Chapter Three
Ethical, Regulatory, and
Environmental Issues in
Marketing
Communications
 2007 Thomson South-Western
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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.
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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.
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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
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The Ethics of Targeting
• Ethical debate—practice of targeting
products and communications efforts
to segments that, for various
psychosocial and economic reasons,
are vulnerable to marketing
communications.
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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 preadults—Miller
Brewing Company— “bolder” beer
• Use of unacceptable images—cartoons—greatest
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
consumers—provide 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 advertising—same ethical issues apply
• The difference is negative publicity—firms
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 individual’s privacy rights by selling
information to other sources without the
consumer’s consent
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Fostering Ethical Marketing
Communications
The Golden
Rule
Act in a way that you would want
The
Professional
Ethics
Take only actions that would be
viewed as proper by an objective
panel of your professional
colleagues
The TV test
“Would l feel comfortable
explaining this action on
television to the general public?”
others to act toward you
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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 seller’s “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 consumer’s 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 advertiser’s 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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