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 21 st 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 Ambiguity Exaggeration Employment of Psychological Appeals Concealment of Facts/Fraud

Consumers’ Need for Information Clear Accurate Adequate Information 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 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

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 Equal Credit Opportunity Act Truth-in-Lending Act Fair Credit Reporting Act Fair Debt Collection Practices Act

The Federal Trade Commission Major Activities of the FTC 1. To maintain free and fair competition in the economy 2. To protect consumers from unfair or misleading 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 practices Credit practices Enforcement Marketing practices Service industry practices

Self-Regulation in Advertising Types of Self-Regulation Types of Self-Regulation Self-discipline Pure self-regulation Co-opted self-regulation Negotiated self-regulation Mandated 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 Fraudulent Spam  Cyberbashing Source: Adapted from Turban, King, Lee & Viehland, 2006, Electronic Commerce: A Managerial Perspective 4/E, Prentice Hall

Search Engine Practices Pure Search Pure Search Paid Placement Paid Placement Paid Inclusion Search engines create an index from searching Web pages. Advertisers bid for order of placement in displays for a specific phrase. Companies pay to have their sites channeled directly by the search engine.

Three Moral Management Models Immoral Management Amoral Management Moral Management Customers are viewed as equal partners in transactions Management does not think through the ethical consequences of customer- oriented decisions Management does not think through the ethical consequences of customer- oriented decisions Customers are viewed as opportunities to be exploited