Differentiation and Marketing Policy

1
Differentiation and Marketing Policy

• Pauline M. Ippolito
• Federal Trade Commission
• Speaking only for myself and not the FTC.
  Advertising report available from author at
  pippolito_at_ftc.gov.

2
Background

• FTC ad policy FDA label policy USDA meat
  labels.
• Policy has changed markedly in 25 years.
• Policy deals with content of ads.
• Nutrition Labeling Education Act (NLEA)
  proposals for claims in 1991 final in 1994.
• Focus Potential consumer deception not
  incentives.

3
Differentiation Claims

• Do firms highlight differences that are not
  differences?
• Under NLEA rules
• Processed foods NO CHOLESTEROL
• Natural foods
• A CHOLESTEROL-FREE FOOD
• Not Sunkist oranges have no cholesterol.

4
Differentiation Claims

• Do firms highlight differences that are too
  small?
• NLEA Comparative claims only if 25 or more
  difference more info required comparisons
  restricted.
• Less fat becomes 25 less fat than our regular
  brand 8 grams of fat per ounce versus 11 grams
  per ounce.
• More complete claims but fewer?

5
Differentiation Claims

• Do claims about good features do harm? Does
  competition fill in?
• NLEA Positive claim triggers reference to bad
  features
• Less sat fat can trigger See nutrition
  information for fat content.
• More nutrients in ads?

6
Differentiation Claims

• Why is so much advertising for processed foods
  and not for natural foods?
• Appropriable advertising versus nonappropriable
  ads
• NLEA restricts health claims to good foods
• More good food ads post NLEA?
• OR did commodities ride the tail wind of the big
  budget brands?

7
Some Evidence

• Collected claim data for health
  nutrition-related claims in magazine ads
• Do NLEA requirements affect ad claims?
• Less potential for misleading consumers BUT less
  information?

8
Advertising Sample

• Womens Magazines General Magazines
• Better Homes and Gardens Readers Digest
• Good Housekeeping Time
• Ladies Home Journal Newsweek
• McCalls
• Womens Day
• Months and Years February, June, October
  1977-97
• Foods Covered All foods but baby food, alcohol.
• Sample has 11,647 advertisements.

9
Nutrient Content Claims

• Post NLEA, claims fall for most major nutrients
  except fat
• Comparative claims fall for all major nutrients
  but fat

10
Fat, Saturated Fat and Cholesterol Claims
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Comparative Calorie Claims / All Calorie Claims
12
Comparative Claims Post-NLEA

• Change
• Fat
• Sat Fat -
• Cholesterol -
• Sodium -
• Fiber -
• Calcium -
• Vitamin/Mineral -
• Calorie -

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More Nutrients After NLEA?

• Number of
• Nutrients in Ad 1977 1983 1991 1997
  __________________________________________________
  _
• 4 1.8 1.0 10.0 3.4
• 3 2.9 3.0 9.9 5.1
• 2 2.6 7.3 12.5 14.2
• 1 9.9 21.9 14.5 28.5
• 0 82.3 66.8 53.1 48.9
• __________________________________________________
  _

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More good food ads?

• Looked at various broad food categories
• Fruits, vegetables, and juice?

15
Number of Ads for the Fruit/Veg/Juice Category
16
Conclusions

• Many ads contain nutrition and health claims.
• Important source of info and competitive
  pressure.
• Rules seem to matter. Content shifts a lot.
• Important to get policy right.

17
Conclusions

• Comparative claims fell post-NLEA
• Lesson on triggered disclosures?
• Limiting health claims to best foods did not
  increase advertising for those foods.
• Best approach for consumers?

18
Conclusions

• Are we worrying too much about claims that might
  mislead someone and not enough about
• the incentives to compete on nutrition?
• the loss of information to most consumers?