Controls on Advertising: an Examination of Some Economic Arguments

There is increasing pressure to regulate advertising in Britain, and economic concepts are often advanced to support such a policy. One argument is that advertising is wasteful, but this depends upon a quite arbitrary view of what kinds of product differences are considered important. A second argument is that advertising distorts consumer tastes. This claim reflects a particular psychological view (behaviourism) which is not widely accepted nowadays. Other psychological theories, reflected in the writings of modern economists, see advertising as playing a constructive role in helping to reveal tastes, with consumers playing an active rather than passive role in choice. The proposals to limit advertising thus depend upon particular value judgements or psychological theories for which economics provides no justification.     

Low involvement processing—a new model of brands and advertising

This article puts forward a new theory of how advertising and other brand learning is processed and stored by consumers. The theory, based on low involvement processing, discusses how advertising creates brand associations which drive intuitive brand purchase decisions. The model explains why we frequently find it difficult to demonstrate that advertising has played an effective role in strengthening brands.     

Advertising effects on consumer welfare: Prices paid and liking for brands selected

The effect of advertising on consumer welfare has been the subject of dispute among economists, arising largely from disagreement among scholars regarding the persuasive versus the informative role of advertising. This paper reports two experiments that explore the welfare implications of advertising effects. Experiment 1 shows that the same advertisements can either increase or decrease prices paid for selected brands, depending on the degree to which the choice situation requires brands to be recalled in order to be considered. However, an increase in prices paid caused by advertising does not necessarily imply detrimental effects on consumer welfare. Experiment 2 shows that, even under circumstances in which differentiating advertising leads consumers to select brands with higher average prices, it can provide useful information to consumers that allows them to make purchases that are more in line with their personal tastes than are the choices of consumers not exposed to the advertisements.     

The economics of professional services: lemon markets, credence goods, and C2C information sharing

We discuss how professional service markets are plagued by asymmetric information, by looking jointly at the literature stemming from the seminal work of Akerlof on the “market of lemons”, and at the definition of “credence good” which has been developed especially within the field of health economics. Since consumers cannot evaluate ex post the quality of purchased professional services when these are “credence goods”, they cannot rely with 100 % confidence on other consumers’ and experts’ signals about service providers’ quality. Hence, questions arise on the effectiveness of traditional market features highlighted in literature as market-enhancing when information asymmetry is an issue, namely: advertising, certification, reputation, and liability. Our analysis specifically focuses on consumer-provided knowledge by looking at recent development of Web-based rating and reviewing services. Results point to the fact that consumers in the U.S. heavily rely on such services, and they do so roughly in proportion to their consumption of each professional sector. Therefore, future research on professional services should include a “C2C search technology” when modeling consumer behaviors that allows to define how much each professional service is to be considered as pure or hybrid “credence good.”     

Hidden persuasions in soap operas: damaged heroines and negative consumer effects

Sex and death, subjects traditionally considered taboo, are now presented in advertisements. Focusing on the French cultural context, this paper analyses whether these topics are still considered taboo in our society. We use the concept of taboo as studied in ethnology and psychoanalysis, which makes the reticence of consumers easier to understand and aids the study of taboos in relation to cultural context. We analyse the use of taboos in advertising, reviewing the literature on the impact of the use of death and sex in advertising, and relating it to ethical issues and cultural aspects. We then present a survey analysing whether French consumers find it acceptable to present taboos in advertising and identifying which individual characteristics affect attitudes towards taboos in advertising. Women and seniors are particularly hostile to sex and death in advertising, while young people find these themes more acceptable. The general attitude towards advertising also appears to have a strong impact on attitudes. We draw managerial implications from these results.     

Manufacturers' brand advertising and how it influences manufacturers' and retailers' margins

This article describes the effects of manufacturers' brand advertising on the costs, margins and prices of firms in a real-life, 'dual-stage' world where manufacturers sell to retailers who resell to consumers. Unlike 'single-stage' models, which are frequently used by economists, in which manufacturers appear to sell directly to consumers or to deal with them through an inert distribution system, retailers in a dual-stage world neither buy nor sell as perfect competitors. Although in some industry structures advertising will raise prices to consumers, the welfare effects of advertising are far more benign in a dual-stage world. In intensively advertised categories consumers are more disposed to switch stores within brand than brands within store (just the opposite of relationships in categories where brand franchises are weak) causing there to be an inverse association between margins at the two stages. Thus, while intensive advertising will normally raise factory prices it will drive down retailer margins, often to the point that retail prices are below the levels that would be obtained if the industry were only lightly advertised.     

Economics in Europe and the United States

Abstract

Business disciplines, including international business, are influenced by economics. This paper examines the facilitating role played by the English language in the dissemination of works in economics and attempts to show that authors who use English gain significant advantage over others. A look into the backgrounds of Nobel Prize winning economists and the predominance of American and British journals lend support to this view. Also, the overwhelming influence of quantitative neo-classical economics, which has gained great strength in the United States, seems to spread to the rest of the world. Still, international business is markedly different from economics not only in content but also in its relationship with other social sciences.     

Reaching Goals and Doing Good: Exploring Consumer Responses to Meaningful Advertisements

The purpose of this study is to investigate how consumers respond to meaningful advertisements, which promote products or brands by portraying moral virtues and life meaning. The authors present findings of an online survey in which participants reported their responses to two meaningful advertisements. A conceptual model was proposed and tested based on the survey data. Results demonstrated that when viewing meaningful advertisements participants' perceptions of meaningfulness positively influenced their feelings of elevation, which leaded to favorable attitudes towards the advertisement and brand. Empathy served as a moderator in the conceptual model. Participants who felt low empathy actually experienced stronger feelings of elevation. This study presents how consumers respond to portrayals of moral virtues and life meaning in advertisements. It contributes to the literature of advertising by demonstrating that the emotion of elevation benefits advertising effectiveness. It has significant implications to advertising professionals as well.     

Consumer Response to Coupon Advertising

Because coupon advertising has both the characteristics of advertising and sales promotion, it may have distinctive effects on consumers that cannot be explained solely by coupons or advertising. Past studies present contradicting results as to the consumers' response to coupon advertising. Our experiment shows that while the coupon may be an incentive for loyal consumers of competing brands, it may be a distractor for brand-loyal consumers in processing the coupon advertising. For multi-brand users, coupons do not appear to have any distinctive effects on processing the coupon advertising. An empirical investigation of an integrated consumer response model to coupon advertising indeed shows that there are various interactive effects between the coupon and the main advertisement. These results may provide guidelines for making targeting and promotion decisions, especially for an internationally well-known brand that is entering a new market where local or other international brands are already serving the customers.     

Effects of ironic advertising on consumers’ attention,involvement and attitude

The use of an ironic message in advertising has increased, but little empirical research has been conducted to identify the effects of ironic advertising on consumers. This study demonstrated that ironic advertising can lead to consumers’ higher attention to the ad and greater involvement in the ad message compared to non-ironic advertising, applying schema incongruity theory. This study also examines whether ironic advertising influences consumers’ attitudes toward the ad and the brand. Lastly, this study identified a moderating role of need for cognition on ad attention.     

The Relative Importance of Various Promotional Elements in Different Industrial Purchase Situations

Most advertisers perceive the views of economists on advertising as generally negative. This study attempts to determine how the role of advertising in the economic system is treated in basic economic textbooks. The assumption is that the materials presented in these introductory texts are reflective of the discipline's fundamental commonalities. The results derived from conducting a content analysis of non value laden issues indicate that most authors provide readers a balanced treatment of advertising. However, when assessed in terms of comprehensiveness and completeness, the majority of the surveyed texts fall short. These results hold out a number of implications for advertisers and economists alike and present several opportunities for further research.     

The Skeptical Green Consumer Revisited: Testing the Relationship Between Green Consumerism and Skepticism Toward Advertising

This article revisits the widely believed notion of the skeptical green consumer, in other words, that green consumers tend to distrust green advertising. Study 1, a survey of U.S. consumers, found no positive relationship between green consumerism and general ad skepticism. However, green consumerism was negatively related to green advertising skepticism. Study 2, a survey of Austrian consumers, addressed the underlying mechanism of this negative relationship in a mediation analysis. It was shown that green consumers saw more informational utility in green ads than nongreen consumers did. This, in turn, decreased their green advertising skepticism. The emotional appeal of green ads, however, had no impact on green advertising skepticism. Findings suggest that the “dilemma for marketers who desire to target the green consumer” (Zinkhan and Carlson 1995, p. 5) is far less serious than previously thought.     

Examining Polish Market Mavens and Their Attitudes Toward Advertising

Abstract

In this paper, we offer some insights about Polish consumers with varying levels of general marketplace expertise, their role in diffusing product information, and their views of advertising. Market mavens are consumers who exhibit heightened interestin and knowledge about the marketplace. Because of their interest in communicating with others about the many aspects of the marketplace, these consumers can play an integral role for companies interested in diffusing marketing information. Our study results indicate that market mavens do indeed exist in Poland and they exhibit similar characteristics to market mavens identified in the U.S. They have more favorable attitudes toward advertising than other consumers. Additionally, they consider advertising as an important source of product and social image information. Although Polish mavens are less critical of advertising being misleading and confusing, they are concerned about advertising promoting materialistic values. Our findings imply that firms doing business in Poland would be well advised to target market mavens because they pay attention to advertising, have favorable attitudes toward advertising, and like to talk about marketplace phenomena with others.     

Predicting Consumer Avoidance of Native Advertising on Social Networking Sites: A Survey of Facebook Users

Abstract

As a result of constant efforts to improve consumers’ online advertising experiences, native advertising has started to gain popularity on social networking sites (SNSs). This survey study examined antecedents of avoidance of native advertising on SNSs and the moderating role of consumer skepticism toward native advertising. Our findings suggest perceived intrusiveness and perceived informative and entertainment advertising value as major antecedents of consumer advertising avoidance. Additionally, the number of brands that consumers are following on SNSs and negative communication among peers on SNSs were found to be factors affecting native advertising avoidance. Finally, consumer skepticism toward native advertising was found to be an important moderating variable in the mechanism of advertising avoidance on SNSs.     

Marketing and advertising practices of Turkish entrepreneurs in transition economies: Evidence from Georgia

As a transition economy, Georgia has an uncertain, complex, and immature business environment, typical of transition economies in the Eurasian region. In an effort to provide insights into marketing and advertising practices in the Eurasian transition economies, this study empirically examines the marketing and advertising practices in Georgia through two surveys conducted with Turkish entrepreneurs in Georgia and Georgian consumers. On the one hand, the findings of the survey of the Turkish entrepreneurs indicated that an overall adaptation strategy is needed in Georgia; in addition, foreign entrepreneurs willing to enter the Georgian market are advised to offer a variety of products by collaborating with local distributors and agents. Although Georgian consumers do not have high income, low-price strategy does not always work as consumers equate low price with inferior quality. Marketing of prestigious products are to be sold at higher prices and appropriate product positioning strategies must be developed for each target market segment. Merchandising strategies must be congruent with the target market served as well as retail stores/outlets utilized. On the other hand, the Georgian consumers demand better customer service and increased variety of products; advertising is welcomed to a certain extent as long as advertising provides useful product/brand and company information.     

Stories as Artworks: Giving Form to Felt Dignity in Connections at Work

Controversial taboo appeals as an executional cue in viral advertising have commonly been used by advertisers. In this context, the study investigates the role of medium context on the effectiveness of controversial taboo ads. By implementing a tightly controlled experiment which deals with controversial taboo ads embedded in a press article and in a viral context, the study finds that the viral medium context does not lead to a more positive attitude toward the embedded brand or to more positive purchase intentions. In addition, a viral medium context triggers ‘unintended consequences’ that lead consumers to undermine the level of tabooness of the viral advertising and subjective norms. To increase the external validity of the research, the results were replicated for two kinds of controversial taboo appeals; one related to sexuality, and the other to death. The results provide useful implications for theory and practice. Extending viral advertising research, a different angle on controversial viral advertising has been taken, shifting from an advertiser and brand focus, to a societal and social one. The work leads to a better understanding of the ethics of controversial viral advertising, and demonstrates its role in the trivialization of taboo behaviors and imagery. The results confirm the need for more regulation of online buzz communication and encourage regulatory bodies to extend policies of viral advertising regulation.     

Attitudes Toward the Advertising by Lawyers,Doctors, and CPA's

This California survey finds that consumers continue to have a more positive attitude toward the advertising of profes- sional services than the providers do. Furthermore, consumers tend to see greater value in CPA advertising than in lawyer or physician advertising. CPA's have a more positive attitude toward !heir adver- tising than physicians or lawyers, with the latter reflecting the most negative attitude.     

锁定原理的再探讨

在静态均衡分析基础上,以报酬递减规律为假设前提的传统经济学无法解释现实中越来越多的非线性、动态、不确定性、报酬递增的经济现象。由布莱恩.阿瑟最早做系统性研究的锁定原理以其强大的现实解释力引起了越来越多学者的关注,但他们的研究多集中在应用领域,忽视甚至回避了锁定原理对经济学理论的贡献。锁定原理填补了长期消费和社会消费规律的空白,完善了生产和供给理论,揭示了一套全新的经济理论分析框架,对经济学理论的发展有着重要的意义。     

The Competitive Effects of Advertising in the US Automobile Industry, 1970‐94

Is advertising anticompetitive? One school of thought in industrial economics holds that advertising increases profits and reduces consumer welfare by creating spurious product differentiation and barriers to entry. Another school focuses on the informative character of advertising, claiming that advertising makes markets more competitive and reduces profits by supplying consumers with information about price and quality. We distinguish these views by examining the effect of advertising on competition in the US automobile industry. Our data include advertising, sales, profit, and market-share figures for General Motors, Ford, and Chrysler over a 25-year period from 1970 to 1994.We ask if advertising increases or decreases profitability, controlling for market structure and other factors affecting demand.Wefind that these firms cannot increase their profits above normal levels by increasing their advertising expenditures. This evidence supports the view that advertising serves primarily to transmit information, not to create entry barriers.     

Introduction to the Special Thematic Symposium on the Ethics of Controversial Online Advertising

The field of marketing and consumer ethics has evolved considerably over the past 20 years, yet research on specific areas of advertising ethics remains limited. This limitation persists despite developments in digital technologies, and the impact they have had on advertising practice generally and online advertising more specifically. Online media are becoming increasingly populated by advertising content, as consumers continuously navigate ever-evolving mediascapes. Thus, there is a need to examine the ethical issues associated with the use of controversial advertising online, as well as consumers’ responses to such ads. This special thematic symposium addresses this literature gap, which is at the intersection of consumer ethics, e-marketing, and controversial advertising. The two papers in the special thematic symposium present new research in this area, along with some initial ethical implications as well as potential for future research.