Advertising n In 1998 351 billion world wide

Advertising n In 1998, $351 billion world wide n n n Source: The Penguin Atlas of Media and Information, Penguin, 2001. Average Expenditure person: $300 or more in the US ( which has 43% share of world market) Canada ( which has 1. 9% share of world ad market) averages between $100 and $199 n Almost equal 6 way split: radio, TV, mags, news, cinema, outdoor CMNS 130

Learning Objectives n n n What is advertising? What are its economic characteristics? Three views of advertising Typical Regulation of Advertising What are its effects? CMNS 130

Definition n n Persuasive message to buy, sell or change behavior Biagi: involves payment to place message and identification of sponsor as well as selling of goods and services Also involves the latin meaning of take note or consider– that is the goal is to be noticed Fleras argues there are structural, functional and ideological elements to the definition ( text: 176) CMNS 130

Definition Cont’d n n n One element of the 4 Ps of marketing ( production, pricing, promotion, etc) An indirect or third party form of financing the media Used to be the dominant form of media financing– still is in television, mags and newspapers But in 1990 in electronic media direct consumer payment ( subs, pay per view) exceeded ads Central to consumer culture: establishing the codes, cultural norms, expectations of consumption, and market signalling CMNS 130

Main Forms of Financing the Media n n n Advertising Direct Subscription ( cable, newspapers, etc) Transaction Revenues Licence Fees ( BBC) Taxes ( CBC/ matched by Ads) CMNS 130

Role of Advertising n n n Principal sources of revenue for: newspapers, radio, television, magazines Not books, film, sound recording, or telecommunication Uncertain but growing role in the Internet CMNS 130

Economic Functions of Advertising n n Generating profits by selling products or services Fostering brand name recognition Establishing corporate ‘good will’ or corporate image for social responsibility Supporting the economic status quo CMNS 130

Social History of Advertising n n Earliest known ad 1000 BC offered a “whole gold coin” for the return of a runaway slave Only began in mass form with the printed press after Gutenberg Associated with the rise of mass production techniques in capitalism especially in 20 th century Needed to stimulate mass demand, synchronize or aggregate demand with oversupply CMNS 130

Economic Characteristics n n A function of the gross domestic product: tied to business cycle Segmented by global/national/local markets Newspapers and Radio: mostly local retail TV mostly national/ international CMNS 130

Economic Paradox n n Just under half of world advertising spending is from US Yet 2/3 rds of world population cannot afford the goods the US advertises CMNS 130

Economic Characteristics 2 n n Ad rates rise in condition of monopoly/oligopoly Ubiquitous n n Less than 5% of all TV signals are non commercial Few magazines, news or other sources are without ads CMNS 130

Economic Characteristics 3 n n Mainstream, ad supported media exist to make money from advertisers Content and style are often reshaped to comply with demands of ads in a highly segmented market n n How? Ads laid out first on a newspaper, then text How? Media often reposition to appeal to a better market segment ( eg. Jake) CMNS 130

Theories of Advertising n n n Neo liberal or pro market view Reform Liberal or pro regulation view Critical or anti consumption view CMNS 130

Neo Liberal/Pro Market View n n Implicit model of the rational consumer, maximizing self interest Individual recognises wants, searches, evaluates and purchases Advertising aids in the consumer’s search Serves essential market communication function in the exchange of messages between buyer and seller CMNS 130

Neo Liberal cont’d n n Stigler and the Chicago school of economists argue that ads reduce search time: make the consumers ‘foraging’ more efficient Permit better aggregation of demand, thus facilitate economies of scale Decrease unit distribution costs To the extent ads persuade someone to buy, provide employment, ensures investment in production is profitable CMNS 130

Neo Liberal cont’d n n Problem: are sales linked to advertising or the business cycle? Neo liberal studies argue that sales depend on disposable income, not advertising Advertising thus mediates market forces, but does not create them ( limited effects thesis) Consumer is sovereign CMNS 130

The Reform View n n n Eg. Galbraith et al Sees from a social welfare standpoint, that advertising is not productive, but wasteful and inflationary Advertising creates ‘false wants’ Promotes hypermaterialism/ hedonism/ environmental degradation Point to evidence that ads have not grown as a % of the GNP over time as sign that ads are not ‘productive’, or ‘dynamic’ engine Furthermore argue that ads ‘buy’ consumer CMNS 130

Reform Cont’d n n Refute thesis of consumer sovereignty Refutation is easiest in ad-supported media, where intermediate demand of advertiser creates valuation: not viewers Argues needs are created: an oligopoly of producers control demand Thus the state must play a central role in regulating ads or ‘policing persuasion” CMNS 130

The Critical Perspective n n n n Eg: Adbusters Sees Advertising as central to the power structure of capitalism Goes beyond the reformers, arguing for ‘culture jamming’ Voluntary simplicity, preservation of the environment, antimaterialism In particular, looks at the system of ownership and control of the advertising agencies and notes 5 out of the big 8 are American These huge companies( WPP group, Thompson, Ogilvie and Mather) integrated to Public Relations Firms which service big business and big government A Seamless Web of the Persuasion Society CMNS 130

The ‘Problem’ of Advertising n n n Business pay for ads on shows Shows on TV ( main channels 100% supported by ads) or newspapers ( 80% supported by ads) are not the product The product is ad time or space sold to advertisers What advertisers buy is the access to audiences No direct price signal between consumer and editor or media No direct cues as to likes/dislikes or customer preference CMNS 130

Fleras’ Argument About Advertising being the Message n n Irony ( Fleras, p. 177): content or programming exists to deliver audiences to advertisers “ Ads cannot be considered interruptions when market values prevail; they are the very foundation for programming in connecting audiences with consumerism” CMNS 130

The Myth of Consumer Sovereignty in Ads n n No direct signal between consumers and media providers In fact, share of conventional TV audiences is declining but ad sales increasing NOT ALL CONSUMERS ARE EQUALLY VALUED: SOME ARE DISCOUNTED, AND SOME ARE PREMIUM Advertisers’s desire to reach the attractive youth consumer segment explains ‘Friends’, recent rise of Reality shows n Also explains exclusion of the low spenders: blacks, CMNS 130 hispanics or old in the US which are less attractive ad

The Myth of the Free Ad Lunch n n Costs of ads passed on to consumers: affect 10 -15% of cost of goods. Current estimates of ads in Canada suggest ad spending of about $900 to reach hhld: this is paid by all, even the poor, whether they want the ads or not Such hidden, indirect payment is not known to consumers Explains why they prefer ad supported, so called ‘free’ media to pay per view or other services on the Internet: they are unaware they are already ‘taxed’ by the manufacturers and distributors of consumer goods CMNS 130

The Canadian Small Market Problem n Canada has half the per capita size of ad spending as the US– tougher market for Canadian cultural industries Overspill of US ads vitiates demand n Segments of the industry: ( health, law etc) are either publicly owned, or prevented from advertising n Retail sector in Canada has not been as competitive In TV, if US programs are more popular: Canadian businesses prefer advertising on US shows, weakening indigenous production markets ( a vicious circle) thus weakening competition, and leading to increase in market dominance and higher US ad rates n n CMNS 130

Policy Responses to small market problem n n n Income Tax Act prohibits spending on US media as an allowable business expense in Canada This is intended to protect ‘diversion’ of ad money south of the border Regulations: ( Canadian Radio-television and Telecommunications Commission) create rules like the “ simultaneous substitution rule” which allows Canadian stations who have bought the rights to a program to insert their ads sold against it in the imported US signal Tax money used to subsidize public/non commercial media ( CBC, community TV) As well, tax money increasingly being used to ‘advertise’ in public sector areas n Public health issue: allow, like the US pharmaceutical manufacturers to advertise to Canadians? CMNS 130

Attack under Globalization n n Before 1999, Canada’s Magazine Policy prevented ‘split runs’ ( except for Time Canada and Readers’ Digest) Goal was to prevent US media companies getting around the Income Tax Act by publishing ‘virtual’ editions which could scoop Canadian ad spending without producing Canadian editorial As well, Canadian magazines were allowed to mail free to their customers ( unlike US mags) ( see Stoffman, cited in Fleras, p. 208) US launched a trade protest under the World Trade Organization on the grounds that magazines offended the rules of free trade: n n n National Treatment rule: despite exemption of cultural services from NAFTA Canada lost. Instructed to strike down legislation: had to create new ones, and offer subsidies to Canadian magazine sector FREE TRADE IN AD SERVICES ON US AGENDA CMNS 130

Classic Forms of Regulation n Truth in advertising: deceptive advertising may be a criminal or civil offense n n n Prohibition or strict regs on Ads for hazardous goods ( drugs, tobacco, liquor etc) Policing Ads directed at children n ( but intent must be established as well as proof of harm) Ad free zones promoted for very young children, since children cannot distinguish between an ad and a program Pre airing censorship: to prohibit violence or other anti social contents Other types of ad regulation n Gender portrayal etc. CMNS 130

The Terms of the Regulation Debate n n What is permitted Who is permitted When and Where it is permitted To whom CMNS 130

Regulation Around the World n n n Various levels of constraint around the world Sexual violence against women in ads is banned around the world except Argentina, Paraguay and Thailand Some categories of products/behaviors are deemed offensive and thereby restricted in certain countries: n n n Sanitary products Toilet paper Undergarments Undue attention to breasts or buttocks Physical intercourse: hetero or same sex CMNS 130

Canadian Ad Institutions n n n The Canadian Advertising Foundation ( CAF) Advertising Standards Council Receive complaints and preclear ads directed at children CMNS 130

Issues in Advertising n Recent ad issue concerns: n n n Historically, ‘patronage’: control of media content through sponsorship ( Disney) Increasingly: ad clutter: more than time allotted ( 18 minutes out of every hour) Sound /noise offense Product placement: eg. American Idol Difficulty in measuring ad impacts Catholic Church in BC protesting Van. City ad representing a gay couple ( as part of a resistance to revision of Canadian marital laws to include same sex couples). CMNS 130

Marketing Surveillance Society Thesis n n n Movement to e-commerce on line allows single source, integrated market research intelligence, new levels of custom advertising to markets of one See www. redsherriff. com An internet tracking company which downloads a hidden Javascript on to y our browser when you visit one of their affiliated sites Can track where you visit, how long you stay, what you bought and create a full virtual data shadow Sell it to business who will design a marketing applet to bombard you Consumer mobility– tracking and ad campaign design now central to new forms of market/advertising n Privacy, issues of ‘informed consent’ and other concerns CMNS 130

Rhetorical Techniques of Ads ( see Fleras, 202 -203) n n 1. Shock/Humour/Novelty: to get attention 2. Repetition 3. Visual Style Codes: 4. Ubiquity CMNS 130

Social Psychology of Ads n Maslov’s hierarchy of basic human needs: n NOT directly observable: n n n n survival, physiological sustenance personal safety social belonging self esteem self actualization aesthetic, expressive needs higher level needs become salient when survival needs are met CMNS 130

Effects of Ads n Saturation n Avoidance n n n See now more than 500 ads a day/182, 000 a day Very low levels of recall Use remote control to dodge ads Tape and fast forward Defensive Industry Response: Integration n Fool consumer by integrating commercial and content: product placement, seamless infomercials ‘advertorials’ Issue of ‘due process’: are consumers aware of what is an appeal and what is not? CMNS 130

Effects Cont’d n Socio-Cultural n n Psychological n n Used to identify ‘in’ and ‘out ‘ groups Create ideal role models stereotyping Behavioral: induce a buy Attitudinal: like the product/associate with attributes— lifestyle appeals Cognitive: recognize, evaluate what is needed Political n Political advertising is more often using conventional CMNS 130 ad appeals ( celebrity/spectacle positioning )

Content Effects n n n Drive to placate advertisers: indirect economic censorship ( Politically Incorrect case during Attack on America) Interrupt content: in newspapers, articles are blocked around ads: more ads, shorter news holes; drives the pyramid style of presentation…drive format and medium expectations Create high aesthetic standards: 4 1. 3 million per 15 second ad / Superbowl exceeds even the highest budgets films …shape novelty/innovation/ imitation trends CMNS 130

Ideological Effects n n n Advertising defines what is important or desirable Draws attention to certain aspects of reality while ignoring others ( Fleras, 171) it is a discourse about ‘reality’ “Manufacture of Discontent” where the only solution is through Buy Buy As a system of persuasion, advertising is propoganda (Fleras, 211) Have we become citizens of shopping malls? CMNS 130

Recommended Sources n Benjamin Singer (1995) “Advertising” A Sociocultural Force” in Communications in Canadian Society, 4 th ed. , Toronto: Nelson. pp. 123 -138, n n Richard Jackson Harris (1999), “Advertising” in A Cognitive Psychology of Mass Communication: 3 rd ed. , Mahwah NJ: Lawrence Erlbaum Associates, pp. 71 -95. Leiss, Kline, Jhally: Advertising as Social Communication Frank: Liberation Marketing Klein : No Logo CMNS 130