Welcome to class of Misleading Marketing in Emerging Markets Dr. Satyendra Singh University of Winnipeg Canada

Negligent Consumer Behaviour Misleading Marketing

Negligent Consumer Behavior This behavior may negatively affect the long- term quality of life of individuals and society This behavior can occur in 2 contexts –Product misuse –Consumption of hazardous products

Product Misuse Injuries result from misuse of a safe product  not from product defects Using cell phone while driving  outlaw So, the most dangerous component is the consumer  no way to recall them

Consumption of Hazardous Products USA, , alcohol related accidents ↓ by ↑ consumer awareness –Informing and education –Social controls –Economic incentives –Economic disincentives In EM, trend is unknown  appears ↑

Misleading Marketing Telemarketing fraud –Elderly are vulnerable to fraud by telemarketers Advertising to children –Criticism of advertising directed at children –Ban advertising to children under 12 Deceptive advertising –Verification of claims –Particularly important in EM

Characteristics of Consumers in EM ↓ Literacy ↓ Education –Neither compulsory nor readily available ↓ Access to legal remedies  BBB Unaware of legal rights Rural communities ↓ Freedom of expression ↓ Access to media Therefore  need for control  Economics of Information Model  to judge veracity of claims

Economics of Information Model… Search claim –Brand X margarine comes in a convenient plastic tub –This claim can be evaluated before the purchase –If learned, distrust advertiser in future advertisements –Advertiser has ↑ incentive to avoid false search claims –Thus  little concern to us Experience claim –Brand X margarine tastes just like butter –Can only be discovered through use of the product –1 st time might be deceived  no same mistake twice –Advertisers depend on repeat purchase to recover investments on their advertisements  little concern to us

#

Economics of Information Model Credence claim –Brand X margarine contains 0 % cholesterol –Cannot check the claim even after use of the product –Requires chemical testing –Average customer does not have this resource –Customer must consult other source of information e.g magazine to discover if the claim is false –Major concern to us! Take another example  Brand Y tastes best –Extremely difficult to verify the claim  cannot find all brands  so all consumers place no credence whatsoever –Further, if repeat sales justify cost of advertising  product performs satisfactory  some truth in the claim  depends on interpretation

Claim Interpretation Issue Literal claim –Direct  most of us agree on its interpretation Implied claim  different interpretation to different people –Brand X is the only margarine with 0% cholesterol –Brand X is a suitable food for those concerned about heart disease –Brand X is better than butter for those concerned about heart disease TV 30-second advt. addresses large audience Do not know who will interpret how to be misled n-% issue  what proportion of the audience must draw a false inference before the advertisement may be defined as misleading. n for USA = 15-25%, n for EM = ? To test claim, 2 criteria: Credibility and Verifiability

Schechter’s Approach to Evaluating Claims Credibility: Prominence of advertiser  ↑ if ad appeared on network TV, magazine of ↑ circulation Verifiability: ↑ Could be evaluated within a month of purchase LO Credibility HI HI LO Verifiability Misleading, if n > 5% Misleading, if n > 50% Misleading if n > 25% standard Misleading, if n > 25% standard Seriousness of injury for being misled: medicine vs. chocolate