1 2007 Thomson South-Western

Ethical, Regulatory, and Environmental Issues in

Marketing Communications

Chapter Three

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Chapter Three Objectives• Appreciate the ethical issues in marketing

communications.• Understand why the targeting of products

and marketing communications is a heatedly debated practice.

• Explore the ethical issues associated with advertising, sales promotions, and other marcom practices.

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Chapter Three Objectives• Explain the role and importance of

governmental efforts to regulate marketing communications.

• Understand deceptive advertising and the elements that guide the determination of whether a particular advertisement is potentially deceptive.

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Chapter Three Objectives• Explain the regulation of unfair business

practices and the three major areas where the unfairness doctrine is applied.

• Recognize the role of the states in regulating unfair or deceptive marketing communications practices.

• Know the process of advertising self-regulation.

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Chapter Three Objectives• Appreciate the role of marketing

communications in environmental (green) marketing.

• Recognize the principles that apply to all green marketing efforts.

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Ethical issues in Marketing Communications

Ethics in our context involves matters of right and wrong, or moral, conductpertaining to any aspect of marketing

communications

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The Ethics of Targeting

• Ethical debate—practice of targeting products and communications efforts to segments that, for various psychosocial and economic reasons, are vulnerable to marketing communications.

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Targeting to Children and Teens

• Products targeted to kids are unnecessary and the communications involved are exploitative

• Use of posters, book covers, free magazines, advertising, and other so-called learning tools

• Placing products in movies with tie-in merchandise programs

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Targeting to Children and Teens

• Targeting adult products to preadults—Miller Brewing Company— “bolder” beer

• Use of unacceptable images—cartoons—greatest recent controversy is Joe Camel and Camel cigarettes

• Marketing of adult-oriented entertainment products to children and teens:

Violent films, video games, and music

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Is Targeting Unethical or Just Good Marketing?

Two arguments:

• Targeting benefits rather than harms consumers—provide consumer with products best suited to their particular needs and wants

• Concerned not with fulfilling consumers’ needs and wants, but rather with exploiting consumer vulnerabilities

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AAAA Standards on Ethics in Advertising

Sets lofty goals for the advertising industry and provides a framework for evaluating whether or not ads meet the high standards specified.

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Ethical Issues in Public Relations

• Publicity involves disseminating positive info about a company and its products and handling negative publicity

• Like advertising—same ethical issues apply

• The difference is negative publicity—firms confess to product shortcomings and acknowledge problems or, instead, attempt to cover up the problems

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Ethical Issues in Packaging and Branding

Four Aspects:

1) Label information

2) Packaging graphics

3) Packaging safety

4) Environmental implications

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Ethical Issues in Sales Promotions

• Sales promotions

• Slotting allowances

• Consumer-oriented sales promotions

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Ethical Issues in Online Marketing

• Overlap with ethics on advertising and promotions

• Privacy is the most important ethical issue with online marketing

• Invade individual’s privacy rights by selling information to other sources without the consumer’s consent

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Fostering Ethical Marketing Communications

Act in a way that you would want

others to act toward youThe Golden

Rule

The Professional

Ethics

The TV test

Take only actions that would beviewed as proper by an objectivepanel of your professionalcolleagues

“Would l feel comfortableexplaining this action on television to the general public?”

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When is Regulation Justified - Benefits

• Consumer choice among alternatives is improved when consumers are better informed

• Product quality tends to improve in response to consumers’ changing needs and preferences

• Reduced prices resulting from a reduction in a seller’s “informational market power”

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When is Regulation Justified - Costs

• Companies incur the cost of complying with a regulatory remedy

• Enforcement costs incurred by regulatory agencies and paid for by taxpayers

• Unintended side effects result from regulations at a cost to both buyers and sellers

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Regulation of Deceptive Advertising

FTC will find a business practice deceptive “if there is a representation,

omission or practice that is likely tomislead the consumer acting

reasonably in the circumstances, tothe consumer’s detriment.”

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Elements of Deception

• Misleading. • Reasonable consumer. • Material.

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Regulation of Unfair Practices

Three major areas

1. Offends public policy as it has been established by statutes

2. Is immoral, unethical, oppressive, or unscrupulous

3. Causes substantial injury to consumers, competitors, or other businesses.

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Unfair Advertising

Acts or practices that cause or are likely to cause substantial injury to consumers, which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.

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Information RegulationCorrective advertising

A firm that misleads consumers shouldhave to use future advertisements torectify any deceptive impressions it hascreated in consumers’ minds

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Regulation of Product Labeling

Food and Drug Administration (FDA)

– Responsible for regulating information on the packages of food and drug products

– Responsible for regulating ads for prescription drugs

– Requires advertisers to present a balanced perspective when advertising drugs

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State Agencies’ Regulation of Marketing Communications

• Most, if not all, states have departments of consumer affairs or consumer protection.

• The National Association of Attorneys General (NAAG) - includes attorneys general from all 50 states

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Advertising Self-Regulation

Advertising Clearance Process1. Advertising agency clearance 2. Approval from the advertiser’s legal

department and perhaps also from an independent law firm

3. Media approval

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The National Advertising Review Council

Council of Better Business Bureaus’

National Advertising Review Council(NARC)

Responsible for receiving or initiating,evaluating, investing, analyzing and holdinginitial negotiations with an advertiser oncomplaints or questions from any sourceinvolving truth or accuracy of nationaladvertising.

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Response to Environmental Problems

Cause-Oriented Programs

Packaging response

Green advertising

Point-of-Purchase

Seal-of-Approval programs

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Appropriate Environmental Claims

• Make specific claims

• Reflect current disposal options

• Make substantive claims

• Make supportable claims