Regulatory, Ethical, and “Green” Issues in Marketing Communications

1. Chapter Twenty Regulatory, Ethical, and “Green” Issues in Marketing Communications

2. Chapter Twenty Objectives • Explain the role and importance of governmental efforts to regulate marketing communications • Understand deceptive advertising and the three elements that guide the determination of whether a particular advertisement is potentially deceptive

3. Chapter Twenty Objectives • Explain the regulation of unfair business practices and the three major areas where the unfairness doctrine is applied • Understand the role that states perform in regulating unfair or deceptive marketing communications practices • Understand the process of advertising self-regulation

4. Chapter Twenty Objectives • Appreciate the ethical issues in marketing communications • Explain why the targeting of products and marketing communications is a heatedly debated practice • Appreciate the role marketing communications play in “green” marketing • Understand the four general principles that apply to all environmental marketing efforts

5. When is Regulation Justified • Certain Circumstances—needed most when consumer decisions are based on false or limited information • Justified if the benefits realized exceed the costs

6. When is Regulation Justified - Benefits • Consumer choice among alternatives is improved when consumers are better informed • Product quality tends to improve in response to consumers’ changing needs and preferences • Reduced prices resulting from a reduction in a seller’s “informational market power”

7. When is Regulation Justified - Costs • Companies incur the cost of complying with a regulatory remedy • Enforcement costs incurred by regulatory agencies and paid for by taxpayers • Unintended side effects result from regulations at a cost to both buyers and sellers

8. Federal and State Regulation Federal Regulation State Regulation Marketing Communications

9. Federal Regulation • Regulation of deceptive advertising • Regulation of unfair practices • Information regulation • Regulation of product labeling • Regulation of prescription drug advertising

10. Regulation of Deceptive Advertising FTC will find a business practice deceptive “if there is a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.”

11. Elements of Deception • Misleading • Reasonable consumer • Material

12. Misleading? • Misleading • Reasonable consumer • Material

13. Regulation of Unfair Practices Three major areas • Advertising substantiation • Promotional practices directed to children • Trade regulation rules

14. Advertising Substantiation • Advertising substantiation • Promotional practices directed to children • Trade regulation rules

15. Information Regulation Corrective advertising A firm that misleads consumers should have to use future advertisements to rectify any deceptive impressions it has created in consumers’ minds

16. Proactive Correction Response prior to corrective advertising

17. Regulation of Product Labeling Food and Drug Administration (FDA) Responsible for regulating information on the packages of food and drug products

18. Regulation of Prescription Drug Advertising Food and Drug Administration (FDA) Responsible for regulating advertisements for prescription drugs

19. Advertising Self-Regulation • Advertising associations • e.g., American Association of Advertising Agencies, Association of National Advertisers • Special industry groups • e.g., the Council of Better Business Bureaus • Media associations • Trade associations

20. The National Advertising Review Council Council of Better Business Bureaus’ National Advertising Review Council (NARC) Responsible for receiving or initiating, evaluating, investing, analyzing and holding initial negotiations with an advertiser on complaints or questions from any source involving truth or accuracy of national advertising

21. NAD/NARB Complaint Resolution Process Complaint Screening and Case Selection Initial NAD Evaluation Advertiser’s Initial Response NAD’s Final Evaluation Advertiser’s Final Response

22. Ethical issues in marketing Communications Ethics in our context involves matters of right and wrong, or moral, conduct pertaining to any aspect of marketing communications

23. The Ethics of Targeting • Ethical debate—practice of targeting products and communications efforts to segments that, for various psychosocial and economic reasons, are vulnerable to marketing communications

24. Targeting to Children and Teens • Products targeted to kids are unnecessary and the communications involved are exploitative • Use of posters, book covers, free magazines, advertising, and other so- called learning tools • Placing products in movies with tie-in merchandise programs • Magazine use of Advertorials—ads disguised as editorial opinions

25. Targeting to Children and Teens • Targeting adult products to preadults—Miller Brewing Company-- “bolder” beer • Marketing of adult-oriented entertainment products to children and teens: Violent films, video games, and music • Use of acceptable images—cartoons—greatest controversy of recent is Joe Camel and Camel cigarettes

26. Ethical Targeting to Youth? Example of Controversial Advertising - Camel’s “Joe camel”

27. Targeting to Economically Disadvantaged Consumers Billboards advertising tobacco (and alcohol) were disproportionately more likely to appear in inner-city areas

28. Is Targeting Unethical or Just Good Marketing Two arguments: • Targeting benefits rather than harms consumers—provide consumer with products best suited to their particular needs and wants • Concerned not with fulfilling consumers’ needs and wants, but rather with exploiting consumer vulnerabilities

29. Criticisms of Advertising • Advertising is untruthful and deceptive • Advertising is manipulative • Advertising is offensive and in bad taste • Advertising creates and perpetuates stereotypes • People buy things they do not really need • Advertising plays upon people’s fears and insecurities

30. Ethical Issues in Public Relations • Publicity involves disseminating positive info about a company and its products and handling negative publicity • Like advertising—same ethical issues apply • The difference is negative publicity—firms confess to product shortcomings and acknowledge problems or, instead, attempt to cover up the problems

31. Ethical Issues in Packaging Four Aspects: 1) Label information—can mislead consumers about the contents 2) Packaging graphics—picture on the package differs from the actual product

32. Ethical Issues in Packaging 3) Packaging safety—dangerous products that are unsafe to children—not tamper-proof 4) Environmental implications—suggest environmental benefits but cannot deliver

33. Ethical Issues in Sales Promotions • Sales promotions—manufacturer promotions directed at the trade and to consumers • Slotting allowances—manufactures pay retailers for their willingness to handle a new product—a form of bribery and therefore unethical • Consumer-oriented sales promotions—promoter offers a reward for consumers behavior that is never delivered or lying about the odds of winning

34. Ethical Issues in Online Marketing • Overlap with ethics on advertising and promotions • Privacy is the most important ethical issue with online marketing • Invade individual’s privacy rights by selling information to other sources without the consumer’s consent

35. Enhancing Ethical Behavior The Golden Rule Act in a way that you would want Take only actions that would be viewed as proper by an objective panel of your professional colleagues The Professional Ethics The TV test “Would l feel comfortable explaining this action on television to the general public?”

36. Response to Environmental Problems Green advertising Cause-Oriented Programs Packaging response Seal-of-Approval programs Point-of-Purchase

37. Green Advertising • Relationship between product and environment • Promote a green lifestyle • Corporate responsibility

38. Green Advertising • Relationship between product and environment • Promote a green lifestyle • Corporate responsibility

39. Green Advertising Green Advertising Addressing the Biophysical Environment

40. Green Advertising Green Advertising Promoting an Image of Environmental Responsibility

41. Green Advertising Green Advertising Promoting an Image of Environmental Responsibility

42. Green Advertising Concentrated refill packs allow for less waste

43. Green Advertising Corporate Responsibility

44. Response to Environmental Problems Green advertising Cause-Oriented Programs Packaging response Seal-of-Approval programs Point-of-Purchase

45. Package Response • Recyclable bottles • Polystyrene to paperboard • Plastic to cardboard • Smaller packages

46. Response to Environmental Problems Green advertising Cause-Oriented Programs Packaging response Seal-of-Approval programs Point-of-Purchase

47. Seal-of-Approval Programs • Designed to assist consumers in identifying environmentally friendly products and brands • Green Seal of Approval • “Chasing arrows logo”

48. Response to Environmental Problems Green advertising Cause-Oriented Programs Packaging response Seal-of-Approval programs Point-of-Purchase

49. Cause-Oriented Programs Cause-Oriented programs

50. Response to Environmental Problems Green advertising Cause-Oriented Programs Packaging response Seal-of-Approval programs Point-of-Purchase