Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 12t
E. Internet Self-Regulation
• As of publication, no industry-wide trade association has emerged to set
guidelines or code of conduct.
• Global Business Dialog on Electronic Commerce (GBDe) is trying to
F. Consumers as Regulatory Agents
Students often forget that consumers wield enormous power over marketers and
1. Consumerism, the actions of individual consumers to exert power over the
marketplace activities of organizations, is by no means a recent phenomenon.
The earliest consumerism efforts can be traced to seventeenth-century
England. In the United States, there have been recurring consumer movements
in the early 1900s, 1920s, 1930s, 1960s, and 1970s.
These movements have focused on the same issue: Consumers want a greater
voice in the whole process of product development, distribution, and
information dissemination.
2. Consumer organizations. Three groups are well known:
a. The Consumer Federation of America (CFA) was founded in 1968 and
now includes over 200 national, state, and local consumer groups and
labor unions as affiliate members. The goals of the CFA are to encourage
the creation of consumer organizations, provide services to consumer
groups, and act as a clearinghouse for information exchange.
b. Consumers Union is a nonprofit consumer organization best known for its
publication of Consumer Reports. Established in 1936, Consumers Union
has as its stated purpose “to provide consumers with information and
c. Commercial Alert was founded by Ralph Nader and has a stated mission
of keeping commercial culture in proper perspective and preventing the
In addition, there are literally hundreds of such groups organized by
geographic location or product category. Consumers have proven that with an
organized effort, corporations can and will change their practices. In one of
the most publicized events in recent times, consumers applied pressure to
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VI. Regulation of Direct Marketing and E-Commerce
PPT 6-13, 6-14
As other promotional tools gain prominence, the regulation of these promotions become
more relevant. This is a regulatory environment that is emerging.
A. Privacy. The most pressing issue was discussed in the introductory section of this
chapter: database marketing and consumer privacy.
Online privacy issues focus on cookies, which marketers place on a Web server’s
hard drive to track online behavior. Some sites require that consumers enable
cookies to use the site. The fear is that cookies may be used in the future to link to
B. Spam. Spam, the unsolicited messages sent en-mass over the Internet, is a serious
problem. The 30 million spam emails being sent every minute worldwide amount
to about 50 billion messages a day. Internet providers have tried to form coalitions
to fight spam. Technological solutions (anti-spam software) is getting more
sophisticated. The U.S. Senate passed the CAN SPAM Act in November of 2003.
Be sure students recognize that not all spam is blocked by this Act—only
fraudulent, deceptive, or pornographic messages.
“Phishing” is fraudulently attempting to acquire private consumer information,
C. Contests, Sweepstakes, Coupons. Contest and sweepstakes are widespread.
Direct-mail sweepstakes are required to state that a purchase is not necessary to
win. These activities give marketers the opportunity to construct databases of
customers. If customers request that their names be removed, this must be done
promptly.
D. Telemarketing. Telemarketing is another area with regulation concerns.
Telemarketers are required to state their names, the purpose of the call and the
company they work for. Telemarketers are only allowed to make calls between 8
A.M. and 9 P.M., and they cannot call the same customer more than once every
three months. In addition, they cannot use automatic dialing machines with a
E. Regulation of Sales Promotion
1. Premium Offers. Premiums are items offered for free or at a greatly reduced
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 15t
and manufacturers to gain positive mentions, reviews, and commentary on these
seemingly grassroots sites. What ethical issues are raised if a blogger is paid to comment
on a product? Does it matter if the blogger discloses any such financial agreements?
Audiences for brand promotion are increasingly skeptical of the information they
3. You have probably been exposed to hundreds of thousands of advertisements in your
lifetime. In what ways does exposure to advertising make you a better or worse
consumer?
This question should lead to a spirited discussion about the information available
that by simply helping consumers know what options are available in a product
category, even when more information would be called for before purchase,
4. Use Maslow’s hierarchy of needs to address critics’ concerns that too much brand
promotion is directed at creating demand for products that are irrelevant to people’s true
needs.
What an individual truly needs (versus wants) is a tough thing to pin down. If Maslow
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 16t
are the more basic needs for others.
5. One type of brand promotion that attracts the attention of regulators, critics, and
consumer advocates is messages directed to children. Why is it the focus of so much
attention?
Critics and regulators of brand promotion focus much of their attention on protecting
groups in the population that may be vulnerable to the effects of promotion.
6. What are the pros and cons of database marketing, and what can consumers do to
protect themselves and their privacy from unwanted or intrusive brand promotion
campaigns?
According to marketers, database marketing creates value for consumers. The more
7. What are comparison advertisements, and why does this form of advertising need a
special set of guidelines to prevent unfair competition?
Comparison advertising involves some claim of superiority versus a competitor’s
8. Explain why a marketer might be tempted to misuse cooperative-advertising
allowances to favor some kinds of retailers over others. What piece of legislation
empowered the FTC to stop these bogus allowances?
Marketers might be motivated to provide bogus allowances to some retailers as an
incentive to get these retailers’ business. In the early days of chain department stores,
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1936 prohibits this practice.
9. Various methods of industry self-regulation are discussed in the chapter. Do you think
self-regulation can be effective, or is government regulation the only really effective way
to control promotional efforts?
Effective controls over advertising often reflect both government intervention and
10. Spam is considered the scourge of not just the Internet but integrated marketing
communication as well. In this chapter, you have read about attempts to limit spam. What
would you suggest as ways spam can be limited—or eliminated?
SOLUTIONS TO EXPERIENTIAL EXERCISES
1. The Federal Trade Commission’s National Do Not Call Registry is one of the most
popular and successful consumer initiatives undertaken by the federal government,
attracting millions of registrants and permitting consumers to block most telemarketers
from calling their personal telephone numbers. Violators face steep fines. While the
registry’s popularity is without question, commerce groups have taken the FTC to court,
claiming that the registry violates the right to free speech—in this case, commercial
speech. Write a report on the current progress of the National Do Not Call Registry
(http://www.donotcall.gov), and discuss the latest court judgments concerning its
constitutionality. Provide your opinion on whether the registry violates the constitutional
right to free speech, and defend your position. Finally, discuss the effect the registry is
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 18t
having on the direct-marketing industry.
The National Do-Not-Call Registry has angered marketing industry groups that argue
2. Cut out an ad from a magazine. Choose three pros or cons in the social aspects of
advertising. Explain how the ad you chose educates (or misleads) consumers, affects the
standard of living, affects happiness, influences mass media, and is demeaning or artful.
It should be fairly easy to find examples of ads that have a message, whether subtle or
3. List two product categories—other than cigarettes—that you think require some kind
of advertising regulation, and explain why. Do you think these products require
government regulation, industry self-regulation, or consumer regulation? Explain. Based
on your answer, list regulatory agents that might get involved in controlling the
advertising process for these products. Finally, search online for one or more agency or
watchdog sites that are relevant to the regulatory process. How does the site encourage
consumers to get involved, and what resources does the site offer to enable participation
in the process?
4. As discussed in this chapter, one recurring criticism of advertising is that it often is
offensive or in poor taste. In 2007, the makers of Trojan condoms faced backlash over an
advertising campaign that portrayed pigs sitting next to attractive women in bars with the
tagline, “Evolve. Use a Condom Every Time.” Television stations in some cities refused
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 19t
to air the commercials, and the CBS and Fox networks rejected the ads for national
programming.
a. Given this description of the ads, do you agree or disagree with the decision by the
two networks and some local television stations not to air the commercials? Why or why
not?
b. In what ways might such an ad campaign be effective? In what ways might it be
offensive?
c. If you had been part of the creative team working for Trojan on the campaign, would
you have wanted to revise the ad to make it more acceptable to the networks and
individual affiliates? If so, how? What arguments could you make that the ad should not
be changed to appease critics? How could the controversy surrounding the campaign
help or hurt the brand?
5. Working in small teams, imagine that you have been hired by a large pizza chain to
develop an integrated marketing communication campaign for a new product, the KidZa
Meal, which will consist of a four-inch-diameter pizza, a small drink, and a doll that
looks like a traditional Italian pizza chef. The chain is hoping sales of KidZa Meals will
drive more families to its dine-in restaurants and increase takeout orders. But the chain
is concerned about perceptions that it is targeting children in its advertising or
contributing to concerns about childhood obesity rates. What type of campaign would
you suggest for this client? As you evaluate the components of the promotional mix, what
recommendations would you make regarding the product?
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 20t
POWERPOINT PRESENTATIONS
Use the Instructor PowerPoint files to pace your instruction and provide class notes on
key ideas and themes. Each presentation provides a slide-by-slide coordination with the
chapter’s learning outcomes, definitions, and visuals. Encourage students to use the
accompanying Student PowerPoint presentation to align and reinforce classroom
instruction with studying outside of the classroom.
VIDEOS
To view the two videos for this chapter, go to the PROMO book companion website,
www.cengage.com/login.
(*) Indicates the correct answer in the multiple-choice video questions.
Nike: Tiger and Earl
1. Following revelation of offensive behavior by golfer Tiger Woods, Nike widely
disseminated the “Tiger and Earl” spot. Based on your readings in Chapter 6, this video
would bring up which of the following ethical questions?
2. Many reports revealed that pro golfer Tiger Woods behaved very badly and was
involved in extramarital affairs and scandals. Many believed that his actual behavior was
at odds with his carefully crafted image, especially as a spokesperson for Nike. After
viewing the “Tiger and Earl” video, would you say the message of the video was
deceptive? Why or why not? What was Earl’s role?
3. The primary message in the “Tiger and Earl” video was:
Chapter 6: The Regulatory and Ethical Environment of Promotions ❖ 22t
5. The Bud Light “Dog Training” video is typical of many beer commercials in that: