Advertising

Social and Legal Considerations

Businesses need to understand the legal ramifications and social implications that occur from intentionally misleading the public.

Learning Objectives

Explain how false advertising is prevented

Key Takeaways

Key Points

  • False advertising or deceptive advertising is the use of false or misleading statements in advertising.
  • Advertising is regulated by the authority of the Federal Trade Commission, a United States administrative agency, to prohibit ” unfair and deceptive acts or practices in commerce”.
  • The goal is prevention rather than punishment, reflecting the purpose of civil law in setting things right rather than that of criminal law.

Key Terms

  • Federal Trade Commission: The Federal Trade Commission (FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices, such as coercive monopoly.

When crafting advertising and marketing communications, businesses need to understand the legal ramifications of false advertising as well as the social implications that occur from intentionally misleading the public.

False advertising or deceptive advertising is the use of false or misleading statements in advertising. As advertising has the potential to persuade people into commercial transactions that they might otherwise avoid, many governments around the world use regulations to control false, deceptive or misleading advertising. “Truth” refers to essentially the same concept, that customers have the right to know what they are buying, and that all necessary information should be on the label.

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Listerine advertisement, 1932: From 1921 until the mid-1970s, Listerine was also marketed as a preventive and remedy for colds and sore throats. In 1976, the Federal Trade Commission ruled that these claims were misleading, and that Listerine had “no efficacy” at either preventing or alleviating the symptoms of sore throats and colds. Warner-Lambert was ordered to stop making the claims, and to include in the next $10.2 million dollars’ of Listerine ads specific mention that “contrary to prior advertising, Listerine will not help prevent colds or sore throats or lessen their severity. “

Advertising is regulated by the authority of the Federal Trade Commission, a United States administrative agency, to prohibit “unfair and deceptive acts or practices in commerce. ” While it makes laymen’s sense to assume that being deceptive is being unfair, deceptiveness in practice has been treated separately by the FTC, leaving unfairness to refer only to other types. All commercial acts may be deceptive, not just advertising, but noncommercial activity such as advertising for political candidates is not subject to prosecution under the FTC Act.

The goal is prevention rather than punishment, reflecting the purpose of civil law in setting things right rather than that of criminal law. The typical sanction is to order the advertiser to stop its illegal acts, or to include disclosure of additional information that serves to avoid the chance of deception. Corrective advertising may be mandated, but there are no fines or prison time except for the infrequent instances when an advertiser refuses to stop despite being ordered to do so. The actual statute defines false advertising as a “means of advertisement other than labeling, which is misleading in a material respect; and in determining whether an advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual. ”

In addition to federal laws, each state has its own unfair competition law to prohibit false and misleading advertising. In California, one such statute is the Unfair Competition Law [hereinafter “UCL”], Business and Professions Code § 17200 et seq. The UCL “borrows heavily from section 5 of the Federal Trade Commission Act” but has developed its own body of case law.

Types of Advertising

There are many types of advertising; each has different attributes, such as price, viewing demographic, and medium.

Learning Objectives

Classify the various types of marketing and advertising

Key Takeaways

Key Points

  • The TV commercial is generally considered the most effective mass-market advertising format, as is reflected by the high prices TV networks charge for commercial airtime during popular TV events.
  • Radio advertising is a form of advertising via the medium of radio.
  • Online advertising is a form of promotion that uses the Internet and World Wide Web for the expressed purpose of delivering marketing messages to attract customers.
  • Press advertising describes advertising in a printed medium such as a newspaper, magazine, or trade journal.

Key Terms

  • World Wide Web: Collectively, all of the web pages on the Internet which hyperlink to each other and to other kinds of documents and media.

There are many types of advertising; each has different attributes, such as price, viewing demographic, and medium.

The TV commercial is generally considered the most effective mass-market advertising format, as is reflected by the high prices TV networks charge for commercial airtime during popular TV events. The annual Super Bowl football game in the United States is known as the most prominent advertising event on television. The average cost of a single thirty-second TV spot during this game has reached $3.5 million (as of 2012).

Radio advertising is a form of advertising that is broadcast as radio waves through the air from a transmitter to an antenna and then to a receiving device. Airtime is purchased from a station or network in exchange for airing the commercials.

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Billboard: Clarkes on Belmont billboard

Online advertising is a form of promotion that uses the Internet and World Wide Web for the expressed purpose of delivering marketing messages to attract customers. Online ads are delivered by an ad server. Examples of online advertising include:

  • Contextual ads that appear on search engine results pages
  • Banner ads
  • In-text ads
  • Rich Media Ads
  • Social network advertising
  • Online classified advertising
  • Advertising networks
  • E-mail marketing, including e-mail spam

Covert advertising, also known as guerrilla advertising, is when a product or brand is embedded in entertainment and media.

Press advertising describes advertising in a printed medium such as a newspaper, magazine, or trade journal. This encompasses everything from media with a very broad readership base, such as a major national newspaper or magazine, to more narrowly targeted media such as local newspapers and trade journals on very specialized topics.

Mobile billboards are generally vehicle mounted billboards or digital screens. These can be on dedicated vehicles built solely for carrying advertisements along routes preselected by clients, they can also be specially equipped cargo trucks or, in some cases, large banners strewn from planes. The billboards are often lighted; some being backlit, and others employing spotlights.

In-store advertising is any advertisement placed in a retail store. It includes placement of a product in visible locations in a store, such as at eye level, at the ends of aisles and near checkout counters (aka POP—Point Of Purchase display), eye-catching displays promoting a specific product, and advertisements in such places as shopping carts and in-store video displays.

Street advertising first came to prominence in the UK by Street Advertising Services to create outdoor advertising on street furniture and pavements. Working with products such as Reverse Graffiti, air dancers, and 3D pavement advertising, the media became an affordable and effective tool for getting brand messages out into public spaces.

Outdoor advertising opens the possibility of combining outdoor with indoor advertisement by placing large mobile, structures (tents) in public places on temporary bases. The large outer advertising space exerts a strong pull on the observer while the product is promoted indoors, where the creative decor can intensify the impression.

Celebrity branding focuses upon using celebrity power, fame, money, or popularity to gain recognition for their products or promote specific stores. Advertisers often advertise their products, for example, when celebrities share their favorite products or wear clothes by specific brands or designers. Celebrities are often involved in advertising campaigns such as television or print ads to advertise specific or general products. The use of celebrities to endorse a brand can have its downsides, however. One mistake by a celebrity can be detrimental to the public relations of a brand.

Sales promotions are another way to advertise. Sales promotions are double purposed because they are used to gather information about what type of customers you draw in and where they are, as well as to jumpstart sales. Sales promotions include things like contests and games, sweepstakes, product giveaways, samples coupons, loyalty programs, and discounts. The ultimate goal of sales promotions is to stimulate potential customers to take action.

Trends in Advertising

With the advent of the ad server, marketing through Internet opened new frontiers for advertisers with the “dot-com” boom of the 1990s.

Learning Objectives

Compare guerrilla marketing and niche marketing

Key Takeaways

Key Points

  • The share of advertising spending relative to GDP has changed little across large changes in media.
  • At the turn of the 21st century, a number of websites, including the search engine Google, started a change in online advertising by emphasizing contextually relevant, unobtrusive ads intended to help, rather than inundate, users.
  • A recent advertising innovation is “guerrilla marketing “, which involves unusual approaches, giveaways of products such as cars that are covered with brand messages, and interactive advertising where the viewer can respond to become part of the advertising message.

Key Terms

  • advertising: communication whose purpose is to influence potential customers about products and services.
  • GDP: Gross Domestic Product (Economics). A measure of the economic production of a particular territory in financial capital terms over a specific time period.

With the advent of the ad server, marketing through the Internet opened new frontiers for advertisers and contributed to the “dot-com” boom of the 1990s. Entire corporations operated solely on advertising revenue, offering everything from coupons to free Internet access. At the turn of the 21st century, a number of websites, including the search engine Google, started a change in online advertising by emphasizing contextually relevant, unobtrusive ads intended to help, rather than inundate, users. This has led to a plethora of similar efforts and an increasing trend of interactive advertising.

The share of advertising spending relative to GDP has changed little across large changes in media. For example, in the US in 1925, the main advertising media were newspapers, magazines, signs on streetcars, and outdoor posters. Advertising spending as a share of GDP was about 2.9 percent. By 1998, television and radio had become major advertising media. Nonetheless, advertising spending as a share of GDP was slightly lower—about 2.4 percent.

Guerilla Marketing

A recent advertising innovation is “guerrilla marketing”, which involves unusual approaches such as staged encounters in public places, giveaways of products such as cars that are covered with brand messages, and interactive advertising where the viewer can respond to or become part of the advertising message. Guerrilla advertising is becoming increasingly popular with more companies. This type of advertising is unpredictable and innovative, which causes consumers to buy the product or idea. This reflects an increasing trend of interactive and “embedded” ads, such as via product placement, having consumers vote through text messages, and various innovations utilizing social network services such as Facebook.

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Candidate for Congress: Walter Faulkner, candidate for U.S. Congress, campaigning with a Tennessee farmer. Crossville, Tennessee.

Niche Marketing

Another significant trend regarding future of advertising is the growing importance of the niche market using niche—or targeted—ads. Also brought about by the Internet and the theory of The Long Tail, advertisers will have an increasing ability to reach specific audiences. In the past, the most efficient way to deliver a message was to blanket the largest mass market audience possible. However, usage tracking, customer profiles and the growing popularity of niche content brought about by everything from blogs to social networking sites, provides advertisers with audiences that are smaller but much better defined. This leads to ads that are more relevant to viewers and more effective for companies’ marketing campaigns. Among others, Comcast Spotlight is one such advertiser employing this method in their video on demand menus. These advertisements are targeted to a specific group and can be viewed by anyone wishing to find out more about a particular business or practice at any time, right from their home. This causes the viewer to become proactive and actually choose what advertisements they want to view.

With the Internet came many new advertising opportunities: popup, Flash, banner, popunder, advergaming, and email advertisements (all of which are often unwanted or spam in the case of email) are now commonplace. Particularly since the rise of “entertaining” advertising, some people may like an advertisement enough to wish to watch it later or show a friend. In general, the advertising community has not yet made this easy, although some have used the Internet to widely distribute their ads to anyone willing to see or hear them. In the last three quarters of 2009 mobile and internet advertising grew by 18.1% and 9.2% respectively. Older media advertising saw declines: −10.1% (TV), −11.7% (radio), −14.8% (magazines) and −18.7% (newspapers ).

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Advertising: Advertisers will have an increasing ability to reach specific audiences due to changes in digital technology.

Agencies

An advertising agency or advert agency is a service business dedicated to creating, planning, and handling advertising for its clients.

Learning Objectives

Explain advertising agencies’ role in communicating ideas

Key Takeaways

Key Points

  • Creative agencies specialize in creative or design -based business models; their basic interest is in the creation of the advertisement or branding.
  • The client who chooses to use a design-only advertising agency must assume some of the advertising purchasing.
  • There are agencies that specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial, financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so on.

Key Terms

  • investment: A placement of capital in expectation of deriving income or profit from its use.
  • Ad agencies: A service business dedicated to creating, planning, and handling advertising (and sometimes other forms of promotion) for its clients.

An advertising agency or advert agency is a service business dedicated to creating, planning, and handling advertising (and sometimes other forms of promotion ) for its clients. An ad agency is independent from the client and provides an outside point of view to the effort of selling the client’s products or services. An agency can also handle overall marketing and branding strategies and sales promotions for its clients.

Ad agencies come in all sizes and include everything from one or two-person shops (which rely mostly on freelance talent to perform most functions), small- to medium-sized agencies such as Traction (agency), large independents such as SMART, and multi-national, multi-agency conglomerates such as Omnicom Group, WPP Group, Publicis, Interpublic Group of Companies, and Havas.

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Advertising: Advertisers will have an increasing ability to reach specific audiences due to changes in digital technology.

Creative agencies specialize in creative or design-based business models; their basic interest is in the creation of the advertisement or branding. Other (“full-service”) agencies offer design in conjunction with media buying. Media agencies concentrate on media buying. In the 1990s, media and creative were often unbundled in the interests of economies of scale in buying media.

The client who chooses to use a design-only advertising agency must assume some of the advertising purchasing. These are activities that are routinely handled by an agency with a media buying option. Media buying agencies are sometimes a good choice for larger businesses. These agencies can assume greater responsibility for the strategic planning and function of an advertising campaign. The advantage to a design-only agency is there is no third-party ordering the service. In turn, cost can be lower and is sometimes a good alternative for smaller businesses.

In addition to the full-service, general-line advertising agencies, there are also agencies that specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial, financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so on.

Specialization occurs in such fields for a variety of reasons. Often, as in recruitment advertising, for example, specialized media or media uses are involved that require knowledge and expertise not ordinarily found in a general-line agency. In other cases, such as medical or industrial advertising, the subject is technical and requires that writers and artists have training in order to write meaningful advertising messages about it.

Such specialist advertising agencies are also usually full-service, in that they offer all of the basic advertising agency services in their area of specialization plus other, peripheral advertising services related to their area of specialization.

Some advertisers believe that they can provide these advertising services to themselves at a lower cost than would be charged by an outside agency. An In-House agency is a team that focuses on one goal to sell the company’s product; they will handle all aspects of the brand. In-House is the better option if a company is looking to build up an image over a number of years and create continuity between all aspects of separate campaigns.

Due to the social networking explosion, new types of companies are doing reputation management. This type of agency is especially important if a company needs online damage control. For example, disgruntled customers can quickly and easily damage a company’s reputation via social networking sites. Reputation management companies help stem the negative information or misinformation that might proliferate in their absence.

Social media agencies specialize in promotion of brands in various social media platforms like blogs, social networking sites, Q&A sites, discussion forums, microblogs etc. The two key services of social media agencies are social media marketing and online reputation management.

While not advertising agencies, enterprise technology agencies often work in tandem with advertising agencies to provide a specialized subset of services offered by some interactive agencies, such as Web 2.0 website design and development, content management systems, web application development, and other intuitive technology solutions for the web, mobile devices, and emerging digital platforms. The student-run advertising agency model, which mainly operates out of university classrooms or as a student groups, provides free advertising services to clients in exchange for the educational opportunity.