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2 Economics
6 The effects of advertising on our
2 Ethics
6 The effects of advertising on our society
2 Regulation
6 Our attempts to manage those effects
arket Power arket Information
6 Ydvertising 6 Ydvertising
6 Persuades consumer to 6 Increased consumer knowledge
purchase one brand over
another more often 6 ore substitute products
6 Excess brand profits consumers can consider
6 Higher barriers to entry 6 Lower barriers to entry
and more market power by new brands
6 ore advertising leads to 6 Reduced market power for
greater brand loyalty any individual brand
6 Reduce quality/raise price 6 Better pricing/distribution
6 Reduced consumer more product innovation
sovereignty 6 Optimal brand profits, consumer
6 onopoly choice, and price benefits
2 Ydvertising = arket Power

2 Ydvertising = arket Information

2 Or both?


2 How does advertising affect the

price of a new car?
2 How does advertising affect the
price of a latté from Starbucks?
2 How does advertising affect the
way that you spend your money?


2 èan ads make people buy things

they don¶t want or need?
2 èan ads make people more
2 Yre the benefits of advertising
worth the annoyance?
2 Yds destroy 2 Yds give consumers
freedom of choice more choices

2 Yds destroy 2 Yds = freedom of

democracy/media speech

2 Ydvertising warps 2 Yds simply reflect

social values the ³real world´
r Ydvocacy
6 uhat does the advertising advocate?
2 Yccuracy
6 How accurate is the advertising?
6 Some of this depends on susceptibility
of the audience (i.e., kids .
3 Ycquisitiveness
6 uhat is the overall effect?
6 Does it make us more materialistic?
r Puffery "Nothing beats a Bud´
2 Decency Sexual innuendo, violence
3 Stereotyping Portrayals of housewives,
seniors, racial groups
4 èhildren Violence, dangerous acts,
unhealthy habits
5 èontroversy èondoms, alcohol, fashion
×    3! 
×   [  
2 Purpose for advertising regulation
6 To protect competition
6 To protect consumers from economic or
physical harm
2 Regulations are concerned with
6 Deceptive or unfair content
6 How advertising is delivered
6 Protection of susceptible groups (kids, etc.
r Deception ust lead to material injury.
2 èomparisons ust substantiate with
statistically significant data.
3 Endorsements ust be qualified;
must use product.
4 Demonstrations ust be accurately depicted.
5 ³Bait & Switch´ Product must be available.
*3 × 
r èonsent Decree FTè asks advertiser to stop.

2 èease & Desist FTè gets court order to

force advertiser to stop.

3 èorrective Yds FTè mandates new ads to

correct false perceptions.

4 èonsumer Redress FTè mandates reimbursement.

´$ ×   
$ !
r FDY 3   

2 Fèè   

3 Postal Service   

4 YTF  

5 Patent Office  
6 Library of èongress   

r NYD (National Ydvertising Division

 Part of Better Business Bureau

2 National Ydvertising Review Board

 Represents advertisers and agencies
 Y division of the NYD

2 èompliance is strictly voluntary

2 uhat do you think is the biggest
benefit of advertising?
2 uhat do you think is the biggest
problem with advertising?
2 uhat do you think is the best example
of bad advertising?
2 uhat do you think is the best example
of good advertising?