Questions:
1. Which is the National advertising Division’s most important stakeholder, business or consumers?
2. Do you believe the BBB can truly be impartial given its financial dependence on business?
3. What actions would you take to ensure an ethical misconduct disaster such as the “pay for play” scheme does not happen again?
In the business World it is very important to have certain tests and checks in place that makes sure that the open market preserves its truthfulness. Better Business Bureau (BBB) and National Advertising Division (NAD) are two such units of self-regulatory system that help in maintaining openness in the market.
Better Business Bureau is one of the best known self-regulatory trade associations in the US. The Better Business Bureau was set up in the year 1912 and has over one-hundred and twenty independently integrated local organizations all throughout the United States and Canada. The function of this organization is to make sure that the marketplace stays moral so that customers and suppliers of consumer goods and services can ascertain trust in the market.
The Better Business Bureau gathers data on a particular business’s dependability, aware the buying public of possible fraud, gives priceless insight into an organization’s moral business practices, and works as a mediator between customers and businesses. Organizations that meet and uphold the Better Business Bureau’s moral standards may be requested to get membership with BBB. Becoming a affiliate of the Better Business Bureau has the advantage of having an extra promotion point to promote to possible customers because the Better Business Bureau is respected for sincerity and honesty. A good rating from the Better Business Bureau could possibly be the power needed to persuade a customer to buy your products or services (Rhee, 2015).
Companies become the members of Better Business Bureau because the market has extra possibility to thrive if the consumers believe the businesses. Also, arrangement with the Better Business Bureau has the profit of representing to customers a business’s promise to carry business in a reliable marketplace. Members of the Better Business Bureau have the chance to associate with those in businesses related to their own and draw public from all over the World.
Conversely, The Better Business Bureau, one of the country’s top consumer supervisory body groups, is being blamed of running a “pay for play” scheme in which good grades are rewarded to those businesses who shell out membership fees to BBB, and poor grades are awarded to those who don’t. As result of this scheme, BBB rating system is not worthy of customer’s belief and trust. BBB system is potentially destructive and deceptive to consumers. Not only does this display a lack of poise in their products, it also makes it unfeasible for anybody to criticize about the Better Business Bureau to the organization. In addition to this, The BBB is financed by membership fee given by businesses All BBB system stakeholders include BBBs, corporate partners, agencies/vendors, Board of Directors, and consumers.
The relation of BBB’s stakeholder is chiefly with commercial businesses as these businesses adhere to BBB Accreditation system and consent and stick to BB’s high standards. BBB offers, free business BBB reports, charity BBB Wise Reports, objective advice, BBB Reliability Reports and educational information on topics that affect market confidence.
National advertising Division is a unit of self-regulatory system. The National Advertising Division (NAD) has the duty of scrutinizing and assessing reality and precision in nationwide advertising. The NAD looks at and assesses an extensive variety of advertising alleges, which include taste tests, consumer surveys, product demonstrations, pricing claims, puffery, disclosures and product testing. All the way through its exceptional window on the market, NAD recognizes hot matters in advertising and endorsement. NAD’s results help advertisers in foreseeing and reacting to the challenges that new media and new products can pretense.
In this study we will study about two units of self-regulatory system, which are Better Business Bureau (BBB) and National Advertising Division (NAD). We will study about their duties and what can these units do to improve their services for customers.
1. National advertising Division is a unit of self-regulatory system. The other units of self-regulatory system are – The Children’s Advertising Review Unit, The Online Interest-Based Accountability Program, The National Advertising Review Board and The Electronic Retailing Self-Regulation Program.
The National Advertising Division (NAD) has the duty of scrutinizing and assessing reality and precision in nationwide advertising. The NAD looks at and assesses an extensive variety of advertising alleges, which include taste tests, consumer surveys, product demonstrations, pricing claims, puffery, disclosures and product testing. All the way through its exceptional window on the market, NAD recognizes hot matters in advertising and endorsement. NAD’s results help advertisers in foreseeing and reacting to the challenges that new media and new products can pretense.
NAD inspects advertising claims for a large range of products from Infant nutrition products to Cosmetics and Energy services. NAD also checks national advertising and inspects complaints filed by local Better Business Bureaus, advocacy groups or consumers.
The most important stakeholder for the National advertising Division are its consumers, as, when an advertiser is making an ad consumes are his viewers. If customers won’t buy the products then business won’t exist, and the only function off business is to make customers. Consumer confidence and spending are important factors that help to determine business prosperity and economic activity. Consumer’s interests should be given foremost importance while designing and advertising the product, but unfortunately this is not always the case and many a times consumers are mislead by false and inaccurate claims by the advertisements, it is here when bodies like National advertising Division come into action and try to protect consumers. Yes, it is true that businesses supplies the resources for the National advertising Division, but it should be kept it mind that they do this only to make a positive image of their brand in the eyes of viewers. The advice from a consumer is significant to the advertiser it can be known if his message has been conveyed correctly or not. If a viewer feels that a particular advertisement makes false claims or is in bad taste, then that they can air their complaints to NAD who can in turn take suitable action, if needed. If the consumers would not care about the false claims made in the advertisements, then business would not invest in NAD. From this we come to know that NAD has come into existence only for the consumers, to protect consumers from the false claims that are shown in advertisements.
However, it should be noted that NAD has no authority to pull advertisements that are unsuitable for viewers, and therefore has to depend on Government agencies to put into effect their decision. If a company fails to obey to the decision o NAD then that case is referred to the FTC, however there is no assurance that FTC will act in accordance with NAD’s suggestion. The FTC will independently investigate the case reported to it by NAD and will take its own resolution; hence, there are chances that a company which NAD referred might not get punished.
2. The BBB Standards for Trust are an inclusive set of top practices for how organizations should take care of the public in a reasonable and sincere approach. Each and every BBB recognized Business is supervised for enduring obedience to BBB standards. The BBB grade system is dependent on BBB file information about the said business. In a number of cases, an organization’s grade may be lower in case BBB does not have adequate information about the organization in spite of BBB asking the business for the information (Neff,, 2011).
BBB allocates letter grades from A+ (maximum) to F (lowest). BBB will grade business “NR” or “No Rating” if information about business is insufficient. BBB Business Reviews usually give details about the most important features that lifted or lower the business’ rating. BBB ratings are not an assurance of a company’s dependability or presentation, and BBB suggests that users reflect on a business’ rating in addition to all other accessible information concerning the business (Kerr, 2015).
A business is entitled for BBB official recognition if it meets, in the view of the BBB, the “BBB Standards for Trust.”
This BBB grade system can’t be truly impartial. The main reason because of which companies invest in “Better Business Bureau” is that they want good ratings for their business, if BBB will start giving ratings according to the true cerebral of the business then there would be no need for business to invest in BBB in order to get a good rating and thus no business will invest in BBB. Therefore, somehow it becomes important for BBB to give good rating to the companies that invest BBB, even though this practice is not ethically correct.
It is common knowledge in the market that employee of BBB award higher rate to business that that BBB to endorse their rating and while gave lower rating to the business who did not pay. Many believe that BBB is operating a Pay-for-Play scheme in which organizations pay for favorable experience to their company. Using this scheme BBB also gives “A” rating to those who pay membership fees while giving F rating to companies who do not pay membership fee.
An investigation has reported that to get higher grading organizations were asked to become a member of BBB, those organizations who agreed to the offer saw their grades changed the next day.
Not only BBB is being accused of operating Pay-for-Play scheme and taking side of businesses that becomes its members, but “Better Business Bureau” is also blamed of being over friendly with the business groups. There have been some cases in which BBB is accused of taking additional information from the customers who came to BBB for complaining about services of a particular organization, BBB then sold this information to other companies in the industry without any knowledge to the customer (Collin, 2015).
3. Pay-for-Play scheme is a scheme in which organizations pay for favorable experience to their company. Using this scheme BBB gives “A” rating to those who pay membership fees while giving F rating to companies who do not pay membership fee. This scheme is a very unethical scheme which has given bad name to BBB in the market. This ethical misconduct disaster of the “pay for play” scheme happened because employees of BBB were offered 45 percent commission for each first year membership they sold. Moreover, William Mitchell receives a salary of $ 400,000 per year, which according to many was too high for someone working for a non-profit organization. There is one more ethical challenge which BBB has failed, but BBB is also blamed of being over friendly with the business groups, there have been talks about how BBB helped e bay in publishing three books and in that year itself won a BBB President’s award for “sustained superior performance”. There have been numerous negative effects of “pay for play” scheme like – BBB branch in Southern California, Los Angles are was expelled, loss of integrity and credibility of trust in BBB, consumers stopped trusting BBBM. It is because of all these negative effects that consumers have now started going to other similar sites like – Yelp, Google review and Angie’s list (Dark, 2013).
For an ethical misconduct disaster such as the “pay for play” scheme not to happen again we should first of all change the 45 percent commission incentive that employees of BBB get for the first year membership they sell, rather all employees should be have equal pay independent of how much deals they have made with other organizations in the market, salary of the head of BBB should be decided again and should be terms of head of other non- profit organizations. To ensure that an ethical misconduct disaster such as the “pay for play” scheme does not take place again, BBB should some potential resolutions, these potential challenges are – it should show to the organizations and consumers that grading system is not biased and does not depend on whether a business or institution has paid its dues to BBB or not, BBB should provide matrices to the companies that outline how a company’s rating is determined. For example – X% of resolved issues = a certain rating for that particular part of the grading system, BBB should disclose to customers what information BBB is collecting, how is it used and it will affect them. BBB should follow a completely transparent policy and make some in its grading procedure and remove the section in which businesses are graded on the basis of their investment in BBB. It should also bring in a third independent party to help in reviewing process.
Furthermore, BBB should again look into the cases of Wolfgang Pack and Ritz Carlton Hotels and try to again review them, this time not judging them based on the fact whether they are members of BBB or not.
Conclusions
From this report we can conclude that customers are the most important stakeholders in both National advertising Division (NAD) and (Better Business Bureau). Both of these organizations and business itself comes into existence only because of its customers, had there been no customers there would have been any business, it is because of this only that businesses have a responsibility towards customers, but unfortunately many of the businesses today forget all their responsibilities and business ethics when it comes to making profits. It is because of this mentality only that businesses invest money in BBB so that get their ranking improved, get a better image among customers and thus earn more profits. Bureaus like BBB which were made to help customers are also responsible for cheating customers as now they refrain from doing their duty as they are offered money. These organizations like BBB which are non-government organizations have now become money making organizations. NAD is also an organization that inspects false claims made in advertisements, even customers can complain in this organization. Now the truth of BBB has come out and now it has become duty of BBB to improve its image in the market and take necessary steps for it and also change its incentive and salary structure for employees and also try to be as impartial as possible.
Reference List
Collin, C., 2015. Better Business Bureau. VermilionToday.com. Available at https://www.vermiliontoday.com/local/better-business-bureau-serving-acadiana-alerting-consumers-fort-lauderdale-fl-based-fmc [Accessed on January 2015]
Dark, J., 2013, Better Business Bureau. Available at https://www.foxbusiness.com/topics/business/companies/better-business-bureau.htm [Accessed on January 2015]
Kerr, D., 2015. Uber gets an F from the Better Business Bureau. Available at https://www.cnet.com/news/uber-gets-an-f-from-the-better-business-bureau/ [Accessed on January 2015]
Neff, J., 2011. National Ad Division Goes After Retouching of Beauty Ads. Available at https://adage.com/article/news/national-ad-division-retouching-beauty-ads/231620/ [Accessed on January 2015]
Rhee. J., 2015, Terror Group Gets ‘A’ Rating From Better Business Bureau?. Available at https://abcnews.go.com/Blotter/business-bureau-best-ratings-money-buy/story?id=12123843. [Accessed on January 2015]
Better Business Bureau News. Available at https://abcnews.go.com/topics/business/companies/better-business-bureau.htm [Accessed on January 2015]
National Advertising Division Of The Council Of Better Business Bureaus Claims. Available at https://www.rediff.com/tags/national-advertising-division-of-the-council-of-better-business-bureaus-claims [Accessed on January 2015]
The National Partner Program. Available at https://www.bbb.org/council/the-national-partner-program/national-advertising-review-services/national-advertising-division/ [Accessed on January 2015]
https://www.rediff.com/tags/national-advertising-division-of-the-council-of-better-business-bureaus-claims
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