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Chapter 13
Consumer
Stakeholders:
Information
Issues and
Responses
© 2012 South-Western, a part of Cengage Learning
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Consumer Spending
Consumer Expectations
• Consumers have decreased their spending in
recent years.
• Businesses have to fight hard for customers.
 Firms must pay careful attention to
customer stakeholders and their fair
treatment.
© 2012 South-Western, a part of Cengage Learning
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The Consumer Movement
Consumer Expectations
• “Fair value” for money spent
• Product that meets “reasonable”
expectations
• Full disclosure of product specifications
• Truthful advertising
• Safe products
• Removal of dangerous products
© 2012 South-Western, a part of Cengage Learning
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Lessons From the Consumer
Movement
1. Achieve a fair and just marketplace for all
consumers.
2. Provide public oversight where:
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Corporations lack the incentives to regulate their own
behavior.
Issue of health, safety and other special concerns.
3. Provide resources, authority, and support for
public watchdogs.
4. Intensify the fight for affordable goods and
services, fair financial practices, and a chance at a
decent standard of living.
5. Curb wasteful overconsumption that threatens the
environment.
© 2012 South-Western, a part of Cengage Learning
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Consumer Problems with Business
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High prices of products
Poor quality of products
Failure to live up to advertising claims
Hidden fees
Poor quality of after-sales service
Product breakage
Misleading packaging or labeling
Feeling that consumer complaints are a waste of
time
Inadequate guarantees and warranties
Failure of company complaint handling
Dangerous products
Absence of reliable product / service information
Not knowing what to do if something is wrong with
product
© 2012 South-Western, a part of Cengage Learning
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Advertising Issues
Arguments for
Advertising
Informs consumers
Increases consumer
satisfaction
Arguments Against
Advertising
It is wasteful and
inefficient– and
decreases our standard of
living
Raises the price of
products and is an
unnecessary business
cost
Inefficient means of
distributing information
Ineffective
Promotes efficiency in
the supply chain
Effective at reaching
consumers
An economical means of High cost
reaching consumers
© 2012 South-Western, a part of Cengage Learning
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Advertising Benefits
• The lifeblood of the free-enterprise system
• Stimulates competition
• Provides information for comparison
buying
• Provides competitive information to
competition
• Sales response provides a mechanism for
immediate feedback
• Provides social and economic benefits
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Advertising Abuses
Ambiguity
Exaggerated Claims
Concealment
of Facts
Psychological
Appeals
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Weasel Words
Weasel Words
• Are inherently vague so companies can
claim they were not misleading consumers.
 Help
 Like
 Virtually
 Up to
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Concealed Facts
Concealed Facts
• The practice of not telling the whole truth
or deliberately not communicating
information the consumer ought to have
access to in making an informed choice.
 Hidden Fees
 Product placement (“stealth advertising”)
 Plot placement
© 2012 South-Western, a part of Cengage Learning
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Exaggerated Product Claims
Exaggerated Claims
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Cannot be substantiated by any kind of
evidence.
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Induce people to buy things that do them no good.
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Result in loss of advertising efficiency as
companies match puffery with puffery.
3.
Drive out good advertising.
4.
Result in consumer loss of faith in product claims.
Puffery
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A euphemism for hyperbole or exaggeration
that usually refers to the use of general
superlatives.
© 2012 South-Western, a part of Cengage Learning
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Psychological Appeals
Psychological Appeals
• Designed to persuade on the basis of
human emotions and emotional needs
rather than reason.
• The products can seldom deliver what the
ads promise.
 Marketers appeal to all our senses, even
sound, when making psychological
appeals.
© 2012 South-Western, a part of Cengage Learning
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Controversial Advertising Issues
 Comparative advertising
 Use of sex in advertising
 Advertising to children
 Marketing to the poor
 Advertising of alcoholic beverages
 Cigarette advertising
 Health and environmental claims
 Ad creep
© 2012 South-Western, a part of Cengage Learning
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Warranties
• Initially used by manufacturers to limit the
length of time they were responsible for
products.
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Came to be viewed by consumers as
mechanisms to protect the buyer against faulty
or defective products.
Express Warranty
• Promise or affirmation of fact that the seller
makes at the time of the sale.
Implied Warranty
• Unwritten promise that there is nothing
wrong with the product and its intended use.
© 2012 South-Western, a part of Cengage Learning
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Warranties (continued)
Full Warranty
• Covers the entire product.
Limited Warranty
• Certain parts or types of defects are not
covered under the warranty.
Extended Warranty
• Service plans that lengthen the warranty
period and are offered at an additional cost.
© 2012 South-Western, a part of Cengage Learning
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Other Product Information
Legislation
Equal Credit Opportunity Act
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Prohibits discrimination in extending
consumer credit.
Truth-in-Lending Act
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Requires all suppliers of consumer credit to
fully disclose all credit terms.
Fair Credit Reporting Act
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Ensures that consumer-reporting agencies
provide information in a manner that is fair
and equitable.
Fair Debt Collection Practices Act
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Regulates the practices of third-party debtcollection agencies.
© 2012 South-Western, a part of Cengage Learning
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The Role of the FTC
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Seeks to ensure that the nation’s markets
function competitively and are free of undue
restrictions.
Works to enhance the smooth operation of the
marketplace by eliminating unfair or deceptive
acts or practices.
Efforts are directed toward stopping actions
that threaten consumers’ opportunities to
exercise informed choice.
Undertakes economic analysis to support its
law enforcement efforts and to contribute to
the policy deliberations of government.
© 2012 South-Western, a part of Cengage Learning
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