LECTURE 12: ADVERTISING CONTENT & COMPARATIVE ADVERTISNG

1. LECTURE 12: ADVERTISING CONTENT & COMPARATIVE ADVERTISNG AEM 4550:Economics of AdvertisingProf. Jura Liaukonyte

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. Celebrity Endorsement • Can strengthen brand’s equity, make claims of ad appear more credible • Wheaties: The Breakfast of Champions • Can pose great risks to the company too • Kellogg’s: Michael Phelps • Wheaties: Tiger Woods

9. 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

10. 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

11. 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

12. 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

13. 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

15. COMPARATIVE ADVERTISING • Different goals • Compare your product to a competitor with a higher market share • Fight back • Heavily used by Coca-Cola and Pepsi • Dr. Pepper stays away from this war

17. COLA WAR • Started with a blind taste test • People chose Pepsi over Coca-Cola • Between Pepsi and Coca-Cola • Comparative advertising between the two firms • Race to endorse celebrities

18. New Fight • Hispanic market • Coke and Pepsi already established • Dr. Pepper is launching its first advertising campaign and plays on its different taste • Hispanics consume more fruit-flavored beverages than non-Hispanics • Growth opportunity for Dr. Pepper

19. Justice issues • A series of ads for Coca-Cola’s Vitamin Water have been banned for making misleading health and nutrition claims • Pepsi sues Coca-Cola because of a commercial comparing Powerade to Gatorade.

22. Infiniti Hybrid • http://www.youtube.com/watch?v=pzWyd10icS4&feature=relmfu

23. 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.

24. Fear Appeals • Within the automotive industry, most of the fear appeals mention safety attributes • Show the harsh realities of accidents and their possible effects • Highlight brand’s unique safety features

25. Humor Appeals

26. 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

27. 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

28. Humor

29. HUMOR • Positively related to brand attitude • Used more often by PepsiCo. • Closer to its core values • Fun brand • 2011 Commercial • “Love Hurts” • http://www.youtube.com/watch?v=Y09z8lwOEYA

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

31. 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

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

33. 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

34. 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

35. 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

36. 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

37. 66% 15% 5% 14% 0 20 40 60 80 Sources of NAD Cases (2001) CompetitorChallenges NADMonitoring Local BBBChallenges ConsumerChallenges

38. NAD Review • http://www.asrcreviews.org/category/narb/narb-press-releases/

39. 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

40. Example Beer Industry

41. Under NAD Review: Anheuser Busch vs. Miller Coors • Anheuser-Busch claimed its Select 55 with only 55 calories was the “lightest beer in the world,” and went farther to claim it had “nearly half the calories of Coors Light.” • Decision: • Anheuser-Busch could claim that Select 55 had “superior taste” • But did not have evidence to support the claim that it had half or less calories than Coors Light

42. Social Cost of Advertising • For there to be a social cost: Advertising must INCREASE the amount of beer consumed • Tremblay’s found that “a 1 percent increase in beer advertising raises external social costs by approximately 41 million dollars.” (Tremblay & Tremblay, 371) • Found that a ban on alcohol ads can reduce: • Cirrhosis of the liver by 47% • Motor vehicle accidents by 39%

43. Advertising Regulations • Regulation of the global beer industry is relatively high, and trends show that regulation will continue to increase. • The United States, European Union, and Australia have the strictest regulatory procedures.

44. Advertising Regulations • United States • Alcohol and Tobacco Tax and Trade Bureau (TTB) has recently imposed regulations on the formulation, labeling and advertising of flavored malt beverages. • Regulations vary from state to state and are usually more stringent throughout eastern states than in the country's west.

45. Regulatory Rules of Alcohol Advertising • Prohibit False or Misleading Alcohol Advertising • Prohibit Alcohol Advertising that Targets Minors • Prohibit Images of Children in Alcohol Advertisements • Prohibit Images or Statements that Associate Alcohol with Athletic Achievement • Prohibit Images or Statements that Portray or Encourage Intoxication • Establish Explicit Jurisdiction Over In-State Electronic Media • Restrict Outdoor Alcohol Advertising in Locations Where Children Are Likely to be Present • Prohibit Outdoor Alcohol Advertising Near Schools, Public Playgrounds and Churches • Restrict Alcohol Advertising on Alcohol Retail Outlet Windows and Outside Areas • Prohibit Alcohol Advertising on College Campuses • Restrict Sponsorship of Civic Events • Limit Giveaways (Contest, Raffles, etc.)

46. Advertising Regulations • European Union • The code of conduct in the E.U. is much more lax than that of the U.S. • The code seeks to ensure advertising does not contribute to excessive consumption or misuse of alcohol, and restricts certain actions such as advertising during certain times of the day or at certain events.

47. Advertising Regulations • Australia • In Australia, fewer advertising regulations exist, but they still impose other regulations. • Government regulations directly control the sale of liquor through licensing laws, and Food Standards Australia New Zealand (FSANZ) develops standards for beverage safety, maximum residue limits, processing, and a range of other functions.

48. Example Prescription Pharmaceutical Industry

49. Government Regulation = HEAVY • In 1962 the Kefauver-Harris Amendments shifted all Federal Food, Drug and Cosmetic regulation and promotion from the Federal Trade Commision to the FDA. • Prescription Drug promotional materials cannot be false or misleading, must provide "fair balance" coverage of risks and benefits of using the drug, must provide a "brief summary" of side effects, and effectiveness and must also meet specific guidelines for readability and size of print. • The FDA interpreted this as everything must be in print form. • They must disclose where they spend all of their advertising dollars (Doctor Payments)

50. A Change in Government Regulation • In 1997 the FDA eliminated the requirement that ads present the entire "brief summary" taken from the product label. • The advertisements needed only to include: • “major statements” of the risks and benefits of the drug • Directions to information sources in addition to a physician such as a toll-free phone number, a website or a print advertisement • This removed a major barrier that had made television and radio advertising infeasible and could only be done through print media