Consumer Problems with Business

High prices of products Poor quality of products Failure to live up to advertising claims Poor quality of after-sales service Product breakage Misleading packaging or labeling Feeling that consumer complaints are a waste of time Inadequate guarantees and warranties Failure of company complaint handling Dangerous products Absence of reliable product/service information Not knowing what to do if something is wrong with product

Consumerism in the 21st Century

Grassroots

Internet

Federal regulatory bodies

Advertising Benefits

The lifeblood of the free-enterprise system

Stimulates competition

Provides information for comparison buying

Provides competitive information to competition

Sales response provides a mechanism for immediate feedback

Provides social and economic benefits

Advertising Abuses

AmbiguityAmbiguity ExaggerationExaggeration

Employment of Psychological

Appeals

Employment of Psychological

Appeals

Concealment of Facts/Fraud

Concealment of Facts/Fraud

Consumers’ Need for Information

ClearClear

AccurateAccurate

AdequateAdequate

InformationInformationthat is…that is…

InformationInformationthat is…that is…

Exaggerated Product Claims

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

Controversial Advertising Issues

Comparative advertising

Use of sexual imaging in advertising

Advertising of alcoholic beverages

Cigarette advertising

Health and environmental claims

Advertising to children

Principles of Advertising to Children

Consider the audience’s level of knowledge and maturity Consider the audience’s level of knowledge and maturity

Use care not to exploit the imaginative quality of childrenUse care not to exploit the imaginative quality of children

Do not advertise products that are inappropriate for children Do not advertise products that are inappropriate for children

Communicate information truthfully and understandably to childrenCommunicate information truthfully and understandably to children

Develop advertising that addresses positive social behaviorDevelop advertising that addresses positive social behavior

Present positive and pro-social roles and role models Present positive and pro-social roles and role models

Parents are responsible for providing guidance for childrenParents are responsible for providing guidance for children

Product Information Legislation

Magnuson-Moss Warranty Act of 1975

Full warranty

Limited warranty

Product Information Legislation

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

FTC administers the Act

Product Information Legislation

Other Product Information Laws Other Product Information Laws

Equal Credit Opportunity ActEqual Credit Opportunity Act

Truth-in-Lending ActTruth-in-Lending Act

Fair Credit Reporting ActFair Credit Reporting Act

Fair Debt Collection Practices ActFair Debt Collection Practices Act

The Federal Trade Commission

Major Activities of the FTC Major Activities of the FTC

1. To maintain free and fair competition in the economy

1. To maintain free and fair competition in the economy

2. To protect consumers from unfair ormisleading practices

2. To protect consumers from unfair ormisleading practices

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

The Divisions of the FTC

Advertising practicesAdvertising practices

Credit practicesCredit practices

EnforcementEnforcement

Marketing practicesMarketing practices

Service industry practicesService industry practices

Self-Regulation in Advertising

Types of Self-Regulation Types of Self-Regulation Types of Self-Regulation Types of Self-Regulation

Self-disciplineSelf-discipline

Pure self-regulationPure self-regulation

Co-opted self-regulationCo-opted self-regulation

Negotiated self-regulationNegotiated self-regulation

Mandated self-regulationMandated self-regulation

National Advertising Division (NAD) of the Council of Better Business Bureaus

Self-Regulation in Advertising

Initiates investigations

Determines issues

Collects and evaluates data

Makes initial decision regarding substantiated claims

Unique Elements of E-Commerce

Personalization

The ability to match services, products, and advertising content with individual consumers in unprecedented

ways.

Developing User profiles

Collecting requirements, preferences, behaviors, and demographic traits of every customer for data

mining.

Search

Consumers can gather and compare information about products and services in ways they never could do so before,

Source: Adapted from Turban, King, Lee & Viehland, 2006, Electronic Commerce: A Managerial Perspective 4/E, Prentice Hall

Collecting Data about Consumers

Web Site Registration

Transaction logs

Clickstream Behavior Logs

Web bugs

Spyware

Source: Adapted from Turban, King, Lee & Viehland, 2006, Electronic Commerce: A Managerial Perspective 4/E, Prentice Hall

Unique E-Commerce Advertising Methods

Pop-up ads

Pop-under ads

Interstitial Ads

E-Mail

• Mass E-mail

• Fraudulent Spam

Cyberbashing

Source: Adapted from Turban, King, Lee & Viehland, 2006, Electronic Commerce: A Managerial Perspective 4/E, Prentice Hall

Search Engine Practices

PureSearch

PureSearch

Paid Placement

Paid Placement

PaidInclusion

PaidInclusion

Search engines create an index from searching Web pages.

Search engines create an index from searching Web pages.

Advertisers bid for order of placementin displays for a specific phrase.

Advertisers bid for order of placementin displays for a specific phrase.

Companies pay to have their siteschanneled directly by the search engine.

Companies pay to have their siteschanneled directly by the search engine.

Three Moral Management Models

ImmoralManagement

ImmoralManagement

AmoralManagement

AmoralManagement

MoralManagement

MoralManagement

Customers are viewed as equal partnersin transactions

Customers are viewed as equal partnersin transactions

Management does not think through theethical consequences of customer-

oriented decisions

Management does not think through theethical consequences of customer-

oriented decisions

Customers are viewed as opportunitiesto be exploited

Customers are viewed as opportunitiesto be exploited