The label on a product is an important selling point for a company's product. Of all product purchase decisions, 70 percent or more are made at the point of purchase, and the product label is an important element in assisting consumers to make those decisions. Product labels perform several functions: to identify the product; to promote the product; and to provide essential, often required, information about the product and its use. Thus, the product label may make or break the sale of a product. In addition to the marketing aspect, certain legal requirements must be met in order for the label to be compliant with federal regulations. When a company designs a label it must take all of these factors into consideration.
The brand name is the central focus on the label for identifying a product. Nevertheless, such elements as the logos, brand marks, color schemes, designs, and graphics may also serve to identify a specific brand. The opportunity to quickly identify a specific product is often important to consumers, because it allows them to choose a brand with which they have had experience or previous knowledge. Additionally, the identification of the manufacturer and/or distributor is often required and may be of interest to the buyer.
The brand name may be enough to persuade a consumer to buy a particular product, but often the label must also promote the product. Creative, attractive, and colorful
graphics are needed to allow the product to "pop out" of the wide array of products surrounding it on the shelf and gain the attention of the consumer. Persuasive characteristics or attributes of the product, such as "low fat" or "vitamin enriched," may be prominently displayed on the label to promote the sale of the product.
Although some products can be identified adequately by brand name alone, many require more complete identification of their nature and use. In short, the purpose of the label is to provide useful and relevant information about the product, as well as to help to market the product. Processed foods, patented drugs, textiles, and numerous other products are required by law to carry a fairly complete list of their ingredients. This specific information is extremely important so that consumers (for example, those who are allergic to certain ingredients) do not use a product that may harm them.
Companies may also provide additional information on their labels that is not legally required. One reason to do so is that consumer groups often publicly protest about the lack of information on labels and request more. Furthermore, when a competitor starts including more information or redesigns its label to make it more user-friendly, a company might decide to modify its own label to prevent losing sales.
Labels may also include a list of ingredients, Universal Product Code, open dating, nutritional labeling, and unit pricing. Ingredients are listed in the order of their prominence, by weight, in the product. The Universal Product Code is a combination of electronically readable lines (the bar code) and numbers identifying the product and providing inventory and pricing information for producers and resellers. Open dating informs consumers about the expected life of the product so they can avoid products that may be spoiled. This information is especially important for such perishable items as milk, eggs, and other products with a short shelf life. Nutritional labeling specifies the amount of calories, total fat, cholesterol, dietary fiber, sodium, minerals, vitamins, and protein in processed foods.
The label also discloses the percentage daily values per serving for each item based on a 2,000-calorie-per-day diet. This information can be useful for consumers who have special dietary needs or are trying to maintain a healthy, balanced diet. Although most often found on the store shelf, unit pricing is occasionally included on the product label and shows the price per unit of standard measure (weight or volume).
Product labels also provide other useful information for consumers. One of the most common features on any label is directions on how the product should be used, or if food, prepared. An example is directions on clothing indicating how to clean and store the items. Another example is directions on either prescription or over-the-counter medications that provide information on how many pills should be taken and warn of possible drug interactions.
Moreover, most products that could be toxic if ingested have a warning about this on the package, as well as instructions on what to do in case of an emergency. This type of label has two main purposes. The first is to help the consumer in case the product is improperly used. The second is to help prevent lawsuits by consumers who misuse products. Generally speaking, more disclosure about the potential hazards of a product provides the company greater legal protection. Nevertheless, no product warning, even a detailed one, can completely prevent all lawsuits.
Most companies also use one or more of three other labels on their products. The first type, known as a grade label, identifies the quality of the product by a letter, such as "grade A," or with a word, such as "prime." The second type, an informative label, uses phrases such as "Keep refrigerated after opening" to help consumers use the product appropriately. The third type, a descriptive label, describes the benefits or positive attributes of the product.
The federal government sets forth legal requirements that form a key element of product label design. Federal regulations regarding products and food have become progressively more numerous since the 1960s, due in large part to consumer activism and media attention. The most important of these regulations and laws are discussed here.
At the start of the twentieth century, responding to consumer pressure, the federal government created two government regulatory bodies: the U.S. Food and Drug Administration (FDA), which regulates interstate commerce in foods and drugs, and the Federal Trade Commission (FTC), whose role is to combat deceptive and unfair-trade practices. Both agencies have broad powers to interpret and enforce laws and regulations. Most companies make a strong effort to comply with federal laws that regulate product labels and advertising.
Numerous laws have been designed to protect consumers, including:
- Wheeler-Lea Amendment (1938) to the Federal Trade Commission Act: Controls deceptive and misleading advertising
- Lanham Trademark Act (1946): Provides protections for and regulations of brand names, brand marks, trade names, and trademarks
- Federal Hazardous Substance Labeling Act (1960): Requires warnings on the labels of all household-use products that contain potentially hazardous ingredients
- Child Protection Act (1966): Strengthens the Federal Hazardous Substance Labeling Act by prohibiting the sale of dangerous toys and other articles that are used by children, especially items containing electrical, mechanical, or thermal hazards
- Fair Packaging and Labeling Act (1966): Primarily outlaws deceptive packaging of certain consumer goods; also requires adequate information on the quantity and composition of product contents, and promotes packaging practices that make it easier to compare prices. In order to comply with the law, the following information must be included on the label: name of commodity and manufacturer, net quantity of contents expressed in the appropriate category (ounces/grams, pints, liters), and relevant ingredient information.
- Cigarette Labeling Act (1965): Requires that all cigarette packages and ads contain the statement: "Warning: The Surgeon General has determined that cigarette smoking is dangerous to your health"
- Consumer Product Safety Act (1972): Established the Consumer Product Safety Commission and gave it broad powers to carry out product tests, set safety standards, ban or seize hazardous products, and issue both civil and criminal complaints against business firms that fail to meet product safety requirements
- Federal Trade Commission Improvement Act (1975): Expanded the authority of the FTC in various ways; in particular, it gave the FTC the power to set rules concerning warranties on consumer products and provide consumers with redress in the form of class-action lawsuits
- Nutrition Labeling and Education Act (1990): Clarified and strengthened the FDA's legal authority to require nutrition labeling on foods and established the circumstances under which claims may be made about the nutrients in foods. The act covers only nutrients or substances in food that "nourish"; it does not in any way regulate nonnutrient substances in foods. Moreover, the act requires that labels disclose the amount of specified nutrients in foods. Every covered food should have a uniform nutrition label disclosing the amount of calories, fat, salt, and other nutrients. In order to make this information meaningful, the act requires the FDA to issue standards providing that uniform servings be noted on the food label. Where the full labeling is impractical, the act provides for an exemption or requires that the information be provided in a modified form. Restaurants, for example, are exempted.
- Federal Trademark Dilution Act (1995): Grants trademark owners the right to protect trademarks and requires relinquishment of names that match or parallel existing trademarks
see also Packaging ; Promotion
Kotler, Philip, and Armstrong, Gary (2006). Principles of marketing (11th ed.). Upper Saddle River, NJ: Pearson Prentice-Hall.
Kotler, Philip, and Keller, Kevin (2006). Marketing management: Analysis, planning, implementation, and control (12th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Lascu, D. N., and Clow, K. E. (2004). Marketing frontiers: Concepts and tools. Cincinnati: Atomic Dog.
Pride, William M., and Ferrell, O. C. (2006). Marketing concepts and strategies. Boston: Houghton Mifflin.
Solomon, M. R., Marshall, G. W., and Stuart E. W. (2006). Marketing: Real people, real choices. Upper Saddle River, NJ: Pearson Prentice-Hall.
Thomas R. Baird
Michael J. Milbier
"Product Labeling." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. (July 14, 2019). https://www.encyclopedia.com/finance/finance-and-accounting-magazines/product-labeling
"Product Labeling." Encyclopedia of Business and Finance, 2nd ed.. . Retrieved July 14, 2019 from Encyclopedia.com: https://www.encyclopedia.com/finance/finance-and-accounting-magazines/product-labeling
Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).
Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.
Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:
Modern Language Association
The Chicago Manual of Style
American Psychological Association
- Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
- In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.