“Marketers Be Aware”

of Deceptive Advertising, Abusive Trade Practice, Consumer Response and the “Sleeping Dragon” Consumer Affairs Authority.

By Maxwell Ranasinghe1

Marketing mix is one of the controllable variables that a business uses to achieve desired level of sales in the target market. Traditionally, it is identified as the 4 Ps, namely: Product, Price, Promotion and the Place. Out of the 4 Ps, Promotion denotes the communication mix of the marketer. The knowledge of consumer behavior is very important when marketers plan their communication mix. When communication mix is singled out and taken separately for analysis, the major elements of it could be identified as advertising, personal selling, sales promotions, direct marketing and publicity. Out of these four elements advertising is the major player and it dominates in proportion and magnitude against all other elements. Therefore, when one thinks of marketing communication, one usually tends to think of advertisement. The advertising could be defined as “Paid, non paid personal communication through various media by organization that are in some way identified in the advertising message and who hope to inform and /or persuade members of a particular target market” ( Churchil and Peter 1995)2.

This article attempts to highlight the importance of studying the consumer response to promotion in the face of consumerism, wide ranging powers of the Consumer Affairs Authority and also of the ethical responsibility we all marketers have towards our customers. Even in USA, where consumer rights, namely right to safety, the right to be informed, right to choose and the right to be heard is enshrined in a Bill declared as far back as 1962 by then US President John F. Kennedy, still there are ample evidence to prove in the form of complaints and law suits that the consumer rights are consistently violated. If a study is done one could provide such examples from many other developed and developing countries. As a result, all over the world, there had been a rising interest in the consumerism.

There are two meanings for this word consumerism. In day to day language the common man uses this word to describe social and economic order that encourage the purchase of goods and services in ever greater amounts. For this article, we take the other meaning denoting the consumers’ movement that pushes for greater legal protection for consumers. As such, we prefer the definition given by Engel et al ( 1995) as to consumerism “ Policies and activities designed to protect consumer rights as they are involved in an exchange relationship with any type of organization”. As a result of the consumerism many countries have brought in such policies and measures into operation by way of laws and regulations.

1 Maxwell Ranasinghe is a, B.Sc.in Business Admin, CPM( New Haven), MSLIM, Practicing Marketer, Attorney at Law. Managing Director of M.M.Organisation, Senior Lecturer at SLIM and visiting lecturer at Universities of Sri Jayewardenepura and Kelaniya2 Churchil A.G. Peter Paul J ( 1995) “Marketing- Creating Value for Customers”, The Austen press, Homewood IL p.16

In Sri Lanka, we have long history of consumer protection which goes back to the Sale of Goods Ordinance 1896 (specially the implied conditions), Food Act, then the Price Control Act, Unfair trading Commission etc and now with the very powerful Consumer Affairs Authority Act No 9 of 2003. 3 (hereinafter called as CAA) The legal provisions in CAA are more than enough to take action against deception and misrepresentation by marketers. However, the powers of CAA have not been invoked by many consumers despite various attempts made to educate the consumer by the CAA. On the marketer’s point of view, non assertive civil society in Sri Lanka has been a benefit for them to flout the law without any restriction.

Let’s make brief survey of deceptive advertising and promotions happening in Sri Lanka.

Infomercials

Infomercial is a program length commercial. It is not a traditional 5 to 60 second range advertisement but goes on to 15, 30, 45 and some time to 60 minutes advertisements, usually these commercials are shown at non prime time of the television and are not shown in highly rated channels. With the growing competition in the television channels and not much of advertising for certain lower end channels, empty time slots are purchased at lower rates to run program length advertisements. Sometimes a 30 minute time slot is offered below the cost of a 30 second prime time slot in a highly rated channel.

These infomercials are part of a broader advertising format called Direct Response Television ( DRTV). The format includes any commercial that features a plea for a customer to call on the spot and order the product advertised. Are infomercials fundamentally fraudulent, manipulating customers into buying shoddy merchandise they neither really want not in need as critics contend, or are they simple ads like any others providing consumers with more information to facilitate their buying decisions ? Studies done in the western world especially in the USA has so much to prove that infomercials contain many false claims. There are many products promoted through this format such as exercise equipments, weight loss drugs, household and kitchen equipments, skin care products, hair growing products etc. They use celebrities, professionals and many credentials of so called happy users of the products. They are sometimes shown to an audience purporting to be customers and such audience ask all the frequently asked questions by customers and all are answered to the benefit of the product. . This enables marketers to make practically anything look appealing. However, according to a study done in the USA for Center for Commercialism 4 they have found that the audiences who appear to be regular looking customers were paid actors of the infomercial producers. Many who have purchased products from infomercials are not satisfied with the products and promised out come. If a study could be done in Sri Lanka on a sample of customers who purchased such products, it is very likely that a high percentage of the respondents will say that they did not receive the benefits described in the infomercial on the product they purchased. Consumers have a legal remedy and they can complaint it to CAA. On the other hand CAA on its own can commence an inquiry. Further there is a very big social

3 See for the list of list of Acts that relate to consumer protection in SL http://www.slideshare.net/maxwellranasinghe/introduction-to-law-relating-to-consumer-protection4 http://articles.latimes.com/keyword/center-for-the-study-of-commercialism

responsibility on the television channels to find out the truthfulness of the products that are advertised through infomercials through their channels before they accept to telecast such infomercials.

Telemarketing

Telemarketing can be defined as any plan, program or campaign which is conducted by using the telephone to induce consumers in buying a product or service. With the recent development of the telephone density ( 100.8 phones to 100 persons)5any strata of the population could be reached through telephones. This has become low cost methodology of talking to customers directly as the telephone charges have come down drastically. Numerous deceptive or abusive trade practices have taken place in the country by using this mode. Selling of unwanted books, pyramid schemes, bogus insurance packages, scholarships, educational programs, seminars on money making through internet, offering high interest bearing deposits schemes etc are some of them.

Telemarketers do not identify themselves, they talk only about the benefits or the cheap prices but do not reveal the rest of the deal, and they not only call people at the working hours but also in nights and early mornings. They do not even care if you are busy or driving. They give many promises over the phone and no document given to that affect. These telemarketers move from one business to another and difficult track them even if they have sold a shoddy product or service by deceiving a customer.

Puffery

The theory of puffery is that it is so exaggerated and no one would believe it to be true. If a statement or a message falls under puffery there could be an excuse for the marketer. However, it is not so in most of the advertisements. They are used with terms that may not connote with unbelievable exaggerations (puffery) but descriptive dramatization, where a person could easily be induced to buy the product or service. Certain products claim that 100 hairs fall a day and once their product is used only 4 hairs will fall a day as if they have done a comprehensive clinical study taking all the age levels of people with different hair types with their product. Further many marketers who sell skin whitening products claim that after using their product for several weeks skin gets fair and it is shown in step by step process in the television. Only dermatologists know how such a magic could happen generally to all the consumers in a society given their various skin types and melanin levels. Are these puffery or deception? Although factual issues of truth and falsity can be difficult to determine, marketer will be required in future to provide scientific evidence to substantiate their claims if anybody take current marketers to court.( Refer to Sec 30 of CAA Act which is discussed later in this article) There is lot work done in this sphere in other countries with the consumer rights groups becoming more powerful and assertive. All what marketer should bear in mind in marketing is what does my message communicate to customer? And any of those messages materially false or misleading?

5 As per data published by Central Bank of Sri Lanka

Herbal and 100% safe Claims

With the herbal product boom there are many so called herbal products advertised to the consumers. Among them herbal medications, skin care products, tooth pastes are very much in the vogue. Most of them are advertised with the tag 100% herbal. Further it also said that herbal products are 100% safe or much safer than non herbal products. Further they go to the extent that the product is a herbal product and it does not have any side effects. It is a real misnomer. If that is the case, even Ganja (Cannabis Sativa) would not have any side effects as it is a totally a herbal product. Any mixture of herbal or non herbal is finally a chemical compound. If the civil society in Sri Lanka become more assertive and watchdog groups and authorities rise and say prove before you advertise about the claims you make then marketers will have to be more careful in their claims.

Green claims

As the world environment is threatened by actions of man general public would prefer a product that is produced with less harm to the environment. So a product that claims “ Green” would have a better image and demand. What matters is how “Green” those products are? Is it just simple package change or an innovative process change? Nobody knows. There is a criterion before the green label is allowed in Sri Lanka. Do these marketers adhere to such procedures before they claim their product to be green? If not it will lead to deception or misleading of consumers. This is a moot point for a broader view.

Conditions Apply

There are many very attractive offers, gifts, lotteries and discounts offered by marketers in their advertisements but with an asterisk in the suffix to the big offer, it is written in the corner of the message in small print that “Conditions Apply” and no such conditions are explained in the body or anywhere in the advertisement. The consumer will come to know about the conditions, only when he visits the marketer’s place of business to buy the product and most of such conditions mellow down the big deals and discounts offered in the advertisements. Consumers get put out and disappointed when such conditions are applied at the time of purchase and they really develop a negative attitude about the marketer. Further at times unwanted arguments and dialogues take place in such times and even the employees of such marketers feel embarrassed to handle such situations.

Consumer rejection of marketers’ communication

As a result of deceptive advertising and puffery, consumers are losing the interest on believing in advertising. There are many studies to this effect especially in the international arena, but even in Sri Lanka there could be studies as many students in marketing and management in the universities and the SLIM Diploma level take up this type of studies for their assignments. The attempt to find local studies on the subject could not be located as they were not published in reputable journals, but the point can be highlighted by citing findings in few of the international journals as facts are similar in the globalised

market place. A lot of studies on this area were done in the USA in the early nineties where they had a lot of research interest in this area. Kurgan et al (1995)6had found that disbelief in advertising, the multi channel environment, having the remote controller in hand, having advertising free channels have dramatically reduced the eyes on screen for commercials. Abernethy ( 1991)7 observed that 32% viewers did not have their eyes on the screen when advertisements are telecasted. But Kurgan et al ( 1995) reports it has gone up to 68% within a short period of time. Especially in Sri Lanka, multi channel viewing has surely reduced attention to commercials. A study done by the author in the year 2012 ( yet to be published) with a sample of 192 students who has just passed G.C.E Advanced Level found that 85% of them switch the channel that they watch when the commercial break appears in teledrama belt, the prime time television where the advertisers pay the highest rates . Therefore just going on the rating or the cost per thousand may not really give an indication of the exposure of the advertisements to the consumer. Further the viewing often takes place among many other activities such as telephone calls, hobbies, general family conversations, eating and drinking etc. They further reduce the impact an advertisement could generate for 15 seconds to 30 seconds advertisement. There is something called cognitive deviation ( the viewer is mentally not with the message) even though the viewer is exposed to the advertisement as his mind is now trained to focus on other matters as and when television ads are shown unless the advertisement is very effective. Therefore, even the small percentage that watches the commercials may not decode the advertisement in the manner the marketer wants.

In light of the above situation, challenge posed to the marketer is to find out ways and means of making an effective advertisement to make the audience watch it with interest. Whatever exposure an advertisement gets, if the consumer does not care about it and does not make positive influence to the consumers buying behavior it would be a futile effort. A very good study done by Ducoffe ( 1995) 8 on” how consumers assess the value of advertisements “ has found that consumers assess an advertisement on four basic elements. That is informativeness, deception, entertainment and irritation. While entertainment and informativeness have positive effects deceptiveness and irritation have negative effects on the valuation given by the consumers. If one observes the advertisements in Sri Lanka, one could surely see majority of the advertisements have positive as well as negative elements. Therefore the consumer acceptance of what advertisement say has become low. If this is the case the marketers should strive hard to reduce the negative elements such as deception and irritation. Deception even could also create irritation among consumers. However, Irritation happens mainly when the advertisement is insulting consumer’s intelligence and there is too much of advertising. As our subject matter here is deception, we do not intend going into a deeper discussion on irritation.

Marketers be aware of the future trend

6 Kurgan et al ( 1995) “Visual Attention to Programming and Commercials- The use of in home observations” Journal of Advertising 24 (1), 1-11 7 Abernerty ( 1991) “ Television Exposure: Programs Vs. Advertising” Current Issues & Research in Advertising 13: 1-2 8 Ducoffe( 1995) “ How Consumers Asses the Value of Advertising” Journal of Current Issues and Research in Advertising 17: 1-16

We learn in Commercial Law in relation to Sale of Goods a maxim called “Caveat Emptor” which translates in to English as “Buyer be aware”, now we may have to introduce another maxim called “Marketer be aware”. There would be numerous ways of consumer action towards deceptive advertising and abusive trade practices. The dragon that they can seek support is CAA. It is having all the powers to intervene and inquire and punish as indicated earlier in this article. It is important to cite here the sec 30 of the CAA Act which states “ No trader shall in the course of trade or business engage in any type or conduct that is misleading or deceptive or is likely to mislead or deceive the consumer or any other trader.

Please note the final part of the section, it is not only misleading and deceptive but even it is “likely to mislead or deceive “is a sentence that could be very widely interpreted. In other words, it makes simple to prove misleading and deceiving. Consumers are now educated and CAA is trying their level best with their limited resources to educate public on the rights they have and with that effort it is very likely that there would be many cases of deceptive and abusive trade practices cases in future. Dr. Wickrema Weerasooriya an eminent scholar of law in his latest book on Commercial Law highlights the power of CAA and the specific power of the sec 30 and says that there are similar sections in Consumer protection statutes in other parts of the world and that is the section that consumers and lawyers have resorted to and use to attack and obtain relief against every type of business entity whether they be normal traders selling consumer items like food, clothing, household equipment etc. or financial and other services like banks, finance companies and insurance companies. ( Weerasooriya 2010)9. Sec 31 provides detailed provisions as to false misrepresentation, which will have effect on many marketers.

Marketers have to uphold the Societal Marketing Concept.

A nicely drafted vision and mission statements will not bear any truth if marketers do not stick to what they preach. Corporate social responsibility has to be created to circumvent the problem of these deceptive advertising and abusive trade practices. No enterprise can survive if customers do not believe in their products and services. The academics as well as businessmen have identified this well and have agreed in many forums to regulate this other than by law.

Conclusion

In conclusion, if the marketing community as a whole does not take action to stop these deceptive and abusive trade practices, marketers themselves will lose a lot in the market place. The consumers will not believe in advertising, promotions, offers, warranties and many other methods used by the marketers to convince the consumer to buy their products. Consumers will get confused to select which marketer is saying the truth. As a good marketer, who sticks to ethics also will face problems in marketing their products as a result of loosing consumer faith in general. Marketing should not be used to deceive the consumer. The essence of marketing is satisfying the needs of the consumer. The whole economic activity of a capitalistic economy is driven by market forces. If marketers employ deceptive practices the consumer behavior will change. Wrongful signals will be given from the consumers. It will distort the

9 Weerasooriya Wickrema ( 2010) A Textbook of Commercial Law, The Post Graduate Institute of Management, Colombo, Sri Lanka, p. 692

situation. If the marketers do not self regulate, then CAA and rest of the Departments that have legal power to intervene will step into and will make the free market behavior further distorted and the remedies will be time consuming, expensive and cumbersome.