Consumers and Business Ethics Consumers as Stakeholders
Lecture 8: Consumers and Business Ethics Consumers as Stakeholders (I) Commonplace argument that businesses are best served by treaitng their customers well So why continued ethical abuses of consumers and poor reputation of marketing and sales professions? ◦ Examples of organizations accused of treating customers in a questionnable manner: ▪ Multinational drug companies ▪ Fast foot and soft drink companies ▪ Banks and credit card companies ▪ Mobile phone companies ▪ Technology schools Consumers as Stkeholders (II) Consumer Rights can be seen as: ◦ Inalienable entitlements to fair treatment when entering into exchnages with sellers. They rest upon the assumption that consumer dignity should be respeced and that sellers have a duty to treat consumers as ends in themselves, and not only as means to the end of the seller ▪ Debate over what constitutes fair treatment ▪ In the past, consumer rights based on caveatem ptor. But caveat emtpor eroded by changing expectations and consumer laws Ethical Issues in Marketing Management – Product Policy At the most basic level, consumers have a right to products and servcies which are safe, efficacious, and fit for the purpose for which they are intended Manufacturers ought to exercise due care in establishing that all reasonable steps are taken to ensure that their products are free from defects and safe to use Consumers right to a safe product is not an unlimited right Safety also a function of the consumer and their actions and precautions Ethical Issues in Marketing Management – Marketing Communications (I) Criticisms of advertising broken down into two levels Individual ◦ Concerned with misleading or decreptive practices that seek to create false beliefs about specific products or companies in the individuals consumers mind Social ◦ Concerned with the aggregate social and cultural impacts such as promoting materialism Ethical Issues In Marketing Management – Marketing Communications (II) Misleading and decreptive practices ◦ Marketing communications aimed to: ▪ Inform consumers about goods and services ▪ Persuade consumers to purchase ◦ Deception occurs when a marketing communication either creates, or takes advantage of a false belief that substantiallu interferes with the ability of people to make rational consumers choices ◦ The UK's Advertising Standards Authority says ads should be “legal, decent, honest and
truthful” Ethical Issues In Marketing Management – Marketing Communications (III) Social and Cultural impact on society Objections that marketing communications: ◦ Are intrusive and unavoidable ◦ Create artificial wants ◦ Reinforce consumerism and materialism ◦ Create insecurity and perpetual disssatisfaction ◦ Perpetuate social stereotypes Such criticisms have been common for at least the last 30 years Ethical Issues In Marketing Management – Pricing Pricing issues are central to the notion of a fair exchange between the two parties, and the right to a fair price – key rights of consumers as stakeholders Four types of pricing practices where ethical problems may arise: ◦ Excessive pricing ◦ Price Fixing ◦ Predatory pricing ◦ Deceptive pricing Ethical Issues in Marketing Management – Distribution Concerned with relations between manufacturers and firms, and firms and market Primary concern is product supply chain ◦ Example: Retailers demanding “slotting fees” free manufacturers in order to stock their product Ethical Issues in Marketing Strategy – Vulnerable Customers Criticisms when there is a perceived violation of the consumers right to be treated fairly (duty of care): ◦ Targeting vulnerable consumers ◦ Consumers may be vulnerable because: ▪ Lack sufficient education or information ▪ Easily confused or manipulated due to old age and senility ▪ Are in exceptional physical or emotional need ▪ Lack the necessary income ▪ Too young ◦ Perceived harmfulness of the product ▪ Examples: Cigarettes and alcohol ▪ Here, the focus shifts from rights duties to consequences Ethical Issues in Marketing Strategy – Customer Exclusion Takes variety of forms: ◦ Access exclusion ◦ Condition exclusion
◦ Price exclusion ◦ Marketing exclusion ◦ Self-exclusion Ethical Issues in Market Research Main issue is possible threats posed ot the consumers right to privacy Recent areas of concern: ◦ Personal information available online. ▪ Exampels: Phrom's advertising targeting service, which British Telecom trailed without consent Use of genetic testing results by insurance companies ◦ Predict likelihood of an individuals genetic predisposition to certain conditions and illnesses ◦ Genetic discrimination Globalization and Consumers Issues Around Marketing in a Global Marketplace Globalization has brought a new set of problems and issues relevant to consumers stakeholders Different standards of consumer protection ◦ Consumer protection varies widely in terms of government regulation and company standards ◦ Example of tobacco Exporting consumerism and cultural homogenization ◦ Global brands huge success has lef to increasing concerns over standardization and uniformity ◦ Considerable debate around role of advetising in promoting consumerism in emerging and transitional economies The Role of Markets in Addressing Povety and Development Globalization also raises propsect of firms targeting products to low income consumers “Bottom of the pyramid” concept Examples of successful initiatives: ◦ Mircocredit institutions (e.g. Brazil) ◦ High nutrition Yogurt company ◦ one laptop per child Criticisms ◦ Bottom of the pyramid is a mirage: Profit opportunities limited ◦ Social purpose and CSR probably more important than profit motive in developing inclusive markets Consumers and Corporate Citizenship Consumer Sovereignty Concept suggests that under perfect competition, consumers drive market Two ethical limitations based on fairness Consumer Sovereignty – customer is king
◦ Consumer sovereignty has three elements ▪ Consumer capability ▪ Information ▪ Choice How is consumer sovereignty to be assessed? ◦ Consumer sovereignty test
Consumer Sovereignty Test Consumer Capability: Freedom from limitations in rational decision making Vulnerability factors. e.g. age, education, health Information: Availability and quality of relevant data Quantity, comparability and complexity of information; degree of bias or deception Choice: Opportunity for switching Number of competitors and level of competition; switching costs Ethical Consumption Ethical consumption is the conscious and deliberate decision to make certain consumption choices due to personal moral beliefs and values Recent 51-market survey on consumer attitudes: ◦ 70% of global consumers said their purchase decision could be influenced by a product supporting a worthy cause ◦ But socially-desirable answers may not correspond to behavior Consumer activism on increase – positive Downside of ethical consumption ◦ Motives of corporations will be primarily economic rather than moral ◦ Consumers may decide they no longer want to or can afford to pay extra for these ethical “accessories” ◦ If purchases are “votes” then rich get more power than poor Sustainable Consumption Definition: The use of goods and services that respond to basic needs and bring a better quality of life, while minimizing the use of natural resources, toxic materials and emissions of waste and pollutants over the life-cycle, so as not to jeopardise the needs of future generations The Challenge of Sustainable Consumption Protestant Ethics Imposes limits to: Consumptiopn Promotes: Investment in productive capacity Consumerism Ethics Imposes limits to: Saving Promotes: Instand gratification and consumption Environmental Ethics
Imposes limits to: Consumption Promotes: Alternative meanings of growth and investment in the environment
Steps Towards Sustainable Consumption Producing environmentally responsible products ◦ e.g. Eco-labels are important Product recapture Service replacements for products ◦ Selling mobility rather than cars, or leasing photocopiers Product sharing ◦ Examples: car-sharing, washing-machine-pooling Reducing demand ◦ Example of China's ban on free plastic bags ◦ Implementing the polluter pays principle to create financial incentive for lower consumption SLIDE PRODUCT RECAPTURE SLIDE
truthful” Ethical Issues In Marketing Management – Marketing Communications (III) Social and Cultural impact on society Objections that marketing communications: ◦ Are intrusive and unavoidable ◦ Create artificial wants ◦ Reinforce consumerism and materialism ◦ Create insecurity and perpetual disssatisfaction ◦ Perpetuate social stereotypes Such criticisms have been common for at least the last 30 years Ethical Issues In Marketing Management – Pricing Pricing issues are central to the notion of a fair exchange between the two parties, and the right to a fair price – key rights of consumers as stakeholders Four types of pricing practices where ethical problems may arise: ◦ Excessive pricing ◦ Price Fixing ◦ Predatory pricing ◦ Deceptive pricing Ethical Issues in Marketing Management – Distribution Concerned with relations between manufacturers and firms, and firms and market Primary concern is product supply chain ◦ Example: Retailers demanding “slotting fees” free manufacturers in order to stock their product Ethical Issues in Marketing Strategy – Vulnerable Customers Criticisms when there is a perceived violation of the consumers right to be treated fairly (duty of care): ◦ Targeting vulnerable consumers ◦ Consumers may be vulnerable because: ▪ Lack sufficient education or information ▪ Easily confused or manipulated due to old age and senility ▪ Are in exceptional physical or emotional need ▪ Lack the necessary income ▪ Too young ◦ Perceived harmfulness of the product ▪ Examples: Cigarettes and alcohol ▪ Here, the focus shifts from rights duties to consequences Ethical Issues in Marketing Strategy – Customer Exclusion Takes variety of forms: ◦ Access exclusion ◦ Condition exclusion
◦ Price exclusion ◦ Marketing exclusion ◦ Self-exclusion Ethical Issues in Market Research Main issue is possible threats posed ot the consumers right to privacy Recent areas of concern: ◦ Personal information available online. ▪ Exampels: Phrom's advertising targeting service, which British Telecom trailed without consent Use of genetic testing results by insurance companies ◦ Predict likelihood of an individuals genetic predisposition to certain conditions and illnesses ◦ Genetic discrimination Globalization and Consumers Issues Around Marketing in a Global Marketplace Globalization has brought a new set of problems and issues relevant to consumers stakeholders Different standards of consumer protection ◦ Consumer protection varies widely in terms of government regulation and company standards ◦ Example of tobacco Exporting consumerism and cultural homogenization ◦ Global brands huge success has lef to increasing concerns over standardization and uniformity ◦ Considerable debate around role of advetising in promoting consumerism in emerging and transitional economies The Role of Markets in Addressing Povety and Development Globalization also raises propsect of firms targeting products to low income consumers “Bottom of the pyramid” concept Examples of successful initiatives: ◦ Mircocredit institutions (e.g. Brazil) ◦ High nutrition Yogurt company ◦ one laptop per child Criticisms ◦ Bottom of the pyramid is a mirage: Profit opportunities limited ◦ Social purpose and CSR probably more important than profit motive in developing inclusive markets Consumers and Corporate Citizenship Consumer Sovereignty Concept suggests that under perfect competition, consumers drive market Two ethical limitations based on fairness Consumer Sovereignty – customer is king
◦ Consumer sovereignty has three elements ▪ Consumer capability ▪ Information ▪ Choice How is consumer sovereignty to be assessed? ◦ Consumer sovereignty test
Consumer Sovereignty Test Consumer Capability: Freedom from limitations in rational decision making Vulnerability factors. e.g. age, education, health Information: Availability and quality of relevant data Quantity, comparability and complexity of information; degree of bias or deception Choice: Opportunity for switching Number of competitors and level of competition; switching costs Ethical Consumption Ethical consumption is the conscious and deliberate decision to make certain consumption choices due to personal moral beliefs and values Recent 51-market survey on consumer attitudes: ◦ 70% of global consumers said their purchase decision could be influenced by a product supporting a worthy cause ◦ But socially-desirable answers may not correspond to behavior Consumer activism on increase – positive Downside of ethical consumption ◦ Motives of corporations will be primarily economic rather than moral ◦ Consumers may decide they no longer want to or can afford to pay extra for these ethical “accessories” ◦ If purchases are “votes” then rich get more power than poor Sustainable Consumption Definition: The use of goods and services that respond to basic needs and bring a better quality of life, while minimizing the use of natural resources, toxic materials and emissions of waste and pollutants over the life-cycle, so as not to jeopardise the needs of future generations The Challenge of Sustainable Consumption Protestant Ethics Imposes limits to: Consumptiopn Promotes: Investment in productive capacity Consumerism Ethics Imposes limits to: Saving Promotes: Instand gratification and consumption Environmental Ethics
Imposes limits to: Consumption Promotes: Alternative meanings of growth and investment in the environment
Steps Towards Sustainable Consumption Producing environmentally responsible products ◦ e.g. Eco-labels are important Product recapture Service replacements for products ◦ Selling mobility rather than cars, or leasing photocopiers Product sharing ◦ Examples: car-sharing, washing-machine-pooling Reducing demand ◦ Example of China's ban on free plastic bags ◦ Implementing the polluter pays principle to create financial incentive for lower consumption SLIDE PRODUCT RECAPTURE SLIDE
