1. Archie B. Carroll Ann K. Buchholtz
Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
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2. Chapter 13 Consumer Stakeholders: Information Issues and Responses
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3. © 2012 South-Western, a part of Cengage Learning
Learning Outcomes
Recite the consumer’s Magna Carta and explain its meaning.
Chronicle the evolution of the consumer movement, highlighting Ralph Nader’s role.
Identify the major abuses of advertising and discuss specific controversial advertising issues.
Enumerate and discuss other product information issues that present problems for consumer stakeholders.
Describe the role and functions of the FTC.
Explain recent consumer-related legislation that has passed.
Discuss the strengths and weaknesses of regulation and self- regulation of advertising and proposed consumer financial protection regulations.
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4. © 2012 South-Western, a part of Cengage Learning
Chapter Outline
The Consumer Movement
Product Information Issues
The Federal Trade Commission (FTC)
Self-Regulation in Advertising
Summary
Key Terms
Discussion Questions
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5. Customer Relationship Management
The ability of an organization to effectively identify, acquire, foster, and retain loyal profitable customers.
Customers remain dissatisfied with how they are treated and are mistrustful of businesses.
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6. The Consumer’s Magna Carta
Right to Safety
Right to Be Informed
Right to Be Heard
Right to Choose
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The Consumer Movement
Consumer Expectations
“Fair value” for money spent
Product that meets “reasonable” expectations
Full disclosure of product specifications
Truthful advertising
Safe products
Removal of dangerous products
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Consumerism
Consumerism
A social movement seeking to augment the rights and powers of buyers in relation to sellers.
What were Ralph Nader’s contributions to the modern consumer movement?
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9. Lessons From the Consumer Movement
Achieve a fair and just marketplace for all consumers.
Provide public oversight where:
Corporations lack the incentives to regulate their own behavior.
Issue of health, safety and other special concerns.
Provide resources, authority, and support for public watchdogs.
Intensify the fight for affordable goods and services, fair financial practices, and a chance at a decent standard of living.
Curb wasteful overconsumption that threatens the environment.
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Advertising Issues
What are the arguments for and against advertising?
What are advertising’s benefits?
What are the four major advertising abuses?
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11. The Need for Information
Clear
Accurate
Adequate
Consumers need information that is…
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Weasel Words
Weasel Words
Are inherently vague so companies can claim they were not misleading consumers.
Help
Like
Virtually
Up to
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13. © 2012 South-Western, a part of Cengage Learning
Concealed Facts
Concealed Facts
The practice of not telling the whole truth or deliberately not communicating information the consumer ought to have access to in making an informed choice.
Hidden Fees
Product placement (“stealth advertising”)
Plot placement
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14. Exaggerated Product Claims
Exaggerated Claims
Cannot be substantiated by any kind of evidence.
Induce people to buy things that do them no good.
Result in loss of advertising efficiency as companies match puffery with puffery.
Drive out good advertising.
Result in consumer loss of faith in product claims.
Puffery
A euphemism for hyperbole or exaggeration that usually refers to the use of general superlatives.
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15. Psychological Appeals
Designed to persuade on the basis of human emotions and emotional needs rather than reason.
The products can seldom deliver what the ads promise.
Marketers appeal to all our senses, even sound, when making psychological appeals.
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16. Controversial Advertising Issues
Comparative advertising
Use of sex in advertising
Advertising to children
Marketing to the poor
Advertising of alcoholic beverages
Cigarette advertising
Health and environmental claims
Ad creep
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17. Controversial Advertising Issues
Environmental Claims
Companies have been ramping up their advertising claims about the environmental friendliness of their products.
The green economy was estimated in to be worth $1.04 trillion and growing.
An industry of “green watchdogs” has been growing.
Growing “green fatigue” developing among some consumers who are weary of claims.
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18. © 2012 South-Western, a part of Cengage Learning
Warranties
Initially used by manufacturers to limit the length of time they were responsible for products.
Came to be viewed by consumers as mechanisms to protect the buyer against faulty or defective products.
Express Warranty
Promise or affirmation of fact that the seller makes at the time of the sale.
Implied Warranty
Unwritten promise that there is nothing wrong with the product and its intended use.
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19. Warranties (continued)
Full Warranty
Covers the entire product.
Limited Warranty
Certain parts or types of defects are not covered under the warranty.
Extended Warranty
Service plans that lengthen the warranty period and are offered at an additional cost.
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20. Packaging and Labeling
Federal Packaging and Labeling Act of 1967
Prohibits deceptive labeling on consumer products
Requires disclosure of certain important information on consumer products
The FTC and the Food and Drug Administration (FDA) have responsibilities under the Act.
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21. Other Product Information Legislation
Equal Credit Opportunity Act
Prohibits discrimination in extending consumer credit.
Truth-in-Lending Act
Requires all suppliers of consumer credit to fully disclose all credit terms.
Fair Credit Reporting Act
Ensures that consumer-reporting agencies provide information in a manner that is fair and equitable.
Fair Debt Collection Practices Act
Regulates the practices of third-party debt- collection agencies.
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22. The Federal Trade Commission
The government’s major instrument for ensuring that business lives up to its responsibilities in the areas of advertising, warranties, and packaging/labeling.
Major Activities of the FTC
To maintain free and fair competition in the economy.
To protect consumers from unfair or misleading practices.
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23. The Divisions of the FTC
Advertising practices
Credit practices
Enforcement
Marketing practices
Service industry practices
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24. Recent Consumer Legislation
Credit Card Act of 2009
Consumer Financial Protection Agency
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25. Self-Regulation in Advertising
Types of Self-Regulation
Self-discipline
Pure self-regulation
Co-opted self-regulation
Negotiated self-regulation
Mandated self-regulation
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26. The National Advertising Division’s Program
NAD was created to help sustain high standards of truth and accuracy in national advertising.
Initiates investigations
Determines issues
Collects and evaluates data
Makes initial decision regarding substantiated claims
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27. © 2012 South-Western, a part of Cengage Learning
Key Terms
Accurate information
Ad creep
Adequate information
Age compression
Ambient advertising
Ambiguous advertising
Clear information
Comparative advertising
Concealed facts
Consumerism
Consumer Financial Protections Agency (CFPA)
Consumer’s Magna Carta
Co-opted self-regulation
Credit Card Act of 2009
Customer Relationship Management (CRM)
Exaggerated claims
Express warranty
Extended warranty
Full warranty
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28. © 2012 South-Western, a part of Cengage Learning
Key Terms (continued)
Implied warranty
Limited warranty
Mandated self-regulation
Negotiated self-regulation
Plot placement
Product information
Product placement
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
© 2012 South-Western, a part of Cengage Learning