Lecture 19
Customer Services and Consumer
Protection
Defining, Assessing, and Measuring Service
Quality: A Conceptual Overview
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
2
Multi-Phase, Multi-Sector, Multi-Year
Program of Research to Address the
Following Issues
• How do customers perceive and evaluate service
quality?
• What are managers’ perceptions about service
quality?
• Do discrepancies exist between the perceptions
of customers and those of managers?
• Can customers’ and managers’ perceptions be
combined into a general model of service quality?
• How can service organizations improve customer
service and achieve excellence?
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
3
Determinants of Perceived Service
Quality
Word of
Mouth
Personal
Needs
Expected
Service
Service
Quality
Gap
Past
Experience
External
Communication
to Customers
Perceived
Service
Quality
Perceived
Service
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
4
A “GAPS” MODEL OF SERVICE QUALITY
CUSTOMER
Customers’
Service
Expectations
SERVICE ORGANIZATION
Market
Information
Gap
Organization’s
Understanding of
Expectations
Service
Standards
Gap
Organization’s
Service Standards
GAP 1
GAP 2
Service
Quality
Gap
Customers’
Service
Perceptions
GAP 5
GAP 3
GAP 4
Organization’s
Communications to
Customers
Service
Performance
Gap
Organization’s
Service
Performance
Internal
Communication
Gap
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
5
PROCESS MODEL FOR CONTINUOUS MEASUREMENT AND IMPROVEMENT
OF SERVICE QUALITY
DO YOUR CUSTOMERS PERCEIVE
YOUR OFFERINGS AS MEETING
OR EXCEEDING THEIR EXPECTATIONS?
YES
CONTINUE TO MONITOR
CUSTOMERS’ EXPECTATIONS
AND PERCEPTIONS
NO
DO YOU HAVE AN ACCURATE
UNDERSTANDING OF
CUSTOMERS’ EXPECTATIONS?
NO
TAKE CORRECTIVE ACTION
YES
ARE THERE SPECIFIC
STANDARDS IN PLACE TO MEET
CUSTOMERS’ EXPECTATIONS?
NO
TAKE CORRECTIVE ACTION
YES
DO YOUR OFFERINGS MEET OR
EXCEED THE STANDARDS?
NO
TAKE CORRECTIVE ACTION
YES
NO
IS THE INFORMATION
COMMUNICATED TO CUSTOMERS
ABOUT YOUR OFFERINGS ACCURATE?
TAKE CORRECTIVE ACTION
YES
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
6
SERVQUAL: Development, Refinement, and
Empirical Findings
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
7
Determinants of Perceived Service
Quality
Dimensions of Service
Quality
1. Access
2. Communication
3. Competence
4. Courtesy
5. Credibility
6. Reliability
7. Responsiveness
8. Security
9. Tangibles
10. Understanding/Knowing
the Customer
Word of
Mouth
Personal
Needs
Expected
Service
Service
Quality
Gap
Past
Experience
External
Communication
to Customers
Perceived
Service
Quality
Perceived
Service
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
8
Relative Importance of Service
Dimensions When Respondents
Allocate 100 Points [Study 1]
RELIABILITY 32%
TANGIBLES 11%
RESPONSIVENESS
EMPATHY 16%
22%
ASSURANCE 19%
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
9
Relative Importance of Service Quality Dimensions [Study 2]
Mean Number of Points Allocated out of 100 Points
37
33
11
9
23
18
32
14
21
23
15
13
19
Computer Manufacturer
All Companies
Retail Chain
29
28
12
12
23
23
18
17
19
20
Auto Insurer
Reliability
15
18
Responsiveness
Life Insurer
Assurance
Empathy
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
Tangibles
10
Nature of Service Expectations
Desired Service
Level Customers
Believe Can and Should Be
Delivered
Zone
of
Tolerance
Adequate Service
Minimum Level
Customers Are Willing
to Accept
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
11
The Two Levels of Expectations Imply Two
Corresponding Measures of GAP 5:
Measure of Service
Adequacy (MSA)
Measure of Service
Superiority (MSS)
=
Perceived
Service
-
Adequate
Service
=
Perceived
Service
-
Desired
Service
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
12
TWO APPROACHES FOR
MEASURING MSA AND MSS
• Two-Column Format Questionnaire
– Direct measures of MSA and MSS
• Three-Column Format Questionnaire
– Difference-score measures of MSA and MSS
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
13
MULTIPLE METHODS OF LISTENING TO
CUSTOMERS
• Transactional surveys*
• Mystery shopping
• New, declining, and lost-customer surveys
• Focus group interviews
• Customer advisory panels
• Service reviews
• Customer complaint, comment, and inquiry
capture
• Total market surveys*
• Employee field reporting
• Employee surveys
• Service operating data capture
*A SERVQUAL-type instrument is most suitable for these
methods
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
14
The Role Of Technology In Service Delivery:
Electronic Service Quality (e-SQ) and Technology
Readiness (TR)
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
15
Technology’s Growing Role in Marketing to
and Serving Customers: Pyramid Model
Company
Internal
Marketing
External
Marketing
Employees
Customers
Interactive
Marketing
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
16
Ongoing Research on e-Service
Quality: Conceptual Framework and
Preliminary Findings
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
17
Research Phases and Questions
PHASE 1:
• What is good service on the Web?
• What are the underlying dimensions of
superior electronic service quality (e-SQ?)
• How can e-SQ be conceptualized?
PHASE 2:
• How do these dimensions compare to
those of traditional service quality?
• How can e-SQ be measured and thereby
assessed?
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
18
Definition of e-Service
Quality (e-SQ)
e-SQ is the extent to which a
Website facilitates efficient and
effective shopping, purchasing
and delivery of products and
services.
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
19
What is Technology
Readiness [TR]?
TR refers to “people’s
propensity to embrace
and use new
technologies for
accomplishing goals
in home life and at
work”
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
20
Technology-Beliefs Continuum
Resistant to
Technology
Neutral
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
Receptive to
Technology
21
Link between Technology Beliefs
and Technology Readiness
Technology
Readiness
High
Medium
Low
Resistant to
Technology
Neutral
Receptive to
Technology
Technology-Beliefs Continuum
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
22
Drivers of Technology Readiness
Contributors
Optimism
Innovativeness
Technology Readiness
Inhibitors
Discomfort
Insecurity
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
23
Thank You!
© A. Parasuraman, University of Miami; not to be reproduced or disseminated without the author’s permission
24
Consumer Protection
Source: Manual on Consumer Protection
United Nations Conference on Trade and
Development (UNCTAD)
2004
Overview: Three broad categories
•
1. Consumer Protection System
– Policies, laws, institutions and structures that
form the framework for a consumer
protection system
•
•
•
•
UN Guidelines
Consumer Protection Agencies/Organizations
Consumer Protection Law
Consumer Redress
• 2. Consumer Protection in the Marketplace
– Various transactions that consumers enter in a
market economy
•
•
•
•
•
Consumer information
Product safety and liability
Consumer credit
Insurance
Electronic commerce
• 3. Consumer Protection and Basic Needs
– Consumer education
– The provision of utilities
– Food
– Health care delivery
– Sustainable consumption
Part I. Consumer Protection System
Rationale for consumer protection
• Addresses disparities in consumer-supplier
relationship
– Bargaining power
– Knowledge
– Resources
• State intervention premised on grounds of
– Economic efficiency
– Individual rights
– Distributive justice
• Achieving bargaining equality between consumer and producer
interests
• Alleviating the problems of the particularly disadvantaged
– Poor, elderly, children
• “Consumerism, especially in the developing world, is now
seen as a fundamental part of the strategy to eradicate poverty
and to bring socio-economic justice to the underprivileged.”
– Positive communal values
– Right to development
Consumer Rights
• John F. Kennedy’s Message to Congress on
March 15, 1962
• Four basic rights
– Right to safety
– Right to be informed
– Right to choose
– Right to be heard
• 1982 Consumer International’s Charter of
Consumer Rights
• Eight rights
– Right to basic needs
• Food, clothing, shelter, health care, education, water
and sanitation
– Right to safety
– Right to information
– Right to choice
– Right to be heard
– Right to redress
– Right to education
– Right to healthy environment
• Rights further re-enforced by adoption of
UN Guidelines on Consumer Protection in
1985 and 1999
Who is the “consumer”?
• Original definition limited to purchases for
“personal consumption”
• More recently includes small operators
– Applies to farmers
– Assures reasonable prices and quality of farm
inputs
Who is responsible for consumer
protection?
• Government agencies
– Ministry of Commerce, Investment and
Consumer Affairs
• Professional/Industry associations
• Consumer organizations
– St. Lucia Consumer Association
U.N. Guidelines on Consumer
Protection (UNGCP)
• Provide a framework for governments to
develop and strengthen consumer protection
policies and legislation
• Minimum guarantee by governments that
the measures will be undertaken
Obligations imposed on
governments by the UNGCP
• 1. Physical Safety
– Assure that products are safe and conform to
safety standards
– Consumers receive information on proper use
of goods and risks involved
– Measures are in place for notification and recall
of unsafe goods
• 2. Consumers’ economic interests
– Consumers obtain optimum benefit from their
economic resources
• Ensuring that goods meet production and performance
standards
• Adequate distribution channels and after sales services
• Fair business practices are employed
• Protection against contractual abuses
• Information is adequate for consumers to make informed
decisions and exercise choice
• 3. Standards for safety and quality of goods
and services
– Ensure there are national standards for safety
and quality of goods and services
– Such standards conform to international
standards
– Facilities to test and certify goods and services
are encouraged
• 4. Distribution facilities for essential goods
and services
– Especially to consumers who are
disadvantaged, e.g., in rural areas
• 5. Redress
– Establish and publicize mechanisms that are
fair, affordable and accessible
• Especially taking into consideration the needs of
low-income consumers
• 6. Education and information programs
– Should involve consumer and business groups
– Particular attention to disadvantaged consumers
in urban and rural areas
– Should be included in school curriculum
– Training programs for educators, mass media
professionals and consumer advocates
• 7. Promotion of sustainable consumption
– Should be done in conjunction with civil
society organizations and business groups
– Sustainable consumption practices within
government, by business enterprises and by
consumers
• 8. Measures relating to food, water and
pharmaceuticals
– Prioritizes these areas
– Should ensure quality control, adequate
distribution and standardized information
• Food production
– Sustainable agricultural polices and practices
– Conservation of biodiversity
– Traditional knowledge
• Drinking water
– National policies should be developed to
improve supply, distribution and quality of
water for drinking and other purposes
• Pharmaceuticals
– Develop national policies to ensure appropriate
use, procurement, distribution, production,
licensing arrangements, registration systems
and information to consumers
Current status of UNGCP
• UN is surveying countries’ adoption
• Many LDCs have nothing in place
– No laws or consumer organizations
• Doesn’t fully account for globalization and
other changes in marketplace
Functions of a consumer protection
agency
• Advise the government on consumer issues
• Represent the consumer interest in other
governmental committees
• Enforce consumer protection and competition law
• Conduct market surveys and research into
consumer protection problems
• Conduct product testing for safety and quality
Consumer organizations
• Need for an independent party that is non-political
and non-commercial
• Need for views of the under-represented and
vulnerable groups
• Some have wide membership and broad spectrum
of concerns
• Democracy involves participatory decisionmaking ; consultation with these groups is part of
the nation-building process
Role of consumer organizations
• Provide independent information on
products and services
• Organize mass action, such as letter-writing
campaigns, boycotts, rallies, etc.
• Advise and act on consumer complaints and
obtain redress for consumers
• Organize workshops and seminars on
particular issues
• Engage in public interest litigation on behalf of
consumers
• Conduct surveys and research to study problems
faced by consumers or the impact of government
policies on consumers
• Engage in dialogue with government and business
to inform, persuade or negotiate on behalf of
consumers
• Consult with stakeholders to understand
consumer issues and develop policy to
address problem areas
• Organize public education programs
• Register and issue licenses for certain
business activities
• Issue administrative rules to regulate
business entities
Consumer Law: Constitutions
• Early constitutions focused on civil and
political rights (“first generation rights”)
– Freedom and security of an individual
– Protection from state and public power
• More recent constitutions confer wider
range of human rights
– Economic, social and cultural rights
– “second generation rights”
• Trend is to include the right to development
– “third generation” or “solidarity” rights
• In constitutions adopted since 1980’s, consumer
rights recognized as human rights
• Thus included in the constitutions of many
countries
• Recognize disparity of knowledge, resources and
bargaining power and provide for consumer rights
Consumer Law: Framework
• Cover a broad range of practices, goods and
services
• Create consultative bodies
• Vest agencies with rule-making powers
• Create special tribunals with simplified procedures
and rules of evidence
• Confer on consumer groups the right to represent
individuals
• Provide for a range of remedies
Consumer Redress
• Problems include:
– Expense
– Length of time
– Alienation
– Adversarial
• Alternatives
– Facilitating access to courts
• Legal aid for the needy
• Contingent fee system
• Permit paralegals to perform attorney functions
– Court substitutes (ADR)
• Statute-based tribunals
• Arbitration
• Ombudsman
• Assessing efficacy of ADRs
– Access
• Widespread publicity
• Cost
• Accessibility
– Fairness
• Independent
– Transparency
– Effectiveness
•
•
•
•
•
Scope comprehensive
Procedures simple
Rules of evidence relaxed
Speedy
Decisions binding on industry
Part II: Consumer Protection in the
Marketplace
Consumer Information and Choice
• “Consumer information ideally is meant to
provide standardized, objective and
impartial information direct to consumers at
the point of sale, in order for them to decide
which of the many branded products and
services available will best suit their own
needs.”
• Consumer information is especially needed
where
– Products and services are high priced
– Products and services are technically complex
– No basis of assessment at point of sale
– Little consumer knowledge of required
performance before purchase
• Where information is regulated (e.g., labels
subject to mandatory labeling laws, such as
pharmaceuticals) consumers have relatively
few problems
• Where information is unregulated (e.g.,
advertising or unregulated labels)
consumers have more problems
– Sometimes offset by information from
independent consumer groups
• Additional problems arising from expansion
of international trade
– Information on imported products
• Many don’t comply with voluntary labeling
standards
– Information provided electronically over the
internet (later)
Critical issues related to advertising
• “Commercial advertising, when it is practiced
fairly and responsibly, serves a useful function,
informing the public about the existence of a
product and the characteristics of the product. In
order to be a positive influence, advertisements
must be truthful and informative, must not
exaggerate the usefulness or qualities of the
product and should not play on the emotional
needs of the consumer so as to create artificial
needs.”
• Consumer concerns with advertising
– Ads for products proven to be unsafe and/or addictive
(e.g., alcohol and tobacco)
– Ads that target and mislead vulnerable communities
about the product
– Ads that aggressively target children to consumer foods
high in fat, sugar and salt
– Ads for products that contain toxic or cancer-causing
chemicals for which there is no scientific proof of
safety levels (e.g., pesticides, aspartame, etc.)
• International codes on advertising
– WHO/UNICEF Code of Marketing of
Breastmilk Substitutes 1981
– FAO International Code of Conduct on the
Distribution and Use of Pesticides 1985
– Framework Convention on Tobacco Control
2003
Product Safety Laws
• Rationale for product safety laws
– Products are increasing in complexity and
sophistication; reasonable inspection will not reveal
latent defects or hazards
– Minimum and uniform standards ensure developing
countries do not become dumping grounds for substandard products rejected in the country of origin
– International standards will provide for unimpeded
access to overseas markets
• Components (5) of a comprehensive product
safety policy:
• 1. Preparatory action
– Surveillance of products in the market
– Data collection (local and foreign sources)
• “Consolidated List of Products Whose Consumption and/or
Sale Have Been Banned, Withdrawn, Severely Restricted, or
Not Approved by Governments”
• 2. Regulatory action
– Development of product safety standards
• 3. Monitoring action
– Testing by government or reliable independent
consumer organizations
• 4. Corrective action
– Impose product bans
– Warning notices
– Product recalls
– Seize stocks
– Destroy stocks
– Require modifications of the product
• 5. Compensatory actions
– Compensate consumers for loss
– Deter future wrongdoing
Consumer Credit
• Credit increases demand for and
consumption of goods and services
• Critical to economic growth
• Unfettered growth of credit has negative
consequences
– Impulse buying
– Extra costs associated with credit
– Excessive debt
• The poor pay more
– Ineligible for credit in many stores; thus buy shoddy
goods at higher prices
– If credit advanced, higher rates charged
• Credit often advanced to individuals with a history
of default
• Increased complexity of transactions (e.g. home
equity loans/lines of credit) require more complex
documents
– More difficult to understand and compare terms,
including cost of credit
• Consumer credit laws should
– Require lenders to provide consumers with copies of all
documents
– Establish a single method of calculating interest rates
– Conspicuously disclose the rate
– Control the price of credit
– Regulate credit-related insurance
– Provide right to cancel (“cooling off” period)
Electronic commerce
• 1996 fewer than 40 million connected to internet
• 1997 number increased to 96 million
• 2005 predicted to be nearly 1 billion
• 1998 27.6 million buying goods and services
online worth $32 million
• 2002 more than 128 million spending over $425
million
• Issues:
– Consumer redress in cyberspace disputes
– Privacy
– Identification of provider
– Security of payments
– Fraud
• Organization for Economic Cooperation and
Development (OECD)
• United Nations Commission on International
Trade Law (UNCITRAL)
• Alliance for Global Business (AGB)
– International trade associations
• Global Business Dialog on Electronic Commerce
(GBDe)
– CEO-led business initiative
• International Chamber of Commerce (ICC)
Part III: Consumer Protection and
Basic Needs
Consumer Education
• Objectives of consumer education are:
• Develop skills to make informed decisions in the
purchase of goods and services in light of
– Personal values
– Maximum utilization of resources
– Available alternatives
– Ecological considerations
– Changing economic conditions
• Become knowledgeable about the law and
consumer rights, in order to participate effectively
and confidently in the marketplace and take
appropriate action to seek redress
• Develop an understanding of the citizen’s role in
the economic, social and government systems and
to influence those systems to make them
responsive to consumer needs
• Consumer education is not the same thing
as consumer information
– Consumer education improves consumer’s
ability to use information
• “By exercising free choice, based on knowledge of
the facts, the consumer will be able to make the
best use of his resources, money, time, knowledge
and ability. He will thereby contribute to the
proper functioning of the economy and stimulating
effective and fair competition and he will thereby
contribute to social and economic development.”
– Council of Europe (1981)
• Modern conception of consumer education reflects
the inter-relationship between the private
household and societal responsibilities
• Concepts such as sustainable consumption are
woven into education about the impact of modern
consumer lifestyles on the environment
• In developing countries, consumer education is a
tool to ensure that scarce resources of poorer
consumers are not fritted away by unethical
business practices
• Strategies for implementing consumer
education
• A comprehensive program is directed to all
consumers
– Schools
• Skills to make informed decisions
• Skills to understand the impact of decisions of
individuals, businesses and governments on the lives of
others
– Those outside formal education
•
•
•
•
Mass media
Trade associations
Trade unions
Resident associations
– Special focus on
• Rural areas
• Low income
• Vulnerable groups (seniors; disabled)
• Six fields of content suggested by the
Nordic Council of Ministers (1999)
– Personal finances
– Rights and obligations
– Commercial persuasion
– Consumption, environment and ethics
– Food
– Safety
Utilities
• Utilities are considered basic needs
• Universal Declaration of Human Rights
states that everyone has the right of equal
access to public services in his/her country
• 1.6 billion do not have access to energy
supply
• Over 1 billion lack access to clean water
• One half of the world’s population has
made a phone call
• 5% of the world uses the internet
– 88% of those are in developed world (15% of
world’s population)
• Utilities present unique problems for consumers
– Generally involve basic and essential services
– Peculiar economic characteristics that make
competition difficult
• Public policy has focused on regulating
monopolies for public protection
– Price and other controls
– Public ownership
• Support for privatization based on
– Inefficiency of government ownership
– Corruption
– Failures in developing countries to provide
adequate levels of service
The special case of water
• One reason for problems stemming from state
ownership of water is that it’s too cheap
• Prices are kept artificially low
– On average, price covers 1/3 of cost
– Shortfall made up by government subsidies
• Consequences
– Consumption is encouraged
– No incentive to conserve
– shortages
– Governments don’t have the money to invest in
infrastructure improvements or pay off debts
• Response of IMF and World Bank is
privatization
– Introduce market discipline
– Give access to financial capital necessary for
infrastructure expansion
• Built into loan conditionality agreements or
structural adjustment programs
• Privatization is controversial
– Results in increased cost to consumers
– Some consumers may not be able to afford it
• Governments must raise prices to make sale possible; profit of
buyers factored in
– Potential abuses of monopoly power
– Improvements to infrastructure and potential extension
of service to additional consumers may be offset by
refusal to extend to non-profitable areas
– Buyers tend to be western multi-nationals
• Loss of economic independence
• Foreign owners dictating terms
• Concentration of developing world resources in
western ownership
• Privatized systems must include:
– Guaranteed universal access
– Fair pricing structure
– Uniform quality standards
– Protection from termination of service
Food: Security and Safety
• International law recognizes the right to food
– Physical and economic access to food
– Access to food of adequate quality and quantity
– Having the means to obtain it
• By way of production or procurement
• Food security defined by FAO as food that is
“safe, nutritious and culturally acceptable and is
available, accessible and affordable to all people”
• Over 800 million people suffer from hunger
and food insecurity
– 99% are in the developing world
• 21% of population of India
• 11% of population of China
• 58% of population of Central Africa
• 1996 World Food Summit, 185 countries and the
EC made a commitment to achieve universal food
security.
• Pledged to reduce number of hungry people in
world to half (to 400 million) by 2015
• According to FAO, number of undernourished
falling at rate of 8 million per year (target of 20)
• Thus goal won’t be reached until 2030
Hunger Facts
• There is enough food to feed all the people
in the world
– 4.5 pounds per person per day
• Real causes of hunger are poverty,
inequality and lack of access
• Rapid increase in food production doesn’t
necessarily result in food security
– 78% of countries reporting child
malnourishment export food!
• India had 42 million ton grain surplus in 2000
• 5,000 Indian children die each day of malnutrition
• Prosperity of a country no guarantee that
citizens won’t go hungry
– US has highest GDP in world
– 4.2 million households (4.1%) experience
hunger at least part of the year
Role of food imports
• Removal of import restrictions and lower food
tariffs make importation of highly subsidized food
an attractive alternative
• Potential problems:
– Vulnerability to price and supply fluctuations and
political upheaval
– Subject to manipulation by transnational corporations
– Undermine livelihood of farmers
• Consumer groups should focus government attention on:
• Promoting food security and improved access to food
• Reconciling demand for cheap food with adequate
compensation to farmers
– Often involves scrutiny of middlemen
• Address underlying causes of poverty
• Give priority to production of staple foods for domestic
consumption
• Address issues that contribute to food security
– Urbanization
– Land degradation
– Water scarcity
Food safety
• Food safety risks are increasing
– Movement of food and live animals across borders
– Changes in food handling
– Emergence of new pathogens
• Risks greater in developing countries
• Pesticide risks
– Direct risk through application process
– Indirect risk through toxic residues in food
• Hormones, veterinary drugs and antibiotics in
animals
• Building food safety capacity is essential,
especially in developing countries
– Food borne disease has significant impact on
both health and development
• Many developing countries lack the
resources and expertise to implement food
safety policies
Codex Alimentarius Commission
• Established by FAO and WHO in 1962
• Harmonize food standards between
countries
• Protect health of consumers and ensure fair
practices in food trade
• Membership of 165 countries representing
98% of world population
• Codex committees
– Meat and poultry hygiene
– Food additives and contaminants
– Pesticide residues
– Residues of veterinary drugs in foods
– Food hygiene
– Animal feeding
– Biotechnology
Consumer concerns with genetic
engineering
• Concerns about GE relate to
– Sustainability of biodiversity
– Ecological balance of life support systems
– Wildlife
– Environment
– Health problems
• Groups have called for moratorium on planting
GE crops until safety concerns are addressed and
appropriate controls put in place
• Appropriate controls include
– Labeling of GE imports
– Banning of unlabeled GE foods
• Some countries already have labeling laws
in place
Sustainable Consumption
The concept of sustainable consumption
• Ever-increasing consumption is putting a
strain the environment
• Outcome of the development model the
North follows and the South emulates
• Sustainable consumption is viewed as the
only long-term strategy for survival
• Many definitions of sustainable consumption
• All share these basic principles:
– Satisfaction of basic needs to improve quality of life
– Improving efficiency in resource use
– Minimizing emissions of wastes taking into consideration
the capacity of the earth to assimilate the wastes
– Adopting consumption patterns that will not jeopardize the
needs of current and future generations
– Ensuring equity in consumption within countries and
between countries
Obstacles
• Ignorance
– We don’t know level of per capita consumption the
planet can sustain
• Inequality
– Differences within and between nations make
developing a common agenda difficult
• Institutions
– Existing political and economic mechanisms for
addressing major international problems of the
environment are inadequate
Successes
• Growth in use of material resources has
slowed as a result of shifts in demand
towards less material-intensive products
• Emissions have been reduced as a result of
tighter regulations and incentives
• Municipal waste growth has slowed or
declined
Obligations of government
• UN Guidelines on Consumer Protection:
• Minimize resource utilization
– E.g., greater efficiency in use of energy
• Exercise leadership
– Adopt and enforce regulations
• Reinforce values
– Consumer education programs for consumers
on impacts of their choices and behavior
Obligations of the corporate sector
• World Business Council for Sustainable
Development in 2001 proposed a seven-point
blueprint for corporations; include:
– Develop technological and social innovations to
improve quality of life and tackle depletion of resources
– Use media and advertising to promote sustainability
– Create markets that reflect real economic, social and
environmental costs
– Create opportunities for the poorest segments of society
Obligations of consumers
• CI urges consumer organizations to:
– Educate members on sustainable consumption in order
to change attitudes and behavior
– Provide information to consumers on products and
services and demand that same be provided by
merchants
– Regularly assess environmental aspects of products
– Represent the environmental interests of consumers at
all relevant national and international forums
• Consumers are encouraged to avoid products that
– Cause environmental degradation during the extraction of
natural resources or during their manufacture, use and
disposal
– Utilize large amounts of energy during their manufacture,
use or disposal
– Cause unnecessary waste, due to over-packaging or unduly
short life span
– Utilize materials derived from threatened species or
environments
– Adversely affect other countries and communities,
especially those in the South
• “Consumers may be willing to take easy steps that
benefit the environment; but may not make
significant changes in buying habits, pay markedly
higher costs, or make changes in basic lifestyles. Yet
sustainable consumption calls for such effective
approaches. Consumer conscience has to be
sufficiently modified such as to effect changes in
behavior. This is the ultimate challenge for the
consumer movement. Consumers have to be
convinced that when they vote with their pockets they
are in fact exercising a social, moral and political
responsibility that goes beyond their own parochial
interests and their present generation.”
Building Financial Systems for the Poor
Consumer Protection at the Bottom of the Pyramid
(BOP):
Striking the right balance between access, protection and
innovation
Kate McKee, Senior Policy Advisor
Global Seminar on Consumer Protection and Financial Literacy
Washington, DC September 3, 2008
1.
Four
key
messages
Low-income and first-time financial
consumers face specific risks –>consumer
protection policy and regulation should
consider needs of different client segments
2. Different financial products also raise distinct
risks –> product-specific regulation may be
appropriate
3. With the huge growth projected in branchless
banking, specific channel risks need attention
4. A “light-touch” approach to regulation can
permit evolution of standards as risks evolve - enabling regulators to encourage innovation,
Consider the CP issues for a lowincome consumer . . .
•Looking for a safe place to save
•Trying to get cash for a remittance
transferred from a relative working overseas
•Opening her first basic banking account
•Shopping around for a business loan
•Going into a community retailer to send
money to his mother in the village
•Deciding whether to permit her MFI to
report payment info to the credit bureau
•Receiving his social payment (pension, child
allowance, etc.) via a card linked to an
The logic of branchless banking: a low-cost
transactional channel
1. Use existing
retailers – shops,
lottery, POs
2. Deliver trust
through
technology
Agent
Real-time accountto-account transfers
Customer
3. Use existing
technology in use
Any store can potentially be an agent
The power of using existing
infrastructure
Philippines
 1,000 branches
 7,000 ATMs
 25,000 POS
terminals in stores
 1.1 million prepaid
airtime resellers
Panama
 Largest bank has 65
branches
 850 shared ATMs
(many in branches!)
 12,000 prepaid
airtime resellers
~3bn
~25m
Worldwide points of presence
~1m
250k
Western
Union
500k
Bank
branches
600k
Post Offcs
ATMs
POS
Mobile
Phones
Closing thoughts on consumer protection in
BOP markets
 Keep regulation “light-touch” and focused on
most important products, providers and
delivery channels
 Consider regulatory capacity constraints and
ability to enforce
 Need to leave space for market innovation
and experimentation
 Balance protection and access policy goals
Building Financial Systems for the
Poor
Thank you!