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46 Cards in this Set

  • Front
  • Back
Underlying Principle of Free Market Economics
Society is best served by empowering people to make their own decisions and act within a system with: SELF INTEREST, MANY BUYERS AND SELLERS, COMPLETE INFO. AND ABSENCE OF EXTERNALITIES.
*most good for the most people
Economic impact:
Advertising= 1.85% of GDP

Between $567 and $1000 are spent on every american
Effect on
A. Value of Products

B. Effect on Prices

C. Effect on Competition
A.Increase value of product

B. Increased competition= Lower Prices

C. Stimulates competition; minor barrier to entry for smaller countries
D. Effect on Consumer Demand:

E. Effect on Consumer Choice:

F. Effect on Business Cycle
D. Does increase demand a little, but not the only factor

E. Competition= Increases choices/Better products

F. Expansion= Adv. contributes to good cycle/ Recession= Advertising is a stablilzer
a)Primary Demand

b)Secondary Demand
a)Consumer demand for a whole product category.

b)Consumer demand for the particular advantages of one brand over another.
Abundance Principle
In an economy that produces more goods and services than it consumes, advertising serves two important purposes:
1) It keeps consumers informed of alternatives
2) It allows companies to compete more effectively for consumer dollars
Social Impact:

a) Short-term manipulative arguments

b) long-term macro arguments
a)Criticisms of advertising that focus on the style of advertising (e.g., that it is manipulative or deceptive).

b)Criticisms of advertising that focus on the social or environmental impact of marketing.
Ivan Preston
essence of marketplace= willingness of buyers and sellers to enter into commercial transactions
Exaggerated, subjective claims that can't be proven true or false such as "the best," "premier," or "the only way to fly."
What is Deception?(law)

a)Deceptive advertising
a)According to the FTC, any ad in which there is a misrepresentation, omission, or other practice that can mislead a significant number of reasonable consumers to their detriment.

*Ads that are factually false
*Sometimes difficult to draw the line b/w factually false and puffery
Nonproduct facts
Product claims not about the brand but about the consumer or the social context in which the consumer uses the brand.

EX. Pepsi: The choice of a new generation.
a)Subliminal Advertising

a)Advertisements with messages (often sexual) supposedly embedded in illustrations just below the threshold of perception.

b)Our threshold of perception.
Summary of the Social Impact of advertising:
Ads may be legitimately criticized for incomplete info./unwanted externalities, BUT it should be applauded when it does contribute to the validity of the principles of free market economics
a)Ethical Advertising

b)Social Responsibility
a)Doing what the advertiser and the advertiser's peers believe is morally right in a given situation.

b)Acting in accordance with what society views as best for the welfare of people in general or for a specific community of people.
Three levels of Ethics:
The group/community perception of ethics

The Individual/Personal Value system

Ethic Definition: concrete specification of whet is right, wrong etc.
BOOK: Virginia State Board of Pharmacy v. Virginia citizens consumer council(1976)
ads need protection under the first amendment as commercial speech
BOOK: Central Hudson Gas v. Public Service Commission

Test for Regulation:
1) Does commercial speech concern a lawful activity?

2) Will a restriction substantially serve govt. interest substantially?

3) Does regulation directly advance govt. interest asserted?

4) Is the restriction more than necessary to further the interest that is asserted?

Children's Advertising Review Unit
This entity, created by the Council of Better Business Bureaus, provides a general advisory service for advertisers, agencies, children, parents, and educators.

Guidelines for Children's Advertising
Privacy Rights
Of or pertaining to an individual's right to prohibit personal information from being divulged to the public.
Small pieces of information that get stored in a computer's Web browser when one loads certain Web sites. Cookies keep track of whether a certain user has ever visited a specific site and allows the site to give users different information according to whether or not they are repeat visitors.
Fair Information Practice Principles (Consumer Privacy Online)
Must have:
FTC- Federal Trade Commission
The major federal regulator of advertising used to promote products sold in interstate commerce.
Deceptive Advertising

Unfair Advertising
a)According to the FTC, any ad in which there is a misrepresentation, omission, or other practice that can mislead a significant number of reasonable consumers to their detriment.

b)According to the FTC, advertising that causes a consumer to be "unjustifiably injured" or that violates public policy.
Guidelines for FTC to declare
1) Practice involves substantial, unavoidable injury to consumers

2)The injury is not reasonably avoidable by consumers themselves

3)Injury is not outweighed by benefits to consumers or competition
Comparative Advertising
Advertising that claims superiority to competitors in one or more aspects.

*must be truthful and compare some objectively measurable characteristic


c)Affirmative Disclosure*
a)Evidence that backs up cited survey findings or scientific studies that the FTC may request from a suspected advertising violator.

b)The use of satisfied customers and celebrities to endorse a product in advertising.

c)Advertisers must make known their product's limitations or deficiencies.
Remedies for Unfair/Deceptive Advertising:

a) Consent Decree

b) Cease-and-Desist Order

c) Corrective Advertising
a)A document advertisers sign, without admitting any wrongdoing, in which they agree to stop objectionable advertising.

b)May be issued by the FTC if an advertiser won't sign a consent decree; prohibits further use of an ad.

c)May be required by the FTC for a period of time to explain and correct offending ads.
FDA- Food and Drug Administration
Federal agency that has authority over the labeling, packaging, and branding of packaged foods and therapeutic devices.
Nutrition Labeling and Education Act (NLEA)
A 1994 congressional law setting stringent legal definitions for terms such as fresh, light, low fat, and reduced calorie; setting standard serving sizes; and requiring labels to show food value for one serving alongside the total recommended daily value as established by the National Research Council.
FCC -Federal Communications Commission
Federal regulatory body with jurisdiction over radio, television, telephone, and telegraph industries. Through its licensing authority, the FCC has indirect control over broadcast advertising.
a)Intellectual Property

a)Something produced by the mind, such as original works of authorship including literary, dramatic, musical, artistic, and certain other "intellectual" works, which may be legally protected by copyright, patent, or trademark.

b)A grant made by the government that confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time.
c)Any word, name, symbol, device, or any combination thereof adopted and used by manufacturers or merchants to identify their goods and distinguish them from those manufactured or sold by others.
USPTO-U.S. Patent and Trademark Office
Bureau within the U.S. Department of Commerce that registers and protects patents and trademarks.

*patents and trademarks, NOT copyrights
Library of Congress
protects all copyrighted material
An exclusive right granted by the Copyright Act to authors and artists to protect their original work from being plagiarized, sold, or used by another without their express consent.
*Life of the copyrighter + 50 yrs.
"Printers Ink"
Major trade publication @ the beginning of the 20th century off of which most trade regulation at the state level is based
BBB- Better Business Bureau
A business-monitoring organization funded by dues from more than 100,000 member companies. It operates primarily at the local level to protect consumers against fraudulent and deceptive advertising.
*Largest Business monitoring organization
*BBB code= most important self regulation in Advertising
NARC- National Advertising Review Council
An organization founded by the Council of Better Business Bureaus and various advertising industry groups to promote and enforce standards of truth, accuracy, taste, morality, and social responsibility in advertising.
NARC Operating Arms:

a)NAD- National Advertising Division

b)NARB- National Advertising Review Board
a) part of the Council of Better Business Bureaus. It investigates and monitors advertising industry practices and reviews complaints about advertising from consumers and consumer groups, competitors, trade associations, etc.

b)A fivemember panel, composed of three advertisers, one agency representative, and one layperson, selected to review decisions of the NAD.
*appeals board for NAD
Who, other than the government, regulates advertising?
the Media, Consumer Groups, plus Advertisers, Agencies, and Associations
Social action designed to dramatize the rights of the buying public.

*a result of consumer demand for products to perform as advertised
Consumer Information Networks
Organizations that help develop state, regional, and local consumer organizations and work with national, regional, county, and municipal consumer groups. Examples include the Consumer Federation of America (CFA), the National Council of Senior Citizens, and the National Consumer League.
Consumer Advocates
Individuals and groups who actively work to protect consumer rights, often by investigating advertising complaints received from the public and those that grow out of their own research.
AAAA- American Association of Advertising Agencies
The national organization of the advertising business. It has members throughout the United States and controls agency practices by denying membership to any agency judged unethical.
AAF- American Advertising Federation
A nationwide association of advertising people. The AAF helped to establish the Federal Trade Commission, and its early "vigilance" committees were the forerunners of the Better Business Bureaus.
ANA- Association of National Advertisers
An organization composed of 400 major manufacturing and service companies that are clients of member agencies of the AAAA. These companies, which are pledged to uphold the ANA code of advertising ethics, work with the ANA through a joint Committee for Improvement of Advertising Content to uphold ethics.