Advertising Sem III Module 3 Dr Jayashri Kulkarni

Advertising Sem III Module 3 Dr. Jayashri Kulkarni

Economic and Social Aspect of Advertising Economic Aspect: Economic Impact Effect in consumer demand Effect on Monopoly, Competition Effect on Price

Economic Impact � Impact on products � Impact on demand � Impact on market � Impact on prices � Impact on cost � Impact on economic growth � Impact on competition � Impact on consumer welfare � Concentration of economic power

Effect of Advertising on Consumer demand � Primary Demand—generic products � Selective Demand—branded products � Impact on psychology of customers � Demand through endorsement � Demand by comparison � Standing in competition

Effect on Monopoly& Competition � Monopoly: Few sellers—more products � Argument-Advertising leads to Monopoly � Samuelson, Jules Backman-Ad. leads to monopolistic situations a. Large organisations b. Huge funds c. Control over market d. Control over media-T. V. e. More demand, More profit, More money f. Concentration of economic power in few hands. g. Competitive advertising rather than creative advertising,

Effect on Monopoly& Competition � Argument-Advertising leads to Competition � Philip Nelson-reduces monopoly a. Advertising does not restrict entry of any firm to market b. Creates demand, develops market c. Invites new brands d. Promotes competition e. Stabilises /reduces prices f. Quality products g. Wide choice to customers

Effect on Monopoly& Competition � Conclusion: � At times it leads to monopoly and at times it leads to competition. � It may lead to Monopoly for short time. � In long run it boosts competition. � Ad. Helps new firms to enter in to market. � It expands scope of market. � Creative advertising will help even a small firm to widen market slowly � Not advertising but quality of the product creates Brand equity.

Effect of Ad. On price of the product/service � Price consist of two factors-cost and profit. � Cost includes three elements a. Production Cost b. Distribution Cost c. Administrative Cost

Impact on Production /distribution cost � Cost consists of two elements fixed cost and variable cost. � Fixed cost i. e. overhead cost do not change as per the changes in out put e. g. rent , rate , taxes of factory building /sales building, salaries to production /sales people etc. � Variable cost changes as per the changes in output e. g. material cost, wages/ commission payable to salesmen � Due to advertising demand increases , production increases but due to fixed cost element cost per unit do not increase proportionately. � Thus the cost per unit reduces.

Impact on Production /distribution cost Particulars Before Ad After Ad. Units produced/distributed 5000 10000 Total Cost in Rs. 10000/ Rs. 15000/ Cost per unit Rs. 2/ Rs. 1. 5/

Impact of d. On price of the product � Price includes cost and profit � When the cost reduces after advertising there are two options available to the marketer. a. To reduce the price b. Increase his own profit � Generally the marketer does not change prices in short run and enjoys entire amount of reduction in cost as her/his profit � In long run however the marketer may reduce price and transfer the benefit to consumers and expand her/his market.

Impact of Ad. On price of the product � Price = Cost + profit � Price before advertising be rs. 3/ per Unit � Before advertising the equation will be � 3=2+1 � After advertising the cost will be rs. 1. 5/ per Unit. Hence the price will be � In short run 3= 1. 5+1. 5(profit increases) � In long run 2. 5=1. 5+1 (price reduces)

Social Aspect of Advertising � Advertising as a social process � Ethical Issues � Importance of Truth in advertising � Cultural impact of advertising � Positive Impact � Negative Impact � Pro Bono advertising � Advertising through DAVP � Control of Unethical advertising

Social Process � Awareness � Education � Cultural Impact � Ethical impact � Consumer satisfaction

Ethical Issues in Advertising � Ethics: basic values , norms of behaviour of people. Social pattern of agreed ways of be haviour.

Forms of Unethical Advertising � Fake Advertising � Over exaggerated � Wrong Testimonial � Wrong Statistics � False /misleading statements � Free gifts/discounts � Typical portray of women

Forms of Unethical Advertising � Unhealthy comparison � Surrogate/backdoor advertising � Targeting children � Self proclaimed awards � Cheap popularity � Vulgarity � Advertising of harmful products

Importance of truth in Advertising � Survival in industry � Good brand image � Corporate image � Credibility � Brand loyalty � Brand equity � Market expansion

Importance of truth in Advertising � Healthy competition � Consumer satisfaction � Consumer welfare � More profitability � Long term benefits � Promotion of overall ethics in business

Positive effect of Advertising on society/culture For Consumers � Reduces price � Stabilises prices � Wide choice � Information � Firm decision making � Assurance of quality � Consumer satisfaction q

Positive effect of Advertising on society/culture For society: � Market development � Healthy competition � Optimum use of resources � Boosts good traditions and customs � Promotes healthy relations among family/friends q

Positive effect of Advertising on society/culture � Helps to pass on urgent messages � Endorses basic human values � Social messages � Improves standard of living � Develops good habits � Promotes national integration � Helps to promote the communal harmony intact

Negative effect of Advertising on society/culture � Increases unhealthy competition � Increases prices � Materialistic life style � Unproductive use of funds � Monopolistic situations � Less scope to medium/small organisations � MNCs dominate the market

Negative effect of Advertising on society/culture � Unethical advertising � Cheating to customers � Spoils scene of city-big hoardings � Spoils culture � Develops poor taste � Women shown in stereotype roles � Glamorous advertising-false impression � Effect on mental/physical health

Pro Bono advertising q Social advertising/public service advertising � Social Awareness � Social interest/welfare � Important social/environmental /political issues � Mass media � For general people � Celebrities

Pro Bono advertising � Public service campaignse. g. Anti drugs, Literacy Mission, Family planning � Social cause advertising An attempt to link a company for social cause e. g. education to tribal children

DAVP � Directorate of Advertising and Visual Publicity � Nodal Agency of Govt. � Many wings: Print Wing, Audio visual Wing, mass mailing Wing, outdoor publicity Wing, Research wing, Distribution Wing, language Wing

Features � To communicate socially important messages � One stop agency for advertising of Central govt. bodies all over country. � Covers all media � Professional principles are observed � Quality important � Competitive media rates

Role-DAVP q Social awareness campaigns: � Immunisation � Right to Education � Drinking Water � Rural Development q Awareness q Social Development q Empowering weaker section q Std. of living

Self Regulation Laws � ASCI � INS � DD � AAAI

ASCI � Advertising � 1985 � Non Statndards Council of India. Government Body � Company not for profit � Advertiser, media, agencies, market research companies. � Self regulation of advertising to enhance public faith in advertising.

ASCI-Objectives � To monitor, administer and promote standards of advertising practices in India. � To Codify, adopt and modify the code of advertising practices in India. � To implement , monitor and administer such a code. � To give wide publicity to the code. � To publish literature for promotion objectives of ASCI.

ASCI-Role � Promote truthfulness of advertising. � The code is not offensive to the generally accepted standards of public decency. � Safeguarding against violence, risky products, discrimination on the ground of race/caste/colour � Fairness in competition � Guidelines/rules from ASCI for--Advertiser /ad. Agencies/media people/celebrities to adopt code.

Questions � What is the economic impact of advertising/impact of advertising on economy? � Assess the impact of advertising on consumer demand? � Does advertising create monopoly or competition? Justify your answer. � What is the effect of advertising on consumer price? Explain with example. � What is the impact of advertising on cost of the product? Explain with example.

Questions—contd. . � What are the forms of unethical advertising? � What is the importance of truth in advertising? � What is the social impact of advertising? � Write a note on positive and negative impact advertising on culture of advertising. � Write a note on Pro Bono advertising. � Write a note on DAVP. � Write a note on ASCI � Describe the role of ASCI in self regulation of advertisements.