Ethics & Comparative Advertising Flashcards
Is commercial speech protected by the first amendment?
No
Two types of advertising effects
Economic effects
Social effects
What are the effects of advertising on consumer perceptions of brand value?
More heavily advertised brands are perceived to be higher in quality and value than less advertised brands
Ex. McDonald’s
What are the effects of advertising on the prices of goods and services?
Advertising can exert an upward or downward pressure on prices
Why can advertising exert an upward pressure on prices
Cost of advertising is passed along to consumers
Why can advertising exert a downward pressure on prices (3)?
Leads to economies of scale
Speeds up stock turnover
Lowers the cost of sales
What are the effects of advertising on competition in markets?
Advertising can encourage or restrict competition in markets
How can advertising encourage competition in markets
Vehicle to promote superior products
How can advertising restrict competition in markets?
Entry barrier
Large advertisers can buy space/time more cheaply
Two schools of thought in economic advertising
Advertising = market power Advertising = information
Three questions of advertising economic effects
Effect of advertising on:
Consumer perceptions of brand value
Prices of goods and services
Competition in markets
Negative social effects (4)
Advertising is manipulative
Advertising promotes unnecessary consumption
Advertising is deceptive
Advertising is too provocative
Based on this act, you can get in trouble for:
False promises, incomplete description/partial disclosure/false and misleading comparisons/bait-and-switch offers/visual distortions/false demonstrations/false testimonials/small print qualifications
Unfair/deceptive advertising practices
Exaggerated, often subjective claims that can’t necessarily be proven true or false
Puffery
Information regarding unfair or deceptive advertising practices typically come from
Customers
Competitors
3 preventative measures to the unfair/deceptive advertising practices
Substantiation
Endorsements
Affirmative disclosure
This is additional documentation that supports claims made in ads
Substantiation
Endorsers can be personally liable for ad misrepresentations; their lawyers will look thoroughly
Endorsements
Information stated in the ad regarding product limitations and/or deficiencies
Affirmative disclosure
The practice of directly or indirectly naming one or more competitors in an ad, and making explicit comparisons on specific attributes/characteristics
Comparative advertising
Comparative ad guidelines (6)
Inform vs discredit or unfairly attack
Use of proper identification
Compare similar and significant properties or features
Honest comparison vs upgrading by comparison
Use of objective, independent testing sources
Total support for claims vs partial results
Use of proper identification example
No “the leading brand” or “top competitor”
Compare similar ad significant properties or features example
Can’t be like red package is better than blue so we’re better
Market leaders pros of engaging in comparative advertising (3)
Communicates the brand’s comparative advantage(s)
Attention-getting
Signaling effect
Market leader cons of engaging in comparative advertising (5)
Gives free exposure to the challenger Gives credibility to the challenger Negative attitudes toward the ad Negative attitudes toward the brand Litigation
Market challenger pros of engaging in comparative advertising (3)
Communicates the brand’s comparative advantage(s)
Positive association with the leader
Attention-getting
Market challenger cons of comparative advertising (6)
May provoke response by leader Lack of credibility Counter-arguing Negative attitudes toward the brand Litigation
