CHAPTER 20
MARKETING REGULATION
AND CONSUMER BEHAVIOR
LEARNING OBJECTIVES
LO1: Explain the two major concerns in marketing to children that CARU deals with
LO4: Explain marketing communication issues related to adults including deceptive advertising
LO5: Discuss regulation concerns when marketing to adults as they relate to product and price
SUMMARY
LO1: Explain the two major concerns in marketing to children that CARU deals with
Marketing to children is a major concern to regulators and consumer groups. One major reason for this
concern is evidence based on Piaget’s theory of cognitive development that children are not able to
fully comprehend commercial messages. Comprehension here has two dimensions. The first is that
LO2: Describe the various marketing activities aimed at children that are controversial
There are a number of marketing activities aimed at children other than television advertising that
cause concerns. Marketing to children through mobile devices is an emerging concern. Corporate
LO3: Discuss new guidelines by the FTC regarding online privacy protection for adults
With adult privacy issues, the FTC has been hesitant to craft specific legislation. However, in response
to the rapidly changing online environment, and in particular in response to the increased use of
“covert” behavioral tracking and targeting of consumers online, the FTC has put forth a framework
LO4: Explain marketing communication issues related to adults including deceptive advertising
children. In addition, regulators and businesses alike are concerned that adults receive accurate and
adequate information about products. Accuracy of information relates to deceptive advertising and it is
LO5: Discuss regulation concerns when marketing to adults as they relate to product and price
The focus of consumer concern and regulation of products is twofold: Are they safe? and Are they
LECTURE TIPS AND AIDS
1) This is a fun chapter. On the issue of regulation, you will probably have students with vastly
differing views and philosophies from each other and from yours. Obviously, you must be careful
2) It is important that your students realize that they are unique. While this varies by campus,
business students are generally much less inclined to see a need for government regulation of
business than are other students. It can be fun to bring in an articulate student radical (in the sense
of being anti-business) and let him or her address the class.
3) Invite a consumer lawyer from the state attorney general’s office to speak to your class. She or he
5) The nutritional labeling requirements are supposed to help consumers make sound diet choices.
Label changes address serving sizes, added sugars, and fats. Note how the percentage of fat is
presented. It is in terms of the percent of an “average” person’s daily fat requirement that one
serving of the product will provide. However, for people who eat more or less than the average
6) Find several ads that demonstrate the notion of pragmatic implications. Many ads use “hedge”
words and phrases such as “can,” “aid,” “fight,” “fight the signs of,” and so on. One ad the author
found particularly humorous (but scary) was an ad that stated something to the effect “When you
REVIEW QUESTIONS
1) What are the major concerns in marketing to children?
The major concerns are children’s ability to comprehend the selling intent and the content of
2) What are the main issues concerning children’s ability to comprehend advertising messages?
(1) Do children understand the selling intent of commercials? (2) Can children understand specific
aspects of commercials, such as comparisons?
3) What is CARU? What does it do? What are some of its rules?
CARU is the Children’s Advertising Review Unit of the of the National Advertising Division
(NAD) of the National Council of Better Business Bureaus. It passes guidelines and issues rulings
4) What are the major concerns about the content of commercial messages targeting children?
The impact of commercial messages on children’s values and the impact of commercial messages
on children’s health and safety.
6) What are the issues concerning the impact of advertising on children’s values?
7) Why are consumer advocates worried about online marketing to kids?
Two major concerns emerge: invading children’s privacy and exploitation of children through
manipulative techniques. First, unlike other media that children confront, the Internet is less easily
subject to adult supervision. Second, the Internet is interactive. It can respond to you based on how
customized messages.
8) What are the concerns associated with mobile and social media marketing to children?
Sometimes known as the “third screen,” mobile devices, including tablets, are an increasingly
integral part of our lives, including our children’s lives; and marketers see younger children as the
next big growth market. Various types of promotional efforts are being used including ringtones,
mobile games, text-in contests, and celebrity “tweets.” The ability for marketers to infiltrate yet
9) What is meant by “commercialization of schools”? What are the various areas in which
commercialization can occur and what are the major concerns?
Schools are often motivated by money as budgets continue to be tight. The issue of
commercialization covers a broad sphere of activities. Consumers Union has the following
classification system:
• Corporate-sponsored Educational Materials and Programs – Also called sponsored
educational materials or SEMs. SEMs are teaching materials provided by corporations,
usually for free. They come in various forms including posters, activity sheets, and multi–
media teaching aids.
10) Describe the key provisions of The Rule under COPPA.
The primary goal of COPPA is to place parents in control over what information is collected from
their young children online.
Privacy Policy – Post a clear and comprehensive online privacy policy describing their
information practices for personal information collected online from children.
Parental Notice – Provide direct notice to parents and obtain verifiable parental consent, with
limited exceptions, before collecting personal information online from children.
internal use of a child’s information, but prohibiting the operator from disclosing that information to
third parties (unless disclosure is integral to the site or service, in which case, this must be made clear
to parents).
Parental Access – Provide parents access to their child’s personal information to review
and/or have the information deleted.
of a child’s personal information.
collect from children, including by taking reasonable steps to release such information only to parties
Data Retention and Deletion – Retain personal information collected online from a child for
only as long as is necessary to fulfill the purpose for which it was collected and delete the information
using reasonable measures to protect against its unauthorized access or use.
NOTE: COPPA and its interpretation under the law continue to evolve. Check www.ftc.org for
updated information on COPPA.
11) How would you go about deciding if COPPA has been effective?
Students may come up with a “pre” and “post” approach in which conformance was measured
12) What are the major concerns with marketing communications targeting adults?
Regulation of marketing activities aimed at adults focuses on privacy, marketing communications,
product features, and pricing practices. There is increasing demand for regulation to protect the
privacy of adults, particularly on the Internet.
13) What are the issues concerning the impact of advertising on adults’ values?
The concern is the same as for advertising directed at children – the long-term effect of a constant
14) What is a pragmatic implication and how does it relate to information accuracy and deception?
Pragmatic implications are one form of implication and are the implied meanings (that are
15) What are the concerns with consumer information adequacy?
The concern is that each consumer have reasonable access to all the information she or he requires
to make an informed decision. Most feel this requires the firm to bring to consumers’ attention
16) What is information overload?
17) What is corrective advertising?
Corrective advertising is advertising run by a firm to cause consumers to “unlearn” inaccurate
information they acquired as a result of the firm’s earlier advertising.
18) What are the FTC’s general guidelines for “clear and conspicuous” disclosure in an online setting?
Place the disclosure near the claim it is qualifying; make the disclosure prominent; avoid having
19) What are the major regulatory issues with respect to products?
Consumer groups have two major concerns with products – Are they safe? and Are they
environmentally sound? Increasingly, groups are also concerned with the conditions provided the
workers during the production process.
20) What are the major regulatory issues with respect to prices?
Consumer groups want prices that are fair (generally defined as competitively determined) and
accurately stated (contain no hidden charges or inaccurate reference prices).
21) What is a reference price? What is the concern with reference prices?
A reference price is a price provided by the manufacturer or retailer in addition to the actual
Discussion Questions
22) A television advertisement for General Mills’ Total cereal made the following claim: “It would
take 16 ounces of the leading natural cereal to equal the vitamins in 1 ounce of fortified Total.”
The Center for Science in the Public Interest filed a petition against General Mills claiming that
the advertisement is deceptive. It was the center’s position that the claim overstated Total’s
nutritional benefits because the cereal is not 16 times higher in other factors important to nutrition.
a. Is the claim misleading? Justify your answer.
Have students analyze if using the information in CI 20–1. The direct claim appears to be true.
There appears to be no logical implication since it does not logically follow that being better on
one aspect of nutrition necessarily means it is better on other aspects. But if the center is correct
b. How should the FTC proceed in cases such as this?
Probably conduct research to see if people actually bought Total because they thought it was 16
times more nutritional on all factors important to nutrition.
c. What are the implications of cases such as this for marketing management?
23) Turkey ham looks like ham and tastes like ham but it contains no pork; it is all turkey. A
nationwide survey of consumers showed that most believed that the meat product contained both
turkey and ham. The USDA approved this label based on a dictionary definition for the technical
a. Is the label misleading?
This will generally elicit a variety of views. Have the students justify their opinions based on
material from Chapter 9. For example, stimulus generalization would explain why many people
would feel that ham means pork. As with the example in question 22, it appears as if a pragmatic
implication was drawn in which case the label appears to be misleading. On the grounds of this
evidence, the FTC might also deem this label deceptive.
b. How should the FTC proceed in such cases?
24) How much and what type, if any, advertising should be allowed on television programs aimed at
children?
a) under 6
b) 6 to 9
25) Are the self-regulatory attempts by the food and beverage industry enough in regard to regulating
food marketing to children? What, if anything, additional would you propose? Explain.
As the chapter opener discusses, childhood obesity continues to be a major concern and given the
enormous amount of time children spend with all forms of media, many students will most likely
feel that self-regulation by the industry to combat this issue is not enough because the food
marketers will do less than parents and lawmakers might want in the name of profits.
26) Does advertising influence children’s values? What can the FTC and/or CARU do to ensure that
positive values are promoted? Be precise in your response.
27) What rules, if any, should govern mobile marketing to children? What about social media
marketing?
This is a great question for open debate. Many students have been marketed to via their mobile
28) What rules, if any, should govern online marketing to kids?
The key provisions set forth by COPPA are clearly fundamental to any online marketing aimed at
children.
29) What rules, if any, should govern advertising and promotional messages presented in the
classroom?
Students may suggest working closely with the companies to curb some of the overuse of
commercial content in materials; others will want legislation developed to mandate less use of ads
30) Does advertising influence or reflect a society’s values?
The answer is both. While most advertising reflects the values of at least a large portion of
American’s, by reflecting these values it reinforces them. Suppose most medical doctors are male
31) Do you agree that beer advertisements portraying groups of active young adults having fun while
consuming beer teach people that the way to be popular and have fun is to consume alcohol?
This will generally elicit a variety of views. Have the students justify their opinions based on
material from Chapter 7 (such as aspiration reference group, etc.).
32) Respond to the questions in Consumer Insight 20-1.
Inferences are a part of the interpretive process involved in perception. Pragmatic implications
relate to the inferences that consumers draw from materials based on a “practical” use of language
in everyday life. However, this type of inference process can lead consumers to believe things
Other forms of pragmatic implications:
Uniqueness implication – where a claim is made in such a way that it seems like the brand is the
only one to possess the feature when in reality many or all do.
33) Do you think corrective advertising works? Evaluate the three corrective messages described in
the text.
Although the effectiveness of corrective advertising has been debated, the FTC considers it a
useful tool in protecting the public.
34) “Since riding tricycles is a major cause of accidental injury to young children, the product should
be banned.” State and defend your position on this issue (the first part of the statement is true).
This is a challenging question. Children spend a lot of time on tricycles so they may not be the
35) To what extent, if at all, do you use nutrition labels to guide your purchases? Why?
Answers will vary widely. It is a good chance to discuss the importance of individual and
situational variables on consumer behavior.
36) Do you believe reference prices generally reflect prices at which substantial amounts of the
product are normally sold? Does this vary by store, season, or other circumstances?