CHAPTER

THE ECONOMIC,
SOCIAL, AND
REGULATORY
ASPECTS OF
ADVERTISING

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The Economic Impact of Advertising -Value

 P
do people prefer Coca-Cola to some ot er

cola? Or Abercrombie & Fitc k akis ?
T ese products ma
not be functionall
better, but
advertising as given t ese brands added value
(in t e mind of t e consumer)

 Advertising also adds value to t e brand b

educating customers about new uses for a
product.
Kleenex was originall
advertised as a makeup
remover, later as a disposable andkerc ief

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 The Economic Impact of Advertising

 Price:
Some advertised products cost more t an unadvertised
products, but t e opposite is also true
Bot t e FTC and t e Supreme Court ave ruled t at
b
encouraging competition, advertising as t e effect
of keeping prices down.

 Business c
cles:
P en business c
cles are up, advertising contributes to
t e increase. P en business c
cles are down,
advertising ma
act as a stabilizing force b

encouraging more bu
ers to bu

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 T e Social Impact of Advertising-
Deception

 Deception in Advertising: So frequentl

If a product does not live up to its ads, dissatisfaction
occurs- and in t e long term t at is as armful to t e
advertisers as to t e bu
ers.

 Puffer
(inflated promises and claims):

³Nestle¶s makes t e ver
best c ocolate´
³T ere is a smile in ever
Hers e
bar´

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Claims versus Puffer

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 T e Social Impact of Advertising

 T e Proliferation of Advertising:
T e average person in t e U.S. ma
be exposed to 500-
1000 commercial messages per da
.

 Offensiveness in Advertising:
P at is considered offensive toda
ma
not be so
tomorrow.
People were outraged w en t e first ad for underarm deodorant
appeared in 1927 Ladies Home Journal
Taste is ig l
subjective: P at is bad taste to some is
perfectl
fine b
ot ers.
Calvin Klein¶s ad was perceived as pornograp ic b
man
.

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Ourrent Regulations affecting of U.S. Advertisers

 Freedom of Commercial Speec

- In 1982, t e Supreme Court up eld (Ok) an FTC order allowing
p
sicians and dentists to advertise.

- Because t e tobacco industr
ad abused its freedom of

commercial speec , it was banned from using outdoor advertising
posters, sponsors ip events wit a
out audience, and t e use of
cartoon c aracters.

- Advertising to c ildren is far more strict in ot er countries t an in

t e U.S.: Sweden and Norwa
do not permit an
television
advertising toward c ildren under 12.

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 Äed Regulations affecting Ads in North America

 U.S. Federal Trade Commission (FTC) is

t e major regulator of advertising for products sold in
interstate commerce.

 T e Food and Drug Administration (FDA)

to make sure t e food we eat is safe, t e cosmetics we
use won¶t urt us, and t e medicines and t erapeutic
devices we bu
are safe and effective.

 T e Federal Communication Commission (FCC)

control over radio, television, telep one, satellites,
cable TV, and t e internet.
FCC can control t e advertised products and contents
of ads.
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 Äed Regulations affecting Ads in North America

 T e Patent and Trademark Office to register and

protect:
- patents of new invention and tec nolog
worldwide.
- trademark : an
word, name, or s
mbol used b

manufacturers to distinguis t eir products from
ot ers.

 T e Librar
of Congress
protects all cop
rig ted material, including advertising
in t e U.S.

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