Page 614 - Business Principles and Management

Chapter 22 • Pricing and Promotion

from the ads, and whether or not the ads have influenced their attitudes or feelings
about a product.
A number of companies specialize in advertising evaluations. The A. C.
Nielsen Company uses people meters to record who in a family watches what
television shows. The Arbitron Company has people record in a diary which
radio programs they listen to throughout a day.

TRUTH IN ADVERTISING AND SELLING
Laws and regulations protect consumers from unfair promotional practices.
Nationally, the Federal Trade Commission (FTC) and the Federal Communi-
cations Commission (FCC) are responsible for regulating promotion. As you
learned in Chapter 7, false advertising is a violation of the law. False advertis-
ing is defined by federal law as “misleading in a material respect” or in any
way that could influence the customer’s purchase or use of the product.
To protect consumers, advertisers are required to make full disclosure, pro-
viding all information necessary for consumers to make an informed decision.
They must also provide substantiation—that is, be able to prove all claims they
make about their products and services in promotions.
If a business violates laws and regulations in its advertising, it may face three
types of penalties from the regulating agencies: (1) The agency may impose a
cease-and-desist order, which requires the company to stop using specific adver-
tisements. (2) If the advertising has harmed consumers, the company may be
required to spend a specified amount of its advertising budget to run corrective
advertising. Corrective advertising is new advertising designed to change the false
impression left by the misleading information. (3) In unusual situations, the com-
pany may have to pay a fine to the government or to the consumers harmed by its
illegal advertising.
Long-term business success is built on honesty and fair practices. A businessper-
son may occasionally be tempted to exaggerate or to imitate a competitor who
seems to be stretching the truth. In the long run, however, it does not pay to
destroy customers’ confidence. If customers do not get what they believed was
promised to them in advertisements or by salespeople, they will likely not return to
the business. On the other hand, a satisfied customer is often an important source
of promotion for a business.

CHECKPOINT
List the components of an advertising plan.

Personal Selling

Personal selling is promotion through direct, personal contact with a customer.
The salesperson usually makes direct contact with the customer through a face-
to-face meeting. There are many types of customers, and a salesperson must be
able to adjust to each type. Some customers know exactly what they want, but
others are in the early stages of decision making. A critical sales skill is under-
standing the customer’s motivations.

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