Lecture Plan

1. AEM 4550: Economics of AdvertisingProf.: Jura LiaukonyteLecture 11 Advertising Content and Comparative Advertising

2. Lecture Plan • Advertising Content • Expert Testimonials • Celebrities • Humor • Comparative Advertising • Advertising Regulation • Model of comparative advertising

3. Credence Attribute Advertising • Usually comes with a third party testimonials • E.g. “dentists recommend” • “doctor recommends” • “experts agree” etc. WHY?

4. Experts Lend Authority to an Appeal

5. Celebrities • ~ 25% of ads have celebrities in them • The general belief among advertisers is that advertising messages delivered by celebrities: • provide a higher degree of appeal, attention and possibly message recall than those delivered by non-celebrities. • affect the credibility of the claims made, • increase the memorability of the message, and may provide a positive effect that could be generalized to the brand • Despite the potential benefits they can provide, celebrity advertising increases the marketers' financial risk. • Using celebrities are an unnecessary risk unless they are very logically related to the product

6. Endorsement by a “Celebrity Expert”

7. The celebrity may be overexposed, reducing his or her credibility The celebrity may be overexposed, reducing his or her credibility The target audience may not be receptive to celebrity endorsers The target audience may not be receptive to celebrity endorsers The celebrity’s behavior may pose a risk to the company Risks of Using Celebrities The celebrity may overshadow the product being endorsed The celebrity may overshadow the product being endorsed

8. May be especially useful for new brands • Often used for brands with small market share • Frequently used in political advertising • May stress physical danger or threats to health • May identify social threats: disapproval or rejection • May backfire if the level of threat is too high • They can attract and hold attention • They are often the best remembered • They put the consumer in a positive mood Message Appeal Options Comparative Ads Comparative Ads Fear Appeals Fear Appeals Humor Appeals

9. Comparative Advertising • Definition: Mentioning/showing the competitor in your ad by way of comparison (and typically how we are better) • History: Early 80’s FTC lifts the ban on CA to enhance the provision of choice-making information to consumers. • Legal issues: Advantages must be substantiated • Used offensively (attack) or defensively (“fight back”) • Great for newly launched products with small (or zero) market share that offer a distinct edge over the competition. • The confusion aspect: Which brand was advertised???!, though consumers may remember attributes advertised.

10. Comparative Advertising, cont. • Political ads • Negative information tends to outweigh positive information • Typically more effective to besmirch the opponent than to praise one’s self. • Exception: Negative tit-for-tat exchanges (“mudslinging”) usually wind up helping neither candidate. • Too much attacking results in negative perceptions of the attacking brand.

11. Lanham Act • The Lanham (Trademark) Act (title 15, chapter 22 of the United States Code) is a piece of legislation that contains the federal statutes of trademark law in the United States. The Act prohibits a number of activities, including: • trademark infringement, • trademark dilution, • false advertising.

12. False statements have been made about advertiser’s product or your product The ads actually deceived or had the tendency to deceive a substantial segment of the audience The deception was “material” or meaningful and is likely to influence purchasing decisions The falsely advertised products or services are sold in interstate commerce You have been or likely will be injured as a result of the false statements, either by loss of sales or loss of goodwill Suing a competitor under the Lanham Act False statements have been made about advertiser’s product or your product Elements Required To Win a False Advertising Suit Under the Lanham Act The ads actually deceived or had the tendency to deceive a substantial segment of the audience The deception was “material” or meaningful and is likely to influence purchasing decisions The falsely advertised products or services are sold in interstate commerce

14. Fear Appeals • Fear has facilitating effects and inhibiting effects. • Facilitation = motivation to approach/avoid something • Inhibition = discouragement from approaching/avoiding something • Moderate fear appeals work best by encouraging facilitation and minimizing inhibition. • Too much fear: the audience tunes out the message • Low credibility or elaboration of harmful consequences is hedonically unpleasant. • Too little fear: the audience isn’t motivated enough to do anything.

15. Humor Appeals

16. Pros and Cons of Using Humor Pros Cons Aids attention and awareness Aids attention, awareness and repeat attention Does not aid persuasion in general Does not aid persuasion in general May aid retention of the message May aid retention of the message May harm recall and comprehension May harm recall and comprehension Creates a positive mood and enhances persuasion Creates a positive mood and enhances persuasion May harm complex copy registration May harm complex copy registration May aid name and simple copy registration May aid name and simple copy registration Humor is not universal Does not aid source credibility May serve as a distracter, reducing counterarguing May serve as a distracter, reducing counterarguing Good “universal” humor is hard to produce! Is not effective in bringing about sales Company seen as clever – carries over to products May wear out faster than non-humorous ads

17. Humor and Ad effectiveness • Gelb and Zinkhan: • Humor was negatively related to advertising recall • Positively related to brand attitude • Not directly related to purchase probability or choice behavior • Any effect that humor may have on purchase probability or choice behavior appears to be mediated through brand attitude.

18. Current Regulatory Issues Affecting U.S. Advertisers • Tobacco advertising • Consumer Privacy • Advertising to children

19. Regulatory Aspects of Advertising Areas of advertising regulation: • Deception and unfairness • Representation or omission that can mislead • Judged from perspective of consumer • Advertising to children

20. Some TV Network Guidelines for Children’s Advertising Must Not Over Glamorize Product Must Not Over Glamorize Product No Exhortative Language, Such As “Ask Mom to Buy No Exhortative Language, Such As “Ask Mom to Buy Generally No Celebrity Endorsements Generally No Celebrity Endorsements Can’t Use “Only” or “Just” in Regard to Price Can’t Use “Only” or “Just” in Regard to Price No Costumes or Props Not Available With the Toy No Costumes or Props Not Available With the Toy Influencing Influentials, Providing Information to Opinion Leaders Influencing Influentials, Providing Information to Opinion Leaders Three-second Establishing Shot of Toy in Relation to Child Three-second Establishing Shot of Toy in Relation to Child No Shots Under One Second in Length

21. Key Regulatory Agents Government Regulation • Federal Trade Commission (FTC) • Wide range of regulatory programs and remedies • Federal Communications Commission (FCC) • Food and Drug Administration (FDA) • Bureau of Alcohol, Tobacco, and Firearms

22. Federal Regulation of Advertising in North America Federal Trade Commission (FTC) http://www.ftc.gov/ Defining deception Comparative advertising Defining unfairness Investigating violations Remedies for unfair or deceptive advertising Consent decree Corrective advertising Cease-and-desist order

23. Key Regulatory Agents--FTC FTC Programs and Remedies • Advertising Substantiation Program • Affirmative Disclosure • Consent Order • Cease and Desist Order • Affirmative Disclosure • Corrective Advertising • Control of Celebrity Endorsements

24. Key Regulatory Agents (con’t) Industry Self-Regulation • National Advertising Review Board (NARB) • State and Local Better Business Bureaus • Ad Agencies and Associations • Media Organizations

25. 66% 15% 5% 14% 0 20 40 60 80 Sources of NAD Cases (2001) CompetitorChallenges NADMonitoring Local BBBChallenges ConsumerChallenges

26. NAD Review • http://www.nadreview.org/NewsRoom.aspx

27. Key Regulatory Agents (con’t) Internet Self-Regulation • No industry-wide trade association has emerged to date • Global Dialogue on Electronic Commerce (GBDe) is emerging as a governing body • Little progress has been made to address consumers’ complaints

28. Modeling Comparative Advertising