem of African-American youth. As we’ll see in Chapter 4, this positive trend has accelerated with the emergence of many ad agencies owned and staffed by minorities that specialize in reaching minority markets. In national advertising, the image of women is also changing from their historic depiction as either subservient housewives or sex objects (see the Ethical Issue, “Does Sex Appeal?” in Chapter 12). This may be partially due to the increasing number of women in managerial and executive positions with both advertisers and agencies. Stanford professor Debra Meyerson says “the glass ceiling definitely exists, but at the same time, there are an increasing number of women who are breaking through it.” By 2000, more than 60 percent of all women were participating in the workforce, with more than 20 million of them in managerial and professional careers. Advertisers want to reach, not offend, this sizable market of upwardly mobile consumers. Some agencies now
Offensiveness in Advertising
Offensiveness is another short-term style argument that also speaks to externalities. Many parents, for instance, were incensed at Calvin Klein’s ads because they perceived them as pornographic, thereby causing a social cost that extended well beyond the limited scope of merely selling clothes. More recently, Abercrombie & Fitch came under attack for showing nude and seminude models in the company’s quarterly catalogs. The fact is, people just don’t want their children exposed to messages that they deem immoral, offensive, or strictly adult-oriented.
Taste, of course, is highly subjective: What is bad taste to some is perfectly acceptable to others. And tastes change. What is considered offensive today may not be so tomorrow. People were outraged when the first ad for underarm deodorant appeared in a 1927 Ladies Home Journal; today no one questions such ads. Yet, even with the AIDS scare, all the broadcast networks except Fox still restrict condom ads to local stations, and all forbid any talk of contraception.
Taste is also geographic. A shockingly bloody ad for a small surfwear company in Sydney, Australia, showed a gutted shark lying on a dock. Protruding from its cut-open belly were a human skeleton and an intact pair of surfer shorts. The tagline: “Tough clothes by Kadu—Triple stitched. Strongest materials available. Homegrown and sewn.”
While we might consider that ad quite offensive in North America, it won the Grand Prix at the International Advertising Festival in Cannes, France, several years ago. In Australia it received wide media coverage, since two surfers were killed by sharks while it was running. Rather than pulling the ad out of respect, the company reveled in its timeliness, and the local surfer set responded very favorably. Today, grooming, fashion, and personal hygiene products often use partial nudity in their ads. Where nudity is relevant to the product, people are less likely to regard it as obscene or offensive—except, as in the case of Abercrombie & Fitch, when the advertising is targeting kids. In many European countries, in fact, nudity in commercials is commonplace. Even the usually staid Brits are starting to see women’s breasts in TV commercials and posters.36 Some industry observers predict that nudity in U.S. advertising will increase in the twenty-first century but there will be fewer overt sexual scenes of the Abercrombie & Fitch style. Some consumers get so offended by both advertising and TV programming that they boycott sponsors’ products. Of course, they also have the option to just change the channel. Both of these are effective strategies for consumers because, ultimately, the marketplace has veto power. As the 2003 demise of A&F Quarterly shows, if ads don’t pull in the audience, the campaign will falter and die.
The Social Impact of Advertising in Perspective
Marketing professionals earnestly believe in the benefits that advertising brings to society. Advertising, they say, encourages the development and speeds the acceptance of new products and technologies. It fosters employment. It gives consumers and business customers a wider variety of choices. By encouraging mass production, it helps keep prices down. And it stimulates healthy competition between producers, which benefits all buyers. Advertising, they point out, also promotes a higher standard of living; it pays for most of our news media and subsidizes the arts; it supports freedom of the press; and it provides a means to disseminate public information about important health and social issues.
Critics of advertising might agree with some of these points but certainly not all of them. For example, critics charge that rather than supporting a free press, advertising actually creates an externality that interferes with it.
The media, they say, pander to national advertisers to attract the big ad dollars. In the process, they modify their editorial content to suit their corporate benefactors and consequently shirk their primary journalistic responsibility of presenting news in the public interest. In summary, we can conclude that while advertising may legitimately be criticized for offering less-thancomplete information and, in some instances, for creating unwanted externalities, it should also be applauded when it contributes to the validity of the principles of free enterprise economics. In most cases, by being a rich information source (albeit not complete), advertising contributes to the existence of many buyers and sellers and, therefore, to the self-interest of both consumers and marketers.
Social Responsibility and Advertising Ethics
When advertising violates one of the basic economic assumptions we’ve described, some corrective action is needed. As we’ll discuss in the next section, numerous laws determine what advertisers can and cannot do, but they also allow a significant amount of leeway. That’s where ethics and social responsibility come into play. An advertiser can act unethically or irresponsibly without breaking any laws. Beer and tobacco companies could sponsor rock concerts for college students, and a shoe company could market a basketball sneaker to urban youth as the “Run ‘N Gun” brand. As Ivan Preston says, ethics begin where the law ends.
Ethical advertising means doing what the advertiser and the advertiser’s peers believe is morally right in a given situation. Social responsibility means doing what society views as best for the welfare of people in general or for a specific community of people. Together, ethics and social responsibility can be seen as the moral obligation of advertisers not to violate our basic economic assumptions, even when there is no legal obligation.
Advertisers’ Social Responsibility
The foundation of any human society is the amicable relationship among its members. Without harmony, a society will collapse. So all the institutions within a society have some responsibility for helping to maintain social harmony through proper stewardship of families and companies, exercise of honesty and integrity in all relationships, adherence to accepted ethical standards, willingness to assist various segments of the society, and the courtesy to respect the privacy of others.
Advertising plays an important role in developed countries. It influences a society’s stability and growth. It helps secure large armies, creates entertainment events attracting hundreds of thousands of fans, and often affects
Advertising is a form of communication for marketing and used to encourage, persuade, or manipulate the audience to continue or take some new action. Most commonly, the desired result is to drive consumer behaviour with respect to a commercial offering.
Commercial advertisers often seek to generate increased consumption of their products or services through "branding," which involves associating a product name or image with certain qualities in the minds of consumers. Non-commercial advertisers who spend money to advertise items other than a consumer product or service include political parties, interest groups, religious organizations and governmental agencies. Nonprofit organizations may rely on free modes of persuasion, such as a public service announcement
Advertising is praised but also criticized by critics in their own ways. Advertising has many positive impacts along with its negative pictures. Advertising is something else. It is not related to studies, but it educates. It is not a journalist but gives all information. And it is not an entertaining device but entertains everyone.
- John O’ Toole , President of American Association of Advertising Agencies
The basic economic principles that guided the evolution of advertising also have social and legal effects. When they are violated, social issues arise and the government may take corrective measures. Society determines what is offensive, excessive, and irresponsible; government bodies determine what is deceptive and unfair. To be law-abiding, ethical, and socially responsible, as well as economically effective, advertisers must understand these issues.
Social role of Advertising:
There are some positive and some negative aspects of advertising on the social ground. They are as follows.
Deception in Advertising:
The relation between the buyers and sellers is maintained if the buyers are satisfied with what they saw in advertise and what they got after buying that product. If seller shows a false or deceptive image and an exaggerated image of the product in the advertisement, then the relation between the seller and buyers can’t be healthy. These problems can be overcome if the seller keep their ads clean and displays right image of the product.
The Subliminal Advertising:
Capturing the Minds of the consumers is the main intention of these ads. The ads are made in such a way that the consumers don’t even realizes that the ad has made an impact on their minds and this results in buying the product which they don’t even need. But “All ads don’t impress all consumers at all times”, because majority of consumers buy products on basis of the price and needs.
Effect on Our Value System:
The advertisers use puffing tactics, endorsements from celebrities, and play emotionally, which makes ads so powerful that the consumers like helpless preys buy those products.
These ads make poor people buy products which they can’t afford, people picking up bad habits like smoking and drinking, and buy products just because their favorite actor endorsed that product. This affects in increased the cost of whole society and loss of values of our own selves.
Offensiveness:
Some ads are so offensive that they are not acceptable by the buyers. For example, the ads of denim jeans showed girls wearing very less clothes and making a sex appeal. These kinds of ads are irrelevant to the actual product. Btu then there is some ads which are educative also and now accepted by people. Earlier ads giving information about birth control pills was considered offensive but now the same ads are considered educative and important.
But at the last, there are some great positive aspects which help * Development of society and growth of technologies * Employment * Gives choices to buyers with self interest * Welcomes healthy competition * Improving standard of living. * Give information on social, economical and health issues.
In their constant quest to attract consumers and associate products with “cool” or luxurious and hedonistic lifestyles, some advertisers have consistently pushed the boundaries of what is ethically and socially acceptable. American advertising has always embraced erotic suggestiveness while usually staying clear of full nudity and explicit sexuality. Campaigns that blur that distinction often arouse controversy and even protest. For two decades, the most notorious purveyor of sensual “cool” was Calvin Klein—beginning in the late 1970s with the “nothing comes between me and my Calvin’s” campaign featuring Brooke Shields and culminating in 1998’s “kiddie-porn” controversy. Klein’s racy advertisements provoked the ire of conservative groups but earned him the respect of edgier critics who viewed his campaigns as artistically ironic. In the end, the controversies benefited Klein, as the media firestorm provided free publicity for his brand name and underscored the sophisticated “cool” of the campaigns. Since the millennium, however, the mantle of “most controversial advertiser” has passed from Klein to trendy teen retailer Abercrombie and Fitch (A&F). A subsidiary of The Limited since 1988, A&F flirted with controversy in the early 1990s, when a black-and-white print ad, ostensibly featuring a father and son on a boating outing, was misinterpreted as a gay couple. Capitalizing on the angle, A&F hired iconic 1980s fashion photographer Bruce Weber, who had been responsible for some of the steamier Calvin Klein images, as the principal photographer for the A&F Quarterly, a hybrid catalog and lifestyle magazine, known as a “magalog.” According to Quarterly contributor Sean Collins, the magalog was intended as an “outside-looking-in fantasy version of college life” that parodied “the idealized life of leisure, while at the same time celebrating that ideal for its very unattainability.” The magazine originally featured pseudo-adult photographs of hunky, underdressed young adult men, but as it became increasingly popular in campus Greek culture, it began featuring under- and undressed women as well, in increasingly suggestive sexual situations. The publication’s articles, sexually explicit but often tongue-in-cheek, underscored this “sex and games” attitude. Although opposition always existed toward Weber’s erotic photographs, the explicit articles bred controversy, particularly as it was hard to see what they had to do with the clothing. A feature article on alcohol consumption, called “Drinking 101,” caught the attention of Mothers Against Drunk Driving, and the magazine’s 1999 issue “Naughty or Nice” prompted Illinois Lieutenant Governor Corinne Wood to call for a boycott of the retailer for “peddling soft porn in the guise of a clothing catalog.” In 2002–2003, the company faced two public relations problems regarding ethnically insensitive T-shirt designs and racial discrimination in hiring practices. So when controversy over the Quarterly broke out again, in December 2003, this time over an article on group sex, the company finally reformatted the magalog and introduced a new publication for summer 2004, A&F Magazine, which focused exclusively on artistic photographs of models wearing A&F clothing. The outcry over the Quarterly occurred in spite of the fact that the magalog was sold in a wrapper labeling it as “for over 18” and required identification to purchase. Although containing no full-frontal nudity and only marginally raunchier than magazines like Maxim and Stuff, the confusion of the soft-porn genre with conventional advertising seemed particularly distressing to conservative critics like the National Coalition for the Protection of Children and Families, who claim that the company uses “clothing to sell a sexual philosophy.” Especially since the target market is teens and young adults, the advertising is viewed as transgressing the proper place of marketing. Critics claim it reverses the conventional purpose of ads, using the clothing to sell the lifestyle rather than invoking the lifestyle to sell the clothing. But as with the Calvin Klein ads, the impact of controversy on brand-name recognition is sometimes worth the risk to the corporate image: Abercrombie and Fitch’s profits were up for the second quarter of 2004, and copies of the last issue of the A&F Quarterly fetch up to $100 on eBay. And although the lifestyle depicted may not be popular with certain groups, the clothes themselves have achieved the status of uniform among preppy suburban youth. In advertising, it seems generating controversy is a sure way to be seen.
The Many Controversies about Advertising
Advertising is one of the most visible activities of business. By inviting people to try their products, companies risk public criticism and attack if their advertising displeases or offends the audience or if their products don’t measure up to the advertised promise. Proponents of advertising say it’s therefore safer to buy advertised products because, when a company’s name and reputation are on the line, it tries harder to fulfill its promises (especially when it lists product benefits).
Advertising is both applauded and criticized not only for its role in selling products but also for its influence on the economy and on society. For years, critics have denigrated advertising for a wide range of sins—some real, some imagined.
John O’Toole, the late chair of Foote, Cone & Belding and president of the American Association of Advertising Agencies, pointed out that many critics attack advertising because it isn’t something else. Advertising isn’t journalism, education, or entertainment—although it often performs the tasks of all three. To go back to Albert Lasker’s original definition, advertising is salesmanship in print (or in today’s parlance, in the paid space and time of mass media). As a means of communication, advertising shares certain traits of journalism, education, and entertainment, but it shouldn’t be judged by those standards. Sponsors advertise because they hope it will help them sell some product, service, or idea.
Notwithstanding O’Toole’s articulate defense, many controversies still swirl around the whole field of advertising. Some of them focus on advertising’s economic role. For example, how does advertising affect the value of products? Does it cause higher or lower prices? Does it promote competition or discourage it? How does advertising affect overall consumer demand? What effect does it have on consumer choice and on the overall business cycle?
Other controversies focus on the societal effects of advertising. For instance, does advertising make us more materialistic? Does it force us to buy things we don’t need? Does it reach us subliminally in ways we can’t control? How does it affect the art and culture of our society? Does advertising debase our language?
From these economic and social controversies, new questions arise regarding the responsibility for and control of advertising. What is the proper role for participants in the marketing process? How much latitude should marketers have in the kinds of products they promote and how they advertise them? And what about consumers? Don’t they have some responsibility in the process? Finally, what is the proper role of government? What laws should we have to protect consumers? And what laws go too far and violate the marketer’s freedom of speech?
These are important questions, and there are no simple answers. But debate is healthy. This chapter addresses some of the major questions and criticisms about advertising, both the pros and the cons, and delves into the regulatory methods used to remedy advertisers’ abuses. the underlying principle of free-market economics—that a society is best served by empowering people to make their own decisions and act as free agents, within a system characterized by four fundamental assumptions: self-interest, many buyers and sellers, complete information, and absence of externalities (social costs).
This fundamentally utilitarian framework, derived from the goal of society to promote behaviors that foster the greatest good for the most people, offers a system of economic activity—free enterprise—that has accomplished that goal better than any other economic system in history. This is why societies around the world are increasingly adopting free-enterprise economics. Economic role of AdvertisingThe 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 the chain reaction, although hard to predict, is related to the force of the shot and the economic environment in which it occurred. It’s no coincidence that the level of advertising investment in a country is directly proportional to its standard of living. - Marcel BleusteinBlanchet, the father of modern French advertisingValue of Products:The advertised products are not always the best products in the market. There are some unadvertised products also present which are good enough. But advertising helps increase value for the products by showing the positive image of the product which in turn helps convincing customers to buy it. Advertising educates consumers about the uses of the products hence increasing its value in minds of the consumers. For e.g. mobile phones were first considered as necessity but nowadays the cell phones come with number of features which makes them mode of convenience for consumers.Why do most people prefer Coca-Cola to some other cola? Why do some people prefer Calvin Klein underwear to some other unadvertised brand? Are the advertised products functionally better? Not necessarily. But, in the mind of the consumer, advertising has given these brands added value. | |
Effect on Prices:
Some advertised products do cost more than unadvertised products but the vice versa is also true. But if there is more competition in the market for those products, the prices have to come down, for e.g., canned juices from various brands. Thus some professional like chartered accountants and doctors are not allowed to advertise.
But some products do not advertise much, and they don’t need much of it and even their prices are high but they are still the leaders in market as they have their brand name. e.g., Porsche cars
Effect on consumer demand and choices:
Even if the product is heavily advertised, it does not mean that the demand or say consumption rates will also increase. The product has to be different with better quality, and more variety than others. For E.g., Kellogg’s cornflakes have variety of flavors with different ranges to offer for different age groups and now also for people who want to loose weight thus giving consumers different choices to select from.
Effect on business cycle:
Advertising no doubt helps in employing more number of people. It increases the pay rolls of people working in this field. It helps collecting more revenues for sellers which they use for betterment of product and services. But there are some bad effects of advertisements on business cycle also. Sometimes, consumer may find the foreign product better than going for the national brand. This will definitely effect the production which may in turn affect the GDP of the country.
The economic aspects are supported by the Abundance Principle which says producing more products and services than the consumption rate which helps firstly keeping consumers informed about the options they have and secondly helps sellers for playing in healthy and competitive atmosphere with their self interest.
Value of Products
In the mid-1960s, a famous psychologist named Ernest Dichter asserted that a product’s image, created in part by advertising and promotion, is an inherent feature of the product itself. Subsequent studies showed that while an ad may not address a product’s quality directly, the positive image conveyed by advertising may imply quality. Moreover, by simply making the product better known, advertising can make the product more desirable to the consumer. In these ways, advertising adds value to the brand. That’s why people pay more for Bufferin than an unadvertised brand displayed right next to it—even though all buffered aspirin, by law, is functionally the same.
Advertising also adds value to a brand by educating customers about new uses for a product. Kleenex was originally advertised as a makeup remover, later as a disposable handkerchief. AT&T first promoted the telephone as a necessity and later as a convenience.
One advantage of the free-market system is that consumers can choose the values they want in the products they buy. If, for example, low price is important, they can buy an inexpensive economy car. If status and luxury are important, they can buy a fancy sedan or racy sports car. Many of our wants are emotional, social, or psychological rather than functional. One way we communicate who we are (or want to be) is through the products we purchase and display. By associating the product with some desirable image, advertising offers people the opportunity to satisfy those psychic or symbolic wants and needs.
In terms of our economic framework, by adding value to products, advertising contributes to self-interest—for both the consumer and the advertiser. It also contributes to the number of sellers. That increases competition, which also serves the consumer’s self-interest
Effect on Prices
If advertising adds value to products, it follows that advertising also adds cost, right? And if companies stopped all that expensive advertising, products would cost less, right?
Wrong.
Some advertised products do cost more than unadvertised products, but the opposite is also true. Both the Federal Trade Commission and the Supreme Court have ruled that, by encouraging competition, advertising has the effect of keeping prices down. That again serves the consumer’s self-interest. And that is why professionals such as attorneys and physicians are now allowed to advertise.
Sweeping statements about advertising’s positive or negative effect on prices are likely to be too simplistic.
We can make some important points, though: * As one of the many costs of doing business, advertising is indeed paid for by the consumer who buys the product. In most product categories, though, the amount spent on advertising is usually very small compared with the total cost of the product
*Advertising is one element of the mass-distribution system that enables many manufacturers to engage in mass production, which in turn lowers the unit cost of products. These savings can then be passed on to consumers in the form of lower prices. In this indirect way, advertising helps lower prices.
* In industries subject to government price regulation (agriculture, utilities), advertising has historically had no effect on prices. In the 1980s, though, the government deregulated many of these industries in an effort to restore free-market pressures on prices. In these cases, advertising has affected price—usually downward, but not always.
* In retailing, price is a prominent element in many ads, so advertising tends to hold prices down. On the other hand, national manufacturers use advertising to stress features that make their brands better; in these cases advertising tends to support higher prices for their brands.
Effect on Competition
Some observers believe advertising actually restricts competition because small companies or industry newcomers can’t compete with the immense advertising budgets of large firms. It’s 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. In other cases, competition is reduced because of mergers and acquisitions (big companies working in their own self-interest).
High costs may inhibit the entry of new competitors in industries that spend heavily on advertising. In some markets, the original brands probably benefit greatly from this barrier. However, the investments needed for plants, machinery, and labor are of far greater significance. These are typically the real barriers to entry, not advertising.
Advertising by big companies often has only a limited effect on small businesses because a single advertiser is rarely large enough to dominate the whole country. Regional oil companies, for example, compete very successfully with national oil companies on the local level. In fact, the freedom to advertise encourages more sellers to enter the market. And we’ve all seen non-advertised store brands of food compete very effectively with nationally advertised brands on the same grocery shelves.
Effect on Consumer Demand
The question of advertising’s effect on total consumer demand is extremely complex. Numerous studies show that promotional activity does affect aggregate consumption, but they disagree as to the extent. Many social and economic forces, including technological advances, the population’s educational level, increases in population and income, and revolutionary changes in lifestyle, are more significant. For example, the demand for CD players, cellular phones, and personal computers expanded at a tremendous rate, thanks in part to advertising but more to favorable market conditions. At the same time, advertising hasn’t reversed declining sales of such items as hats, fur coats, and manual typewriters.
As we shall discuss in Chapter 6, advertising can help get new products off the ground by giving more people more “complete information,” thereby stimulating primary demand—demand for the entire product class. In declining markets, when the only information people want is price information, advertising can influence selective demand—demand for a particular brand. But the only effect it will have on primary demand is to slow the rate of decline. In growing markets, advertisers generally compete for shares of that growth. In mature, static, or declining markets, they compete for each other’s shares—conquest sales.
Effect on Consumer Choice
For manufacturers, the best way to beat the competition is to make their product different. For example, look at the long list of car models, sizes, colors, and features designed to attract different buyers. And grocery shelves may carry more than 100 different brands of breakfast cereals—something for everybody.
The freedom to advertise encourages businesses to create new brands and improve old ones. When one brand reaches market dominance, smaller brands may disappear for a time. But the moment a better product comes along and is advertised skillfully, the dominant brand loses out to the newer, better product. Once again, the freedom to advertise promotes the existence of more sellers, and that gives consumers wider choices.
Effect on the Business Cycle
The relationship between advertising and gross domestic product has long been debated. John Kenneth Galbraith, a perennial critic of advertising, concedes that, by helping to maintain the flow of consumer demand (encouraging more buyers), advertising helps sustain employment and income. But he maintains that, despite declines in the value of the dollar, the U.S. trade deficit persists because advertising and marketing activities create consumer preference for certain foreign products. Historically, when business cycles dip, companies cut advertising expenditures. That may help short-term profits, but studies prove that businesses that continue to invest in advertising during a recession are better able to protect, and sometimes build, market shares. However, no study has shown that if everybody just keeps advertising, the recessionary cycle will turn around. We conclude that when business cycles are up, advertising contributes to the increase. When business cycles are down, advertising may act as a stabilizing force by encouraging more buyers to buy.
The Abundance Principle: The Economic Impact of Advertising in Perspective
To individual businesses such as Calvin Klein, the local car dealer, and the convenience store on the corner, advertising pays back more than it costs. If advertising didn’t pay, no one would use it. And the various news and entertainment media that depend on advertising for financial support would go out of business.
Advertising costs less for the consumer than most people think. The cost of a bottle of Coke includes about a penny for advertising. And the $20,000 price tag on a new car usually includes a manufacturer’s advertising cost of less than $400.
To the economy as a whole, the importance of advertising may best be demonstrated by the abundance principle. This states that in an economy that produces more goods and services than can be consumed, advertising serves two important purposes: It keeps consumers informed of their alternatives (complete information), and it allows companies to compete more effectively for consumer dollars (selfinterest). In North America alone, the U.S. and Canadian economies produce an enormous selection of products. Most supermarkets carry more than 30,000 different items. Each carmaker markets dozens of models.
And many suppliers compete for the consumer dollar. This competition generally results in more and better products at similar or lower prices. Advertising stimulates competition (many buyers and sellers). In countries where consumers have more income to spend after their physical needs are satisfied, advertising also stimulates innovation and new products. However, no amount of advertising can achieve long-term acceptance for products that do not meet consumer approval. Despite massive advertising expenditures, fewer than a dozen of the 50 best-known cars developed in the twentieth century are still sold today.
The Social Impact of Advertising
Because it’s so visible, advertising gets criticized frequently, for both what it is and what it isn’t. Many of the criticisms focus on the style of advertising, saying it’s deceptive or manipulative. Collectively we might refer to these as short-term manipulative arguments. Other criticisms focus on the social or environmental impact of advertising. These are long-term macro arguments.
The social aspect of advertising typically involves the last two principles: complete information and absence of externalities. In fact, social issue debates can be seen as instances where advertising tends to violate one or more of these basic economic principles. We can examine many issues from these two perspectives. Some of the most important are deception and manipulation in advertising, the effect of advertising on our value system, commercial clutter, stereotypes, and offensiveness.
Deception in Advertising
One of the most common short-term arguments about advertising is that it is so frequently deceptive. Professor Ivan Preston notes that the essence of a marketplace lies in the willingness of buyers and sellers to enter commercial transactions. Anything that detracts from the satisfaction of the transaction produces a loss of activity that ultimately hurts both parties. If a product does not live up to its ads, dissatisfaction occurs—and in the long term that is as harmful to the advertiser as to the buyer.
For advertising to be effective, consumers must have confidence in it. So any kind of deception not only detracts from the complete information principle of free enterprise but also risks being self-defeating. Even meaningless (but legal) puffery might be taken literally and therefore become deceptive. Puffery refers to exaggerated, subjective claims that can’t be proven true or false, such as “the best,” “premier,” or “the only way to fly.”
Under current advertising law, the only product claims—explicit or implied—that are considered deceptive are those that are factually false or convey a false impression and therefore have the potential to deceive or mislead reasonable people. But puffery is excluded from this requirement because regulators maintain that reasonable people don’t believe it anyway. Preston points out that since advertisers regularly use puffery and nonproduct facts to enhance the image of their products, they must think consumers do believe it. Nonproduct facts are not about the brand but about the consumer or the social context in which the consumer uses the brand.
An example is “Pepsi. The choice of a new generation.”
The fact is that advertising, by its very nature, is not complete information. It is biased in favor of the advertiser and the brand. People expect advertisers to be proud of their products and probably don’t mind if they puff them a little. But when advertisers cross the line between simply giving their point of view and creating false expectations, that’s when people begin to object. One problem is the difficulty of seeing the line, which may be drawn differently by different people. Papa John’s Pizza no doubt thought it was just puffing when it advertised “Better ingredients. Better pizza.” Pizza Hut saw it differently, though, and sued Papa John’s for deceptive advertising. A U.S. District judge agreed and awarded Pizza Hut close to half a million dollars in damages. The judge then ordered Papa John’s to stop using its “Better ingredients” slogan. This decision was later overturned on appeal, but the case still goes to show that there are limits on what an advertiser can safely puff. Preston points out, “Only puffs open to measurement lose their invisible shields. If Papa John’s says it has better dough, you can attack it. But if Papa John’s says it’s better overall, that’s OK. The bigger the lie, the bigger the protection. Isn’t that amazing?” For more on this story and on puffery, see the Ethical Issue: “Truth in Advertising: Fluffing and Puffing,”
Ivan Preston believes these kinds of problems can be avoided if marketers simply improve the kind of information they give in their advertising. He would require advertisers to have a reasonable basis for any claims they make, whether those claims are facts about the product, nonfacts such as “Coke is it,” or nonproduct facts. This, he believes, would contribute positively to our free market system. Ad Lab 3–A lists some other common deceptive practices
The Subliminal Advertising Myth
Wilson Bryan Key promotes the notion that, to seduce consumers, advertisers intentionally create ads with sexual messages hidden in the illustrations just below the limen—or the threshold of perception. He calls this subliminal advertising. His premise is that by embedding dirty words in the ice cubes in a liquor ad, for instance, advertisers can somehow make us want to buy the product. Over the years, many academic studies have completely debunked this theory. In fact, to date, no study has proved that such embedding exists or that it would have any effect if it did exist. Unfortunately, by promulgating this fiction, Key has been able to sell many thousands of books; worse, he has propagated a generation of consumers who believe in the poppycock of subliminal advertising.
The chord that Key has been able to touch on, though, is important to discuss: the widespread fear that advertisers are messing with our heads—manipulating us psychologically, and without our consent, into buying things we don’t want or need. This gets to the heart of the complete information principle because the criticism suggests that advertising does not give consumers information upon which to base rational decisions, but rather manipulates us through brainwashing. Consumers are, therefore, like captured prey, helpless in the jaws of marketing predators.
If this were true, it would be cause for great alarm and a congressional investigation. But, in fact, if we stop to think about it, we all know it’s not true. Marketers introduce thousands of new products to the marketplace every year. And every year—despite massive advertising expenditures—the vast majority of them fail. Why? Because of competition—many sellers are fiercely competing for the patronage of the same customers. Only some succeed. Most fail.
If you think about all the products you buy, how many involve a choice between different brands and different styles? And how many involve a decision based on price or convenience? Probably most. So how many of your purchases can you trace to having been helplessly manipulated? Probably none. You receive information from many different sources: friends and relatives, store displays, ads, packaging, and retail store clerks. At some point, you make a decision. In many cases, your decision is not to buy at all—to wait for either more information or more money. As always, the customer, acting in his or her own self-interest, is king.
The Effect of Advertising on Our Value System
A related long-term argument, often voiced by certain professional critics—sociologists, journalists, consumer advocates, and government regulators—is that advertising degrades people’s value systems by promoting a hedonistic, materialistic way of life. Advertising, they say, encourages us to buy more cars, more CDs, more clothing, and more junk we don’t need. It is destroying the essence of our “citizen democracy,” replacing it with a self-oriented consumer democracy.
Critics claim advertising manipulates us into buying things by playing on our emotions and promising greater status, social acceptance, and sex appeal. It causes people to take up harmful habits, makes poor kids buy $170 sneakers, and tempts ordinary people to buy useless products in the vain attempt to emulate celebrity endorsers. Again, they claim advertising is so powerful consumers are helpless to defend themselves against it.Once again, this argument exaggerates the power of advertising. In fact, most Americans express a healthy skepticism toward it. One study showed that only 17 percent of U.S. consumers see advertising as a source of information to help them decide what to buy. Perhaps that’s why more advertised products fail than succeed in the marketplace.
Still, this may be the most damning criticism of advertising because there’s no question that advertisers do indeed spend millions trying to convince people their products will make them sexier, healthier, and more successful. The very amount of advertising we witness every day seems to suggest that every problem we have can be solved by the purchase of some product.
Even if we assume that most people can willingly accept or reject an advertising message, they are still not getting the whole picture. After all, advertising is supported by marketers who want to sell their products, but nobody markets the opposite stance of why we don’t need to or shouldn’t buy a particular product at all. In this sense, consumers don’t have complete information, so our advocacy system has failed. This is an important issue of externalities, because the aggregate activities of the nation’s advertisers affect many people outside the immediate marketing transaction and create an unexpected cost to society.
The Proliferation of Advertising
One of the most common long-term complaints about advertising is that there’s just too much of it. In the United States alone, the average person may be exposed to 500 to 1,000 commercial messages a day. With so many products competing for attention (more than 30,000 in the average supermarket), advertisers themselves worry about the negative impact of excessive advertising. According to a recent study by the American Association of Advertising Agencies, ad clutter is still on the rise. In 2002, the amount of nonprogram time ranged from a low of 16 minutes per hour in prime time to nearly 21 minutes per hour in daytime, a day part that is particularly important to advertisers. The networks add to the problem themselves by jamming every possible moment with promotions for their shows. Too much advertising creates an externality not only for consumers (nuisance), but for the advertisers themselves—the more commercials that hit the consumer’s brain, the less effective paid advertising is. Conscious of this, Meredith Broadcasting Group cut 15 percent of its advertising inventory from local newscasts at its CBS-affiliate, WGNX Atlanta, and saw its household ratings go up 20 percent. Higher ratings, of course, means they can charge more for their remaining commercial time. Hopefully, other stations will follow suit.
While the clutter problem is irksome to viewers and advertisers alike, most people tolerate it as the price for free TV, freedom of the press, and a high standard of living. However, with the proliferation of new media choices, this externality is only likely to get worse. Virtually every popular website is cluttered with advertising banners, and our e-mail boxes are flooded with advertising messages on a daily basis. While the Federal Communications Commission exercises no jurisdiction over the Internet, it did consider reinstating commercial time limits on television. But, as of now, the only limits currently in force relate to TV programming aimed at children 12 and under—advertising may not exceed 10.5 minutes per hour on weekends and 12 minutes per hour on weekdays.
Clutter is not so evident in other countries. In France, for example, government-owned stations can carry no more than 12 minutes of commercials per hour. During movies there is only one 4-minute commercial break, although the government is considering changing that rule to allow two breaks.
In North America we should be so lucky. During election periods, the clutter problem gets worse, seriously devaluing an advertiser’s commercial. One year, in fact, after an unexpectedly large number of political ads ran during the fall election season, the Association of Canadian Advertisers urged its members to try to renegotiate the prices they had been charged for air time during that period.
The Use of Stereotypes in Advertising
Advertising has long been criticized for insensitivity to minorities, women, immigrants, the disabled, the elderly, and a myriad of other groups—that is, for not being “politically correct.” This long-term argument also addresses externalities because the very presence of advertising affects the nature of our culture and environment, even when we do not want it. This is ironic, because marketing and advertising practitioners are supposed to be professional students of the communication process and consumer behavior (a subject we cover in Chapter 5). But, in fact, they sometimes lose touch with the very people they’re trying to reach. This is one reason the discipline of account planning (discussed in Chapter 4) is growing so rapidly. Since the 1980s, national advertisers have become more sensitive to the concerns of minorities and women.
Latinos, African Americans, Asians, Native Americans, and others are now usually portrayed favorably in ads, not only because of pressure from watchdog groups, but also because it’s just good business; these consumers represent sizable target markets. Marilyn Kern-Foxworth, a Texas A&M professor and an expert on minorities in advertising, points out that positive role portrayal in some mainstream ads has had a positive effect on the selfesteem of African-American youth. As we’ll see in Chapter 4, this positive trend has accelerated with the emergence of many ad agencies owned and staffed by minorities that specialize in reaching minority markets. In national advertising, the image of women is also changing from their historic depiction as either subservient housewives or sex objects (see the Ethical Issue, “Does Sex Appeal?” in Chapter 12). This may be partially due to the increasing number of women in managerial and executive positions with both advertisers and agencies. Stanford professor Debra Meyerson says “the glass ceiling definitely exists, but at the same time, there are an increasing number of women who are breaking through it.” By 2000, more than 60 percent of all women were participating in the workforce, with more than 20 million of them in managerial and professional careers. Advertisers want to reach, not offend, this sizable market of upwardly mobile consumers. Some agencies now
Offensiveness in Advertising
Offensiveness is another short-term style argument that also speaks to externalities. Many parents, for instance, were incensed at Calvin Klein’s ads because they perceived them as pornographic, thereby causing a social cost that extended well beyond the limited scope of merely selling clothes. More recently, Abercrombie & Fitch came under attack for showing nude and seminude models in the company’s quarterly catalogs. The fact is, people just don’t want their children exposed to messages that they deem immoral, offensive, or strictly adult-oriented.
Taste, of course, is highly subjective: What is bad taste to some is perfectly acceptable to others. And tastes change. What is considered offensive today may not be so tomorrow. People were outraged when the first ad for underarm deodorant appeared in a 1927 Ladies Home Journal; today no one questions such ads. Yet, even with the AIDS scare, all the broadcast networks except Fox still restrict condom ads to local stations, and all forbid any talk of contraception.
Taste is also geographic. A shockingly bloody ad for a small surfwear company in Sydney, Australia, showed a gutted shark lying on a dock. Protruding from its cut-open belly were a human skeleton and an intact pair of surfer shorts. The tagline: “Tough clothes by Kadu—Triple stitched. Strongest materials available. Homegrown and sewn.”
While we might consider that ad quite offensive in North America, it won the Grand Prix at the International Advertising Festival in Cannes, France, several years ago. In Australia it received wide media coverage, since two surfers were killed by sharks while it was running. Rather than pulling the ad out of respect, the company reveled in its timeliness, and the local surfer set responded very favorably. Today, grooming, fashion, and personal hygiene products often use partial nudity in their ads. Where nudity is relevant to the product, people are less likely to regard it as obscene or offensive—except, as in the case of Abercrombie & Fitch, when the advertising is targeting kids. In many European countries, in fact, nudity in commercials is commonplace. Even the usually staid Brits are starting to see women’s breasts in TV commercials and posters.36 Some industry observers predict that nudity in U.S. advertising will increase in the twenty-first century but there will be fewer overt sexual scenes of the Abercrombie & Fitch style. Some consumers get so offended by both advertising and TV programming that they boycott sponsors’ products. Of course, they also have the option to just change the channel. Both of these are effective strategies for consumers because, ultimately, the marketplace has veto power. As the 2003 demise of A&F Quarterly shows, if ads don’t pull in the audience, the campaign will falter and die.
The Social Impact of Advertising in Perspective
Marketing professionals earnestly believe in the benefits that advertising brings to society. Advertising, they say, encourages the development and speeds the acceptance of new products and technologies. It fosters employment. It gives consumers and business customers a wider variety of choices. By encouraging mass production, it helps keep prices down. And it stimulates healthy competition between producers, which benefits all buyers. Advertising, they point out, also promotes a higher standard of living; it pays for most of our news media and subsidizes the arts; it supports freedom of the press; and it provides a means to disseminate public information about important health and social issues.
Critics of advertising might agree with some of these points but certainly not all of them. For example, critics charge that rather than supporting a free press, advertising actually creates an externality that interferes with it.
The media, they say, pander to national advertisers to attract the big ad dollars. In the process, they modify their editorial content to suit their corporate benefactors and consequently shirk their primary journalistic responsibility of presenting news in the public interest. In summary, we can conclude that while advertising may legitimately be criticized for offering less-thancomplete information and, in some instances, for creating unwanted externalities, it should also be applauded when it contributes to the validity of the principles of free enterprise economics. In most cases, by being a rich information source (albeit not complete), advertising contributes to the existence of many buyers and sellers and, therefore, to the self-interest of both consumers and marketers.
Social Responsibility and Advertising Ethics
When advertising violates one of the basic economic assumptions we’ve described, some corrective action is needed. As we’ll discuss in the next section, numerous laws determine what advertisers can and cannot do, but they also allow a significant amount of leeway. That’s where ethics and social responsibility come into play. An advertiser can act unethically or irresponsibly without breaking any laws. Beer and tobacco companies could sponsor rock concerts for college students, and a shoe company could market a basketball sneaker to urban youth as the “Run ‘N Gun” brand. As Ivan Preston says, ethics begin where the law ends.
Ethical advertising means doing what the advertiser and the advertiser’s peers believe is morally right in a given situation. Social responsibility means doing what society views as best for the welfare of people in general or for a specific community of people. Together, ethics and social responsibility can be seen as the moral obligation of advertisers not to violate our basic economic assumptions, even when there is no legal obligation.
Advertisers’ Social Responsibility
The foundation of any human society is the amicable relationship among its members. Without harmony, a society will collapse. So all the institutions within a society have some responsibility for helping to maintain social harmony through proper stewardship of families and companies, exercise of honesty and integrity in all relationships, adherence to accepted ethical standards, willingness to assist various segments of the society, and the courtesy to respect the privacy of others.
Advertising plays an important role in developed countries. It influences a society’s stability and growth. It helps secure large armies, creates entertainment events attracting hundreds of thousands of fans, and often affects
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