Download Misleading Marketing

Welcome to class of
Misleading Marketing
in Emerging Markets
Dr. Satyendra Singh
University of Winnipeg
Canada
www.uwinnipeg.ca/~ssingh5
Negligent
Consumer
Behaviour
Misleading
Marketing
Negligent Consumer Behavior
• This behavior may negatively affect the longterm quality of life of individuals and society
• This behavior can occur in 2 contexts
– Product misuse
– Consumption of hazardous products
Product Misuse
• Injuries result
from misuse of a safe
product  not from product defects
• Using cell phone while driving  outlaw
• So, the most dangerous component is the
consumer  no way to recall them
Consumption of Hazardous Products
• USA, 1988-1998, alcohol related accidents ↓ by ↑
consumer awareness
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–
–
–
Informing and education
Social controls
Economic incentives
Economic disincentives
• In EM, trend is unknown  appears ↑
Misleading Marketing
• Telemarketing fraud
– Elderly are vulnerable to fraud by telemarketers
• Advertising to children
– Criticism of advertising directed at children
– Ban advertising to children under 12
• Deceptive advertising
– Verification of claims
– Particularly important in EM
Characteristics of Consumers in EM
• ↓ Literacy
• ↓ Education
– Neither compulsory nor readily available
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↓ Access to legal remedies  BBB
Unaware of legal rights
Rural communities
↓ Freedom of expression
↓ Access to media
Therefore  need for control  Economics of
Information Model  to judge veracity of claims
Economics of Information Model…
• Search claim
– Brand X margarine comes in a convenient plastic tub
– This claim can be evaluated before the purchase
– If learned, distrust advertiser in future advertisements
– Advertiser has ↑ incentive to avoid false search claims
– Thus  little concern to us
Economics of Information Model…
• Experience claim
– Brand X margarine tastes just like butter
– Can only be discovered through use of the product
– 1st time might be deceived  no same mistake twice
– Advertisers depend on repeat purchase to recover
– investments on their advertisements little concern to us
#
Economics of Information Model…
• Credence claim
– Brand X margarine contains 0 % cholesterol
– Cannot check the claim even after use of the product
– Requires chemical testing
– Average customer does not have this resource
– Customer must consult other source of information
• e.g., magazine to discover if the claim is false
– Major concern to us!
Economics of Information Model
• Take another example  Brand Y tastes best
– Extremely difficult to verify the claim
 cannot find all brands
 so you’d think consumers would not place credence on such
advertising
 But they do because, repeat sales justify credence (and cost of
advertising)
 product must be performing satisfactory
 So there must be some truth in the claim
 depends on interpretation
Interpret these advertisements...
Interpret these advertisements
Interpret these advertisements
Claim Interpretation Issue
• Literal claim
– Direct  most of us agree on its interpretation
• Implied claim  different interpretation to different people
– Brand X is the only margarine with 0% cholesterol
– Brand X is a suitable food for those concerned about heart disease
– Brand X is better than butter for those concerned about heart disease
Claim Interpretation Issue
• TV 30-second advt. addresses large audience
• Do not know who will interpret how to be misled
• n-% issue  what proportion of the audience must draw a
false inference before the advertisement may be defined as
misleading. n for USA = 15-25%, n for EM = ?
• To test claim, 2 criteria: Credibility and Verifiability
Schechter’s Approach to Evaluating Claims
• Credibility: Prominence of advertiser  ↑ if ad appeared on network TV,
magazine of ↑ circulation
• Verifiability: ↑ Could be evaluated within a month of purchase
Verifiability
HI
Misleading, if n > 50%
Misleading, if n > 25% standard
Misleading if n > 25% standard
Misleading, if n > 5%
LO
LO
Credibility
HI
Seriousness of injury for being misled: medicine vs. chocolate
Seriousness of injury for being misled