Ethics & Comparative Advertising

Question 1

Is commercial speech protected by the first amendment?

Answer 1

No

Question 2

Two types of advertising effects

Answer 2

Economic effects

Social effects

Question 3

What are the effects of advertising on consumer perceptions of brand value?

Answer 3

More heavily advertised brands are perceived to be higher in quality and value than less advertised brands
Ex. McDonald’s

Question 4

What are the effects of advertising on the prices of goods and services?

Answer 4

Advertising can exert an upward or downward pressure on prices

Question 5

Why can advertising exert an upward pressure on prices

Answer 5

Cost of advertising is passed along to consumers

Question 6

Why can advertising exert a downward pressure on prices (3)?

Answer 6

Leads to economies of scale
Speeds up stock turnover
Lowers the cost of sales

Question 7

What are the effects of advertising on competition in markets?

Answer 7

Advertising can encourage or restrict competition in markets

Question 8

How can advertising encourage competition in markets

Answer 8

Vehicle to promote superior products

Question 9

How can advertising restrict competition in markets?

Answer 9

Entry barrier

Large advertisers can buy space/time more cheaply

Question 10

Two schools of thought in economic advertising

Answer 10

Advertising = market power
Advertising = information

Question 11

Three questions of advertising economic effects

Answer 11

Effect of advertising on:
Consumer perceptions of brand value
Prices of goods and services
Competition in markets

Question 12

Negative social effects (4)

Answer 12

Advertising is manipulative
Advertising promotes unnecessary consumption
Advertising is deceptive
Advertising is too provocative

Question 13

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

Answer 13

Unfair/deceptive advertising practices

Question 14

Exaggerated, often subjective claims that can’t necessarily be proven true or false

Answer 14

Puffery

Question 15

Information regarding unfair or deceptive advertising practices typically come from

Answer 15

Customers

Competitors

Question 16

3 preventative measures to the unfair/deceptive advertising practices

Answer 16

Substantiation
Endorsements
Affirmative disclosure

Question 17

This is additional documentation that supports claims made in ads

Answer 17

Substantiation

Question 18

Endorsers can be personally liable for ad misrepresentations; their lawyers will look thoroughly

Answer 18

Endorsements

Question 19

Information stated in the ad regarding product limitations and/or deficiencies

Answer 19

Affirmative disclosure

Question 20

The practice of directly or indirectly naming one or more competitors in an ad, and making explicit comparisons on specific attributes/characteristics

Answer 20

Comparative advertising

Question 21

Comparative ad guidelines (6)

Answer 21

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

Question 22

Use of proper identification example

Answer 22

No “the leading brand” or “top competitor”

Question 23

Compare similar ad significant properties or features example

Answer 23

Can’t be like red package is better than blue so we’re better

Question 24

Market leaders pros of engaging in comparative advertising (3)

Answer 24

Communicates the brand’s comparative advantage(s)
Attention-getting
Signaling effect

Question 25

Market leader cons of engaging in comparative advertising (5)

Answer 25

Gives free exposure to the challenger
Gives credibility to the challenger
Negative attitudes toward the ad
Negative attitudes toward the brand
Litigation

Question 26

Market challenger pros of engaging in comparative advertising (3)

Answer 26

Communicates the brand’s comparative advantage(s)
Positive association with the leader
Attention-getting

Question 27

Market challenger cons of comparative advertising (6)

Answer 27

May provoke response by leader
Lack of credibility
Counter-arguing
Negative attitudes toward the brand
Litigation