Chapter Three

Ethical, Regulatory, and Environmental Issues in Marketing Communications

2007 Thomson South-Western 1

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.

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 selfregulation.
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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.

Ethical issues in Marketing Communications

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

The Ethics of Targeting

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

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 preadultsMiller Brewing Company bolder beer Use of unacceptable imagescartoonsgreatest 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 consumersprovide 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 advertisingsame ethical issues apply

The difference is negative publicityfirms 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 individuals privacy rights by selling information to other sources without the consumers consent

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Fostering Ethical Marketing Communications

The Golden Rule The Professional Ethics
Act in a way that you would want

others to act toward you

Take only actions that would be viewed as proper by an objective panel of your professional colleagues Would l feel comfortable explaining this action on television to the general public?

The TV test

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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 sellers 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 to mislead the consumer acting reasonably in the circumstances, to the consumers 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 Regulation
Corrective advertising A firm that misleads consumers should have to use future advertisements to rectify any deceptive impressions it has created 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 Process 1. Advertising agency clearance 2. Approval from the advertisers 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 holding initial negotiations with an advertiser on complaints or questions from any source involving truth or accuracy of national advertising.
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Response to Environmental Problems

Green advertising Packaging response Seal-of-Approval programs Cause-Oriented Programs Point-of-Purchase
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Appropriate Environmental Claims

Make specific claims
Reflect current disposal options

Make substantive claims

Make supportable claims

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