3-1 Outside lecture in Advertising read Ch 11 in SOLOMON Text Advertising occupies a special, historical place in American society. Advertising is a powerful.

3-1

Outside lecture in Advertisingread Ch 11 in SOLOMON Text

• Advertising occupies a special, historical place in American society.

• “Advertising is a powerful tool of competition. It provides valuable information about products and services in an efficient and cost-effective manner. In this way, advertising helps the economy to function smoothly – it keeps prices low (some would disagree) and facilitates the entry of new products and new firms into the market.”

Nobel Laureates in Economics Arrow and Stigler

3-2

Advertising as a Socioeconomic Force

• In many ways, advertising may be the most significant U.S. contribution to the world (WOW!!!! Maybe a bit self-serving). That notwithstanding, to some degree it may be, metaphorically, the glue that holds US together)

• Advertising has been called “this country’s most characteristic institution.”– Images– Logos

– Cultural icons like Mr. Whipple/Charmin tissue, Apple, Nike, The Gecko, Weeeeeeeeeeeeeee Pig, AFLAC Duck etc.)

• Critics of advertising claim that ads manipulate the public into wasting money on unnecessary products. Corrupted Thanksgiving, Christmas; theory Coca-Cola invented the US Version of Santa Claus.

3-3

Economic Effects of Advertising

• Advertising expenditures contributed between 12 to 16% of private sector revenues throughout the country.

• The sales created by advertising

represent about 20% of the nation’s $25.5 trillion total economic activity

• .

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Advertising’s Role in the Economy

• Advertising educates consumers about product and service choices.

• Advertising causes an economic chain reaction that generates a net gain in direct sales and jobs, indirect sales and jobs among first-level suppliers, and indirect sales and jobs among all other levels of economic activity.

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Advertising’s Role in the Economy

• Advertising plays a significant role in the business cycle.• Problematically, using % of revenue method for budgeting provides less Ad

$ during cyclical downturns (the opposite would be one of the best ways to gain market share at the expense of those using the % or revenue method. This would also help the economy bottom out by stimulating economic growth and adding jobs.

• Advertising the best way to efficiently, quickly “get the news out: about discoveries, new products (communicate information etc.)

• 75% of newspaper costs is generated by ad revenue. Without ad revenue newspapers would cost 4 times as much to buy

• Broadcast (over the air) Radio and TV is “free” because of the Ads• Helps support the arts e.g. many composers, musicians earn more per hour

playing “jingles” mood music than they earn with major symphony’s.

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Defining Who You Are: Affiliation & Differentiation

• Advertising intangibles creates affiliation. – Starting in the 1920s advertisers started to link products with a

particular lifestyle.

• What examples illustrate affiliation?• Differentiation: Seeking Your Personal Style• “Dog whistle” advertising targets a group with messages only that

group can appreciate. (e.g. iTunes “Rip, Mix, Burn” campaign to change attitudes about illegally downloading free music (Napster. LimeWire etc.), and prepare the market to pay for music) Just that “free” community “got it” (the message)

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Cultural Effects of Advertising the “Glue of a Nation”

• Advertising creates a shared experience of brands and associated images.

• Advertising influences decisions of what to buy.• James Twitchell describes advertising as a sort of “commercialized

gossip.”• Advertising is a collection of stories that companies use to make

products distinctive.

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Economic Rationale for Advertising

• Creating Advertising:• Increases sales of existing products;• Helps grow adoption of new products;• Builds brand loyalty;• Takes sales away from competitors.

3-9

Economic Rationale for Advertising

• Viewing Advertising: • The perspective called the economics of information shows how

consumers benefit from viewing advertising. – Reducing search costs– Reducing disutility

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How Does Advertising Provide Information?

• Describes new products and what they do.

• Alerts consumers to product availability and purchase locations.

• Shows consumers what to look for on store shelves.• Helps consumers differentiate among competitive

choices.• Advises the consumer about price information and

promotional opportunities.

• Hypthesis: Saves consumers money by encouraging competition that exerts downward pricing pressures (Yes/No???

3-11

The Good: Advertising Enhances Our World

• Most popular spokes characters of 2008:– Mars’ M&M characters– The Geico Gecko– The AFLAC Duck– The Pillsbury Doughboy – Tony the Tiger

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The Good: Advertising Enhances Our World

• The average adult is exposed to 3,500 pieces of advertising information per day (the clutter) vs

500+ items in the late 70’s.• HARD = perceptual selection, overcoming perceptual

blocking, increasing perceptual retention is the goal. Like most of marketing, easily defined, hard to do. That’s why if you can do it well you will be paid VERY WELL!!

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The Good: Advertising Enhances Our World

Advertising for Social Causes and Movements

• Advertising helps save lives through public service

announcements (PSAs).• The Advertising Council creates many PSAs for worthy causes

that promote improvement of society as a whole.• PSAs What subjects? What messages? E.G. MADD Mothers against

drunk driving, free lectures on topical issues, sponsorship for political debates etc.

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The Bad: Ethical Hot Buttons

• Body image– 30 minutes or less of TV viewing can alter a young woman’s

perception of her body shape• Nike turned this around somewhat with its “If you let me play”

campaign

• “Beefcake” ads for men = same impact.

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The Bad: Ethical Hot Buttons

• Can ads reinforce negative ethnic and racial stereotypes?

– No longer Aunt Jemima or Frito Bandito or other potentially offensive characters

– Is U.S. demographics real motivator?

• Multicultural advertising is a real force in the U.S. today

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The Bad: Ethical Hot Buttons

• Behavioral Targeting (e.g. where you’ve been on WWW)– Web tracking – but it delivers relevant ads– Marketing, privacy– How private is your Facebook page?