Business roundtable; 23 Of 26

The following program is made possible through a grant from nation's business. This is a business roundtable a program of current comment from leading members of America's business community. Today. Norman EK president of the television Bureau of advertising and Thomas a stout chairman of the Department of Marketing and Transportation Administration at Michigan State University will explore the topic advertising and the consumer with series host Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University. Our subject today Business Roundtable advertising in the consumer this morning has become increasingly important in our form and type of society. We used to have many years ago advertising in very primitive forms.

Today it comes in a great variety of very sophisticated forms in print through the air and radio through the air both visually and orderly on TV. It's appropriate today that we look at some of the tremendous economic and social implications of this powerful tool and its importance in our kind of free enterprise society. Mr. Cash How important is advertising today in our society. Well as one dimension Dean. Advertising one thousand sixty was two point two three percent of our gross national product. I just haven't looked this up. I don't really have that in my head was generated some 11 billions of dollars. 967 our best estimates are 2.1 6 percent of GNP which will generate some sixteen billion nine hundred millions of dollars. There are it's large dimensions of the ability of the American system to tell Americans about its products and services. Which is little more than two cents on

every sales dollar. Dr. Stout this important and powerful tool is this absolutely essential in a free enterprise kind of an economy. Well I think Dean's really it is. I think it's performed a very useful role over quite a period of time. And I think it's well to recognize that our form of society presumes rivalry between firms for the customer's favor. And consequently advertising is one of the major means used to cultivate markets and we rely on the consumer to his best judgment purchase the products and services that he believes meets his own needs. So advertising brings him some information that's important to his making his choices and some persuasion. And I think we ought to recognize that in an open society persuasion is an important part of our culture I try to persuade you that my candidate for public

office is better than another one. Our legislators try to persuade each other that their legislation is better for the society than some other form and so advertising I think makes a contribution in terms of its information and in the growth and development of the private interview it is. This is such an important element of our free enterprise kind of system why does it generate in many cases such criticisms as we have been having in recent years with their garden when I look back over what's been written in the past. So used to mean there's always been some criticisms of the use of advertising I think that critical observation is a fair one based upon the fact that we have more products and services to sell. We have more media someone estimate I think Dr. Stout that we have some fifteen hundred advertisement of all forms in a single day. A person is exposed. So we build up through this communications

device carried by advertising a large amount of advertising. I will speak on behalf of television this moment General if I may because I'm sure I'll get around to that in a moment anyway. I'm not sure I could keep it from me that way. We do because of the dynamics of the medium demand a time span between the beginning of the commercial and the end of the commercial or a person's attention or boredom world whatever. Whereas in other media they can move rapidly across that commercial except already of course it's the same dimension as television in a sense so if the product being advertised is ready if not him of import to the person or if it's badly put in either taste or loud shouting It's an annoyance factor. But after all the advertiser is proud of his product and anxious to get your attention so is you a biased product. He surely doesn't want to offend you. Well let's look at some of the types of criticisms that we find today by being written about or expressed vocally at times.

One of them not to stop others that has to do with the economics of advertising. There are some who feel that when they look at the large amount of money that the company is spending to sell soap or to sell an automobile that this raises the price of the product they simply say well I could get the product at a lower price if the company didn't spend so much money advertising this product is that true. Well I think there's an element of truth in some of these charges that we've had with us a long time. The argument runs that advertising only shifts the demand between sellers in certain cases and doesn't contribute very much and therefore there might be lower prices. What do you mean by this shift. The amount of soap Bye-Bye essential piece stays the same but I choose different brains from time to time or I do this in cigarettes now I think we ought to recognize certain important elements here.

First is the notion that advertising stimulates demand Hopefully that's the advertisers purpose and therefore the volume of business he does increases and his production costs may decline with that greater volume and so in many instances in one sense you could say the advertising pays for itself or lowers or lowers the cost. Yeah I just read it does it. Well I think there are many instances in which that is certainly the case. Now there are some others of the former type I think but I would regret seeing a strike to dishonored those areas in which advertising does make a contribution and those that it doesn't and therefore have regulation that would attempt to separate the times at which it is appropriate and which it is not. You mention a little while ago that advertising in a sense was the art of persuasion I believe you used the

phrase had elements to tell it was fallacious Yes. Well if that's true and I think it is. Might might we say that advertising really when you're talking about an automobile that really the advertising of an automobile is not simply against other automobiles other brains or makes of automobile but it might be against a trip to Europe. In other words the consumer has a choice of spending the money to buy a refrigerator or an automobile or a trip to Europe or whatever it may have to be so that we are within one product category. Mr. Cashman we think about advertising Nardin and it's amazing how our system we think in comparison to others by offering a multiplicity of choice let me slide in a little bit of humor you're a good friend of General so I was asked once many years ago I had too many years ago as a matter of fact within the past decade. Couldn't he get him a television color television set it cost him the General at that point said You better buy it at retail it cost a hundred thirty million dollars that's what the developmental cost cost on a major part of our meeting and

it was only truly when the free competitive flow both many types of television sets and many choices of programs came into being that color really took off. The American public is used to choice unless it has their choice it seems to stand back and say well it's alright but I'd rather have that choice. Was there another facet this problem we were looking at some of the criticisms that have been put forth frequently for example people of some people have written or stated that they think there are times when. Some of the advertising has displayed questionable ethics or perhaps questionable taste that don't advertise much maybe in bad taste. Do you find that this is basically true or not. Well I think probably in the bulk of the cases advertisers show considerable restraint they attempt to promote their product in a way that is acceptable to the consuming public

and consequently their intention I believe is is good. Now on the other hand the matter of taste is of course a complicated subject. I think there are. Advertisements clearly that are in their taste I wonder sometimes the amount of sex and violence that are used as advertising medium or media as to how appropriate they really are and haven't we reached a point where the advertiser today has a far greater responsibility that he must bear for the choice of his hands than was the case previously because of the introduction of these mass media which cannot be shut out from the minds of the young people of this society and consequently I would address a question to Mr. Kane in that respect. Is it not true that we are facing problems as to what in fact the level

of taste is that the advertiser ought to concern himself with. First I couldn't agree more that good taste is a part of our fabric or it should be the exuberance of a new advertiser or any product doesn't excuse him for using bad taste because he's entering the privacy of a home especially in my medium. How do you control is the forays of the American Association of advertising agencies have their own standing committees we have our own codes. Which attempt to police this out but the unexplained is little when you're selling your own code in the television industry certain products to begin with and that we're not and we don't allow any or all of the that are not allowed after us. There are certain products copy which is so far out that we automatically say Hold it can you in any reasonable sense prove this. And if we can't hold this as a question of credibility as well as taste right there is no profanity in our culture you know disparaging of the law and so on.

So but occasionally this I think advertising as we started really in our discussions is so much in the minds of people today because it's so conspicuous. It is tarred with the brush of the bad fellow who and I sitting here all holding a saying the television hasn't had its obnoxious commercials on. But the free flow of the public saying that man is taking advantage of me and the reverberations against his product quickly tends to meet only to straighten up that advertising. Now when you're talking about your code this is a voluntary code that television stations subscribe to the NABJ the Nats Association of Broadcasters code. Now how does a complete get brought under this cog of the kind that does a consumer buying it or a competitor and so we're going bring it but supposing of most come from competitors which I think is a very fine policing action can he really say that again or the best

complaint system is that the public's free ability to respond to it or reject it. And I guess if anything television because of its speed has a playback of failure faster we've got some real bombs in town and which may have said about it after a lot of money whether it was taste or bad product. But suddenly we can make a lot of people as most of them as we can terribly conscious of a product. Now when we're talking about mass media TV he seems to me as a real new dimension because the fact that both of you have mentioned that when we had advertisements in newspapers or magazines that came into our homes. I might read it or I might not give an article or look at a given page. The children probably didn't look at the adult kind of magazines. The nature of the media in the sense of TV is in our homes. The children do see it. If you're watching a program you don't turn

it off years away because perhaps a commercial is goes against your taste you leave it on do you want to see the program. It seems to me in some ways this is a very different kind of problem than we have in the printed media. But it is by all means and that's what makes our difficult programming as difficult as it is. First of all remember the amount of product we need I'm not excusing any bad programming that we will get on here. The freedom of choice of the viewer despite what you just said if he's within a program what does he know what's going to get good better and different. Is craftily measured by us in a sense. The sets in use the amount that people spend before their television sets. People will question the size of the sample but American business is fairly well guided by some very careful selected samples. The off position on that knob is a very powerful one. I don't think that we we certainly aren't saying we can't do better not try to do better but we are. And it's reflected in the rapidity

with which we change programs. We don't stay with the same program ad tonight unless the republic the public responds to it and wants it or they have the vote of throwing those things off more rapidly than you'd believe. I think Dean Seeley I would be a bit critical of some of the advertisers. But in their own interest I believe they have failed to recognize the increasing level of taste in the American people. Now we now have about 80 million one hundred fifteen million adults through four years of high school. And this is a great change from 20 years ago and I have a feeling there may be a propensity for advertisers to lag the level of taste instead of contribute to advancing it and that's a value judgment. It's hard to defend if the feeling of my Doctor let me give you a reaction which you may agree or disagree with some of our viewers. Matt is

under this tension to the mass media and his involvement in life around him and his social consciousness especially in this group you just mention who should have you have given him the ability to be better educated and more discerning in what needs to be done. You know our evening program has many needs a little relaxation a little escape a little fun and surprising the amount of programming that we put on in the evening Prime our time is when we will have as many as 60 to 70 percent of the homes using television were the reaction of audiences are so small to find discussion programs classical music etc.. It isn't that people don't want this. It's just the fact that they have had enough of it through their normal day. We will continue to put on these programs even though they don't meet the normal large audience status which we need for the cost of a life. I would agree I would only raise the question however do we escape into the land of violence and vice and other kinds of areas of this sort that that may not be lifting to the to the society were a

part of. Now obviously what we get is probably what we are prepared to watch. So I would I would defer to your basic point but I would ask continually higher standard upis dont start dont we get on commercial TV just as you said exactly what the people want. But I think Mr Kash made the point that if a program doesn't get a certain number of listeners it's dropped pretty quickly because of the enormous cost of it. So as an advertising medium it's just not effective. So that when you criticize as let's say not the taste of a commercial I think we want to distinguish here between the taste of a commercial and what you might say as they level or taste of a program these are two different things but let's take the level or taste of a program. It must be that there are large elements work that or have a different value judgement of taste than yours or it's going to be dropped because it simply isn't an effective advertising medium.

Well I want to keep one thing in focus now gentlemen. I'm rather proud to know you are of this system in which we do live at the higher levels of education the ability of this nation to not only free the if you will defend the free world feed it. We are naturally critical of ourselves I think this is part of our strength. It doesn't want to throw the baby out with the water by saying well there was a show that I saw I didn't like. And I think we pay much more attention and almost too much attention it was to the carping harping critic who had nothing to constructively throw in in place of what we are doing or misses what we are doing. One very big one of the most popular shows is a strong father image and it gets out of the title of a Western. Unless you are designing up to see that strong father image in the program you're missing a very needed thing in the whole cultural society I think of and this is a characteristic I think of the American society we're very good self critics. I think we as educators we as educators for example are constantly criticizing things in our own

educational system all on the ballot so I think we've got the greatest educational system in the world. But I think this is a very constructive part of our society to the self to TV One. But let's look at another little aspect of this since we're kicking around some of the TV aspects of the amount of commercial time that's on the program again since this is so pervasive in your home. You as you said cash you can shut it off all right but if you want to see that program you can't shut it off. But if you really want to see that program you like their program therefore you are kind of a captive of us x number of minutes of TV time. I suppose we might vary what is a reasonable amount. TV commercial time per hour we ought to be involved with. Well let me say Dean Seeley that that that's a game of value judgment but who are ever the line is I think were at the maximum if we haven't exceeded and I

think there's another change that's come about in this connection too and that is that we're increasingly running events and programs for the benefit of the advertiser instead of the advertiser fitting his message into the event being staged and I would pick out pro football as a case in point in which we stop the play and disrupt the flow of the game in order that the advertiser have the opportunity to put his commercial message in. Now who's to say how much advertising there should be is a difficult question but I have a feeling we're at the maximum particularly in the non-prime time hours where one could have as much as 16 minutes out of an hour of commercial time. Doctors tell of a responder because I think this is our field and we have the television bureau are proud of our sales record. Again there's no restriction or no necessity that you watch this program. Also if the advertisers found that you were not responsive to his ad

he would stop sponsoring the program. In the conditions of the sporting events which you mention the total cost of bringing this event into the home ever rises. I'm not prepared to discuss where or how we should be paid what. But playing football is a pretty rugged game these men like to have more money just as you and I do in a salary for the cost of these games are going up because they have been receptive with a larger audience. They have also been profitable for the advertiser. The minute that audience turns away from those programmes or the audience the commercial advertisers get their response and as he expects for that heavy investment he'll move away from it. And believe me we're a quick to recognize those things and I just yes I do have a right and I will. I want to add another one example I have a feeling that there may be an undertow of consumer resentment against some of these. And by the time it creates

a change in the advertising connected with these shows it may be too late for the advertisers to retrieve their position and I really think there is a appropriate note of caution there not to be sound I appreciate your concern over at the very opposite is true though. Our audience is that these games become ever larger. This if you a hater I didn't have city advertising demand on these products and these programs sponsorships ever increase. And including the costs not because we like to see high cost anymore than they do but this is that funny free flow that in the marketplace of the United States there is an amazing ability to judge what is too high or too low and force we have set up measurements to see this quickly enough to say hold it and we may see increasing alternatives in the future. The advent of pay-TV which some people are now have an option of of watching events without the interruptions involved or in pain of what I want to know but I

believe it's coming. I thought well that's as far down the road if I want the free system to run I've got all our free competition to come in but we've had about seven or eight pretty major experimentations in pay-TV. And I just pity the poor salesman has to come into even this delightful community and say it for you to see that the games this week is going to pay for them now. It was one thing at the brand new start of the media of the making is that if you want to see the Yankee baseball games or the Green Bay Packers and you never seen him before he could get in for a dollar buy a television he would be glad to do this but it's been given to him through the support of the advertiser and the media. Because I don't think we always have these things sold out as well as they are sponsored in many cases. Let's turn to another question here. With regard to advertising in the consumer today it's frequently mentioned that in all of the different advertising media not just TV although we've been concentrating on TV here the past few minutes

some of it's bad and I think the fact we devoted as much time to TV shows what a powerful medium it is. It's quite clearly a very powerful Let's look at the. It does however tasing make make people buy things they don't need. Stout This is a frequent allegation a recent very popular book that has been on the bestseller list for weeks. One chapter in the book much is made about the fact that advertising. Is undesirable socially because it makes people buy many things they don't need or shouldn't have. Well that that that's been said and on the other hand I don't put much faith in that because first of all who's to play God. What do we really need. There are many things we have we certainly don't need now hopefully advertising does indeed stimulate demand. I acknowledge that. But I think you and I should be free to determine what we need rather than having someone else

determine that for us now. Finally I would say on that I don't believe you can persuade people to buy something counter to their best interest and with their own experience with the product if the product doesn't meet their needs and perform they will repurchase it. If the product isn't satisfactory or acceptable no amount of advertising will make it a successful market other words than these kind of critics are overestimating the power of advertising. I think they are as deflating as it is for me to admit but my backup doc just out I have to be a complete agreement on this that no one advertiser doesn't doesn't have to know when to advertise who doesn't have to. When we sign our name we're advertising. When you put that brand name on a product in the massive distribution process that we have today that is a tremendous endorsement of that corporate structure. And I just like to throw this paramedical philosophy in here if I may. Advertising ourselves people things they don't need it has been said. And I just like to wring out that advertising does tell people

things they don't need like television sets and automobiles catchup mattresses cosmetics ranges et cetera. People don't really need these things and people don't really need art or music or literature or newspapers or historians or even us. All people really need is a cave and a piece of meat in a fire. We're a long way from that kind of a society Thank goodness. I think though Dean Seeley there are many things we don't know about advertising. We don't really know all of its competitive effects. We don't know to what degree it does inhibit the introduction of new products by smaller firms. We don't know what. The returns are from advertising dollars to two marketers in precise terms. We need a lot more research. I think you're going to see proposals coming for certain kinds of regulation that we don't now have many of which would be ill founded. But this is a subject in which controversy is likely to continue in my judgment and which we need a

great deal more effort. Well I understand there's a piece of federal legislation that might be introduced that there isn't people talking about us having a law restricting the amount of money that a firm can spend actually spend on advertising as either a percentage of sales or some other criterion that selected what you think of a lot of this type as it's highly dangerous frankly if I'm the new entrepreneur trying to get at the business side and let us presume that the category of business has been legislated out of the extreme for the moment to a very few dollars of advertising. If I'm to come in as a new person must spend only within that limit. I'm going to get it through. I am at a tremendous disadvantage to be heard. I've got to expand my race to be heard to let people know I have a new product or service. And if you're going to regulate the amount of advertising then I think you'd have also have to regulate the other means of market cultivation personal saing sales promotion the amount of money spent on product development and the like. And historically we

felt that marketers should be free to determine what is the best means of cultivating those market take it on balance that you think advertising has been a good social and economic force and I think that has I think it's had some abuses. I think there are a good start. I'm sorry but our time in a business roundtable is up. Thank you both very much for participating in today's business roundtable where nominees cash president of the television Bureau of advertising. And Thomas a stout chairman of the Department of Marketing and transportation at minute. Next Michigan State University almost for the program was Alfred L. C. Dean of the Graduate School of Business Administration at Michigan State University. The topic for next week's Business Roundtable is the transportation crisis. Guests on the program will be MC's assistant secretary for policy development the U.S. Department of Transportation and Herbert unordered

president of the American Academy of transportation. This program was produced by the Graduate School of Business Administration and the Broadcasting Services of Michigan State University under a grant from nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is NPR National Educational Radio Network A.