Consumer Problems with Business

1. 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

2. Consumerism in the 21st Century • Grassroots • Internet • Federal regulatory bodies

3. 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

4. Ambiguity Exaggeration Concealment of Facts/Fraud Employment of Psychological Appeals Advertising Abuses

5. Informationthat is… Clear Accurate Adequate Consumers’ Need for Information

6. 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

7. Controversial Advertising Issues • Comparative advertising • Use of sexual imaging in advertising • Advertising of alcoholic beverages • Cigarette advertising • Health and environmental claims • Advertising to children

8. Consider the audience’s level of knowledge and maturity Use care not to exploit the imaginative quality of children Do not advertise products that are inappropriate for children Communicate information truthfully and understandably to children Develop advertising that addresses positive social behavior Present positive and pro-social roles and role models Parents are responsible for providing guidance for children Principles of Advertising to Children

9. Product Information Legislation Magnuson-Moss Warranty Act of 1975 • Full warranty • Limited warranty

10. 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

11. Product Information Legislation Other Product Information Laws Equal Credit Opportunity Act Truth-in-Lending Act Fair Credit Reporting Act Fair Debt Collection Practices Act

12. Major Activities of the FTC To maintain free and fair competition in the economy To protect consumers from unfair ormisleading practices The Federal Trade Commission

13. 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

14. Advertising practices Credit practices Enforcement Marketing practices Service industry practices The Divisions of the FTC

15. Types of Self-Regulation Self-discipline Pure self-regulation Co-opted self-regulation Negotiated self-regulation Mandated self-regulation Self-Regulation in Advertising

16. Self-Regulation in Advertising National Advertising Division (NAD) of the Council of Better Business Bureaus • Initiates investigations • Determines issues • Collects and evaluates data • Makes initial decision regarding substantiated claims

17. 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

18. 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

19. 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

20. Pure Search Search engines create an index from searching Web pages. Paid Placement Advertisers bid for order of placementin displays for a specific phrase. PaidInclusion Companies pay to have their siteschanneled directly by the search engine. Search Engine Practices

21. Customers are viewed as opportunitiesto be exploited ImmoralManagement Management does not think through theethical consequences of customer- oriented decisions AmoralManagement Customers are viewed as equal partnersin transactions MoralManagement Three Moral Management Models