This Document Contains Chapters 15 to 16 CHAPTER 15 CONSUMER RELATIONSHIPS WHAT DO YOU THINK? POLLING QUESTION When I have a good experience with a brand, I reward it by telling my friends how great it is. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 List and define the behavioural outcomes of consumption. LO2 Know why consumers complain and the ramifications of complaining behaviour for a marketing firm. LO3 Use the concept of switching costs to understand why consumers do or do not repeat purchase behaviour. LO4 Describe each component of true consumer loyalty. LO5 Understand the role that value plays in shaping loyalty and building consumer relationships. SUGGESTED LECTURE OPENER During an economic downturn, one of the consumer relationships that may take a hit is brand loyalty. When customers are feeling the pressures of cost, they may turn to low-priced, bargain products rather than stick with their favourite brands. However, prices can only go so low, downturns don’t last forever, and the strongest brands tend to do well even during recessionary times. Marketers need to consider how they can earn long term, loyal consumers now and for the future. Recent research indicates that one powerful way to do this is through social networking. Consumers are increasingly using the Web to collect and put out information related to products, goods, and services. Building a social community around a brand helps promote awareness and allows marketers to keep brands relevant and targeted. [Source: Helen Leggatt, “Rebuild Brand Loyalty with Social Media,” Biz Report, August 19, 2010, http://www.bizreport.com.] KEY CONCEPTS WITH POWERPOINT® SLIDES Slide 1 Slide 2 LO1. List and define the behavioural outcomes of consumption. Outcomes of Consumption Slide 3 Exhibit 15.1 expands the disconfirmation framework traditionally used to explain consumer satisfaction. This particular chart divides the different concepts into three groups. 1. Predominantly cognitive—these include the actual disconfirmation process that results from comparing actual performance with expected performance. 2. Affective reactions—the evaluation process could lead to any number of affective outcomes. 3. Behaviour—critical to the success or failure of competitive enterprises. Slide 4 LO2. Know why consumers complain and the ramifications of complaining behaviour for a marketing firm. Complaining and Spreading WOM Slide 5 Complaining Behaviour Complaining behaviour occurs when a consumer actively seeks out someone with whom to share an opinion regarding a negative consumption event. Slide 6 Complainers Fewer than one-half of customers experiencing some dissatisfaction complain to management. Only 17% of healthcare consumers complain when experiencing some problem with the service or care they are receiving, and a recent survey among restaurant consumers suggests that no more than 5% of consumers with a problem complain. When a consumer complains, the marketer has a chance to rectify the negative situation. A truly consumer-oriented organization should encourage customers to complain. The Result of Complaining Exhibit 15.2 provides a summary of what happens when consumers do or do not complain. The following list gives advice to service providers for handling consumer complaints effectively: 1. Thank the guest for providing the information. 2. Ask questions to clarify the issue. 3. Apologize sincerely. 4. Show empathy for the customer’s situation. 5. Explain the corrective action that will take place. 6. Act quickly. 7. Follow up with the customer after the corrective action. Slide 7 Slide 8 What can I do in class? Q: Ask students whether they have ever worked at a place where a customer complained. How did they handle it? What lessons can they share with the class? A: Answers will vary. Many students that work with the general public (e.g., retail, restaurants, service industries) should have a story to tell. The Result of Not Complaining So, what happens when the consumer does not complain? Let’s return to the noisy hotel room example from the book. A customer may simply put up with the inconvenience and end up leaving miserable after a poor night’s sleep. The result is that the hotel will never know that the customer was not pleased with their stay. Revenge If a consumer’s verbal complaint does not get results, some may retaliate in the form of revengeoriented behaviours. Rancorous revenge is when a consumer yells, insults, or makes a public scene in an effort to harm the business. In retaliatory revenge, a consumer becomes violent with employees and/or tries to vandalize a business. Slide 9 Word-of-Mouth Negative word-of-mouth (negative WOM) takes place when consumers pass on negative information about a company from one person to another. Some estimates suggest that a consumer who fails to achieve a valuable consumption experience is likely to tell their story to more than 10 other consumers. Positive WOM occurs when consumers spread information from one person to another about positive consumption experiences with companies or products. Conventionally, negative WOM is seen as more commonplace than positive WOM. Slide 10 Negative Public Publicity When negative WOM spreads on a relatively large scale, it can result in negative public publicity. Negative public publicity could even involve media coverage. Thus, most large companies have employees whose job is to attempt to quell or respond to negative public publicity. Today, consumers can easily make their complaints public by using the Internet, and numerous websites exist that facilitate this type of behaviour. One such site is www.consumer.ca. What can I do in class? Have students visit the Consumer Association of Canada’s website and select one or two current topics for class discussion. The following are some alternative courses of action for a firm to use to handle negative public publicity: 1. Do nothing; the news will eventually go away. 2. Deny responsibility for any negative event. 3. Take responsibility for any negative events, and be visible in the public eye. 4. Release information allowing the public to draw its own conclusion. Doing Nothing or Denying Responsibility Doing nothing is neither the best nor worst option. Taking action seems to be a responsible thing to do, but it’s possible that the action can backfire. Even when the basis for negative public publicity is simply rumour, denying any responsibility can be a very bad idea. Taking Responsibility If consumers blame the company for the event surrounding the negative public publicity, then the potential repercussions appear serious. However, public action taken to deal with any consequences of a negative event can mollify any negative effects. Discuss the Tylenol example from 1982. Many students will not know about this case since it happened before they were born. Releasing Information Sometimes, a company may be able to release some public relations counter-information to the media that allows consumers to make up their own minds about the potential source of any negative publicity. If done properly, the company does not publicly deny any allegation about the event and instead insists that actions are being taken to get to the bottom of the event. Discuss the Pepsi event from the book. Slide 11 Participating in Negative WOM Consumers who spread negative WOM without complaining to the company itself are particularly likely not to ever do business with that company again. Implications of Negative WOM One reason why consumers share negative WOM is to prevent other consumers from falling victim to a company. Thus, negative WOM can hurt sales. However, this is not the only potential negative effect. Negative WOM can also damage the image of the firm. LO3. Use the concept of switching costs to understand why consumers do or do not repeat purchase behaviour. Switching Behaviour Slide 12 Switching in a consumer behaviour context refers to those occasions when a consumer chooses a competing choice rather than the previously purchased choice on the next purchase occasion. If a consumer visited Burger King for lunch last Tuesday and chooses Wendy’s on Saturday, the next time he or she goes out for lunch, the consumer has practised switching behaviour. Slide 13 Switching costs are the costs associated with changing from one choice (brand/retailer/service provider) to another. Switching costs can be divided into three categories: 1. Procedural 2. Financial 3. Relational Procedural Switching Costs These costs involve expended time and effort. Although Apple computers have a stellar reputation for being easy to use, most computer users stick with PC models despite this reputation to avoid spending time learning a new system. Financial Switching Costs These costs consist of the total economic resources that must be spent or invested as a consumer learns how to obtain value from a new product choice. One example is the need to purchase new video games when switching from one gaming platform to another. Relational Switching Costs This term refers to the emotional and psychological consequences of changing from one brand/retailer/service provider to another. A sales associate who knows customers by name and remembers their preferences can be a key asset in customer retention for a store. Understanding Switching Costs Exhibit 15.3 demonstrates the conventional consumer behaviour theory explaining switching costs. Consumers become dissatisfied for any number of reasons, and these reasons and dissatisfaction determine how likely a consumer is to return on the next purchase occasion. Slide 14 Slide 15 What can I do in class? Q: Ask students how many have switched as users from PC to Apple, or vice versa. How do procedural switching costs influence loyalty to computer brands? A: Answers will vary. Either user, PC or Apple, would have to learn a new operating platform so the effort previously used to learn the first operating platform would be lost. When consumers master a technologically complex product, they may become very resistant to switching. Satisfaction and Switching Exhibit 15.4 summarizes the vulnerability of a company to consumer defections based on the interaction between switching costs, competitive intensity, and consumer satisfaction. Switching costs are dependent on the amount of competition or competitive intensity. Competitive intensity refers to the number of firms competing for business within a specific category. At one time, consumers had only one choice for telephone service: Bell Canada. Slide 16 LO4. Describe each component of true consumer loyalty. Consumer Loyalty Slide 17 Customer Share Customer share is the portion of resources allocated to one brand from among the set of competing brands. The share of wallet is sometimes used to refer to customer share. Exhibit 15.5 demonstrates how the concept works. Slide 18 Slide 19 Consumer Inertia Consumer inertia means that a consumer will tend to continue a pattern of behaviour until some stronger force motivates him or her to change. Slide 20 Loyalty Programs A loyalty card/program is a device the keeps track of the amount of purchasing a consumer has had with a given marketer. Once some level is reached, a reward is offered, usually in terms of future purchase incentives. The consumers in Exhibit 15.5 repeat similar behaviour and thus appear to be loyal to Starbucks, but are they really loyal? This question is the focus of the next section. What can I do in class? Q: Ask which students have a loyalty card. What is the value of the loyalty card? What types of rewards do they receive for being a loyal customer? A: Answers will include everything from grocery shopping, pet stores, drug stores, Scene cards, Air Miles, and so forth. Rewards will also vary. Customer Commitment A sense of attachment, dedication, and identification with a brand is known as customer commitment. Exhibit 15.6 depicts the components of loyalty. Customer share is behavioural, and commitment is an affective component of loyalty. Truly loyal customers are like gold to a company. Slide 21 Slide 22 Anti-Loyalty Anti-loyal consumers are those who will do everything possible to avoid doing business with a particular marketer. Anti-loyalty is often motivated by a bad experience between a consumer and the marketer in which the marketer could not redress the problem. Slide 23 Value and Switching Exhibit 15.7 reproduces the centre portion of the CVF and clearly shows that value plays a role in the post-consumption process. For a host of reasons, consumers may end up maintaining a relationship with a brand even if they experience dissatisfaction; however, consumers do not maintain relationships in which they find no value. Slide 24 Slide 25 LO5. Understand the role that value plays in shaping loyalty and building consumer relationships. Value, Relationships, and Consumers Slide 26 Relationships and the Marketing Firm Marketers have come to realize that the exchanges between a business and a consumer comprise a relationship. Two factors help to make this clear: 1. Customers have a lifetime value to the firm. 2. True loyalty involves both a continuing series of interactions and feelings of attachment between the customer and the firm. What can I do in class? Q: Ask students if they have a particular company with which they have a longstanding relationship. Why do they feel such loyalty to the firm? A: Answers will vary. Discuss value along with the type of relationship they share. Value and Relationship Quality Relationship quality represents the degree of connectedness between a consumer and a retailer. When relationship quality is high, the prospects for a continued series of mutually valuable exchanges exist. Relationship quality can be thought of as capturing the health of the relationship so that it will likely continue. Slide 27 There are many kinds of relationships between consumers and salespeople. The critical key to a relationship with a consumer could in fact be the salesperson. By having salespeople work to build relationships with consumers, the company also benefits. Slide 28 A healthy relationship between a consumer and a marketer enhances value for both parties. Exhibit 15.8 displays some of the characteristics of a healthy marketing relationship, such as the following: • Competence • Communication • Trust • Equity • Personalization • Customer-oriented For example, a good hair stylist can build relationship quality through value-added services, including knowing a consumer’s preferences. What can I do in class? Q: Besides the hair stylist example, what are some other examples where the marketer has used these relationship quality characteristics to build a healthy marketing relationship? A: Answers will vary. VIDEO CLIP PowerPoint Clip from Travelocity Run time 1:42 minutes Slide 29 Travelocity is a pioneering brand in the world of Internet travel businesses. Travelocity has maintained its brand leadership by embracing a stance of traveller advocacy. The Travelocity Guarantee promotes the idea that what you book will be right, or Travelocity will work with their partners to make it right. Ask your students: 1. How does the Travelocity Guarantee reinforce brand loyalty? Answer: Consumers can rely on the brand to protect their travel interests with a minimal level of involvement on their part. This means a decrease in consumer risk and an increase in customer value, and thus a likely repeat purchase. 2. What kind of response has Travelocity gotten from the launch of the guarantee program? Answer: Travelocity hit a 37% revenue growth the quarter of the launch and also garnered a lot of positive buzz and “free” launch press because it was a company doing what it should be doing—backing up its product. CHAPTER 16 CONSUMER AND MARKETING MISBEHAVIOUR WHAT DO YOU THINK? POLLING QUESTION Consumers are generally more ethical than the typical businessperson. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 Understand the consumer misbehaviour phenomenon and how it affects the exchange process. LO2 Distinguish between consumer misbehaviour and consumer problem behaviour. LO3 Discuss the interplay between marketing ethics and consumerism within the marketing concept. LO4 Comprehend the role of corporate social responsibility in the field of marketing. LO5 Understand consumer protection, privacy, and the regulation of marketing activities. LO6 Comprehend the major areas of criticism to which marketers are subjected. SUGGESTED LECTURE OPENER Every year Fortune magazine publishes a list of the world’s most admired companies. While this list celebrates companies’ positive behaviour, many might not realize that this edition of the magazine also functions as a watchdog against companies’ misbehaviour. The magazine lists the top 10 best and the top 10 worst performers in each of the following categories: • Innovation • People management • Use of assets • Social responsibility • Management quality • Financial soundness • Long-term investment • Product quality • Global competitiveness [Source: “World’s Most Admired Companies,” Fortune, March 22, 2010, http://money.cnn.com/magazines/fortune.] KEY CONCEPTS WITH POWERPOINT® SLIDES Slide 1 Slide 2 LO1. Understand the consumer misbehaviour phenomenon and how it affects the exchange process. Consumer Misbehaviour and Exchange Slide 3 Consumer misbehaviour may be viewed as a subset of the human deviance topic. It is considered a subset because the term covers only negative or destructive deviance and does not consider positive deviance. Misbehaviour violates norms and also disrupts the flow of consumption activities. For example, a consumer who is screaming loudly and cursing at a waiter because his or her order is wrong will likely make other consumers feel uncomfortable. Researchers sometimes call misbehaviour the “dark side” of consumer behaviour, and there are certainly many ways to describe it. Slide 4 The Focus of Misbehaviour: Value A central component for understanding consumer behaviour is value. How consumers obtain value is the key issue. In each case, consumers seek to maximize the benefits they receive from an action while reducing their own costs. Slide 5 Consumer Misbehaviour and Ethics Moral Beliefs Moral beliefs, or beliefs about the perceived ethicality or morality of behaviours, play important roles in ethical decision making. The effect of moral beliefs on ethical decision making and consumer misbehaviour is shown in Exhibit 16.1. A consumer’s moral beliefs comprise three components: 1. Moral equity—Beliefs regarding an act’s fairness or justness. Do I consider this action to be fair? Is it “fair” for me to shoplift this item? 2. Contractualism—Beliefs about the violation of written (or unwritten) laws. Does this action break a law? Does it break an unwritten promise of how I should act? Is shoplifting illegal? 3. Relativism—Beliefs about the social acceptability of an act. Is this action culturally acceptable? Is shoplifting acceptable in this culture? Does it matter if it is acceptable in this culture? Is it acceptable to me? Slide 6 Slide 7 Ethical Evaluations Once a consumer enters into a situation that calls for an ethical decision, he or she considers the various courses of action. Deontological and teleological evaluations then occur. 1. Deontological evaluations—Focus on specific actions: Is this action “right”? As such, deontology focuses on how people accomplish their goals. 2. Teleological evaluations—Focus on the consequences of the behaviours and the individual’s assessment of those consequences. Four major issues are involved with teleological evaluations: a. The perceived consequences of the actions for various stakeholders b. The probability that the consequence will occur c. The desirability of the consequences for the stakeholders d. The importance of the stakeholder groups to the consumer Slide 8 Motivations of Misbehaviour Why do consumers misbehave? Researchers Fullerton and Punj offer the following motivations: • Unfulfilled Aspirations—Anomie is the concept as a response to rapid cultural change and an explanation for deviance. Some consumers turn to deviant actions (or actions deemed inappropriate by society) in order to achieve goals that society has set. • Thrill-seeking—The thrill of the action may lead consumers to misbehave. • Lack of Moral Constraints—Consumers who don’t have a set of moral beliefs that are in agreement with society’s expectations and see no problem with their behaviour. • Differential Association—Explains why groups of people replace one set of acceptable norms with another set that others view as unacceptable. • Pathological Socialization—Consumers may view misbehaviour as a way to seek revenge on firms. • Provocative Situational Factors—Crowding, wait times, excessive heat, and noise can contribute to misbehaviour. • Opportunism—The outcome of a deliberate decision-making process that weighs the risks and rewards of the behaviour. Slide 9 What can I do in class? Q: Ask students to search online for evidence of misbehaviour. Have their favourite celebrities been caught recently for shoplifting or disorderly conduct? Is the cause of the misbehaviour clear? A: Answers will vary. Students may speculate on the motivations behind the misbehaviour of celebrities more readily than their own consumer behaviour. LO2. Distinguish between consumer misbehaviour and consumer problem behaviour. Distinguish Consumer Misbehaviour and Problem Behaviour Slide 10 Although the line between consumer misbehaviour and problem behaviour can be somewhat blurred, we distinguish between the two areas by considering the issue of selfcontrol. 1. Consumer misbehaviour—Behaviours deliberately harmful to another party in an exchange process. 2. Consumer problem behaviour—Behaviours that are seemingly outside of a consumer’s control. Slide 11 Consumer Misbehaviour There are many different types of consumer misbehaviour. This discussion will be limited to behaviours that typically gather a lot of attention. Shoplifting Did you know that Canadian retailers lose about $9.5 million to shoplifting each day? Consumer motivations for shoplifting are similar to their motivations for other misbehaviour and often include the following: • The temptation is so strong. • They believe retailers can afford the monetary loss. • The perceived likelihood of getting caught is low. • They seek acceptance in a group. • Some people steal for the excitement associated with the activity. The shoplifting intentions of adolescent consumers appear to be more heavily influenced by emotions than by moral beliefs. The opposite occurs in older consumers. Shoplifting behaviour appears to peak during the adolescent years. Computer-Mediated Behaviours: Illegal Sharing of Software and Music With improvements in technology, consumers have the ability to download illicit materials from a number of sources. Major problems include the pirating of computer software, video games, and music. The software industry loses billions of dollars annually due to illegal copying. Research reveals that how consumers view illegal downloading depends on the motivation for the behaviour. Computer-Mediated Behaviours: Attacks Businesses can lose productivity from slow Internet connections and clogged up computers due to attacks. Computer viruses are a major problem. There are thousands of computer viruses being circulated from computer to computer. An emerging form of computer misbehaviour is known as cyberbullying. Cyberbullying is the attack of innocent people on the Internet, and it is an especially big problem among young consumers. Consumer Fraud Consumers can fraudulently obtain credit cards, open bank accounts, and turn in fake insurance claims. Identity theft is another major public concern. Abusive Consumer Behaviour Some consumers become so incredibly upset when they don’t get their way that they become obnoxious and belligerent. One early study in the area of problem customers suggested that four categories of customers can be identified: 1. Verbally or physically abusive customers 2. Uncooperative customers 3. Drunken customers 4. Customers who break company policy. Dysfunctional fan behaviour is abnormal functioning relating to sporting event consumption. Simply stated, dysfunctional fan behaviour is bad fan behaviour! Culture jamming refers to attempts to disrupt advertisements and marketing campaigns by altering the messages in some meaningful way. Slide 12 What can I do in class? Q: Has anyone in the class been a victim of identity theft? Have they had their Facebook accounts hacked? What happened? A: Answers will vary. Illegitimate Complaining Sometimes consumers complain about products or services when there isn’t a problem. Illegitimate complaining is motivated by a: • Desire for monetary gain. • Desire to evade personal responsibility for product misuse. • Desire to enhance the consumer’s ego. • Desire to look good to others. • Desire to harm a service provider or company. Slide 13 Product Misuse Consumers also may use products in ways that were not intended by the marketer. Statistics from the Consumer Product Safety Commission reveal that deaths and injuries resulting from product consumption cost the United States over $800 billion annually. A number of explanations have been offered: • Consumers simply may not pay attention to what they are doing. • Consumers may feel as though they always “get away” with the risky behaviour. • Consumers may have a tendency to be error prone. • Consumers may focus more on the thrill of misuse rather than the actual risk of the behaviour. There are currently three major issues of regarding the misuse of a product, specifically cars: 1. Aggressive Driving—Aggressive driving may range from mild displays of anger to seriously violent acts while driving. Although aggressive driving is often thought of as an act by a solitary consumer, aggressive driving problems often involve multiple drivers. Younger, less-educated males are more likely to engage in aggressive driving behaviour. 2. Drunk Driving—According to the latest statistics, 13,000 people die from alcohol-related traffic accidents per year. Drunk driving is often related to binge drinking. 3. Cell Phone Use in Cars—A growing area of public concern involves the use of cellphones while driving. Given the increased popularity of cellphone technologies, this issue is likely to remain under intense public scrutiny. Currently, 40 countries restrict or ban the use of cellphones while driving. Consumer Problem Behaviour Compulsive Consumption Compulsive consumption refers to repetitive, excessive, and purposeful consumer behaviours that are performed as a response to tension, anxiety, or obtrusive thoughts. Addictive consumption refers to a physiological dependency on the consumption of a product. Slide 14 Compulsive consumption often takes two forms: 1. Compulsive buying may be defined as chronic, repetitive purchasing behaviours in response to negative events or feelings.12 The influences of this form of buying include feelings of low self-esteem and self-adequacy, obsessive-compulsive tendencies, fantasy-seeking motivations, and materialism.13 2. Compulsive shopping refers to repetitive shopping behaviours. The word oniomania is sometimes used to describe this behaviour. Compulsive shoppers frequently shop four to seven days per week, think about shopping for nine or more hours per week, and spend two or more hours shopping during each trip. Both men and women engage in compulsive shopping. What can I do in class? Q: Ask students whether they know anyone who fits the description of a compulsive shopper. How do these people handle the problem? A: Many people are becoming compulsive shoppers and are using shopping as a way of escaping reality. Eating Disorders Binge eating refers to the consumption of large amounts of food while feeling a general loss of control over intake. Binge eating may result in medical complications including high cholesterol, high blood pressure, and heart disease. Exhibit 16.3 presents a description of the binge eating disorder. Bulimia is a disorder that includes binge eating 12 This definition based on Faber, Ronald and Thomas O’Guinn (1992). “A Clinical Screener for Compulsive Buying,” Journal of Consumer Research 19 (3) December, 459‐469. 13 Hirschman, Elizabeth C. (1992). “The Consciousness of Addiction: Toward a General Theory of Compulsive Consumption,” Journal of Consumer Research (September), 155‐179; O’Guinn, Thomas C. and Ronald J. Faber (1989). “Compulsive Buying: A Phenomenological Exploration,” Journal of Consumer Research (September), 147‐157; Dittmar, Helga (2005). “A New Look at Compulsive Buying: SelfDiscrepancies and Materialistic Values as Predictors of Compulsive Buying Tendencies,” Journal of Social and Clinical Psychology (September), 832‐859. episodes followed by self-induced vomiting or purging. Anorexia is the starving of one’s body in the pursuit of “thinness.” Slide 15 Binge Drinking Binge drinking is a very serious problem in society today, and it is defined as the consumption of five or more drinks in a single drinking session for males and four or more drinks for women. Over 45% of full-time college students reported engaging in binge drinking behaviours. Binge drinking has been linked to suicide attempts, unsafe sexual practices, legal problems, academic disruptions, and even death. The behaviour is not confined to the college crowd, but found throughout demographic groups. Problem Gambling Problem gambling is another serious consumer behaviour issue and may be described as an obsession with gambling and the loss of control. Problem gamblers exhibit at least some of the criteria for pathological gambling. Drug Abuse Drug abuse, using both illegal and legal drugs (such as over-the-counter medications and prescription drugs), can become problematic for some consumers. A recent study revealed that nearly one in five teenagers report using prescription drugs to get high, and nearly one in ten report abusing cough medicine. LO3. Discuss the interplay between marketing ethics and consumerism within the marketing concept. Marketing Ethics and Misbehaviour Slide 16 Marketing Ethics Ethics has been used in many ways, and ethical issues permeate our everyday lives. Unscrupulous actions of companies directly impact the marketplace because they upset the value equation associated with a given exchange. The term ethics refers to standards or moral codes of conduct to which a person, group, or organization adheres. Marketing ethics consists of societal and professional standards of right and fair practices that are expected of marketing managers as they develop and implement marketing strategies. Consumerism Consumerism is a term used to describe the activities of various groups to protect basic consumer rights. Slide 17 Overconsumption has been suggested to be a misbehaviour itself. Advertisements tell us to buy this and that to “improve” all different aspects of our lives. So consumers generally buy more products and services than we need. Some consumers have chosen to not overconsume, and in fact have simplified their lives. Slide 18 Today, the consumer has an unprecedented ability to broadcast concerns and express dissatisfaction through social media platforms like Facebook or Twitter. As we saw in the case study of Oasis Juice in Chapter 10, consumers are beginning to harness this power to effect change in how businesses operate. Slide 19 The Marketing Concept and the Consumer During the 1960s, author Theodore Levitt published an article in the Harvard Business Review titled “Marketing Myopia.” Levitt’s new marketing concept perspective argued that businesses should define themselves in terms of the consumer needs that they satisfy rather than in terms of the products that they make. The marketing concept developed quickly during this time period. The Marketing Mix and the Consumer One of the most visible elements of the marketing mix is pricing. For this reason, pricing policies are often questioned. Exhibit 16.4 presents the four Ps of marketing as well as their ethical and unethical uses. The four Ps include: 1. Product 2. Place 3. Price 4. Promotion The product portion of the marketing mix also commonly comes under fire. Consider the following categories of products that were originally introduced by Philip Kotler: • Deficient products—Products that have little to no potential to create value of any type (i.e., faulty appliances). • Salutary products—Products that are good for both consumers and society in the long run (i.e., air bags). They offer high utilitarian value but do not provide hedonic value. • Pleasing products—Products that provide hedonic value to consumers but may be harmful in the long run (i.e., cigarettes). • Desirable products—Products that deliver high utilitarian and hedonic value and also benefit both consumers and society in the long run (i.e., personal computers). Slide 20 Consumer Vulnerability and Product Harmfulness Two important issues to consider when discussing marketing ethics are product harmfulness and consumer vulnerability. Public criticism of marketing strategies tends to be most intense when a marketer targets vulnerable consumer groups with harmful products. Employee Behaviour Individual behaviour is guided not only by a sense of what members of society would believe is ethical or unethical in a particular situation, but also by an individual’s morals. Morals are personal standards and beliefs that are used to guide individual action. Slide 21 LO4. Comprehend the role of corporate social responsibility in the field of marketing. Corporate Social Responsibility Slide 22 Corporate social responsibility may be defined as an organization’s activities and status as they relate to its societal obligations. Due to increased pressure from consumer and media groups, companies are finding that they must be socially responsible with their activities. The activities fall into one of three categories: 1. Ethical duties—Involve acting within expected ethical boundaries. 2. Altruistic duties—Involve giving back to communities through philanthropic activities. 3. Strategic initiatives—Involve strategically engaging in socially responsible activities to increase the value of the firm. Slide 23 What can I do in class? Q: Discuss greenwashing. Do students think it is right for marketers to mislead consumers into believing a product is “green” or was made using “green” processes? A: Answers will vary. See if students can find examples of companies that have been caught greenwashing. The Societal Marketing Concept The societal marketing concept considers not only the wants and needs of individual consumers, but also the needs of society. All firms have many stakeholders and the effects of marketing actions on all these stakeholder groups should be considered. This concept emerged out of recognition of the effects that a marketing system has on society as a whole. This assertion is found in Exhibit 16.6, which presents prescriptions for improved marketing ethics. Slide 24 Slide 25 LO5. Understand consumer protection, privacy, and the regulation of marketing activities. Regulation of Marketing Activities Slide 26 Marketing and the Law Many federal, provincial, and municipal laws, by-laws, and regulations have been enacted to protect consumers from unsafe products and marketer misbehaviour. Slide 27 lists some of the federal agencies, as well as industry and advocacy groups, charged with ensuring a fair and safe marketplace for consumers across a variety of different industries. Slide 27 LO6. Comprehend the major areas of criticism to which marketers are subjected. Public Criticism of Marketing Slide 28 Many areas in marketing come under public scrutiny. Although several issues may be discussed regarding public criticism of marketing, the focus here is on only a handful of issues, such as the following: • Deceptive advertising • Marketing to children • Pollution • Planned obsolescence • Artificial needs • Manipulative sales tactics • Stealth marketing Deceptive Advertising Deceptive advertising is advertising that contains messages omitting information that is important in influencing a consumer’s buying behaviour and is likely to mislead consumers acting “reasonably.” Actual deception can sometimes be difficult to prove in practice. The term puffery describes the practice of making exaggerated claims about a product and its superiority. Puffery differs from deceptive advertising in that there is no overt attempt to deceive a targeted consumer. Marketing to Children It has been estimated that the average American child sees more than 40,000 television commercials per year or an average of more than 100 commercials per day. Two important issues arise concerning marketing to children: 1. One issue is whether children can understand that some marketing messages may not offer a literal interpretation of the real world. 2. Another issue is that the sheer quantity of marketing messages to which children are exposed can be called into question. Pollution The process of marketing a product often leads to pollution. As a result, marketers are often criticized for harming the environment. The issue of environmental protection continues to grow in importance, and several popular movies and events highlight consumer pressure on businesses and government to move toward increased environmental protectionism. Planned Obsolescence Planned obsolescence is the practice of managing and intentionally setting discontinue dates for products. Critics charge that it is both wasteful and greedy for marketers to engage in planned obsolescence. Marketers counter by arguing that by continually offering improved products, consumers are able to enjoy increased standards of living. Artificial Needs Marketers are often criticized for imposing what might be called “artificial” needs on consumers. An issue here is the difference between a want and a need and the validity of the marketing impetus to prod consumers to “keep up with the Joneses.” Manipulative Sales Tactics High-pressure and manipulative sales pitches are often the topic of consumer dissatisfaction. For example, a realtor might tell a client that several other people have looked at a particular house when they actually have not. Or, a salesperson might tell a customer that a product is in short supply when it really is not. There are several well-known techniques that salespeople use, including: 1. Foot-in-the-door technique—When consumers realize that they have opened themselves up to a sales pitch (or literally opened their door to a salesperson), they are more likely to listen to the pitch and more likely to buy a product. 2. Door-in-the-face technique—A salesperson begins the sales pitch with a very large request to a customer. For example, the salesperson might begin with, “Can I get you to buy this car today?” Realizing that very few, if any, customers would say “yes,” the salesperson prepares for the dreaded “no.” This tactic plays on the fact that a consumer will feel badly for rejecting the salesperson and will reciprocate by listening to the sales pitch. 3. Even-a-penny-will-help technique—The tactic is to make the donor feel ashamed for giving such a small amount. If donors do feel shame, they are more likely to give more than is requested. 4. “I’m working for you!” technique—Salespeople attempt to lead customers into believing that they are working as hard as possible to give them the best deal when, in reality, they are simply following a script or a routine. What can I do in class? Q: Ask students whether they have ever experienced a high-pressure sales technique. A: Answers might include occasions when purchasing a new car, cellphone, or simply a new pair of shoes. Stealth Marketing Stealth marketing was discussed earlier, but we again highlight its use here because it is commonly called into question on moral grounds. In stealth marketing, consumers are completely unaware that marketing tactics are being used on them. WOMMA is opposed to such tactics and consider them to be unethical. Slide 29 VIDEO CLIP PowerPoint Clip from Recycline Run time 1:23 minutes Slide 30 For an environmentally conscious consumer-product company like Recycline, it is essential that the customer understands and believes the “green story” behind their products. This means marketing both to retail partners in order to get the products on store shelves as well as marketing directly to consumers to make product sales. Recycline wants consumers to know that participating in the green marketplace doesn’t mean that customers have to make sacrifices. Ask your students: 1. What does Recycline feel is essential to making green products mainstream? Answer: Green products must involve no consumer sacrifice in comparison to similar non-green products. This means the products must perform as well, look as good, and fall into the same cost range. On top of this, these products must provide a truly meaningful environmental alternative. 2. What are consumers wary of when it comes to green marketing and green companies? Answer: Consumers are concerned that companies abuse the term “green” in order to increase sales. They also may feel that companies talk more about environmentally sound products and practices than they do deliver on them. Instructor Manual for CB Consumer Behaviour Canadian Barry J. Babin, Eric Harris, Kyle B. Murray 9780176555283
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