Chapter 6 THE REGULATION ENVIRONMENT FOR PROMOTION and

Chapter 6: THE REGULATION ENVIRONMENT FOR PROMOTION and ETHICAL ISSUES 6. 1

Regulation, Ethics and a Free Enterprise Economy PROMOTION DID NOT COME FROM MADISON AVENUE MARKETING PROCESSES, INCLUDING PROMOTION: n Naturally Emerge in Highly Industrialized, High Consumption Societies from a Need to: n Efficiently, Effectively Distribute the Production Output of Society BASIS FOR EXISTENCE OF PROMOTIONAL PROCESS n Economic: Free-Enterprise Economy Fundamentals n Social: Mixed Economy that is Somewhat Free, Partially Socialistic and Heavily Regulated. 6. 2

Regulation of Promotion: Government, Industry & Consumers FEDERAL GOVERNMENT REGULATION n FTC Legal Powers - Broadest & Most Direct Power Over Promotional Practices n n n Advertising Substantiation Program Consent Order Cease & Desist Order Affirmative Disclosure Corrective Advertising Celebrity Endorsements 6. 3

Regulation of Promotion: Government, Industry & Consumers (con’t) STATE GOVERNMENT REGULATION States Do Not have Extensive Policing Power over Promotional Activities of Firms n Attorney General’s (AG) Office Investigates n National Association of Attorneys General (NAAG) are an Active Group n 13 States have Prize Notification Laws Regarding Sweepstakes and Contests n 6. 4

Regulation of Promotion: Government, Industry & Consumers (con’t) INDUSTRY SELF-REGULATION ORGANIZATIONS n Promotion Industry’s Attempt to Police Itself n National Advertising Review Board n State and Local Better Business Bureaus n Better Business Bureau Code of Online Business Practices n Advertising Agencies & Promotion Trade Associations n The Direct Marketing Association (DMA) n Point-of-Purchase Advertising Institute (POPAI) n Media Organizations n Internet Self-Regulation 6. 5

Regulation of Promotion: Government, Industry & Consumers (con’t) CONSUMERS ARE REGULATORY AGENTS n Consumerism - Actions of Individual Consumers or Groups of Consumers Designed to Exert Power in the Marketplace n n n Earliest Consumer Efforts - 17 th Century England Consumers want More Voice in Process of Product Development, Distribution, & Information Dissemination Consumers Try to Create Pressure on Firms Through Boycotts 6. 6

Regulation of Promotion: Government, Industry & Consumers (con’t) CONSUMERS ARE REGULATORY AGENTS (con’t) n Consumer Organizations n Consumer Federation of America (CFA) n Consumers Union n Action for Children’s Television (ACT) 6. 7

Issues in the Regulation of Promotion ISSUES IN THE REGULATION OF ADVERTISING n Deception & Unfairness n False Testimonials n Bait-and-Switch Advertising n Misleading Demonstrations n “Free Offers” n Puffery 6. 8

“Puffery” is a Completely Legal Approach to Touting a Brand’s Value 6. 9

Issues in the Regulation of Promotion (con’t) ISSUES IN THE REGULATION OF ADVERTISING (con’t) n Competitive Issues n Vertical Cooperative Advertising n Comparison Advertising n Monopoly Power 6. 10

Advertisements Using Comparison are Subject to Regulation by the FTC 6. 11

Issues in the Regulation of Promotion (con’t) ISSUES IN THE REGULATION OF ADVERTISING (con’t) n Advertising Aimed at Children n Critics say Continually Bombarding Children w/Persuasive Stimuli Can Alter Their Motivation and Behavior n Children’s Television Act (199) - Limits Amount of Commercial Airtime During Children’s Programs n Children’s Review Unit Issues Set of Guidelines n Major TV Networks Set Their Own Guidelines 6. 12

Advertising Aimed at Children is Scrutinized Both Legally and Ethically 6. 13

Issues in the Regulation of Promotion (con’t) ISSUES IN REGULATION OF DIRECT MARKETING & e-COMMERCE Privacy n Contests & Sweepstakes n n Telemarketing 6. 14

Issues in the Regulation of Promotion (con’t) ISSUES IN THE REGUALTION OF SALES PROMOTION n Premium Offers n Trade Allowances n Contest & Sweepstakes 6. 15

Issues in the Regulation of Promotion (con’t) ISSUES IN THE REGULATION OF PUBLIC RELATIONS n Rights of Privacy n Appropriation n Copyright Infringement n Defamation n Slander n Libel 6. 16

Issues in the Regulation of Promotion (con’t) ISSUES IN THE REGULATION OF PERSONAL SELLING n Price Discrimination n Price Fixing n Tying Agreements n Bribery 6. 17

Ethical Issues in Promotion ETHICAL ISSUES IN ADVERTISING n n n n n Advertising is Superficial Advertising Wastes Resources Advertising Creates Needs Advertising Promotes Materialism Advertising Perpetuates Stereotypes Advertising is Often Offensive & In Poor Taste Advertisers Deceive with Subliminal Stimulation Advertising Affects Programming on Mass Media Advertising Causes People to Use Alcohol & Tobacco 6. 18

Critics Argue that Advertising Creates an Emphasis on Materialism

Ethical Issues in Promotion (con’t) ETHICAL ISSUES IN SALES PROMOTION, DIRECT MARKETING, and e-COMMERCE n Issue of Privacy n Trade Channels - Recently Acquired Power n Slotting Fees n Question of Retailers Not Following Through the Promised Rewards of a Promotion 6. 20

Ethical Issues in Promotion ETHICAL ISSUES IN PUBLIC RELATIONS ETHICAL ISSUES IN PERSONAL SELLING 6. 21