Please help with this assignment. Please refer to attachments. Highlights are listed below.
MEMO: Concerns about the Marketing and Sales Proposal
To: Marketing and Sales Departments
From: Legal Department
Subject: Legal and Ethical Concerns Regarding Proposal to Increase Rewards Memberships in Low
We appreciate the sales and marketing teams’ desire to expand the rewards membership programs into
low‐income markets and their consideration of potentially mutual benefits to company profitability and
the communities we serve. However, there are two legal requirements and three ethical concerns we
need to address before taking this community outreach proposal further.
The Two Legal Requirements
Because the program you are proposing makes specific claims about the benefits of membership and
presumably captures personal data, we begin with a discussion of two legal requirements:
- Truth in advertising
- Data collection and privacy
Truth in advertising.
The U.S. Federal Trade Commission requires that all advertising be truthful and be supported by
Pursuant to that, we require that ABC Rewards Membership marketing materials must meet these
requirements drawn from our interpretation of the law.
Requirement 1: We need to be precise in making statements about the program’s benefits.
Requirement 2: Commercial speech must be non‐deceptive.
Requirement 3: Advertisers must be able to substantiate direct or implied superiority claims.
While the plan we reviewed is high level and does not detail a complete advertising campaign, some of
the themes outlined in the “Ad Lines” section appear to fail the test of these requirements. Please
Data collection and privacy.
Because this will be a national program, we must ensure compliance with the most restrictive laws on
data collection and privacy. Those laws are found in the state of California. According to the Office of the
Attorney General of California, the California Consumer Privacy Act of 2018 (CCPA) secures new privacy
rights for California consumers including “the right to know about the personal information a business
collects about them and how it is shared and used, the right to delete personal information collected
from them (with some exceptions), the right to opt out of the sale of their personal information, and the
right to non‐discrimination for exercising their privacy rights.” As such, we need to ensure we are not
collecting any more data than is needed for the purposes of contacting consumers and shipping
merchandise. We must make it convenient and accessible for consumers to opt out of data sharing.
Even if we are in full compliance with the CCPA, we are particularly concerned about marketing your
program in high schools to children under the age of 18. While high‐school aged youths are among our
biggest customers, they are not legal adults and the contractual terms a rewards membership program
would entail, not to mention the data you would collect, would put the schools in an awkward position.
Schools are mandated to protect the privacy and data of their students, including those who are 18.
If you plan to market a rewards program that supports local high schools, you are required to come up
with an alternative approach that does not require the kind of membership that students under 18 must
purchase and that they must share sensitive data to use.
The Three Ethical Concerns
Beyond legal requirements, there are also three ethical concerns that need to be addressed.
- Direct marketing to low‐income populations
- Transparency in language
- Collection and use of consumer data
Direct marketing to low‐income populations.
The populations you are targeting are financially vulnerable and should be approached only if the
company can add value to their lives. It is essential that the company does not come across as practicing
predatory marketing. ABC will need to build trust and show that the membership program will not be
another revenue‐generating opportunity that disadvantages these consumer groups by making
promises of paybacks to individuals and communities that do not come to fruition. Furthermore, we
need to ensure that rewards do not encourage excessive non‐discretionary spending among individuals
who are struggling just to make ends meet.
An essential aspect of ethically marketing to low‐income populations is ensuring that the program is
culturally, economically, and socially appropriate to the market. As such, we need to demonstrate that
the goals of the program align to the areas these consumers desire to improve. At the same time, we
must consider that low‐income populations are extremely diverse and not everyone will share the same
We know, for example, that in our current middle‐ and upper‐income rewards program markets, 27.8%
of loyalty members never redeem their points. They enjoy special discounts on purchases that we
sometimes apply to products for card members, but they don’t apply their points. 67% of these non‐
redeemers are on auto‐renewal plans, which means they choose to pay for yearly memberships they do
not fully use. And 12% of our non‐redeeming members who do renew do not make enough purchases
with built‐in discounts to recoup the cost of their membership.
We do not believe the same under‐redemption and under‐use practices should occur in a low‐income
market. In addition to the ethical issues, we risk negative public relations and other reputation hits if our
rewards memberships end up costing low‐income customers more than they redeem.
Another area of concern on this issue is your plan for rewarding local business owners for signing up
members. The fee for processing payments is standard business. The incentives for signing up members
can lead to abuses. For example, if a store employee lives in the neighborhood and that employee gets a
customer to join the rewards program, why does the owner receive points on his or her rewards
membership account? And why do store owners get a free membership? We have similar concerns on
this front around giving discounted memberships to influential high school students.
Please suggest changes to the issues we listed above. It is important at the very least that customers in
this market break even on their memberships and that incentives for signing up new customers are
Transparency in language.
It is the responsibility of the company to ensure that all consumers understand what they will receive
from their rewards memberships. Standard language and exchange for middle‐income and high‐income
populations will need to be adjusted for the low‐income population that may have had fewer
educational opportunities or less experience with managing personal finances. All terms need to be
reviewed with low‐income populations to ensure their understanding of what the terms indicate and
what their obligations are. Care needs to be taken to clearly articulate the standard “fine print” in
culturally and educationally appropriate language without being condescending or misleading.
We are particularly concerned about the complexities of the pro rata coupon plan described in the
memo. While we understand a contract may make it clear that the method is in use, which would shield
us at least from a deceptive practice frame, we are concerned at the complexity of the method.
We are also concerned that language in the proposal about plans for donations to local charities and
schools is vague about how precisely that would work. We know that details are to be worked out, but if
you do not have a clear and transparent vision here, you risk not being transparent on rollout. What will
the contributions be based upon? How will they be tracked and reported? What kind of cost will these
be recorded as for TBL purposes?
Please address the pro rata coupon issue and the need for clarity around how charitable contributions
will be determined.
Collection and use of consumer data.
Beyond legal requirements, it is critical to ensure that the collection and use of consumer data does not
create vulnerabilities for the low‐income populations. Behavioral profiling is a key issue related to
vulnerable populations. It enables companies to offer goods at different prices to extract the most
revenue from everyone—a concept known as price discrimination. Given the existence of such
disreputable practices, we must consider that some low‐income populations may feel targeted and may
not wish to engage in data collection practices many companies use. As such, the company must use
culturally and linguistically appropriate marketing and must design messaging that considers the
socioeconomic barriers faced by the low‐income populations.
We mentioned earlier our concerns with data in the context of pre‐adults, but we are also concerned
specifically about the plan to ask parents (and grandparents, we assume) for information about their
children’s or grandchildren’s ages and birthdates as part of the membership sign up.
The minimal amount of information you need to sell, issue, and renew a membership rewards card and
number to a consumer is their name, age, address, and if they wish to provide a credit card or ACH
checking account number for auto‐renewals.
Please review the birthday dates idea. It is okay to ask for this kind of additional information, but you
must explain how that information will be used, protected, and whether we will share it with other
product lines in the company or third parties.