2. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-1 Chapter 12 Consumer Stakeholders: Information Issues and Responses 1 Consumer Stakeholders: Information Issues and Responses Search the Web The Better Business Bureau maintains a web site useful to both business and individual consumers: www.bbb.orgwww.bbb.org

3. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-2 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

4. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-3 Chapter 12 Consumer Stakeholders: Information Issues and Responses Chapter Twelve Outline The Paradox of the Consumer Orientation The Consumer Movement Product Information Issues The Federal Trade Commission Self-Regulation in Advertising Summary

5. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-4 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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.

6. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-5 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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?

7. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-6 Chapter 12 Consumer Stakeholders: Information Issues and Responses The Consumer Movement The Right to Safety The Right to Be Informed The Right to Choose The Right to Be Heard Four Basic Consumer Rights

8. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-7 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

9. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-8 Chapter 12 Consumer Stakeholders: Information Issues and Responses The Consumer Movement Consumer Problems with Business The high prices and poor quality of many products and after-sales service The failure of many companies to live up to advertising claims Too many products breaking or going wrong after you bring them home Misleading packaging The feeling that it is a waste of time to complain about consumer problems because nothing substantial will be achieved Inadequate guarantees and warranties Failure of companies to handle complaints properly Too many products that are dangerous The absence of reliable information about various products and services Not knowing what to do if something is wrong with a product

10. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-9 Chapter 12 Consumer Stakeholders: Information Issues and Responses The Consumer Movement Consumerism in the 21 st Century Grassroots Unorganized Internet –Implications for global companies

11. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-10 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues 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 Advertising Arguments

12. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-11 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Need for Information That is clear That is accurate That is adequate

13. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-12 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Abuses of Advertising Ambiguous advertising –Weasel words Concealed facts Exaggerated claims –Puffery Psychological appeals

14. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-13 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

15. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-14 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Children’s Advertising 1 Advertising should take into account the audience level. 2 Realize that children are imaginative. 3 Recognize that advertising plays important part in child’s education level. 4 Use advertising to nurture positive and beneficial behaviors. 5 Incorporate minority and other groups as positive role models. 6 Contribute to the parent-child relationship.

16. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-15 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

17. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-16 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Magnuson-Moss Warranty Act Full warranty Limited warranty

18. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-17 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

19. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-18 Chapter 12 Consumer Stakeholders: Information Issues and Responses Product Information Issues Other Product Information Issues Equal Credit Opportunity Act Truth-in-Lending Act Fair Credit Reporting Act Fair Debt Collection Practices Act

20. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-19 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

21. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-20 Chapter 12 Consumer Stakeholders: Information Issues and Responses 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

22. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-21 Chapter 12 Consumer Stakeholders: Information Issues and Responses The Federal Trade Commission Historical View Early activism of the FTC Less active years of the FTC Reassertion of the FTC

23. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-22 Chapter 12 Consumer Stakeholders: Information Issues and Responses Self-Regulation in Advertising Types of Self-Regulation Self-disciplined regulation Pure self-regulation Co-opted self-regulation Negotiated self-regulation Mandated self-regulation

24. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-23 Chapter 12 Consumer Stakeholders: Information Issues and Responses Self-Regulation in Advertising National Advertising Division Private organization –Initiates investigations –Determines issues –Collects and evaluates data –Makes decisions

25. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-24 Chapter 12 Consumer Stakeholders: Information Issues and Responses 3 Moral Management Models Immoral Management: Immoral Management: Customers viewed as opportunities to be exploited Amoral Management: Amoral Management: Does not focus on what is fair for customers Moral Management: Moral Management: Customers viewed as equal partners

26. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-25 Chapter 12 Consumer Stakeholders: Information Issues and Responses Selected Key Terms 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

27. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 12-26 Chapter 12 Consumer Stakeholders: Information Issues and Responses Selected Key Terms 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