A brief Article discussing different aspects of the Consumer Union of the United States and its various activities

Warne, Colston E.

English

University of San Diego

San Diego Law Review Volume 8 Issue 1 Consumer Protection Article 6 1-1-1971 The Impact of Consumerism on the Market Colston E. Warne Follow this and additional works at: https://digital.sandiego.edu/sdlr  Part of the Consumer Protection Law Commons Recommended Citation Colston E. Warne, The Impact of Consumerism on the Market, 8 SAN DIEGO L. REV. 30 (1971). Available at: https://digital.sandiego.edu/sdlr/vol8/iss1/6 This Article is brought to you for free and open access by the Law School Journals at Digital USD. It has been accepted for inclusion in San Diego Law Review by an authorized editor of Digital USD. For more information, please contact digital@sandiego.edu. The Impact of Consumerismon the MarketCOLSTON E. WARNE*Thirty-five years have passed since Consumers Union of UnitedStates (CU) ambitiously set out to develop a national consumerconsciousness from a two-room New York office. CU was the off-shoot of a disoriented predecessor, Consumers Research, which ahalf-dozen years earlier had pioneered in establishing consumertesting. The first decade of CU's development was a precarious one.It was faced by an advertising boycott and by the designation of theorganization as a subversive effort undermining the American wayof life.Somehow the organization managed to weather the initial periodof skepticism, a second period of war-induced product shortages,and today has a monthly circulation approaching 2,000,000 copies, anannual budget of $12,000,000 and a staff of 350. This new social in-vention of brand-name product testing by an organization ownedand controlled by consumers now has its counterparts in most tech-nically advanced countries.From its inception CU has accepted no advertising and has pur-chased its test samples in the open market. Its directors and staff* B.A., M.A., Cornell University; Ph.D., University of Chicago; Presi-dent of United States Consumer Union, 1936 to present.February 1971 Vol. 8 No. IImpact of ConsumerismSAN DIEGO LAW IMVIEWare not permitted to have connections with business enterpriseswhich would affect their independent judgment. The central thrustof the organization has been that of ascertaining consumer purchaseplans through an annual questionnaire, of learning from the mem-bership their testing priorities and of bringing test techniques andsurveys to bear which will ascertain the character of products, theproblems of safe use, the pricing patterns encountered in the mar-ket, the adequacy of guarantees and warranties and the availabilityof suitable substitutes.In the presentation of the material to Consumer Reports, CU hassought to steer a course between the technical accent of the engi-neer and the brevity demanded by the consumer on the run. The or-ganization has sought to blend sobriety with good humor. A recentsurvey conducted by Benson and Benson of Princeton, New Jersey,reflects the bewilderment of American consumers in the market andtheir desire for assistance in buying economically. In all, 92% sub-scribed "to know what to look for in order to tell a good productfrom a bad one." The survey revealed that 54% expected to savemoney through reading Consumers Reports. The same number con-tended that they could not rely on what advertising or the salesmentold them. The Benson and Benson study also revealed the highlyeducated and highly articulate audience which CU is reaching. Themedian age was 40; the median income $14,336. In all, 79% had acollege background. Some 63% were in professional or managerialoccupations.In CU's thirty-five years of existence very little scholarly activityhas been devoted to the measurement of the impact of consumertesting upon consumer purchasing. Eugene Beem of the WhartonSchool in the early 1950's did study the phenomenon of consumertesting in a doctors thesis.1 Sylvia Lane of the University of South-ern California measured CU's impact upon manufacturers in themiddle 19501s.2 Hugh Sargent of the University of Illinois soughtto measure the extent to which buyer purchasing patterns were al-L. E. Beem, Consumer Financed Testing and Rating Agencies in theUnited States, (Doctoral dissertation presented to University of Pennsyl-vania, 1951).2. S. Lane, A Study of Selected Agencies that Evaluate Goods Qualita-tively in the United States (Dissertation presented to faculty of the Gradu-ate School of the University of Southern California, in partial fulfillmentof the requirements for a Ph.D. in Economics, January, 1957).tered.3 Harry Stricding of the New York University GraduateSchool of Business sought to discover the impact of their testing or-ganization on the marketers of major appliances.4 Thomas Juster ofthe National Bureau of Economic Research conducted an extensivestudy of the purchase expectations of a sample of CU's membership,feeling that it was reaching a group whose purchase intentionstended to anticipate major market shifts.While all of these studies did throw some light on consumer test-ing activities, the truth is that very few scholars have been greatlyconcerned with the effect of consumer testing on business. Exceptfor Hans Thorelli of Indiana University, who is now comparing themarket impact of CU with that of a number of foreign organizations,and Professor Ruby Morris of Connecticut College, who is measur-ing CU's impact, CU has been largely neglected by the scholarlyworld.The reason may lie in the very recent emergence of "consumer-ism" as an important force in the economy. CU has, after all,doubled its roster of subscribers in the last five years. A part of theneglect may also be due to the assumptions of economic theorists asto the nature of the market. After all, American brand-name adver-tising, a most powerful market force, was long neglected before Ed-ward Chamberlain gave it attention. Even today one may porethrough most volumes on economic theory and observe little men-tion of the economic impact of advertising.Whatever the reasons, it does seem clear today that consumer test-ing has speeded many transactions by giving consumers a basis forreaching a decision before entering a store. Consumer testing hasalso measurably altered market shares. It has stimulated thegrowth of certain innovations and has retarded the growth of oth-ers, not as useful to consumers. Consumer testing has had an im-pact on levels and types of advertising appeal and on resource allo-cation. It has given a new meaning to freedom of choice and toconsumer sovereignty. In some small way, it may even have re-tarded the accent on style and have given impetus to a new accenton safety.3. H.W. Sargent, The Influence of Consumer-Product Testing and Re-porting Services On Consumer Buying Behavior (Thesis presented tofaculty of the Graduate College of the University of Illinois for Ph.D. inCommunication, 1958. The research was implemented by research grantsand fellowship from Consumers Union).4. H.L. Strickling, Implications of the Existence of Consumers Unionfor Marketeers of Major Appliances and Related Consumer Durables(Thesis presented to the faculty of the Graduate School of Business Ad-ministration, New York University, in partial fulfillment of the require-ments for M.B.A., 1965).Impact of ConsumerismSAN DIEQO LAW REVIEWThe degree and intensity of this impact of testing vary greatly byfields. From all the evidence CU has observed, food tests have inall probability not had a great market effect. CU may induce con-sumers to stay away from fish sticks because it recently found inmany brands a high level of fecal contamination of the product.(In September, 1970, we found half of the 40 nationally-sold brandswith such contamination).5 In the main, however, food buyers areprone to do their own testing rather than to go to the trouble oflooking up CU's test ratings.Similarly, in the field of purchasing children's shoes, we foundsome differences between brands but recognized that the main valueof CU's article might flow from its advice in furnishing guides as toproper fitting without the use of a fluoroscope. 6There are, however, areas in which brand-name testing has todaya substantial impact. In this connection Strickling stated: "Con-sumers Union has emerged at least in some markets as a factor inwhich consumers put their trust, equal to and in some cases exceed-ing in influence the traditional factors of store name and brandname." This new loyalty is especially great among those withhigher incomes and higher education, affecting those with greatermobility and greater sophistication and the greater per capita num-ber of appliances.In the early study of Beem and Ewing some twenty years ago, 27out of the 52 sales managers questioned thought a favorable ratinghad a great or measurable effect on their sales. Some 35% of thesales managers thought that a bad rating had an effect on theirsales. The greatest sensitivity to ratings was found among thelarger mail order houses.Sylvia Lane in her study contended that consumer testing agen-cies have influenced firms to improve product quality by pinpoint-ing product defects and by listing the attributes of competitive prod-ucts which are deemed superior. She contended that the real in-come of consumers was measurably augmented by the buying coun-sel given.Most of the studies thus far undertaken allude to the great5. 35 CoNsumE REPORTS 545 (Sept. 1970).6. Id. at 512.7. H.L. Strickling, supra note 4.surprise of retailers in first noting the marked effects of favorableratings. Thus a store's inventory of a top-rated brand of air condi-tioner, television set or high fidelity speaker may be completelywiped out within several days after the test. An automobile sales-man accustomed to consumers asking many questions about theproduct may be surprised to discover consumers, checkbook in hand,interested in a particular model with particular options and con-cerned solely with one question-the price.From its thirty-five years of experience, CU has learned muchconcerning the areas in which consumers wish product information.At the top of the list is, of course, the motorcar, followed by majorappliances and small appliances. Articles in the field of medicaland health information will also be high on the list.One rule of thumb on which the organization operates is that ofwatching the competitive advertising claims in a given field. Wher-ever a battle of claims and counterclaims exists, whether over en-zymes, phosphates or "tigers" in gasoline tanks, the demand is toconduct a test, or resolve the dispute impartially rather than for theconsumer to accept the loudest voice.It is only fair to recognize that a consumer testing organization isby no means today's panacea for all of the nation's market ills. CUdoes exercise an unknown but substantial leverage in the market.It does not possess a perfected instrument of social change. Con-sumer testing is principally employed by intelligent, affluent con-sumers who would fare reasonably well in the marketplace, were itnot to exist. Those most exploited in the market, those who are themost ardent supporters of brand names, are prone to be those withthe lowest income. They are not typically Consumers Union mem-bers.The consumer testing movement of today focuses its attentionrather heavily on the goods of an affluent society-automobiles, skis,television sets. While CU may competently puncture many bub-bles of over enthusiastic sales promoters, it has not given adequateattention to the nutritional needs of consumers or to the environ-mental hazards that all buyers face. CU's output has in the pastbeen somewhat narrowly focused. It has accepted the allegiance ofa limited opinion-forming segment of the community that is moreinterested in the clarity and fidelity of television pictures than inthe problem of what is televised. Becoming as it has the bible ofthe affluent, it has not paid adequate attention to the needs of otherconsumers. Perhaps in retrospect CU has been too dignified, tooeager to keep a calm, dispassionate tone. For a quarter of a centuryit has been pleading for uniform USDA quality grades on foods, forImpact of ConsumerismSAN DIE O LAW REVIEWcompulsory federal inspection of foods and for a vital federal con-cern over product safety. Yet it was not until the dramatic flair ofRalph Nader was brought to bear that substantive results wereforthcoming.For many years CU has testified at hearings and served on govern-ment advisory committees in the hope that consumer-oriented legis-lation would emerge. Today's flood of bills in the field of autosafety, food safety, toy safety, medical safety and the protection ofconsumers against fraud and deception reflects a new political re-sponse to the consumer. CU has only planted the seed of an idea.Other direct action groups aided by politically ambitious Congress-men have brought the result.Ralph Nader somewhere declared the new consumer movement oftoday is the meeting place of the middle class desirous of carefultests and rational purchasing, the Blacks desirous of redressing con-sumer grievances and freedom from economic exploitation by mer-chants, and of conservatives feeling concern about the waste of re-sources and bad social deportment of corporate business.CU has undoubtedly been the vehicle of the middle class. It isbecoming a new force seeking to create an altered power balance bygiving consumers a better knowledge of the product. Will the arti-cle function successfully?-what dangers does it bring with it?-what costs?-what benefits?-what are the alternatives?-is it ac-curately promoted?-what guarantee does it carry? CU's findingsare, of course, imperfect. They may not give adequate weights tothe attributes desired by consumers. CU may not have a fully ade-quate sample. CU's test techniques may not be fully perfected. CUmay not cover all the brands in the market. Qualities may changesubsequent to CU's tests.CU has nonetheless successfully launched a new movement, thefull implications of which remain to be seen. Perhaps the best in-sight into this future was given in June 1966 by Donald F. Turner,then Assistant U.S. Attorney-General in charge of Antitrust. Mr.Turner, now professor of law at Harvard, spoke before the FederalBar Association:We all know that such consumer research organizations as Con-sumer Reports tend to promote informed consumer judgment, andwe can reasonably surmise that reports of that kind, if generallycirculated, would significantly limit the ability of advertising to en-hance degrees of monopoly power, to say nothing of enabling con-sumers to spend their dollars more fruitfully ....A major difficulty is that these publications are produced by non-profit organizations and that they frequently face difficulties inobtaining the funds required for adequate testing and evaluation.One prospective solution would be governmental efforts in this di-rection, either direct governmental evaluation and publication, orfinancial support for private organizations of this type ....Mr. Turner was contending that excessive advertising outlaysmay well have a significant impact on the degree of market powerexercised in many industries and that it may impair the functioningof a competitive economy. His proposal was based on the theorythat freedom of entry constitutes a pivotal factor in maintainingworkable competition. The impact of extensive brand-name ad-vertising competition, he affirmed, is far different from price rivalrybetween competitive brands. The excessive din created on behalf ofestablished products tends to limit the salability of cheaper but rel-atively unknown brands. Either the newcomer has to incur heavyselling costs in penetrating a market or cut prices. Heavy advertis-ing thus constitutes a barrier to entry and eliminates a major com-petitive price restraint. The considerable advantage already pos-sessed by established products tends to be accentuated and moremessages per dollar can be provided by the larger firms throughquantity discounts in the media.In essence, Professor Turner was suggesting that governmentalpolicies be directed toward the broadening of the scope of test or-ganizations in order to remove the uncertainty which surrounds therelative merit of products-an uncertainty which makes consumerspeculiarly prone to accept the blandishments of establish2ed brand-names; hence enhancing monopoly power. Once advertising expen-ditures have built up deeply entrenched consumer preferences, newcompetitors find market acceptance difficult. If new and accuratesources of consumer information are made available, rational choicemay ensue and market shares would depend upon efficiency and su-periority of a product rather than quantity of effective advertising.Those connected with Consumers Union are bound to be flatteredby the pivotal role in antitrust enforcement suggested by Mr. Turn-er's thesis. The world organization of consumers, International Or-ganization of Consumers Unions, has long been accustomed to theuse of extensive government subsidies for consumer testing. InNorway, for example, half of the cost of consumer testing is carriedby the government. Yet Mr. Turner has perhaps excessive faith inthe power of consumer testing to search out and discover success-ful innovators to restore rationality and competition in the market-place on a scale that would approximate the basic assumptions ofImpact of ConsumerismSAN DIEGO LAW REVIEWeconomic theory-with rational buyers in full knowledge of alterna-tives confronting rational sellers.It should be emphasized in closing that consumer testing is by nomeans a patented tool owned by Consumers Union, nor is it by anymeans a new tool. It is today employed by purchasing agents ofcorporations, of universities, of hospitals and hotels. It is used bygovernment purchasing agents. The consumer interest in producttesting was born of the recognition that product experience may besystematically measured and fairly reported. As a non-profit or-ganization run largely by professors in American universities (13out of 21 of our Board), we welcome the participation in consider-ing the problems of the consumer by those interested in the legalaspects of consumer research.

The Impact of Consumerism on the Market

https://digital.sandiego.edu/cgi/viewcontent.cgi?article=2302&amp;context=sdlr

The Impact of Consumerism on the Market

Abstract

Similar works

Full text

Available Versions

University of San Diego