Consumer Stakeholders: Information Issues and Responses

1. Search the Web The Better Business Bureau maintains a web site useful to both business and individual consumers: www.bbb.org Consumer Stakeholders: Information Issues and Responses 12 1

2. Chapter Twelve Objectives • Recite the consumer’s Magna Carta and its meaning • Chronicle the evolution of the consumer movement • Identify the major abuses of advertising and controversial advertising issues • Consider product information issues that present problems for consumer stakeholders • Describe the role and functions of the FTC • Discuss the strengths and weaknesses of regulating advertising 2

3. Chapter Twelve Outline • The Paradox of the Consumer Orientation • The Consumer Movement • Product Information Issues • The Federal Trade Commission • Self-Regulation in Advertising • Summary

4. Introduction to Chapter Twelve Within the context of customer relationship management, the chapter focuses on the evolution and maturity of the consumer movement and product information issues, such as advertising.

5. The Paradox of the Customer Revolution • Historical evolution of marketing • Focus shifted from problems of production to problem of marketing. • Current issues in marketing • Is it sufficient to put the customer first? • Do consumers think business cares about their needs?

6. The Consumer Movement Four Basic Consumer Rights • The Right to Safety • The Right to Be Informed • The Right to Choose • The Right to Be Heard

7. The Consumer Movement Ralph Nader’s Consumerism • Unsafe At Any Speed • Nader’s Raiders • Groups • Public Interest research Group • Center for the Study of Responsive Law • Public Citizen

8. The Consumer MovementConsumer Problems with Business

9. The Consumer Movement Consumerism in the 21st Century • Grassroots • Unorganized • Internet • Implications for global companies

10. Pros Increases standard of living Increases consumer satisfaction Efficient means of distributing information Effective Low cost Cons Lowers standard of living Decreases consumer satisfaction No net benefit Inefficient means of distributing information Ineffective Costly Product Information Issues Advertising Arguments

11. Product Information Issues Need for Information • That is clear • That is accurate • That is adequate

12. Product Information Issues Abuses of Advertising • Ambiguous advertising • Weasel words • Concealed facts • Exaggerated claims • Puffery • Psychological appeals

13. Product Information Issues Specific Controversial Advertising Issues • Comparative Advertising • Use of Sex and Women in Advertising • Advertising to Children • Advertising of Alcoholic Beverages • Cigarette Advertising • Health and Environmental Claims • Ad Creep

14. 1Advertising should take into account the audience level. 3Recognize that advertising plays important part in child’s education level. 2Realize that children are imaginative. 4Use advertising to nurture positive and beneficial behaviors. 5Incorporate minority and other groups as positive role models. 6Contribute to the parent-child relationship. Product Information Issues Children’s Advertising

15. Product Information Issues Warranties • Express warranties • Promise or affirmation of fact that the seller makes • Implied warranties • Uniform commercial code creates implied warranties when goods are sold or leased • Merchantability • Fitness for a particular purpose

16. Product Information Issues Magnuson-Moss Warranty Act • Full warranty • Limited warranty

17. Product Information Issues Packaging and Labeling • Federal Packaging and Labeling Act • Prohibits deceptive labeling on consumer products • Requires disclosure of certain important information on consumer products • FTC administers the Act

18. Product Information Issues Other Product Information Issues • Equal Credit Opportunity Act • Truth-in-Lending Act • Fair Credit Reporting Act • Fair Debt Collection Practices Act

19. The Federal Trade Commission Two Major Activities of the FTC • To maintain free and fair competition in the economy • To protect consumers from unfair or misleading practices

20. The Role of the FTC Enforce federal antitrust and consumer protection laws Ensure markets function competitively Enhance the smooth operation of the marketplace Stop actions that threaten consumers’ opportunities Undertake economic analysis to support enforcement Carry out policies of Congressional mandates, such as consumer education

21. The Federal Trade Commission Historical View • Early activism of the FTC • Less active years of the FTC • Reassertion of the FTC

22. Self-Regulation in Advertising Types of Self-Regulation • Self-disciplined regulation • Pure self-regulation • Co-opted self-regulation • Negotiated self-regulation • Mandated self-regulation

23. Self-Regulation in Advertising National Advertising Division Private organization • Initiates investigations • Determines issues • Collects and evaluates data • Makes decisions

24. Amoral Management: Does not focus on what is fair for customers Immoral Management: Customers viewed as opportunities to be exploited Moral Management: Customers viewed as equal partners 3 Moral Management Models

25. Ambiguous advertising Ad creep Adequate information Ambiguous advertising Clear information Comparative advertising Concealed facts Consumerism Consumer’s Magna Carta Co-opted self-regulation Customer relationship management Exaggerated claims Express warranty Full warranty Implied warranty Selected Key Terms

26. Limited warranty Mandated self-regulation Product information Psychological appeals Puffery Pure self-regulation Right to be heard Right to be informed Right to choose Right to safety Self-discipline Self-regulation Warranties Weasel words Selected Key Terms