Consumer Behavior

1
Consumer Behavior Public Policy
2
Why the Concern?

• Advertising -- communication by an identified
  sponsor about its goods or services, meant to
  inform or persuade using a mass media vehicle
• Inherently one-sided
• Somewhat intrusive
• Advocative
• Should advertising be used only to inform?
• Should advertising be used to persuade?

3
Why the Concern?

• Advertising decisions and executions are often
  made by an agency external to the firm (Ad
  agency)
• Will the ad agency use the same ethical standards
  that the firm would use?
• FTC has decided that in some cases, the answer
  may be NO
• Moreover, FTC has decided that in order to
  maintain a fair and competitive playing field,
  certain ad rules must be followed
• So advertising is regulated
• BUT HOW MUCH? HOW SHOULD IT BE DONE?

4
Why the Concern?

• Advertising continuum
• Information Persuasion Embellishment
  Deception
• Consumer is protected (by law) from deception.
  What about embellishment?

5
Regulation of Ads

• Deceptive practices are monitored and laws are
  enforced by the Federal Trade Commission (FTC)
• Protects consumers from fair and unethical
  practices
• Protects competition

6
Regulation of Ads

• How does the FTC determine whether ads are
  deceptive (CB has helped)
• Deceptive Ads have 3 components
• Ads which have the capacity to deceive consumers
  (i.e., consumers form beliefs about the
  advertised brand which cannot be substantiated by
  the advertiser)

7
Regulation of Ads

• Components of deceptive advertising
• Ads have the capacity to deceive in a material
  manner (i.e., unsubstantiated beliefs are
  important in terms of consumers buying behavior)

8
Regulation of Ads

• Deceptive advertising -- components of law
• Ads have the capacity to deceive consumers acting
  reasonably (consumers are acting with care and
  credulousness)

9
Regulation of Ads

• Deceptive advertising -- punitive actions
• Cease desist orders
• Corrective ads
• Do they work? -- Listerine case
• Fine retribution

10
Advertising Children

• Issue 1
• Can children distinguish ads from programs?
• Those aged 7 or less can not
• Should advertisers be allowed to target such kids?

11
Advertising Children

• Issue 2
• If children are exposed to ads, do they have the
  defenses to deal with them?
• Not those less than the age of 8 (although, this
  may be changing media education programs exist
  in most schools)
• Defenses seem to emerge for kids aged 8 - 12
• Should advertisers be allowed to target such
  kids? All kids?

12
Advertising Children

• Issue 3
• Do programs which feature toys as characters
  negatively affect kids?
• Parents think so
• Unfairly influence kids choices
• Kids think products will be like those in the
  show
• Often lead children to act in an antisocial
  manner
• Leads kids to play less creatively

13
Advertising Children

• Public Policy Actions
• Stations must provide 3 hours of educational
  television per day
• Stations must provide commercial identifiers
• Restrictions on certain ads during toy-based
  programs
• No advertising for toys that are related to the
  program