CHAPTER 21 © 2010 South-Western, a part of Cengage Learning All rights reserved Ethical, Regulatory, and Environmental Issues Eighth Edition PowerPoint Presentation by Charlie Cook The University of West Alabama Chapter Objectives After reading this chapter you should be able to: 1 Appreciate the ethical issues associated with advertising, sales promotions, and other marcom practices 2 Understand why the targeting of marketing communications toward vulnerable groups is a heatedly debated practice 3 Explain the role and importance of governmental efforts to regulate marketing communications 4 Be familiar with deceptive advertising and the elements that guide the determination of whether a particular advertisement is deceptive © 2010 South-Western, a part of Cengage Learning All rights reserved 21–2 Chapter Objectives (cont’d) After reading this chapter you should be able to: 5 Be acquainted with the regulation of unfair business practices and the major areas where the unfairness doctrine is applied 6 Know the process of advertising self-regulation 7 Appreciate the role of marketing communications in environmental (green) marketing 8 Recognize the principles that apply to all green marcom efforts © 2010 South-Western, a part of Cengage Learning All rights reserved 21–3 Ethical Issues in Marketing Communications • Ethics in Marcom  Involves matters of right and wrong, or moral, conduct pertaining to any aspect of marketing communications  Honesty, honor, virtue, integrity • Ethical Conduct  Lack of consensus about what it is  Ethical lapses and moral indiscretions occur under pressures of trying to meet business goals and attempting to satisfy the demands of the financial community © 2010 South-Western, a part of Cengage Learning All rights reserved 21–4 Sources of Ethical Issues Targeting Marcom Public Relations Advertising Ethical Issues in Marketing Activities and Communications Packaging Communications Sales Promotions Internet Marketing © 2010 South-Western, a part of Cengage Learning All rights reserved 21–5 The Ethics of Targeting • Ethical Debate  Is it ethical to target products and communications efforts to segments that vulnerable or put at risk by these actions? • Is Targeting Unethical or Just Good Marketing?  When does a good targeting strategy become a method of unfair (unethical) advantage? © 2010 South-Western, a part of Cengage Learning All rights reserved 21–6 Is Targeting Unethical or Just Good Marketing? • Positive  Targeting benefits rather than harms consumers—providing them with products best suited to their particular needs and wants © 2010 South-Western, a part of Cengage Learning All rights reserved • Negative  Targeting is not concerned with fulfilling consumers’ needs and wants, but rather with exploiting consumer vulnerabilities 21–7 The Ethics of Targeting Ethical Issues in Targeting Children and Teens Targeting Food and Beverage Products Targeting Tobacco and Alcohol Products © 2010 South-Western, a part of Cengage Learning All rights reserved Targeting Miscellaneous Products 21–8 Targeting to Children and Teens • Negative Targeting Outcomes  Products targeted to kids are unnecessary and the communications involved are exploitative  Posters, book covers, free magazines, advertising, and other so-called learning tools that are ads for products  Movies with tie-in merchandise programs  Targeting adult products (e.g., beer) to pre-adults  Using unacceptable cartoon-like images (e.g., Joe Camel)  Promoting adult-oriented entertainment (e.g., violent films, video games, and music products) to children and teens  Marketing food products (e.g., high-fat, high-calorie snacks) South-Western, achildhood obesity that contribute to part of © 2010 Cengage Learning All rights reserved 21–9 Targeting to Economically Disadvantaged Consumers • Billboards advertising tobacco and alcohol disproportionately appear in inner-city areas • Examples:  R.J Reynolds attempt to market new brands cigarettes to African-Americans and downscale young women  Heileman Brewing Company’s targeting of “Power Master” high-alcohol malt liquor to inner-city neighborhoods © 2010 South-Western, a part of Cengage Learning All rights reserved 21–10 Regulation by Federal Agencies Federal Trade Commission (FTC) Regulatory Authority Deceptive Advertising Unfair Practices © 2010 South-Western, a part of Cengage Learning All rights reserved Information Regulation 21–20 Regulation by Federal Agencies (cont’d) Elements of the FTC’s Deception Policy Misleading Misrepresentation or Omission Reasonable Consumer Test © 2010 South-Western, a part of Cengage Learning All rights reserved Material Misrepresentation 21–21 Regulation of Unfair Practices • 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 (emphasis added) • FTC’s Criteria for Unfair Business Acts  Act offends public policy established by statutes  Act is immoral, unethical, oppressive, or unscrupulous  Act causes substantial injury to consumers, competitors, or other businesses © 2010 South-Western, a part of Cengage Learning All rights reserved 21–22 Regulation by Federal Agencies (cont’d) • FTC’s Corrective Advertising Program  Requires a firm that misleads consumers to use future advertisements to rectify any deceptive impressions it has created in consumers’ minds • Food and Drug Administration (FDA)’s Regulation of Product Labeling  Responsible for regulating information on the packages of food and drug products  Requires advertisers to present a balanced perspective when advertising drugs © 2010 South-Western, a part of Cengage Learning All rights reserved 21–23 Regulation by Federal Agencies (cont’d) • Drug Advertising  FTC regulates deceptive and unfair advertising for over-the-counter (OTC) drugs  FDA regulates advertisements for prescription drugs in requiring advertisers to present a balanced perspective when advertising drugs © 2010 South-Western, a part of Cengage Learning All rights reserved 21–24 Regulation of Marketing Communications • Regulation by State Agencies  Most, if not all, states have departments of consumer affairs or consumer protection • Advertising Self-Regulation  Is undertaken by the advertising community itself (i.e., advertisers, industry trade associations, and ad media) rather than by governmental bodies © 2010 South-Western, a part of Cengage Learning All rights reserved 21–25 Advertising Self-Regulation • Advertising Clearance Process 1 Advertising agency clearance 2 Approval from the advertiser’s legal department and perhaps also from an independent law firm 3 Media approval © 2010 South-Western, a part of Cengage Learning All rights reserved 21–26 The National Advertising Review Council • 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 • NARC Organizational Units  The Children’s Advertising Review Unit (CARU)  National Advertising Review Board (NARB)  Council of Better Business Bureau’s National Advertising Division (NAD) © 2010 South-Western, a part of Cengage Learning All rights reserved 21–27 Environmental Marketing Communications • Legitimate Green Marketing  Is a firm’s introduction of environmentally oriented products and its undertaking of marcom programs to promote them  Seeks to accomplish two objectives:  Improve environmental quality  Satisfy customers © 2010 South-Western, a part of Cengage Learning All rights reserved 21–28 Green Marketing Initiatives • Green Marketing Communications  Advertisements that promote green products  Environmentally friendly packaging  Seal-of-approval programs promoting green products  Cause- and event-oriented marcom efforts that support environmental consciousness  Point-of-purchase display materials that are environmentally efficacious  Direct marketing programs that reduce resource usage by developing more efficient solicitations  Outdoor advertising efforts © 2010 South-Western, a part of that reduce the usage of environmentally damaging materials Cengage Learning All rights reserved 21–29 Figure 21.2 Green Advertising Addressing the Biophysical Environment © 2010 South-Western, a part of Cengage Learning All rights reserved 21–30 Guidelines for Green Marketing • FTC’s Green Guides  Qualifications and disclosures should be sufficiently clear and prominent to prevent deception  Claims should make clear whether they apply to the product, the package, or a component of either  Claims should not overstate an environmental attribute or benefit, either expressly or by implication  Comparative claims should be presented in a manner that makes the basis for the comparison sufficiently clear to avoid consumer deception © 2010 South-Western, a part of Cengage Learning All rights reserved 21–31 Figure 21.4 Green Advertising Presenting an Image of Environmental Responsibility © 2010 South-Western, a part of Cengage Learning All rights reserved 21–32 Guidelines for Green Marketing General Recommendations for Environmental Claims Make Specific Claims Reflect Current Disposal Options © 2010 South-Western, a part of Cengage Learning All rights reserved Make Substantive Claims Make Supportable Claims 21–33 Figure 21.3 Green Advertising Promoting a Green Lifestyle © 2010 South-Western, a part of Cengage Learning All rights reserved 21–34 ... with advertising, sales promotions, and other marcom practices Understand why the targeting of marketing communications toward vulnerable groups is a heatedly debated practice Explain the role and. .. Fears and Insecurities 21–12 American Association of Advertising Agencies’ Code of Ethical Standards • Ethical Code and Standards of Practice  Set lofty goals for the advertising industry and. .. in Marketing Activities and Communications Packaging Communications Sales Promotions Internet Marketing © 2010 South-Western, a part of Cengage Learning All rights reserved 21–5 The Ethics of