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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
• 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