1. 1  2007 Thomson South-Western Ethical, Regulatory, and Environmental Issues in Marketing Communications Chapter Three

2. 2 Chapter Three Objectives Appreciate the ethical issues in marketing communications. Understand why the targeting of products and marketing communications is a heatedly debated practice. Explore the ethical issues associated with advertising, sales promotions, and other marcom practices.

3. 3 Chapter Three Objectives Explain the role and importance of governmental efforts to regulate marketing communications. Understand deceptive advertising and the elements that guide the determination of whether a particular advertisement is potentially deceptive.

4. 4 Chapter Three Objectives Explain the regulation of unfair business practices and the three major areas where the unfairness doctrine is applied. Recognize the role of the states in regulating unfair or deceptive marketing communications practices. Know the process of advertising self- regulation.

5. 5 Chapter Three Objectives Appreciate the role of marketing communications in environmental (green) marketing. Recognize the principles that apply to all green marketing efforts.

6. 6 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

7. 7 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.

8. 8 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

9. 9 Targeting to Children and Teens Targeting adult products to preadults—Miller Brewing Company— “bolder” beer Use of unacceptable images—cartoons—greatest recent controversy is Joe Camel and Camel cigarettes Marketing of adult-oriented entertainment products to children and teens: Violent films, video games, and music

10. 10 Ethical Targeting to Youth? The Centers for Disease Control and Prevention states nearly 1 in 6 children is considered obese. Many critics consider it unethical to market food products to children – especially through cartoon characters – to sell sugared cereals and non-nutritious snacks.

11. 11 Targeting to Economically Disadvantaged Consumers Billboards advertising tobacco (and alcohol) were disproportionately more likely to appear in inner-city areas. Examples: –R.J. Reynolds “Uptown” –Heileman Brewing Company “Power Master” high-alcohol malt liquor

12. 12 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

13. 13 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

14. 14 AAAA Standards on Ethics in Advertising Sets lofty goals for the advertising industry and provides a framework for evaluating whether or not ads meet the high standards specified.

15. 15 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

16. 16 Ethical Issues in Packaging and Branding Four Aspects: 1) Label information—can mislead consumers about the contents 2) Packaging graphics—picture on the package differs from the actual product

17. 17 Ethical Issues in Packaging and Branding 3) Packaging safety—dangerous products that are unsafe to children— not tamper-proof 4) Environmental implications—suggest environmental benefits but cannot deliver

18. 18 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 consumer’s behavior that is never delivered or lies about the odds of winning

19. 19 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

20. 20 Fostering Ethical Marketing Communications Act in a way that you would want others to act toward you The Golden Rule The Professional Ethics The TV test Take only actions that would be viewed as proper by an objective panel of your professional colleagues “Would l feel comfortable explaining this action on television to the general public?”

21. 21 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

22. 22 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”

23. 23 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

24. 24 Federal and State Regulation Federal Regulation State Regulation Marketing Communications

25. 25 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.”

26. 26 Elements of Deception Misleading. There must be a representation, omission, or practice likely to mislead the consumer. A misrepresentation is defined by the FTC as an express or implied statement contrary to fact. Reasonable consumer. The act or practice must be considered from the perspective of the “reasonable consumer.” Material. The representation, omission, or practice must be “material,” involving information important to consumers and likely to influence their choice or conduct regarding a product.

27. 27 Elements of Deception This ad is not misleading... but a reasonable consumer would expect sale hours to be at a reasonable time… and the ad does contain material representation.

28. 28 Regulation of Unfair Practices Three major areas 1.Offends public policy as it has been established by statutes 2.Is immoral, unethical, oppressive, or unscrupulous 3.Causes substantial injury to consumers, competitors, or other businesses.

29. 29 Unfair Advertising Acts or practices that cause or are likely to cause substantial injury to consumers, which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.

30. 30 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

31. 31 Regulation of Product Labeling Food and Drug Administration (FDA) –Responsible for regulating information on the packages of food and drug products –Responsible for regulating ads for prescription drugs –Requires advertisers to present a balanced perspective when advertising drugs

32. 32 State Agencies’ Regulation of Marketing Communications Most, if not all, states have departments of consumer affairs or consumer protection. The National Association of Attorneys General (NAAG) - includes attorneys general from all 50 states

33. 33 Advertising Self-Regulation Advertising Clearance Process 1.Advertising agency clearance 2.Approval from the advertiser’s legal department and perhaps also from an independent law firm 3.Media approval

34. 34 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.

35. 35 NARC Consists Of Three Review Units The Children’s Advertising Review Unit (CARU) National Advertising Review Board (NARB) Council of Better Business Bureau’s National Advertising Division (NAD)