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Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
1
Chapter 13
Consumer
Stakeholders:
Information
Issues and
Responses
© 2012 South-Western, a part of Cengage Learning
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Learning Outcomes
1. Recite the consumer’s Magna Carta and explain
2.
3.
4.
5.
6.
7.
its meaning.
Chronicle the evolution of the consumer movement, highlighting
Ralph Nader’s role.
Identify the major abuses of advertising and discuss specific
controversial advertising issues.
Enumerate and discuss other product information issues that
present problems for consumer stakeholders.
Describe the role and functions of the FTC.
Explain recent consumer-related legislation that has passed.
Discuss the strengths and weaknesses of regulation and selfregulation of advertising and proposed consumer financial
protection regulations.
© 2012 South-Western, a part of Cengage Learning
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Chapter Outline
• The Consumer Movement
• Product Information Issues
• The Federal Trade Commission (FTC)
• Self-Regulation in Advertising
• Summary
• Key Terms
• Discussion Questions
© 2012 South-Western, a part of Cengage Learning
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Customer Relationship
Management
Customer Relationship Management
• The ability of an organization to effectively
identify, acquire, foster, and retain loyal
profitable customers.
 Customers remain dissatisfied with how
they are treated and are mistrustful of
businesses.
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The Consumer’s Magna Carta
Right to Safety
Right to Be Informed
Right to Choose
Right to Be Heard
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The Consumer Movement
Consumer Expectations
• “Fair value” for money spent
• Product that meets “reasonable”
expectations
• Full disclosure of product specifications
• Truthful advertising
• Safe products
• Removal of dangerous products
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Consumerism
Consumerism
• A social movement seeking to augment the
rights and powers of buyers in relation to
sellers.
 What were Ralph Nader’s contributions to
the modern consumer movement?
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Lessons From the Consumer
Movement
1. Achieve a fair and just marketplace for all
consumers.
2. Provide public oversight where:
•
•
Corporations lack the incentives to regulate their own
behavior.
Issue of health, safety and other special concerns.
3. Provide resources, authority, and support for
public watchdogs.
4. Intensify the fight for affordable goods and
services, fair financial practices, and a chance at a
decent standard of living.
5. Curb wasteful overconsumption that threatens the
environment.
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Advertising Issues
• What are the arguments for and against
advertising?
• What are advertising’s benefits?
• What are the four major advertising
abuses?
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The Need for Information
Clear
Consumers
need information
that is…
Accurate
Adequate
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Weasel Words
Weasel Words
• Are inherently vague so companies can
claim they were not misleading consumers.
 Help
 Like
 Virtually
 Up to
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Concealed Facts
Concealed Facts
• The practice of not telling the whole truth
or deliberately not communicating
information the consumer ought to have
access to in making an informed choice.
 Hidden Fees
 Product placement (“stealth advertising”)
 Plot placement
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Exaggerated Product Claims
Exaggerated Claims
•
Cannot be substantiated by any kind of
evidence.
1.
Induce people to buy things that do them no good.
2.
Result in loss of advertising efficiency as
companies match puffery with puffery.
3.
Drive out good advertising.
4.
Result in consumer loss of faith in product claims.
Puffery
•
A euphemism for hyperbole or exaggeration
that usually refers to the use of general
superlatives.
© 2012 South-Western, a part of Cengage Learning
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Psychological Appeals
Psychological Appeals
• Designed to persuade on the basis of
human emotions and emotional needs
rather than reason.
• The products can seldom deliver what the
ads promise.
 Marketers appeal to all our senses, even
sound, when making psychological
appeals.
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Controversial Advertising Issues
 Comparative advertising
 Use of sex in advertising
 Advertising to children
 Marketing to the poor
 Advertising of alcoholic beverages
 Cigarette advertising
 Health and environmental claims
 Ad creep
© 2012 South-Western, a part of Cengage Learning
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Controversial Advertising Issues
Environmental Claims
• Companies have been ramping up their
advertising claims about the environmental
friendliness of their products.
• The green economy was estimated in 2010
to be worth $1.04 trillion and growing.
• An industry of “green watchdogs” has been
growing.
• Growing “green fatigue” developing
among some consumers who are weary of
claims.
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Warranties
• Initially used by manufacturers to limit the
length of time they were responsible for
products.
•
Came to be viewed by consumers as
mechanisms to protect the buyer against faulty
or defective products.
Express Warranty
• Promise or affirmation of fact that the seller
makes at the time of the sale.
Implied Warranty
• Unwritten promise that there is nothing
wrong with the product and its intended use.
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Warranties (continued)
Full Warranty
• Covers the entire product.
Limited Warranty
• Certain parts or types of defects are not
covered under the warranty.
Extended Warranty
• Service plans that lengthen the warranty
period and are offered at an additional cost.
© 2012 South-Western, a part of Cengage Learning
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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
 The FTC and the Food and Drug
Administration (FDA) have responsibilities
under the Act.
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Other Product Information
Legislation
Equal Credit Opportunity Act
•
Prohibits discrimination in extending
consumer credit.
Truth-in-Lending Act
•
Requires all suppliers of consumer credit to
fully disclose all credit terms.
Fair Credit Reporting Act
•
Ensures that consumer-reporting agencies
provide information in a manner that is fair
and equitable.
Fair Debt Collection Practices Act
•
Regulates the practices of third-party debtcollection agencies.
© 2012 South-Western, a part of Cengage Learning
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The Federal Trade Commission
 The government’s major instrument for
ensuring that business lives up to its
responsibilities in the areas of
advertising, warranties, and
packaging/labeling.
Major Activities of the FTC
1. To maintain free and fair competition in
the economy.
2. To protect consumers from unfair or
misleading practices.
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The Divisions of the FTC
Advertising practices
Credit practices
Enforcement
Marketing practices
Service industry practices
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Recent Consumer Legislation
 Credit Card Act of 2009
 Consumer Financial Protection
Agency
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Self-Regulation in Advertising
Types of Self-Regulation
• Self-discipline
• Pure self-regulation
• Co-opted self-regulation
• Negotiated self-regulation
• Mandated self-regulation
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The National Advertising Division’s
Program
• NAD was created to help sustain high
standards of truth and accuracy in national
advertising.
 Initiates investigations
 Determines issues
 Collects and evaluates data
 Makes initial decision regarding
substantiated claims
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Key Terms
•
•
•
•
•
•
•
•
Accurate information
Ad creep
Adequate information
Age compression
Ambient advertising
Ambiguous advertising
Clear information
Comparative
advertising
• Concealed facts
• Consumerism
• Consumer Financial
Protections Agency
(CFPA)
• Consumer’s Magna
Carta
• Co-opted selfregulation
• Credit Card Act of
2009
• Customer Relationship
Management (CRM)
• Exaggerated claims
• Express warranty
• Extended warranty
• Full warranty
© 2012 South-Western, a part of Cengage Learning
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Key Terms (continued)
• Implied warranty
• Limited warranty
• Mandated selfregulation
• Negotiated selfregulation
• Plot placement
• Product information
• Product placement
• Psychological appeals
• Puffery
•
•
•
•
•
•
•
•
•
Pure self-regulation
Right to be heard
Right to be informed
Right to choose
Right to safety
Self-discipline
Self-regulation
Warranties
Weasel words
© 2012 South-Western, a part of Cengage Learning
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