Consumer Skepticism and Advertising Regulation: What Do the Polls Show?

ABSTRACT - This paper looks at public opinion polls on the truthfulness and value of advertising. Such data are of interest because the economic analysis of advertising usually assumes consumers are skeptical of undocumented advertising claims, and advertising regulation (such as the FTC's advertising substantiation doctrine) is justified partly as a means for overcoming skepticism. Poll results strongly suggest that consumers are deeply skeptical of advertising claims. Moreover, public opinion has remained extraordinarily constant for two decades or more. Consumer assessments of the level of truthfulness and informational value of advertising did not increase after advertising substantiation was implemented and have not declined during the relaxed enforcement of the Reagan years.

Citation:

John E. Calfee and Debra Jones Ringold (1988) ,"Consumer Skepticism and Advertising Regulation: What Do the Polls Show?", in NA - Advances in Consumer Research Volume 15, eds. Micheal J. Houston, Provo, UT : Association for Consumer Research, Pages: 244-248.

Advances in Consumer Research Volume 15, 1988      Pages 244-248

CONSUMER SKEPTICISM AND ADVERTISING REGULATION: WHAT DO THE POLLS SHOW?

John E. Calfee, University of Maryland

Debra Jones Ringold, The American University

[The authors are grateful for financial support from the Center for Marketing Policy Research, The American University. We also wish to acknowledge the valuable assistance of Lois E. TimmsCFerrara, Senior Research Librarian, The Roper Center for Public Opinion Research.]

ABSTRACT -

This paper looks at public opinion polls on the truthfulness and value of advertising. Such data are of interest because the economic analysis of advertising usually assumes consumers are skeptical of undocumented advertising claims, and advertising regulation (such as the FTC's advertising substantiation doctrine) is justified partly as a means for overcoming skepticism. Poll results strongly suggest that consumers are deeply skeptical of advertising claims. Moreover, public opinion has remained extraordinarily constant for two decades or more. Consumer assessments of the level of truthfulness and informational value of advertising did not increase after advertising substantiation was implemented and have not declined during the relaxed enforcement of the Reagan years.

CONSUMER SKEPTICISM AND ADVERTISING REGULATION: WHAT DO THE POLLS SHOW?

The subject of this paper is what public opinion polls show about consumer skepticism toward advertising claims. Consumer skepticism plays a central role in the economic analysis of advertising and the regulation of advertising. The best known economic analyses of advertising and information assume that consumers are deeply skeptical of advertising claims in the absence of credible bases for specific claims. When such a basis is lacking, consumers will disbelieve claims. A market in which no claims are believed could then reach an extremely adverse equilibrium in which only the very lowest quality products are produced (Nelson 1974; Akerlof 1970). Advertising regulation can be seen as a tool for preventing such adverse markets by making advertising more truthful. Enhanced credibility of claims is expected to bring a series of desirable second-order effects as consumers learn that advertising is more truthful and believe more of what they are told, sellers of superior products are able to advertise their superiority credibly, and sellers therefore have an incentive to improve products. All this will lead to a new market equilibrium with greater product variety, higher average product quality, and a better match between individual preferences and individual purchases (FTC 1984; Beales, Craswell and Salop 1981).

Thus two issues stand out the natural skepticism of consumers and the effects of advertising regulation on this skepticism. This paper is concerned with both. skepticism, we simply ask whether public opinion polls suggest that consumers are in fact deeply skeptical of advertising claims. On the question of how advertising regulation affects skepticism, some background is useful. The connection between regulation and skepticism has played an important policy role. The presumed positive effect of regulation on the credibility of advertising was one factor that motivated the revolution in FTC advertising regulation that came in the years 1970-72 after vigorous criticism to the effect that the FTC had done little to police national advertising. (American Bar Association 1969; Cox, Fellmeth, and Schulz 1969; Pitofsky 1977.) The early 1970s saw a great increase in the resources and vigor allocated to the FTC and, most important, the implementation of the advertising substantiation doctrine. This doctrine removed the legal requirement that the FTC prove an ad is false, substituting the much lighter burden of showing the advertiser had- failed to prove its claim was reasonably substantiated. The new doctrine was seen by the FTC and outside commentators primarily as a tool to make truthful claims more credible in order to bring the second-order effects just listed. (FTC 1979; Beales, Craswell and Salop 1981; FTC 1984b.) At the same time there arose with the FTC's blessing a vigorous advertising self- regulation mechanism. This mechanism, which also emphasized substantiation of claims, relied upon the presumption that the FTC stood ready to take on advertisers that failed to abide by the rulings of the self-regulation group. The apparent success of self- regulation is also attributed to the positive effects of increased credibility. (LaBerbera 1982; Zanot 1980 and the short articles therein.)

It is apparently widely believed by regulators, the advertising community and academics that the FTC's program was successful, and for precisely the intended reason: increased credibility of truthful claims. (Beales, Craswell, and Salop 1981; FTC 1984a.) The events of the 1980s have therefore disturbed a number of observers of the advertising scene. ID 1982, after James C. Miller III was appointed to chair the FTC, one of Miller's first acts was to call into question the usefulness of the advertising substantiation doctrine. This aroused a storm of protest, and eventually Miller instead initiated a full review of the program that eventually led to a new FTC policy statement affirming the usefulness of the ad substantiation doctrine. (Ford and Calfee 1986.) The FTC review, which included numerous comments from the advertising trade and others, revealed two things: first, very little has been done to test the premises or effects of the ad substantiation program, and second, most commentators remain confident the program worked, simply because the underlying logic seemed impeccable. (FTC 1984a.)

Since Reagan appointees took over the Commission in 1982, however, the FTC has clearly deemphasized eases based on ad substantiation. Indeed, some critics, including a former FTC Commissioner, have argued that the ad substantiation program has nearly fallen into disuse as the Commission concentrated on minor actors and cases of outright fraud, rather than on questionable claims in national advertising. This is thought to have reversed many of the positive effects from that had flowed from the substantiation doctrine. (McGrew 1985; Pertschuk 1984.)

We have, then, two sets of predictions. One is simply that consumers are by nature skeptical of advertising claims. The second is that FTC regulation will affect this skepticism. In particular, the usual view of regulation predicts that before the ad substantiation program was initiated in the early 1970s, consumers were deeply skeptical of claims, sufficiently so that they would find advertising of limited use for pure information. From the early 1970s until the early 1980s, the opposite would be true consumers would be far less skeptical and would find advertising far more informative. Finally, after about 1982, things should have reverted towards their original state of skepticism and distrust of advertising. A specific part of these predictions is that when asked about their attitudes toward advertising, consumers are likely to respond along the lines just outlined. That is, we can reasonably expect that as consumers undergo broad changes in their trust of advertising claims, they are probably aware of their own changes in outlook and in reliance upon advertising.

Tests of these competing views or of the presumed .benefits of advertising substantiation policy are nearly nonexistent, an unsurprising result in view of the difficulty of detecting the predicted changes in market data. What is available, however, are the results of -public opinion polls on advertising. These are of obvious interest because they should allow us to track how consumer beliefs have changed in response to fundamental changes in advertising regulation. The rest of this paper presents some of the results of our effort to examine public opinion polls of consumer opinions about various aspects of advertising.

METHOD

We collected data from The Roper Center for Public Opinion Research archive. The Roper Center, which is affiliated with the University of Connecticut, maintains a comprehensive library of information on public opinion, political attitudes, policy preferences, and social values. The archive contains over 10,000 surveys to which approximately 500 are added annually. Polls from twenty national survey organizations, nine state and sub-national polls, and miscellaneous special studies comprise the archive. Data can be accessed through the public opinion location library (POLL), a computer-based, question-level retrieval system designed to locate relevant questions asked nationally in the U.S. POLL can search for questions on specific topics and when a question is found, the system provides the full text of the question along with associated responses, date of poll, polling organization, sampling method, and other information. We augmented the computer assisted Roper search with a manual search to verify its accuracy and to examine additional sources

We began by searching for all poll items from 1940 to 1987 containing the word advertising. We then examined the following: purpose of advertising; honesty or truthfulness of advertising; ethics and morals of advertising industry; usefulness or informativeness of advertising; entertainment value of advertising; sponsorship of entertainment; advertising as a nuisance the effects of advertising; and regulation of advertising. We were of course primarily interested in items that had been asked repeatedly over time.

Success was mixed. Relatively little attention was paid to advertising topics prior to the 1960s. We did find several individual questions used during the '40s and '50s, but none were asked again. Some longitudinal data were obtained for a few items first asked in the 1960s. The vast majority of the longitudinal data, however, were collected during the 15 year period from 1973 to 1987. On average, the longitudinal items were repeated five times over a period of eleven years. Most original data was collected by the Roper Organization, Opinion Research Corporation, or the Gallup Organization. The vast majority of studies employed a national probability sampling method and utilized personal interviews. Average sample size was 1846.

RESULTS

We report here results of particular interest for the effects of the ad substantiation program on consumer beliefs about advertising's accuracy and usefulness as a means for gaining information. We focus on poll questions that directly address these issues. We do not discuss a number of questions on topics that arguably are closely related to advertising regulation, such as the responsibility of advertisers, whether advertising is motivated by the desire to persuade or to inform, and so on. At the end of the paper, however, we discuss two poll questions about the need for advertising regulation. The answers to these questions are remarkable, suggesting that the political impulses behind advertising regulation are something other than simply to attain truth in advertising.

Questions on the Perceived Truthfulness of Claims

Question 1 (personal interviews, Roper Organization): Now here's a list of things people have said are or should be responsibilities of business in this country. Would you go down that list and for each one tell me whether you think business fulfills its responsibilities fully, fairly well, not too well, or not at all well? Advertising honestly.

TABLE

This poll extends from 1978, when advertising substantiation was presumably vigorously enforced under Carter appointee Michael Pertschuk, through the 1982 tempest over Miller's expression of doubt about the advertising substantiation doctrine, and ends in 1984 when the FTC formally endorsed the ad substantiation program even while Miller's staff declined to bring a significant number of cases. The results speak for themselves. By any reasonable measure, consumers are skeptical of advertising claims. The sum of the "not too well" and "not at all well" categories was never below 60%. Moveover, the transition from the Carter administration's activism to the Reagan administration's relative inactivism brought no discernible trend toward the view that advertisers have performed less well the responsibility to advertise honestly. In fact, perhaps the most striking aspect is the "not at all well" category, which shows greater doubt on truth in advertising in 1978 (24%) than in 1984 (15%). We shall comment on this phenomenon at the end of the paper.

Question 2 (personal interviews, Roper Organization): Now, taking some specific aspects of our life, we'd like to know how confident you feel about them. Do you feel very confident, only fairly confident, or not at all confident that . . . We can depend on getting the truth in most advertising?

TABLE

This series, which covers the entire period of active enforcement of ad substantiation and continues through the Miller chairmanship, again shows a remarkable constancy of views. About 8% are "very confident" of advertising and about 50% are "not at all confident." These results are congruent with those from the previous question. The main difference is that the only fairly confident" category here attracted more respondents than did the "fairly well" category of question 1, a difference that is reasonably be ascribed to the extra word "only" in the question 2 category. Virtually the only detectable change over time in the responses to question 2 is the slight increase in the "not at all confident" category, an increase that started in the middle 1970s and comes mainly from changes in the "don't know" category.

Question 3 (personal interviews, Roper Organization): American business and industry has been both credited and charged with many things. I'd like to know which of these statements you think are largely true, and which are largely untrue.... "American business and industry Hoodwinks the public through advertising:"

TABLE

The contrast between this question and the last one is of course a good example of how the phrasing of a question can affect responses. One detects a smidgen of skepticism in the 70% of the population that believes advertising hoodwinks consumers. Again, the constancy of opinion over time is remarkable. The results for 1975 and. 1984 are essentially identical.

The results from these three questions suggest that most consumers are skeptical of claims, that the advent of ad substantiation and more vigorous FTC regulation did little to affect the perceived credibility of advertising claims, and that the relaxing of regulation in the 1980s was similarly without effect. We turn next to a slightly different matter, the perceived usefulness of advertising as a source of information.

Questions on the Perceived Usefulness of Advertising Claims

Question 4 (personal interviews, Opinion Research Corporation): Which one of these statements do you agree with most?

TABLE

This question is indirectly related to skepticism because those who find advertising less useful presumably find advertising less truthful. What the question directly suggests is a progressive deterioration of advertising's perceived usefulness, starting from a high point in 1964, a time when FTC regulation was later universally denounced as moribund, through the years 1973-78, which saw probably the greatest volume of FTC activity in ad substantiation regulation. This is contrary to the expected effect of increased advertising regulation.

A closely related question is the following:

Question 5 (Personal interviews, Roper Organization): Now let's turn to the subject of advertising. Here is a list of things that have been said for and against advertising. Would you read down that list and tell me for each one whether you agree or disagree with it? . . . Advertising provides useful information about products and services.

TABLE

This question, unlike the previous one, does not begin until the years of FTC activism, and continues into the Reagan years. Consumer perceptions remain utterly unchanged in the face of decreased regulation.

Questions on the Need for Advertising Regulation

Of considerable interest in view of these results are consumer beliefs on the need for government regulation of advertising. We found two relevant questions:

Question 6 (Personal interviews, Roper Organization): There are many problems facing our nation today, all of which the federal government must be concerned with. But at certain times some things are more important than others, and need more attention from our government than others. I'd like to know for each of the things on this list whether you think it is something the government should be making a major effort on now, or something the government should be making some effort on now, or something not needing any particular government effort now.... Trying to establish more controls on the way products and services can be advertised.

TABLE

Question 7 (Personal interviews, Roper Organization): I'm going to name some things, and for each one would you tell me whether you think there is too much government regulation of it now, or not enough government regulation now, or about the right amount of government regulation now? ... The honesty and accuracy of claims that are made by advertisers

TABLE

These two questions finally reveal some changes over time. The activist period of the middle 1970s corresponds to a greater perceived need for government action, and the relaxed regulation of the 1980s comes when consumers offer less support for action. In view of the fact that no changes in perceived accuracy or usefulness of advertising occurred during these changes, these results suggest that support for advertising regulation comes from something other than simply a desire for greater truth in advertising. What may have been at work in the 1970s was a general distrust of the motives and effects of business-persons in general. This is consistent with the results from question 4, which indicated a strong increase between the 1960s and 1970s in the proportion of consumers who believe the primary effect of advertising is to persuade (with adverse effects) rather than to inform.

CONCLUSIONS

Poll data show that consumers have been deeply skeptical of advertising claims for at least two decades. In most polls no more than a third of respondents believed advertising was basically truthful and informative. These results seem consistent with the common assumption in the economic analysis of information that consumers are skeptical of claims from sellers unless there are clear reasons (other than the advertiser's own vehemence) for thinking the claims true. This is not to say, of course, that consumers find little information in advertising overall. Some advertising could be extremely informative. What the polls seem to show is a baseline skepticism against which individual sellers must contend in seeking to inform and persuade.

Advertising regulation, particularly the FTC's advertising substantiation program, is usually justified as a "market-perfecting" technique for making advertising more informative by making truthful claims more credible. Public opinion polls on perceived truthfulness or perceived usefulness of advertising do not provide any support for this view. Public opinion remained extraordinarily constant from the period before advertising substantiation, when supposed FTC intervention was greatly needed, through a decade of vigorous regulation by the FTC and by self-regulation groups that relied upon the FTC as a legal backstop, and on into the current decade of greatly relaxed regulation.

The reasons for the lack of change in public opinion are not completely clear. The most obvious hypothesis, of course, is simply that advertising regulation has relatively little to do with the truthfulness of advertising. This may seem counter-intuitive, and in fact no one has really explored this possibility during the past decade and a half of confidence in the ad substantiation program. But the most important factors that make advertising claims credible may not include regulation, with its tendency to stumble over the subtleties of mass communication. Instead, consumers may rely upon various market "signals" that indicate when advertisers have an incentive to be truthful. (Nelson 1974; Ippolito 1986a and 1986b; and see the review in Calfee and Ford, this issue.) Thus, for example, consumers might find claims truthful when seller reputation will be hurt by false claims, or when third party verification is available. Under this view, there is little reason to expect changes in consumer attitudes toward advertising truthfulness in response to changes in FTC ad substantiation policy.

Other hypotheses also cannot be rejected on the data discussed here. Perhaps the advertising substantiation doctrine had the dual effect of pushing most advertising towards puffery, while making the remaining specific claims more credible than before. (Cf. Healy and Kassarjian 1983.) Perhaps consumer attitudes toward advertising simply change extremely slowly, so that the benefits of the ad substantiation program were not yet manifest in public opinion by the time the program had begun to lose some of its force after 1981. This seems implausible in view of the rapidity with which public opinions change on so many related topics.

Indeed, what did change-and quite rapidly-were opinions on the need for advertising regulation and the tendency of advertising to persuade people to buy unneeded products. This suggests that the source of the advertising substantiation program and enhanced advertising regulation stemmed mainly from larger political forces rather than from the economic role of advertising.

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