Cover Story - Legal Issues in Marketing || Shubham Shukla || IIM Shillong || February 2016

Legal Issues in Marketing

 -Shubham Shukla

IIM Shillong

Winning isn’t everything, it’s the only thing-Vince Lombardi

In the highly competitive scenario of today this psychology has been firmly embedded in the minds of the society and even marketers have not been unaffected. With the increasing number of products across all categories and the rising competition across different geographies marketers have come under significant pressures to come up with innovative means and ways to market their products. In this highly competitive environment the demarcation between what is ethical and legal and what is not, can become blurred. We also need to understand that just fulfilling the legal obligations by the marketing companies does not mean that ethical justice has been accomplished. Moreover the advent of community brandings, website advertising, blog writings, twitter groups and instant messaging has given rise to multitude of legal issues in the Indian context. As these are very new forms of communication, the legal and ethical practices in this zone have still to be defined clearly and code of conduct needs to be developed.

There are several legal and ethical issues in varied domains which a firm needs to address while deciding on their marketing strategy:

• Misleading the customer-

1.       Product Endorsements – Product endorsements need to be truthful and in cases of celebrity endorsements the celebrities should have actually used the product. This is a major hurdle in front of marketing firms as they need to ensure that any advertisement does not highlight things about a product which cannot be fulfilled. Advertising false information about any product can even lead to imprisonment.

2.       Advertising to Children – There have been special rules established which stipulate that advertisements which are meant for a young audience need to be especially true in their

message and even the slightest amount of exaggeration about the product or showing something inappropriate in the advertisement is frowned upon.

3.       “Made in the ” labels – Many a times companies advertise their products of being made in a certain place or country in order to put their product in a more favorable light and also in order to sell their products at a higher price. For Ex- Pethas made in Agra are very famous and so in many shops in Delhi selling Pethas you would find them advertising that it belongs to Agra which would not be true. This is against the law and such a practice should not be followed by the firms.

4.       Health Claims – There are various ads for medicines and cosmetics which claim a lot of things but do not deliver on their claims. Such type of claims are not just legally wrong but can also turn out to be harmful for the health of the customers consuming that medicine.

• Telemarketing: Another significant area which has been now heavily regulated in recent times is telemarketing. Telemarketing is a form of marketing in which a salesperson tries to convince customers to buy certain products over the phone. According to laws stipulated by the government if a person registers himself on the “Do not call” registry no telemarketer is allowed to place a call to him. In fact, if such a situation arises not just the telemarketing firm but the telecom service provider is also liable to be punished by the law. Furthermore, the law also protects people against any misinterpretation of facts that would have happened over the phone and a consumer in this case can visit the consumer courts.

• Email SPAM: With the advent of e-mail, now there is a new type of marketing technique which has become very prominent-marketing through e-mail. But as we
  
  have all seen, apart from the handful of mails that may turn out to be of some use, most of the unsolicited mails that we receive are irritating and an infringement on our privacy. The IT Act enacted in the year 2000 does not have any specific section in this regards but under section 79 of the IT Act, internet intermediaries must take care and diligence with regard to the services they provide. If we couple this with section 43A of the IT Act (compensation for failure to protect personal data from theft) we can invoke our right to data privacy. The problem of spamming has been long objected. In 2004, Tata Son’s subsidiary company in India, Panatone Finwest Limited, filed a law suit against McCoy Infosystems Private Limited for transmission of spam. The matter was heard in the court where it was held that in the absence of statutory protection to check spam mails on the Internet, the traditional tort law principles of trespass to goods as well as law of nuisance would have to be used. This means that sending spam mails is trespassing your life to privacy and is thus an offence. However, the law in this area is still either very nascent or non-existent and work needs to be done in order to protect the right of the citizens to decide which advertisements and mails they want to receive.

• Restrictions of marketing of certain products: According to the Cable TV Regulation Act of the Indian Constitution a company cannot advertise alcohol or tobacco products in televised media. But not one to be cowed marketers came up with the concept of surrogate marketing. Surrogate marketing is a form of advertising which is used to promote banned products in the disguise of another product. So to counter this law companies came up with products related to drinking and tobacco use like music CD’s, Soda Water and mouth refreshments in order to popularize their brand so that whenever there is mention of that brand, people start associating it with its main product. Examples include Bacardi Blast Music CD’s, Rajnigandha pearls and many more.

     Now let us look at some of the instances when the Indian legal system and its affiliated entities stepped in to regulate the marketing strategy of a company.

1. In May, 2011 the Ministry of Information and Broadcasting in India issued a statement warning television channels not to broadcast deodorant television commercials following a rash of ads featuring voracious women and "libidinous" men as they felt that plot lines for deodorant ads aimed at young men were very racy which may not sit well with a certain section of the Indian society.
2. The Food Safety and Standards Authority of India (FSSAI) had directed the state food safety commissioner to scrutinize and initiate stringent actions against those advertisements which raised misleading claims on the quality of food and beverages. As per the directions, companies were not allowed to use edible oil named ‘Super Refined’, ‘Extra Refined’, ‘Micro Refined’, ‘Double Refined’, ‘Ultra Refined’ and ‘Cholesterol Friendly’ unless the claims were substantiated by a research report. Also they stipulated that the research findings being produced would have to be published in a respected international journal or should be verifiable by the FSSAI.
3. The Telecom Regulatory Authority of India had issued a notification in May 2012 limiting television advertisement duration to 12 minutes in an hour taking note of viewer irritation and had come up with a proposal to regulate the duration, frequency, timings and audio level of advertisement. The industry claimed that this could impact advertising revenues of the broadcaster by 15% to 40%. This move was challenged by the channels in front of the Telecom Disputes Settlement and Appellate Tribunal and results of the case are awaited. The Telecom Regulatory Authority of India has also pointed out that news and current affair channels cannot run more than two scrolls at the bottom of the screen, occupying a maximum of 10 per cent screen. All these steps are very important from a marketing perspective because now we need to make ads in such a way that they can grab the attention of the audience in a very small time as the time as well as space available for marketers to get their message across is decreasing.
4.  Advertising Industry Watchdog Advertising Standards Council of India(ASCI) upheld complaints against Brooke Bond Red Label Natural Care, Tata Sky, Nikon Camera etc. In case of Tata Sky, ASCI said it had received a complaint against the company stating that "Cable is just a Dabba" in a print advertisement which could harm the reputation and business of existing cable TV service providers. Similarly, it had also upheld a complaint against Nikon camera's TV commercial for violation of The Performing Animals Registration Rules 2001 as the complainant had claimed that the animals used in the advertisement were not taken care of in accordance of the law.

As marketers we have a responsibility to not mislead the public or misuse the trust that they show in us and our brands and we have seen that the government and legal systems take ample measures to prevent this from happening. Moreover companies need to tailor their advertisements according to the culture and values of the audience as what may be acceptable for one section may be derogatory or disrespectful for the other section.

In our bid to win we must keep in mind that following the marketing and advertising related laws of the country in which we are selling our product is very important not just from a business but also from an ethical point of view. 

Jab They Failed- McDonald's Arch Deluxe || Daksh Bhagat || IIM Shillong || January 2016 edition

McDonald’s is known in every nook and corner of the World for offering hot, tasty hamburgers to the masses. Being masters of the “Dollar Menu”, they own the fast food industry by providing their food at a significant value. Then why are we discussing the brand under this section of the magazine today? Any guesses? When a brand fails to recognize the need of the hour, it begins facing some conventional marketing problems, which also happened with McDonald’s when it launched its new burger, Arch Deluxe, which failed to inspire consumers. 

In 1996, the Arch Deluxe debuted as a large hamburger patty on a soft potato-flour roll, with lettuce, tomato and a fancy mustard/mayo combo sauce. Marketed as the ‘Burger with the Grown-up Taste’, the idea was to have a burger which would shift the focus away from children. Indeed, the advertising campaign for the Arch Deluxe sent across the message of a sophisticated alternative of McDonald’s regular offerings with images of kids shying away from the ‘sophisticated’ product. With a $100 million advertising budget, the burger became successful in creating a huge build-up to the release. However, it never caught on with McDonald’s throngs of hungry fans. Reason sighted against the same were many. Some argued that it was overpriced. Others believed that the target market was inappropriately identified. Many people also speculated that the budget was misused and the burger in itself didn’t taste that great. 

Let’s try to understand what actually happened. The value propositions that McDonald’s has set for itself are friendliness, cleanliness, consistency and convenience, which fortunately its competitors have neglected to capture. The first consideration is that a regular customer never goes to McDonald’s for sophistication, rather goes for the convenience offered. On entering a McDonald’s restaurant, a customer gets the convenience of knowing what to expect. He does not want to be bombarded with a million and one different variations of essentially the same product- a hamburger. McDonald’s has never competed on taste, yet everybody comes back. 

Another trouble with Arch Deluxe was regarding the strategy of the burger to be sold on taste. This may have been the wrong approach to draw in consumers because it was seen as McDonald’s trying to be something it’s not: a culinary luxury that appeals to food connoisseurs. That may not have been the intent, but that became the perception that led to a major break down. Another ironical aspect of the Arch Deluxe failure is that the product was well researched. It was only after an extensive market research involving different demographic segments, it was concluded that people would love to eat a hamburger specially designed for adults. However, the target market that was supposed to be catered never turned up, thus proving Arch Deluxe to be an embarrassing flop. Last but not the least, McDonald’s is heavily centralized. Most of the marketing decisions need to pass through the company’s headquarters in Oak Brook, Illinois. In contrast to major product successes such as the Big Mac, the Hot Apple Pie, the Egg McMuffin and the Filet o’ Fish, which were all invented in operators’ kitchens out in the field, the recipe for Arch Deluxe came from the Oak Brook’s kitchen which is infamous for launching many such product failures. Have a look at one of the TVC's of the Arch Deluxe: https://www.youtube.com/watch?v=wE4JrM8OFts

 

However, the problems encountered with the Arch Deluxe are symptomatic of an even bigger problem. McDonald’s in the recent years has been accused of losing connect with the customers who never find it difficult to give up loyalty and hence has been rendered far behind in the market in terms of brand value. Indeed, this is a problem acknowledged by the company’s CEO, Jack Greenberg, who arrived in 1998. Quoting Jack, ‘we have been taking much too long to develop an idea and get it to the market, then too long to decide whether we want to do it or not’.

Finally let us look at the lessons we have learnt from the failure of Arch Deluxe: 
1. Go for what you know: Part of McDonald’s brand identity lies in its simplicity. Another part is defined by its children-friendly approach. A ‘sophisticated’ burger ignoring children was therefore destined to misfire. 
2. Avoid customer confusion: McDonald’s is not cognitive, it is reflexive. By extending its range with products such as the Arch Deluxe, Bratwursts, McTacos and McMussels, McDonald’s was creating a need for its customers to think and get confused. 
3. Be sceptical of research: Market research holds a special place when carefully conducted, but it should never be taken as gospel truth. Perception of the brand/product should always be taken care of, even if the research shows results in the opposite direction.

Logoistic - McDonald's || Mohammed Fahd || IIM Shillong || September October 2015 edition

McDONALD'S - I'M LOVIN' IT

McDonald’s is one of the world’s most popular Quick Service Restaurants (QSRs). The industry giant has its presence in 119 countries & this extensive network has not only benefited the company but also economics wherein the Big Mac Index was introduced as a measure of purchasing power parity (PPP). The company was founded in 1940 as a barbecue diner by Maurice & Richard McDonald & was later morphed into a hamburger joint before it was ultimately purchased by businessman Ray Kroc who saw immense potential in a chain of hamburger restaurants. He revamped the company & gave it a new direction which has led to McDonald’s becoming the behemoth that everyone’s familiar with. 

The History Behind the Logo 

The McDonald’s “Golden Arches” is one of the most widely recognised logos in the world. Its simplicity & its representation of the letter ‘M’ in the golden colour of the company’s iconic French fries immediately generates brand recall. However, the logo that has faithfully represented the company in the 21st century has not been its flag-bearer since the company’s inception. In the olden days when the company was owned by the McDonalds & didn’t even have fries in their menu, the logo was “Tubby chef Speedee”. 

The logo was meant to represent the quick service offered at McDonald’s & the winking chef tried to communicate that very message to the patrons. During this time period barbecue was removed from the menu to improve service times & the focus shifted to the company’s hamburgers. 

It was not until 1961, that the “Golden Arches” logo was introduced. Inspired from one of the company’s most popular & distinctive outlets the arches which were designed by Stanley Meston, appealed to the imagination of the then new owner of the food chain, Ray Kroc, & the logo’s perception as the letter ‘M’ convinced him that this should be the new logo. 

Between 1960-1996 the logo underwent many minor changes. A blue outlining circle was the 1st followed by a standalone version of the arches with the company’s name removed too. This was followed by a removal of the strikethrough between the arches & the emboldening of the ‘M’ as the company emboldened its international presence in Europe & entered developing markets in Asia & the resulting logo was increasingly similar to the one that would come to define the company 2003 onwards. 

During this time period the company also introduced a mascot in Archie McDonald, a pre-cursor to the company’s popular jester & present-day mascot, Ronald McDonald. 

1993-Present 

The company kept toying with the arches after 1993 & had different variants in different countries to adjust to local conditions. A number of renditions were also introduced in USA, with the M being emboldened & getting an outer shade initially followed by a re-introduction of the company name beneath the arches. 

However, the most successful change to the logo was brought about in 2003 when the company added the tagline – “I’m lovin’ it”. A red square in the background which was present in some countries was removed & a background shadow was added for extra effect. The “I’m lovin’ it” campaign was the company’s 1st global campaign & evolved the logo into one that would last till the present day. 

The logo was a start of a new chapter for the company following allegations of spreading obesity. In 2008, the company also launched the “What we’re made of?” campaign to ensure their customers that McDonald’s was not the reason for rising obesity in USA & that given the company’ ingredients it was perfectly safe to consume it’s products a few times a week. 

This was also followed by an introduction of its breakfast menu involving salads & fruits to adjust to the more health-conscious needs of its modern day consumers.