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

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

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

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

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

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”

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

Federal and State Regulation Federal Regulation State Regulation Marketing Communications

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

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.”

Elements of Deception Misleading Reasonable consumer Material

Misleading? Misleading Reasonable consumer Material

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

Advertising Substantiation Promotional practices directed to children Trade regulation rules

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

Proactive Correction Response prior to corrective advertising

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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?”

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

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

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

Green Advertising Green Advertising Addressing the Biophysical Environment

Green Advertising Green Advertising Promoting an Image of Environmental Responsibility

Green Advertising Green Advertising Promoting an Image of Environmental Responsibility

Green Advertising Concentrated refill packs allow for less waste

Green Advertising Corporate Responsibility

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

Package Response Recyclable bottles Polystyrene to paperboard Plastic to cardboard Smaller packages

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

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

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

Cause-Oriented Programs

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

Point-of-Purchase Programs Use the point-of-purchase as a vehicle for promoting a brand’s environmental virtues

Guidelines for Green Marketing Federal Trade Commission (FTC) The U.S. government agency that has primary responsibility for regulating matters such as deceptive and unfair business practices

Guidelines for Green Marketing Qualifications and disclosures should be sufficiently clear and prominent to prevent deception Claims should make clear whether they apply to the product, the package, or a component of either Claims should not overstate an environmental attribute or benefit, either expressly or by implication Comparative claims should be presented in a manner that makes the basis for the comparison sufficiently clear to avoid consumer deception

Appropriate Environmental Claims Make specific claims Reflect current disposal options Make substantive claims Make supportable claims