Consumerism: Search for the Consumer Interest

Consumerism: Search for the Consumer Interest

by David A. Aaker, George Sutherland Day
     
 

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The new edition of this highly acclaimed anthology continues to provide the most comprehensive, rigorously balanced survey available of modern consumerism. Written by a wide range of experts, the 42 articles — half of them new to this edition — cover today's most important consumer and public policy issues: advertising and the disclosure of consumer

Overview

The new edition of this highly acclaimed anthology continues to provide the most comprehensive, rigorously balanced survey available of modern consumerism. Written by a wide range of experts, the 42 articles — half of them new to this edition — cover today's most important consumer and public policy issues: advertising and the disclosure of consumer information, selling practices, anti-trust issues and competition, product safety, liability, and consumer satisfaction. As in previous editions, the articles are arranged according to the steps in the purchase process.

New to this edition are detailed discussions of such current issues as the costs and benefits of government regulation, advertising to children, consumer information systems, and demarketing (encouraging consumers to use less of such products as tobacco and energy). The final section assesses the response of business and industry to consumer pressures.

Product Details

ISBN-13:
9780029000403
Publisher:
Free Press
Publication date:
01/01/1978
Pages:
504

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Chapter 1

A GUIDE TO CONSUMERISM

David A. Aaker & George S. Day

The term "consumerism" identifies the contemporary consumer movement, launched in the mid-1960s by the concerns triggered indirectly by Rachel Carson and directly by Ralph Nader's auto safety investigation, and by President Kennedy's efforts to establish the four rights of consumers: the right to safety, to be informed, to choose, and to be heard. Consumerism encompasses the evolving activities of government, business, independent organizations, and concerned consumers to protect and enhance the rights of consumers.

From the mid-sixties to the late seventies, the scope of consumerism steadily expanded. This trend was most evident in the rapid growth in expenditures for federal regulatory activities (see Table 1), fueled by the emergence of new issues and the persistence of many long-standing consumer problems. Further impetus for expansion came from the recognition that consumerism was concerned with protecting consumers whenever there is an exchange relationship with an organization, whether a business firm, a government agency, or a hospital. Finally, environmental concerns and consumerism became increasingly interwoven and frequently converged on common issues.

By the end of the 1970s, however, consumerist activity appeared to have peaked out and the consumer movement seemed "everywhere in retreat." As evidence, Reich cited a series of reversals that began in 1976:

Congress has rejected the Food and Drug Administration's proposed ban on saccharin, and several courts and state legislatures have attempted to block the FDA's attack on Laetrile. The Consumer ProductSafety Commission's recent ruling that swimming pool slides must carry danger warnings has elicited widespread ridicule, brought a reversal in the federal courts, and contributed to rumors that the Commission itself will be abolished. Congress has rescinded the Department of Transportation's safety-belt/ignition interlock rule, removed its authority to require helmets for motorcyclists, and expressed distaste for its "air bag" regulation. Congress has also rejected the proposed consumer-protection agency. And the Federal Trade Commission's proposal to control television advertising of sugared cereals for children has prompted the Washington Post to accuse the agency of becoming the national nanny.

These events coincided with a period of questioning Ralph Nader's effectiveness and power. For example, there was a largely negative reaction to his formation of a group to protect the interests of sports fans — an effort interpreted as evidence that Nader could no longer count on unquestioning public support. This was followed by several widely publicized confrontations between Nader and onetime supporters who had been given senior positions in the Carter administration. Finally, the 1980 election of Ronald Reagan was viewed by many as conclusive evidence that the consumer movement had lost most of its clout. Not only did Reagan owe little to the traditional constituencies of consumer regulation — unions, environmental interests, and consumer groups — but also he was committed to decreased government intervention.

On the basis of a regulatory or legislative scorecard, the strength of the consumer movement has indeed waned. This would, however, be a premature judgment in light of the considerable momentum of consumerism. For instance, consumer protection is solidly entrenched in the legal system, including provision for private parties to sue to redress violations of regulations, but most of the dissatisfactions that ultimately fuel consumerism have not abated. Indeed, to understand why the contemporary consumer movement has endured longer than similar movements in the 1910s and 1930s, it is necessary to go beyond the issues of the moment and expose the underlying problems and forces. Accordingly, this introduction seeks to clarify the present scope of consumerism — the causal factors and the mechanisms for focusing consumer discontent — and then to use this analysis to suggest what the future likely holds.

THE SCOPE OF CONSUMERISM

At the core of consumerism remain the four rights set forth by President Kennedy. Clearly, the meaning of each of these rights has been broadened considerably to embrace many new concerns. Further, there is a growing recognition that the scope of consumerism now includes the right to redress and the right to an environment that will enhance the quality of life.

The right to safety implies protection against the marketing of goods that are hazardous to health or life. Such a right has motivated numerous laws to protect consumers when they cannot be expected to have sufficient knowledge to protect themselves. Thus, laws pertaining to foods, textiles, drugs, cosmetics, and tires demand that the products not endanger health or safety and that if the potential exists for dangerous misuse a clear warning be provided (e. g., on poisonous cleaning liquids). There is little controversy about such a principle; the only question is whether a specific problem will merit legislation and whether the benefits outweigh the costs.

The right to safety has been broadened to include the protection of people from themselves, a policy with which there is more disagreement. It is argued that people should not always be permitted to make decisions that are not in their best long-run interests even when such decisions are deliberate and informed. Thus, people are not permitted to select an automobile without seat belts and other mandatory safety features. The concern is with consumers' long-run interests, not their immediate desires. At one time the paternalism inherent in this argument was generally accepted as legitimate. This acceptance has turned to skepticism as experience reveals the difficulties of limiting government intervention that is paternalistic. So far, however, there has not been serious questioning of intervention when consumer products may have significant adverse effects on third parties.

The right to be informed is a fundamental economic interest of the consumer. There is wide agreement that this right implies at a minimum that the consumer should not be deceived. Just what constitutes deception is more controversial and fluid. For example, the FTC has taken the position that an advertising claim should be unique to the advertised product. Thus, Wonder Bread's claim to build "bodies 12 ways" was considered deceptive by the FTC not because the message was false but because other brands could make the same claim and people exposed to the Wonder Bread advertisement could get the impression that the claim was unique. Along the same lines, slogans like "best buy" and "most significant breakthrough," which in the past were regarded as innocent exaggerations, permissible puffery, are now being challenged.

The right to be informed goes well beyond protection against deception to giving the consumer sufficient information to make wise purchase decisions. To this end there has been a great deal of legislation designed to provide useful comparative information — such as the true rate of interest (truth in lending), the cost of food products on a per unit basis (unit pricing), product ingredients, and nutritional quality. Nonetheless, commercial sources, principally advertisements and point-of-sale information, still provide much of the product information upon which the consumer relies. To what extent are companies responsible for insuring that such sources are informative rather than merely persuasive (effective by conventional standards)? Should firms be required or motivated to tell the consumer about what their products will not do — to reveal product disadvantages as well as advantages even when safety is not at issue?

There is growing interest in protecting the consumer's right to know through means other than legislation to correct specific information problems. Particular attention is being directed to education and independent information systems, encompassing comparative testing and informative labeling, to give consumers a broad capability to make effective decisions and police the market.

Concern over the right to choose dates back to the end of the last century, when the Sherman Anti-Trust Act was passed to break the monopoly power of the giant firms of the day. Initially, the focus was on protecting competitors from each other, particularly the small firm from the large one. However, antitrust legislation and enforcement have gradually evolved toward an emphasis upon protecting and encouraging competition. Thus, the major effort is directed at increasing the number of competitors and insuring that competitors do not have understandings that are detrimental to the long-run interests of consumers.

Increasing attention is being paid to the economic role of advertising, especially its potential for raising prices, profits, and barriers to entry, which can reduce the range of choice. In a period of significant inflation, it is not surprising that advertising costs have come under scrutiny for their role in contributing to high prices, particularly in the supermarket. However, it now appears that the most significant threat to the consumer's right to choose is price fixing. Although the U.S. Justice Department has always been concerned with deliberate conspiracy to fix prices, its efforts have not been equal to the surprising prevalence of this behavior during a period of inflation. So far the definition of price fixing has stopped short of including administered pricing, although shared monopolies — a few large companies acting in parallel to block outside competition — have been attacked.

There has recently been a significant move away from the view that the structure of an industry is indicative of anticompetitive behavior and in particular that higher prices characterize the more concentrated industries. Some economists have argued that antitrust policies have been doing more harm to consumers than good, as when strong companies in declining industries protect ailing, inefficient competitors for fear that antitrust enforcers would try to dismantle the efficient companies if they became too big.

President Kennedy indicated that the right to be heard involves an assurance that consumer interest will be considered in the formulation of government policy and in regulatory proceedings. The difficulty is that the consumer movement is relatively amorphous and lacks the authoritative spokesmen that labor, business, medicine, education, and other interest groups have. To give the consumer a voice within government, Lyndon Johnson created the Office of Special Assistant to the President for Consumer Affairs in 1964. Many states and cities subsequently established similar offices, as did a number of federal agencies during the Nixon and Ford administrations. This did not satisfy consumer advocates, who campaigned vigorously for an independent agency for consumer advocacy, whose main purpose would be to act as watchdog over regulatory bodies. Business lobbies successfully opposed the agency, arguing that it would only increase the harassment of businessmen and disrupt the work of other government units.

It has become clear, nonetheless, that businesses have difficulty listening to their customers. Thus, many firms have created consumer affairs departments to coordinate consumer programs and to permit a new type of representation of consumer interests. Most of these departments handle customer complaints, but some take a more active role and advocate the consumer interest in the internal policymaking process. However, the political realities of large organizations tend to inhibit such efforts.

It is now generally accepted that there is a fifth right the right to recourse and redress, that is, to fair settlement of just claims. A variety of innovations, including free legal services for the poor, consumer class action suits, and arbitration procedures, have substantially enhanced this right. The Magnuson-Moss Warranty Act of 1975 was a major legislative effort to overcome consumer problems with warranties; one provision established incentives for firms to set up dispute settlement procedures. As with much complex legislation based on imperfect understanding of the problem, the ultimate benefits to the consumer are uncertain.

The list of consumer rights has been further expanded to include the right to a physical environment that will enhance the quality of life. Indeed, consumerism has been defined broadly as an organized expression for an improved quality of life. A discarded beer can or phosphates from detergents can substantially degrade the physical environment. Advertising cluttering the television screen or the highway can similarly depress the quality of life. Environmental problems differ from other consumer questions in that the decisions of the individual consumer do not create an immediate problem. As a result, individual consumers have little incentive to modify their purchasing patterns because their decisions alone will not have an observable impact.

THE ROOTS OF CONSUMERISM

To understand both the evolution of consumerism and the prospect for the future we must look at the enduring problems, which provide the underlying momentum. Of course, any given issue may represent the convergence of a number of these problems:

* disillusionment with the system

* the performance gap

* the consumer information gap

* antagonism toward advertising

* impersonal and unresponsive marketing institutions

* intrusions of privacy

* declining living standards

* special problems of the disadvantaged

* different views of the marketplace

In this section we examine each of these areas in turn, leaving for the next section the question of how they surface as consumer issues demanding action.

Disillusionment with the System

Consumerism is one manifestation of the societal concerns voiced since the sixties. All institutions — courts, government, universities, church, as well as business — have been subjected to increasing public scrutiny, skepticism, and loss of esteem. For example, public confidence in big companies fell from 55 percent in 1966 to 27 percent in 1971. Fortunately, polls show that this decline in confidence was arrested between 1975 and 1977 and has been reversed in the early 1980s. Precisely why confidence eroded so far is not clear. An imbalance of power among components of our society may have encouraged this trend. Marketers were among those whose power was resented. As we will see, a number of aspects of the consumer environment support this hypothesis. Indeed, many measures taken to strengthen the consumer's rights can just as readily be interpreted as efforts to strengthen the consumer' s bargaining position.

Consumers' perceptions of their bargaining position were documented in a 1977 study of attitudes toward consumerism supported by Sentry Insurance. Some 1500 U.S. adults were asked whether "consumers get a better or worse deal in the marketplace compared to ten years ago." The views were generally negative: 27 percent said consumers got a better deal, while 50 percent said they got a worse deal (16 percent said no change and 7 percent were not sure). However, respondents were optimistic that consumers would get a better deal in the marketplace in the next 10 years.

The Performance Gap

Consumers' expectations of product performance and reliability have been steadily rising, in part because advertising of new products stresses their improvements. However, improvements generally make products more complex, so that even though the basic product may be more reliable (and there is good evidence that such is the case), the added features raise new possibilities for malfunction. Thus, while the failure rate has declined or held constant, the total number of product failures has increased because of the growth in the quantity and complexity of products. On balance, then, many consumers express broader dissatisfaction with the goods they buy. At the same time, the service industry is having great difficulty providing adequate service in the face of recruiting problems, resistance to the high costs of service, and confusion over warranty protection.

The persistence of this promise-performance gap was revealed in the Sentry study. Some 48 percent of the public said that the difference between manufacturers' claims for products and services and the latter's performance had increased over the past 10 years; 27 percent reported a decrease. It is not clear just how much this gap is contributing to a continuing growth in the level of complaints. The Better Business Bureau reported that there were 9 percent more complaints in 1979 than in the previous year, but most concerned mail-order companies or retail oriented goods and services such as franchised auto dealers, auto repair shops, and home furnishings stores.

The Consumer Information Gap

During the last century, buyers were usually competent to make most of their own buying decisions: the goods were as simple as their needs, at least by today's standards. When buyers did require assistance, they could turn to a merchant, who was either a trusted friend or a proprietor with a reputation for providing reliable information. The marketplace of today is far different. The products from which the consumer must choose have grown enormously in quantity and complexity. A supermarket now stocks 6000-8000 different items; it may add and delete as many as 3500 in a year. Furthermore, products are more complex, requiring evaluation along many more dimensions, some of which are related to new performance and convenience features, others to societal problems such as ecology.

Against the formidable spectrum of products generated by professional sellers, we have an amateur buyer who usually does not have the time, the interest, or the capacity to obtain information needed to make optimal product decisions. In one study of supermarket shopping, 33 women were asked to select best buys in 20 product categories in a 50-minute period; they were correct in only 43 percent of the cases. At the same time that there is more information to process, information sources are changing. Knowledgeable salespeople or personal experience are losing their previous significance, while TV, print media, and point-of-purchase displays play an increasing role. The information gap is widened further as people spend less time shopping. Competing activities that accompany the new lifestyles reduce both the time for and the appeal of shopping. The emphasis has turned to doing instead of acquiring, and hours devoted to shopping represent a real cost. The gap also reflects rising aspiration levels with respect to the information on which consumers would like to base purchasing decisions.

Prospects for closing this gap are dim — in part because of the illusory nature of information but also because information is a public good whose universal use is difficult to prevent once the data have been released. This circumstance seriously reduces the incentive for private organizations to create and dispense information.

Antagonism toward Advertising

Although advertising is at the core of the existing information system, there is evidence that consumers are skeptical of the usefulness and truthfulness of such information. In one study respondents categorized advertisements. Only 5.8 percent of those noticed were perceived as informative — "ads that you learn something from that you are glad to know or know about...that help you in one way or another because of the information they provide." A number of studies have found that 35-40 percent of the public believe that advertising — especially television advertising — is seriously misleading. In the Sentry study, 46 percent of the respondents said they found all (9 percent) or most (37 percent) television advertising to be seriously misleading; 28 percent found all (4 percent) or most (24 percent) print advertising to be seriously misleading.

Beyond dissatisfaction with the usefulness and truthfulness of the content of advertising, a number of other complaints tend to exacerbate specific consumerism issues:

Intrusiveness and clutter. A major study of television advertising found consumer discontent over intrusiveness to be an important factor leading to a low appraisal of the social value of advertising. Furthermore, an increasing proportion of viewers believe there is more advertising than programs are worth.

Irritation. This occurs when the advertising is irrelevant to an audience and/or does not respect their privacy, values, or intelligence.

Stereotyped role portrayals. These have been a major concern of women and ethnic groups. Ads that perpetuate a minority stereotype or ignore new roles, such as the working wife, are at the center of this debate.

Promotion of unrealistic or unsupportable expectations. The advertisement may associate a product with a certain lifestyle that the product cannot realistically be expected to deliver.

Impersonal and Unresponsive Marketing Institutions

The rise of self-service retailing, the declining knowledgeability of sales employees, the juxtaposition of the computer between the customer and the organization, and the inherent difficulties of dealing with bureaucracies all contribute to this dissatisfaction. Most people cannot identify the chief executives of the largest corporations. The fact that executives maintain a low profile makes it difficult for the organizations to develop a warm personal image. Nearly everyone has had experience with those in organizations who appear to avoid responsibility. When there is a problem with a product or service, it is often not clear to consumers how they can get it rectified. What is worse, it is also often not clear to members of the organization, and consumers may be shuttled from person to person. Prospects for improvement are dim because the benefits of good service and prompt personal attention to complaints are difficult to quantify and consequently are given low priority when investment decisions are made.

Intrusions of Privacy

As computer and telecommunications technologies have exponentially expanded the capacity to store and retrieve data, there has been a corresponding growth in the possibility that the resulting data bases will lead to abuses of the privacy of individuals. Awareness of such abuses has led to greater concern with the protection of private information, including limits on access to personal financial and health records and control over the accuracy of the data that are stored. This concern increasingly manifests itself in other areas, for example, the sale of mailing lists by direct marketing firms.

Declining Living Standards

Early in 1980 Business Week proclaimed that the "golden age of the consumer" was over. It was estimated that in 1979 real discretionary income per worker (disposable income less expenditures for food, housing, fuel, and utilities) had fallen 16 percent below the 1973 level. Not only were usage increases not keeping pace with the overall inflation rate, but the prices of essentials — especially food, medical care, housing and energy — were jumping much faster than the prices of other goods. These broad averages masked the fact that some households were being disproportionately hurt. A two-tier market had evolved in which one tier, encompassing households with two incomes and no children, was coping, while the working-class household with several children and only one wage earner was not.

For the first time Americans had to admit that they were not going to be better off in the future. This loss of optimism has led to further disenchantment with the economic system, which of course is a major underlying cause of consumerism. At the same time, consumers have attempted to deal with the consequences of stagflation (stagnant growth coupled with double-digit inflation) by seeking better value from their purchases and simplifying their lifestyles. However, their efforts in this direction have heightened perceptions of lack of information and declining product quality. These trends suggest that past consumer protection efforts have been largely ineffective.

The Disadvantaged: The Young, the Old, and the Poor

Whatever problems average consumers face, their capacity to cope is much greater than that of the most vulnerable groups in society. The ghetto poor in particular have suffered from fraud, excessive prices, dependence on costly credit, and poor quality merchandise and services. The atomistic ghetto market structure, coupled with skepticism toward comparative shopping, lack of motivation or ability to seek out the best buys, and general lack of education and mobility, works against programs for improvement of this situation.

The problems of the old and the young are very different. The unprotected status of the young stems from their vulnerability to dangerous products, such as toys and flammable clothing, and their lack of defenses against television advertising. The aged, on the other hand, who have a lifetime of experience, often lack the income to meet their nutritional, health, and shelter needs. As their strength and faculties decline, they may lose their motivation to overcome these problems or to defend themselves against unfair sales practices.

Different Views of the Marketplace

The analysis of consumer problems frequently suffers from a lack of data both as to the seriousness of the abuses and the costs versus the benefits of proposed solutions. Thus, discussions frequently move into the realm of value judgments; here the potential for confusion is multiplied by the lack of shared meanings of key words. Bauer and Greyser observed that at least two participants in these discussions, who for convenience are labeled businessmen and business critics, have radically different perceptions of several key words.

One of these words is competition. The critic of business restricts his attention to price competition. In contrast, the businessman believes that price plays a minor role in the marketplace; he believes that the more important form of competition is product differentiation, which is generated by physical product differences or by distinct brand images created by the marketing program.

Another such word is product. The critic views a product as an entity with a primary identifiable function. Thus, an automobile is a transportation device. The businessman is more concerned with a product's secondary functions because they may represent the dimensions upon which product differentiation rests. The automobile's appearance might serve the function of providing a mechanism for the individual to express his personality. High horsepower and superior handling may serve the function of providing an outlet for an individual's desire for excitement.

Third, there are consumer needs. The critic sees consumer needs as corresponding to a product's primary function. For example, there is a need for transportation, nutrition, and recreation. In contrast, the businessman takes a much broader view of consumer needs, considering any product attribute or appeal upon which real product differentiation can be based as reflecting legitimate needs — needs that are strong enough to affect purchase decisions.

The other words are rationality and information. The critic views any decision that results in an efficient matching of product to needs (as he defines these terms) as rational. Information that serves to enhance rational decisionmaking is good information. The businessman contends that any decision the customer makes to serve his own perceived self-interest is rational. Information, then, is any datum or argument that will truthfully convey the attractiveness of a product in the context of the consumer's own buying criteria. Clearly the definition of information is central to any discussion of consumer decisionmaking.

Conflicts also arise from basic differences in the models of the marketplace used by marketers and critics. In its most extreme form, the model used by critics portrays marketing's role as basically that of persuading or seducing the less-than-willing consumer to buy. The balance of power is tilted in favor of the marketers. At the other end of the manipulative spectrum is a pro-business model in which success depends on the ability to identify and serve consumer needs. Advertising is seen as facilitating choices made by consumers, who generally know what they want. However, reality is probably best captured by a transactional model that emphasizes the give-and-take of the marketplace relationship.

FOCUSING THE DISCONTENT

Consumer problems characteristically lead to vague discontent with the marketplace, particularly with respect to product performance and safety, the usefulness and truthfulness of advertising, and the responsiveness of organizations. Certainly at any given time some people will be upset by an immediate problem, but in general consumer interest is diffuse and hard to define. Yet the progress of consumerism has invariably come through raising the intensity of a particular discontent to the point where legislation or regulatory action was either threatened or undertaken. Such events require a catalyst — consumer protection advocates like Ralph Nader; legislators such as Warren G. Magnuson, Frank E. Moss, and Benjamin Rosenthal; consumer organizations such as the Consumer Federation of America and Consumers Union; or highly motivated journalists. These individuals and groups have the capacity to isolate issues, raise public awareness, and propose a specific avenue for action. It is clear, however, that there must be a basis of discontent with which the public can identify (such as a spectacular abuse) before specific action will be taken, which is typically not the case with antitrust issues, for example.

In the late sixties pressure for action on a wide range of consumer problems built. At the same time, Congress was no longer so dominated by rural constituencies, who were less interested in such problems; consumer legislation was relatively cheap and appeared to generate goodwill among voters; and various tests of the influence of business lobbyists showed that their power was not so great as had been previously assumed.

The early seventies also brought considerable pressure on the regulatory agencies, notably the Federal Trade Commission and the Federal Drug Administration, to better fulfill their original responsibilities; moreover, the legislature gave them additional tasks and powers. New consumer protection agencies were also established, including the Consumer Product Safety Commission, which became almost overnight one of the most visible, controversial, and powerful regulatory bodies — in part because it inherited some responsibilities from existing agencies. From the burst of legislative and regulatory activity in the consumer's interest came a wide array of mechanisms for focusing and alleviating consumer discontent. For example, since 1970 almost all of the remedies summarized in Table 2 have either been introduced, or the regulatory agencies have been given expanded authority to employ them. Each will be discussed at various points in this book, but at this ju

Meet the Author

David A. Aaker is the Vice-Chairman of Prophet, Professor Emeritus of Marketing Strategy at the Haas School of Business, University of California at Berkeley, Advisor to Dentsu, Inc., and a recognized authority on brands and brand management. The winner of the Paul D. Converse Award for outstanding contributions to the development of the science of marketing and the Vijay Mahajan Award for Career Contributions to Marketing Strategy, he has published more than ninety articles and eleven books, including Strategic Market Management, Managing Brand Equity, Building Strong Brands, and Brand Leadership (co-authored with Eric Joachimsthaler).

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