Adds Value: How does advertising affect the value of

product.( Making product better known-Desirable to consumer-thus adds value)

Value to both consumer and advertiser(focusing on self interest)

Advertised product cost more than non advertised

I. Completion lowers price(Criticism)II. Adv is element of mass distribution

system-which in turn lowers cost of product.

III. Subject to Government price regulation –no effect on price

IV. In retailing ,price is prominentV. In national advertisers stresses features

It do effect But very small n newcomers cannot

compete with very large firms(immense budget)

Some firms eliminated from advertising who work less effectively

I. Adv affect aggregate consumption.II. Give info n increase primary demandIII. Freedom to advertise-more sellers- give

more choices What effect does it have on consumer

choice and overall business cycle. Relationship of adv and GDP Maintaining consumer demand adv sustain

employment and income Adv helps to maintain business

cycle(recession-adv works)

Cock of bottle include about a penny for advertising

$20,000 include $400 Adv informs consumer(Complete info) Allows companies to compete more

effectively (Self Interest) Competition results in lower price and

better products Advertising must meet consumers

approval

Does advertising make us more materialistic

Deception: Little PUFF OK---Puffery Manipulating psychologically Consumers are captured prey-helpless in

jaws of marketing predators Does it force us buy things we don’t need How does it affect the art and culture of

society Does advertising debase our language

It gives consumer wider choice Encouraging mass production-lowers price Encourages acceptance of new product n

technology-development Promote healthy competition Promote standard of living-subsidize arts Disseminate public info on heath n social

issues Adv create externalities that interfere media

n their editorial statement Self interest of both consumer n marketer

Children's TV Watching BehaviorChildren's TV Watching Behavior

Children ages 2-11 watch an average of 22 hours of TV per week and see 30,000 commercials per year

Children ages 2-11 watch an average of 22 hours of TV per week and see 30,000 commercials per year

80% of all advertising targeted to children falls in fourproduct categories:Toys, cereal, candy & fast food restaurants

80% of all advertising targeted to children falls in fourproduct categories:Toys, cereal, candy & fast food restaurants

Advocates Argue That Children:Advocates Argue That Children:

Marketers Argue Children:Marketers Argue Children:

Lack the knowledge and skills to evaluate advertising claims

Lack the knowledge and skills to evaluate advertising claims

Cannot differentiatebetween programs and commercials

Cannot differentiatebetween programs and commercials

Must learnthrough socializationMust learnthrough socialization

Must acquire skills needed to function in the marketplace

Must acquire skills needed to function in the marketplace

Creates consumer needs, wants Creates consumer needs, wants

Promotes materialism, insecurity, and greedPromotes materialism, insecurity, and greed

More propaganda than informationMore propaganda than information

Provides informationProvides information

Creates jobs Creates jobs

Encourages higher standard of livingEncourages higher standard of living

Promotes competition Promotes competition Proponent argumentsProponent arguments

Critic argumentsCritic arguments

Helps new firms enter a marketHelps new firms enter a market

a) Economic Benefits of Advertising

Informing people about the availability of rationally(Realistically) - improvements

helping them to make informed prudent consumer decisions, contributing to efficiency and the lowering of

prices

stimulating economic progress via expansion of business and trade-creation of new jobs, higher incomes

Does advertising encourage materialism?Does advertising encourage materialism?

Does advertising make people buy thingsthey don’t need?

Does advertising make people buy thingsthey don’t need?

Is advertising justa reflection of society?Is advertising justa reflection of society?

Advertising is the primary source of revenue for newspapers, magazines, television and radio

Advertising is the primary source of revenue for newspapers, magazines, television and radio

Advertisers may exert control over the media by biasing editorial content, limiting coverage of certain issues, or influencing program content

Advertisers may exert control over the media by biasing editorial content, limiting coverage of certain issues, or influencing program content

Media’s dependence on advertising for revenue makes them vulnerable to control by advertisers

Media’s dependence on advertising for revenue makes them vulnerable to control by advertisers

They must report the news fairly and accurately to retain public confidence

They must report the news fairly and accurately to retain public confidence

Advertisers need the media more than the media need any one advertiser

Advertisers need the media more than the media need any one advertiser

Media maintain separation between news and business departments “The Wall”

Media maintain separation between news and business departments “The Wall”

Makes consumers aware of products and servicesMakes consumers aware of products and services

Provides consumers with information to use to make purchase decisions

Provides consumers with information to use to make purchase decisions

Encourages consumption, fosters economic growthEncourages consumption, fosters economic growth

Effects on Consumer Choice• Differentiation • Brand Loyalty

Effects on Consumer Choice• Differentiation • Brand Loyalty

Effects on Product Costs and Prices• Advertising as an expense that

increases the cost of products• Increased differentiation

Effects on Product Costs and Prices• Advertising as an expense that

increases the cost of products• Increased differentiation

Effects on Competition• Barriers to entry • Economies of scale

Effects on Competition• Barriers to entry • Economies of scale

. Each economic system has an interesting relationship with the social system (unequal distribution of wealth) , political system (international politics-by influencing)and cultural value.(vice versa)

a) Economic Harms of Advertising

More often, though, advertising is used not simply to inform but to persuade and motivate — to convince people to act in certain ways: buy certain products or services, patronize certain institutions. This is where particular abuse can occur.

"brand"-related advertising can raise serious problems.

advertising may attempt to move people to act on the basis of irrational motives ("brand loyalty," status, fashion, "sex appeal," etc.) instead of presenting differences in product quality and price as bases for rational choice.

It is true that a judicious use of advertising can stimulate developing countries to improve their standard of living.

serious harm can be done them if advertising and commercial pressure become so irresponsible

The result of this is that they waste their resources and neglect their real needs, and genuine development falls behind."16

Advertising also can be, and often is, a tool of the "phenomenon of consumerism," as Pope John Paul II delineate it when he said: "It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed toward ?having' rather than ?being', and which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself."14

From an economic perspective, advertising might lower the cost of a product by:

A) Creating barriers to entry for less efficient firms

B) Moving consumers to the consumer socialization stage of the buying process

C) Making it possible for firms to realize economies of scale through expansion of sales volume

D) Allowing firms to advertise at high levels along with competitors

E) Doing none of the above

Change consumers’ tastesChange consumers’ tastes

Reduces competitionReduces competition

Lowers sensitivity to priceLowers sensitivity to price

Builds brand loyaltyBuilds brand loyalty

Advertising Equals Market Power

Advertising Equals Market Power

Leads to higher pricesLeads to higher prices

Leads to fewer choicesLeads to fewer choices

Results in higher profitsResults in higher profits

Provides useful informationProvides useful information

Pressure for lower pricesPressure for lower prices

Increases price sensitivityIncreases price sensitivity

Increases competitionIncreases competition

Advertising Equals Information

Advertising Equals Information

Forces inefficient firms outForces inefficient firms out

Pressure for high qualityPressure for high quality

“It must be said that without advertising we would have a far different nation, and one that would be much the poorer-not merely in material commodities, but in the life of the spirit.”

Excerpters is from a speech given by Leo Burnett on the American Association or Advertising Agencies’ 50th anniversary, April 20,1967

Political advertising can support and assist the working of the democratic process, but it also can obstruct it. This happens when, for example, the costs of advertising limit political competition to wealthy candidates or groups, or require that office-seekers compromise their integrity and independence by over-dependence on special interests for funds.

Such obstruction of the democratic process also happens when, instead of being a vehicle for honest expositions of candidates' views and records, political advertising seeks to distort the views and records of opponents and unjustly attacks their reputations. It happens when advertising appeals more to people's emotions and base instincts — to selfishness, bias and hostility toward others, to racial and ethnic prejudice and the like — rather than to a reasoned sense of justice and the good of all.

Political advertising can make a contribution to democracy

so political advertising can make its contribution by informing people about the ideas and policy proposals of parties and candidates, including new candidates not previously known to the public

In the competition to attract ever larger audiences and deliver them to advertisers, communicators can find themselves tempted — in fact pressured, subtly or not so subtly — to set aside high artistic and moral standards and lapse into superficiality, tawdriness and moral squalor.

Some advertisements are instances of popular art, with a vivacity (liveliness) and élan (elegance) all their own.

advertising contributes to the invidious stereotyping of particular groups that places them at a disadvantage in relation to others. This often is true of the way advertising treats women; and the exploitation of women, both in and by advertising, is a frequent, deplorable abuse. "How often are they treated not as persons with an inviolable dignity but as objects whose purpose is to satisfy others' appetite for pleasure or for power? How often is the role of woman as wife and mother undervalued or even ridiculed? How often is the role of women in business or professional life depicted as a masculine caricature, a denial of the specific gifts of feminine insight, compassion, and understanding, which so greatly contribute to the ?civilization of love'?

Portrayal of women to reflect their changing role in societyPortrayal of women to reflect their changing role in society

Portrayal ofwomen asBeauty objects

Portrayal ofwomen asBeauty objects

Ethnic stereotyping/representation

Ethnic stereotyping/representation

Gender stereotypingGender stereotyping

Criticisms of AdvertisingWith Regard to Stereotyping

Criticisms of AdvertisingWith Regard to Stereotyping

Groups such as the National Organization for Women (NOW) are critical of advertising that:

A) Portrays women in traditional sexist roles

B) Contributes to violence against women

C) Is insulting to women

D) Stereotypes women

E) Does any of the above