Marketing Is an Important Factor in Business - Report Example

Writer’s name] [Professor’s name] [Course title] [Date] Marketing Law Introduction Marketing is an important factor in business; it encompasses the notion of consumer’s needs and demands. It is through the exchanging of products and value with others that laws are needed to regulate the market place. However, certain situations are not provided for in law. As a standard of conduct in business, legal behaviour is important when facing the challenge of balancing the best interests of consumers. This is because consumers are informed buyers base decision of which product to buy based on organisation's marketing mix of pricing, product, promotion and place. Analysis The entire decision making process in the marketing field has a legal significance. Whether they have to hire salespeople, introducing a new product, and making confusing decisions, will involve some kind of legal ramification. If a product’s marketing mix, pricing decisions will be according to the competition law in which legislation prohibits different kinds of anti-competitive behaviour. Pricing also has to be done according to the general Government policies like interest rates & tax legislation. There are many legal issues in marketing to be faced. They can be grouped into the following headings selling issues, advertising price, channel decisions, competitive relations price, product price, packaging price and price issues. Some of these above issues are closely linked to issues within the marketing mix The first and arguably most important aspect of the marketing mix, price can pose quite a few legal dilemmas and has done so in the past. One example of this is price collusion or price-fixing. This is where a product or service is set at an unreasonable price with knowledge that the consumer can't afford not to purchase the product or service. One such instance of this occurred in America when leading toy chain Toys 'R' Us "violated federal trade laws by colluding with manufacturers to keep prices for Barbie, Mr. Potato Head and other popular toys artificially high." While it was unlawful, it was also an unlawful act as well as a form of extortion (Nowak etal p175). Price fixing is regarded as a heavily unlawful practice that enables companies to charge high prices with no fear of being undercut by a competitor. This means that consumers have to buy the product at that artificiality-inflated price. A good example of this type of price fixing is the difference in price between cars in the UK and abroad. Although all car manufacturers say that the prices of cars are more expensive in the UK, due to UK vehicles having a better specification, ethically car manufacturers should make prices of UK cars similar to that of cars abroad. For example, a brand new BMW 318 SE UK price £21,495, in France the price is £18,995 (Perreault & Jerome p14). Another unlawful pricing practice is the failure to disclose the full price associated with a product. An example of this is booking up a holiday aboard. Most of time the price you pay is not the 'real' price as many taxes, airfares and insurance are left out of the price you are first given for the holiday The second factor of the marketing mix, product, is also subjected to legal dilemmas. Planned product obsolescence is a prime example of an unlawful act in relation to product. This is where there is a planned life-span of a good, producing a product so that it will wear out inside a period of time, most often beyond it's warrantee. To say such an act is unlawful is to question how much disclosure of information is truly enough. In my personal opinion, it is a wrongful act and one that I consider unlawful. On the other end of the spectrum, acting legally and creating a reliable product would be just as beneficial to a company and it's reputation, if not more so. The external factors of price deception, product deception, fairness and honesty may come up as being legal dilemmas. These issues would make consumers view my place of work in a negative way and would need to be dealt with quite thoroughly. The reputation of the workplace and that of myself amongst my peers, family and the industry would need to be taken into account when acting upon such issues. I would probably have to mention it to someone of a higher authority though and help them to decide whether it would be beneficial to act upon these matters. One other unlawful practice for product is failure to inform customers, or business, of known product defects. If a supplier or company does not inform people about any product defects, that they know exists, and if that defect is serious enough, it could cause injury or be unsafe to consumers. An example of this is recalls on cars. A few months back many of the new Mini's had to be recalled due a risk of the fuel pipe catching fire. If the company had said nothing about this defect then a serious injury or death could have occurred (Gillies & Selvadurai p67). Another issue is that products lack the quality they should have. This is that the products are not made as well as they could be and services not performed to their best ability. According to Kotler etal (2006) In Promotion advertisements and warping should give the customers correct information regarding the product such as some essential pieces of information are the brand name, manufacturer's name and address, use by date, how to use it and so on. For food and drink, the information should include ingredients and nutrition label as well. All this information is required by law all over the world. The packaging should be undamaged when purchased by the consumer and the detail on the packaging needs to consistent with the product inside. Misleading images or captions on a package may lead a consumer to believe that they are purchasing a completely different product and thus is against the marketing law Advertisements scrutinized by the Advertisement Standards Bureau was that of the Just Jeans advertisement. The ASB's decision to uphold the complaint is one which I agree with in some respects (Ardi p57). The violence and Health and Safety factors are quite disturbing and are justifiably held up. There is a feeling of disgust in the portrayal of the advertisement which can be upsetting to sanative people who negatively effected by this kind of advertising. It is extremely hazardous and unjustified. Legislation is an instance of a law which has a long lasting effect for everyday marketing practice. Since the primary objective of 'Promotion' in an organisation is to sell something by communicating with a market, such activities attract attention when violations are quickly noted by the public. This may include false statements about the quality, grade, price, warranty or standard of the good or service. This is covered in the marketing. This also covered in the marketing laws of Germany and this covers specific types of misleading or deceptive conduct. For example, an organisation claiming that its product is 50-90 per cent more effective in what it does than a competitor’s product is prohibited under the law unless the claim made in the advertisement can be substantiated (Lynda p45). When it comes to pricing, in some instances it is economically viable to be unlawful in-order for the organisation to use a skimming strategy to obtain the maximum amount of revenue from various segments of the market. For example, a pharmaceutical company developing specialised drugs to prolong the life for AIDS sufferers would typically adopt a skimming strategy to extract the maximum unit prices for the product. As a result supply is reduced and potential users do not get access to needed drugs. In other examples, it might be economically feasible or lawful to set a low price to be a focus on a big segment of the market nevertheless, thus it results in increasing revenue. Retail Price Maintenance (RPM) is a pricing policy where the manufacturer sets the retail price for a product. Many prices displayed in shops as the Recommended Retail Price (RRP). The Trade Practises Act forbids manufacturers from forcing retailers to charge a specific price, refuse to supply a retailer who decides to sell at the recommended price. The law is designed to allow price competition between retailers of similar goods (Assael etal p16). In determining the distribution of final products, marketing law should include guidelines for defining an organisation's relationship with distributors or intermediaries. In many instances, organisations will try to establish intermediaries to build their business in overseas markets. When the market has been developed to a point where costs can be supported, the intermediary is dropped. Product development may be influenced by the law with consumers seeking more desirable products or changes in existing products to make them more desirable (Ronald & Katelyn p12). Advertising may produce negative attention by consumers in a legal sense and may damage an organisation's reputation. This can be seen as an example of cultural pollution where-by commercials on television for example, may be ignored by those not in the target market. As a result, this can be seen as intrusive direct marketing or invasion of privacy. Since there is no actual body of law known as international law, there are various legal systems around the globe. These legal systems concern the pricing of products, import/ export limitations, types of advertising and product safety. For an example, In United States, every state has its own laws. All organizations who want to market their products should be aware of the laws where they are marketing (Circus p17). Marketers should have full knowledge regarding consumer protection laws, including rules in opposition to misleading advertising and pricing. Consumer protection has been developed protect consumers from unwarranted or misleading practices and at times go ahead of the traditional legal remedies on hand for infringement of warranty. Entrepreneurs have to be have knowledge about these laws differ from country to country (Joel p40). Under both federal and state law, an ad is unlawful if it tends to mislead or deceive, even if it doesn't actually fool anyone. If your ad is deceptive, you'll face legal problems whether you intended to mislead the customer or not. What counts is the overall impression created by the ad -- not the technical truthfulness of the individual parts (Consumer Protection Laws and Your Business p1). One of the main legal problems in the e-commerce arena centers on the controversy over data mining - the selling of consumer information by e-commerce merchants to online advertisers. Leonard vs. PepsiCo, Inc. is a chief example of a case in which the objective theory of giving consumers misleading information applied not only that is also breeched the law by taking into consideration another companies campaign with it’s permission. . In this case, Mr. Leonard, the plaintiff asserted that PepsiCo gave an offer of a Harrier Jet. Even though the commercial was meant to be an entertaining promotional campaign, Mr. Leonard took it serious. After doing the math and learning that the jet was going to cost a measly $700,000, he compiled a business plan. He raised the money and submitted a check along with 15 Pepsi points, an order form and a written demand for the Harrier jet. Pepsi responded to the command with a letter asserting that the Harrier jet was not included in the Pepsi Stuff collection. Pepsi also noted that it was neither in the catalos nor on the order form. The company also explained that the Harrier jet commercial was “fanciful”, as well as a witty and engaging ad. Pepsi apologized for the confusion and included free Pepsi product coupons for Mr. Leonard (John etal p14). Mr. Leonard filed a law suit against Pepsi for misleading advertising, deceit, misleading and unjust trade practices, and breach of contract. Kimba M. Wood, the District Judge upheld Pepsi’s case, stating that a realistic, sensible individual would not have considered the commercial ad to be an offer; therefore the plaintiffs understanding of the commercial ad to be a proposal or offer was rejected. Likewise, PepsiCo did not intend for the commercial ad to be mistaken for an offer, but rather an entertaining commercial. Product liability law covers the range of remedies available when defective products cause loss or damage (Jain p34). Defects in products usually consist of design defects, manufacturing defects and instructional defects, foe example poor labelling, instructions for use or warnings which label the product as being dangerous. Defects may therefore be introduced into products in the entire the chain of manufacture and distribution. There are some significant variations in the standard from country to country. Some countries have rejected the "unreasonably dangerous" test and only require that the injured person prove that there was a defect in the design and that the defective product caused injury (Ries & Ries p67) Marketing law even handles issue like selling decisions which include bribery, stealing trade secrets, misrepresenting, and unfair discrimination. An example of a selling issue is bribery. If a worker is injured in, say Coca-Cola's factory in India, and they might bribe him/her with money, extra holiday etc in order to stop them telling their story and giving the company a bad name. The legal regime for the registration of trademarks is enshrined in the Trade Marks Act 1994 (Aspatore Books Staff p40). The key advantage of registering a trademark is the mark is afforded greater legal protection and there is no need to prove elements and passing off in the mark. For a mark to be registered as a valid trademark it is necessary to show that there is: (i) a sign, (ii) which can be represented graphically, (iii) which is capable of distinguishing the goods or services of one undertaking from those of other undertakings.’ However not all marks are capable of being registered as trademarks(John etal p14) The grounds for refusal are divided into two categories: (1) Absolute grounds for refusal: concerned with objections based on the mark itself and (2) relative grounds for refusal: concerned with conflict with third party rights. Within trade mark legislation the "specific subject matter" further specifies the rights of a trade mark holder as entitling 'the owner to exclude others from making use of it without permission, even if the effect is to exclude them from the market: This has been specified by the ECJ in cases Philips Electronics NV v. Ingman Ltd [1998] 2 CMLR 839, 853 / Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755, 787; HMSO v. Automobile Association [2001] ECC 272, 278 (Grove etal p393). If we come to international marketing then every country has a set of it’s own laws for example Japan law musts imported products to have Japanese language on the product, because most of the population still not to familiar with alphabetic letters and English language. Conclusion Marketing laws affect the marketing activities of businesses they regulate multiple areas. Deceptive and misleading advertising is unlawful and advertising must always be truthful. Price comparisons, specials, and free gift offers must all be true and business must avoid bait and switch advertising. There is a fine line between deceptive and misleading and stimulating and creative advertising. Price Discrimination is also illegal under both the federal and state laws. By law Retailers are supposed to sell their products at exact same prices to a prescribed level of trade for instance Target along with a local clothes shop Retail Price Maintenance makes sure that a retailer is capable of pricing goods at any price which preferable to them and manufacturers cannot decline supply if retailers do not want to sell a product at that specific price. By marketing products accruing to legal and ethical guidelines set by the law marketers make sure that they are obtaining long term sales and have a good reputation in the market . It is necessary for advertising campaign to comply with all legal and ethical obligations. There are certain consumer protection laws that limit how information can be used and obtained and penalties for breaching these are increasing. For example a company cannot engage in misleading or deceptive conduct when advertising its products. Marketers must also be cautious not to violate any intellectual property rights, in particular, Copyright and Trademarks. As well as legal obligations there are codes of conduct which provide guidelines for best possible practice. Work cited Ardi Kolah; Essential law for marketers Butterworth-Heinemann 2002 p57 Aspatore Books Staff; Advertising and Marketing Law Client Strategies: Leading Lawyers on Case Strategies, Exceeding Client Expectations, and Avoiding Litgation (Inside the Minds), Aspatore Books 20907 p 40 Assael, H., Reed, P. and Patton, M; Marketing: Principles and Strategy Harcourt-Brace, Sydney 1995 p26 Circus Phillip; Sales Promotion and Direct Marketing Law 5th edition Tottel publishing 2007 p 17 Consumer Protection Laws and Your Business 2009 p1< http://www.nolo.com/article.cfm/objectId/335A29B1-5FEF-4C77-81A8340048141098/111/277/257/ART/> 17 May 2009 Gillies Peter and Selvadurai Niloufer; Marketing Law, Federation Press, 2008 p 67 Jain S. "Marketing Planning and Strategy", (4th Ed), South Western Publishing Co, USA 1993. p34 Joel Barry; Advertising and Marketing Law, Thorogood 2007 p 50 John Goldring, Laurence Maher, Jill McKeough; Consumer protection law, Federation Press, 1998 p14 Kotler, P., Adam, S., Brown, L., Armstrong, G. Principles of Marketing. 3rd edn, Pearson Prentice Hall, Australia. 2006, Lynda Oswald; The Law of Marketing South-Western, Div of Thomson Learning 2001 p 45 Nowak, J.G., Cameron, G.T., Delorme, D. 'Beyond the world of packaged goods: assessing the relevance of integrated marketing communications for retail and consumer service marketing,' Journal of Marketing Communications, vol. 2, 1996, pp. 173-190 Perreault, William D., Jr. and E. Jerome McCarthy. Basic Marketing. McGraw-Hill Book Company, 1998. p14 Ries Al , Ries Laura; The 22 Immutable Laws Of Branding Profile Business; New Ed edition 2000 p 67 Ronald R. Jordan and Katelyn L. Quynn; Planned Giving: Management, Marketing, and Law: Cumulative Supplement John Wiley & Sons; 3rd Edition edition 2005 p12. Read More