Transcript Lecture 13 Slides

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LECTURE 13: Advertising Content and
Comparative Advertisement
AEM 4550:
Economics of Advertising
Prof. Jura Liaukonyte
Lecture Plan
 HW4,
 Next class: Discuss Exam 2; Advertising Content
 Expert Testimonials
 Celebrities
 Humor
 Comparative Advertising
 Advertising Regulation
 Model of comparative advertising
Credence Attribute Advertising
 Usually comes with a third party testimonials
 E.g. “dentists recommend”
 “doctor recommends”
 “experts agree” etc.
WHY?
Experts Lend Authority to an Appeal
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
Endorsement by a “Celebrity Expert”
Risks of Using Celebrities
The celebrity may overshadow
the product being endorsed
The celebrity may be overexposed,
reducing his or her credibility
The target audience may not be
receptive to celebrity endorsers
The celebrity’s behavior may pose
a risk to the company
Any examples of risky endorsements?
What does empirical research say
about celebrity endorsement effect?
 Elberse and Jeroen (2011) look at stock market valuation
and sales data for a number of athlete endorsements.
 With a celebrity endorsement stocks go up roughly 0.25%, on
average.
 Sales, on the other hand, go up by an average of 4%.
 These sales boosts can be recharged by a career triumph -- a
Grand Slam for Roger Federer, an Olympic Gold Medal for
Michael Phelps.
 A caveat: The sales benefits diminish with each win, while the
stock-return effects stay constant;
 investors, it seems, are more impressed with an athlete's
staying power than consumers.
What does empirical research say
about celebrity endorsement effect?
 So, what accounts for this celebrity effect?
 Endorsements could be a signal of quality
 But the modern consumer is sophisticated. They know money's
changing hands.
 At a deeper level, we seem to crave connection to the famous
and the powerful.
What does empirical research say
about celebrity endorsement effect?
 Newman, Diesendruck and Bloom (2011) look at why people are
willing to pay exorbitant amounts of money for objects once
owned by famous people.
 E.g., President Kennedy's golf clubs or even Saddam Hussein's Rolex
 Resale Appeal? That's circular reasoning. Why does the next person
want to buy it?
 Study tested how much people would be willing to pay for
various objects that had been handled by either a celebrity the
participants admired or someone famous they considered evil.
 For likeable celebrities, the more handling of the object the more it
was worth to people.
 In contrast, with evil celebrities, the more the person touched the
object or used it, the less people wanted anything to do with it.
Message Appeal Options
Comparative
Ads
•May be
especially useful
for new brands
•Often used for
brands with small
market share
•Frequently used
in political
advertising
Fear
Appeals
•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
Humor
Appeals
•They can attract
and hold
attention
•They are often
the best
remembered
•They put the
consumer in a
positive mood
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.
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.
Negative Political Ads: Research
• Not much evidence that that negative
campaigning is an effective means of winning
votes.
• It tends to be more memorable and stimulate
knowledge about the campaign.
• There is no reliable evidence that negative
campaigning depresses voter turnout.
• Though it does slightly lower feelings of political
efficacy, trust in government, and possibly
overall public mood.
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.
Humor Appeals: Pros and Cons
Pros and Cons of Using Humor
Pros
Cons
AidsAids
attention,
attention
awareness
and
and repeat
awareness
attention
Does not aid persuasion in
general
May aid retention of the
message
May harm recall and
comprehension
Creates a positive mood
and enhances persuasion
May harm complex copy
registration
May aid name and simple
copy registration
Does not aid source
Humor is not universal
credibility
May serve as a distracter,
reducing counterarguing
Is not“universal”
effective in humor
bringing
Good
is
hard
about
to produce!
sales
Company seen as clever –
carries over to products
May wear out faster than
non-humorous ads
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.
Current Regulatory Issues Affecting
U.S. Advertisers
•Tobacco advertising
•Consumer Privacy
•Advertising to children
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
Some TV Network Guidelines for Children’s
Advertising
Must Not Over Glamorize Product
No
No Exhortative
Exhortative Language,
Language, Such
Such As
As “Ask
“Ask Mom
Mom to
to Buy”
Buy
Generally No Celebrity Endorsements
Can’t Use “Only” or “Just” in Regard to Price
No Costumes or Props Not Available With the Toy
No Shots Under One Second in Length
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
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
Cease-and-desist
order
Corrective
advertising
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
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.
Suing a competitor under the Lanham Act
Elements
Required
To Win a False
Advertising
Suit
Under the
Lanham Act
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
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
Sources of NAD Cases
Competitor
Challenges
66%
NAD
Monitoring
15%
Local BBB
Challenges
5%
Consumer
Challenges
14%
0
20
40
60
80
NAD Review
 http://www.asrcreviews.org/category/prs/
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
OPTIONAL and not on the test!
Modeling Comparative Advertising
(optional material – Prof. J. Liaukonyte’s research)