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Consumer Behavior & Public Policy

Consumer Behavior & Public Policy. Why the Concern?. Advertising -- communication by an identified sponsor about its goods or services, meant to inform or persuade using a mass media vehicle Inherently one-sided Somewhat intrusive Advocative Should advertising be used only to inform?

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Consumer Behavior & Public Policy

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Presentation Transcript

  1. Consumer Behavior & Public Policy

  2. Why the Concern? • Advertising -- communication by an identified sponsor about its goods or services, meant to inform or persuade using a mass media vehicle • Inherently one-sided • Somewhat intrusive • Advocative • Should advertising be used only to inform? • Should advertising be used to persuade?

  3. Why the Concern? • Advertising decisions and executions are often made by an agency external to the firm (Ad agency) • Will the ad agency use the same ethical standards that the firm would use? • FTC has decided that in some cases, the answer may be “NO” • Moreover, FTC has decided that in order to maintain a fair and competitive playing field, certain ad rules must be followed • So advertising is regulated • BUT HOW MUCH? HOW SHOULD IT BE DONE?

  4. Why the Concern? • Advertising continuum Information Persuasion Embellishment Deception • Consumer is protected (by law) from deception. What about embellishment?

  5. Regulation of Ads • Deceptive practices are monitored and laws are enforced by the Federal Trade Commission (FTC) • Protects consumers from fair and unethical practices • Protects competition

  6. Regulation of Ads • How does the FTC determine whether ads are deceptive (CB has helped) • Deceptive Ads have 3 components • Ads which have the capacityto deceive consumers (i.e., consumers form beliefs about the advertised brand which cannot be substantiated by the advertiser)

  7. Regulation of Ads • Components of deceptive advertising • Ads have the capacity to deceive in a materialmanner (i.e., unsubstantiated beliefs are important in terms of consumer’s buying behavior)

  8. Regulation of Ads • Deceptive advertising -- components of law • Ads have the capacity to deceive consumers acting reasonably (consumers are acting with care and credulousness)

  9. Regulation of Ads • Deceptive advertising -- punitive actions • Cease & desist orders • Corrective ads • Do they work? -- Listerine case • Fine & retribution

  10. Advertising & Children • Issue 1 • Can children distinguish ads from programs? • Those aged 7 or less can not • Should advertisers be allowed to target such kids?

  11. Advertising & Children • Issue 2 • If children are exposed to ads, do they have the defenses to deal with them? • Not those less than the age of 8 (although, this may be changing – media education programs exist in most schools) • Defenses seem to emerge for kids aged 8 - 12 • Should advertisers be allowed to target such kids? All kids?

  12. Advertising & Children • Issue 3 • Do programs which feature toys as characters negatively affect kids? • Parents think so: • Unfairly influence kids’ choices • Kids think products will be like those in the show • Often lead children to act in an antisocial manner • Leads kids to play less creatively

  13. Advertising & Children • Public Policy Actions • Stations must provide 3 hours of educational television per day • Stations must provide “commercial identifiers” • Restrictions on certain ads during “toy-based programs” • No advertising for toys that are related to the program

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