Marketing Quiz 1 (Chapter 16: Sustainability)
1) Acquisition
(-) Companies expand by acquiring competitors rather than by developing their own new products. (-) Many young competitors are absorbed, reducing competition + industry is consolidated (-) Acquisitions can be good, may gain economies of scale that lead to lower costs and lower prices (-) A well-managed company may take over a poorly managed company and improve efficiency. (-) Increase competitiveness after the acquisition.
Refute against criticisms of planned obsolescence
(-) Consumers like style changes; want a new look in fashion. Want the latest high-tech innovations, even if older models still work. (-) Most companies do not design their products to break down earlier; they may lose customers to other brands. (-) They seek constant improvement so products will consistently meet or exceed customer expectations. - "planned obsolescence" is competitive and technological forces in a free society (PROGRESS)— reflects forces that lead to ever-improving goods and services, which the consumers demand. *(progress that reflects consumer demand)
Regulations against Deceptive Practices: (Wheeler-Lea Act and FTC)
(-) Deceptive practices have led to legislation and other consumer protection actions. (-) 1938 Congress enacted the Wheeler-Lea Act which allowed the Federal Trade Commission (FTC) power to regulate "unfair or deceptive acts or practices."
Examples of Deceptive Pricing
(-) Ex. JCPenney, Kohl's, Neiman Marcus, Nordstrom were hit with lawsuits alleging that they used inflated original prices. (-) Macy's - duping customers with a "phantom markdown scheme" and of "purporting to offer steep discounts off of the fabricated, arbitrary, and false former or purported original, regular or 'compare at' prices." (-) And Overstock.com was recently fined $6.8 million as it advertised its prices as lower than fabricated "list prices." sold a patio set for $449 while claiming that the list price was $999. When the item was delivered, the customer found that it had a Walmart sticker stating a price of $247
High Pressure Selling
(-) High-pressure selling = persuades people to buy goods they had no thought of buying. (-) In insurance, real estate, used cars, infomercial pitch "yell and sell" create consumer urgency (-) Marketers have little to gain from high-pressure selling. May work for one-time selling situations or short-term gain, most selling involves building long-term relationships with valued customers. High-pressure or deceptive selling can seriously damage such relationships.
1) Materialism
(-) Marketing system urges too much interest in material possessions, which creates unsustainable mass consumption (-) stimulate people's false desires for goods and creates materialistic models of the good life
sustainable marketing
(-) Meeting the present needs of consumers, businesses, and society as well as preserving/enhancing future consumer, businesses, society needs, through socially, ethically, and environmentally friendly marketing actions (-) Marketers must think beyond immediate customer satisfaction and business performance toward sustainable strategies that preserve the world for future generations. (-) Sustainable marketing requires a smooth-functioning marketing system in which consumers, companies, public policy makers, and others work together to ensure socially and environmentally responsible marketing actions.
2) Barriers to Entry
(-) Patents and heavy promotion spending (-) Deals w/suppliers or dealers to keep out or drive out competitors. Antitrust laws, and regulations, some barriers to entry are natural because of economic advantages
Example of planned obsolescence (apple)
(-) Planned streams of new products that make older models obsolete, turning consumers into "serial replacers." (-) Consumer electronics industries. (-) Apple was even accused recently of deliberately slowing down older iPhones through software updates to encourage customers to upgrade to newer models.
3. Excessive Markups (drug/auto repairs)
(-) Refute: Most businesses try to price fairly to consumers to build customer relationships and repeat business. (-) Consumers often don't understand the reasons for high markups. (-) For example, pharmaceutical markups help cover the costs of making and distributing existing medicines plus the high costs of developing and testing new medicines.
Truth in Lending
(-) Right to true interest on a loan
Consumerism has led too....
(-) Right to true interest on a loan (truth in lending) (2) True cost per unit of a brand (unit pricing) (3) True ingredients in a product (ingredient labeling) (4) Nutritional value of foods (nutritional labeling) (5) Product freshness (open dating) (6) True benefits of a product (truth in advertising).
Consumer Actions to Promote Sustainable Marketing
(-) Sustainable marketing calls for more responsible actions by BOTH businesses and consumers. 1) Consumerism 2) Environmentalism ...grassroots movements have arisen to keep business in check
Traditional Consumer's Rights
(-) The right not to buy a product that is offered for sale (-) The right to expect the product to be safe (-) The right to expect the product to perform as claimed
Refute against critics of poor services to disadvantaged
(-) Walmart, Walgreens, SuperValu, Whole Foods Market have agreed to open/expand into underserved communities. (-) Other retailers can get profit by focusing on low-income areas ignored by other companies. Example: - Brown's Super Stores Inc. = has built itself into the community, - Starbucks case study opening in Ferguson (urban economic dead zone), by service social needs of customers and warm atmosphere, they have encouraged more stores to pop up and created a vibrant economic center
Refute against cultural pollution
(-) because of ads, many television, online, and social media sites are free to users. (-) Ads also help keep down the costs of magazines and newspapers. (-) Entertainment / informative (-) People can easily avoid ads (-) Mass communication needed to reach target audience
Consumerism calls for...
(-) critics feel that the buyer has too little information, education, and protection to make wise decisions when facing sophisticated sellers. Consumer advocates call for the following additional consumer rights: 1) The right to be well informed about important aspects of the product 2) The right to be protected against questionable products and marketing practices 3) The right to influence products and marketing practices in ways that will improve "quality of life" 4) The right to consume now in a way that will preserve the world for future generations of consumers
Refute against critics of materialism
(-) critics overstate power of business to create needs (-) People have strong defenses against advertising/marketing + do their research when they purchase (-) Marketers are more effective when they appeal to existing wants (-) High failure rate of new products shows that companies are not able to control demand. (-) Wants and values are influenced by family, peer groups, religion, larger forces like the economy, cultural background, and education. Materialistic America shows these values arose out of basic socialization processes that go deeper than marketing
Environmentalism Concerns
(-) damage to the ecosystem caused by global warming (-) resource depletion (-) toxic and solid wastes, (-) fresh water (-) loss of recreational areas and (-) increase in health problems caused by bad air, polluted water, and chemically treated food.
Sense of Mission
(-) define its mission in broad social terms rather than narrow product terms. (-) purpose-driven marketing (-) employees feel better about their work and have a clearer sense of direction. (-) serve the best long-run interests of both the brand and consumers.
Traditional Seller's Rights
(-) introduce product if it is not hazardous to health or safety (if so there are warnings and controls) (-) charge any price for the product, provided no discrimination exists among similar kinds of buyers (-) The right to spend any amount to promote the product provided it is not defined as unfair competition (-) The right to use any product message provided it is not misleading or dishonest in content or execution (-) The right to use buying incentive programs, provided they are not unfair or misleading
2) Too few Social Goods
(-) overselling private goods at the expense of public goods which create social costs (-) private goods increase, they require more public services that can't be afforded (-) For cars: require public goods like highways, traffic control, police services. Some of the social costs include traffic congestion, gasoline shortages, and air pollution
Pollution Provention
(-) prevention means eliminating or minimizing waste before it is created (-) safer products, recyclable and biodegradable packaging, pollution controls and more efficient operations (ex. adidas)
2. High Advertising and Promotion Costs
(-) pushing up prices to finance unneeded advertising, sales promotion, and packaging. - Ex. a heavily promoted national brand costs more than an identical store-branded product. This promotion and packaging add only psychological, not functional, value. Refute: Advertising adds to product costs, it adds value by informing potential buyers of the availability and merits of a brand. Brand name products may cost more, but branding assures buyers of consistent quality. Consumers want/are willing to pay more for products that also provide psychological benefits (feel wealthier, more special, etc.) Ex. Claritin
Product Stewardship
(-) reduce environmental impacts throughout the full product life cycle while at the same time reducing costs (-) design for environment and cradle-to-cradle practices = integrate products that can become part of ecological cycle (IBM strip old equipment)
3) Cultural Pollution
(-) senses are being constantly assaulted by marketing and advertising. (-) pollute people's minds with messages of materialism, sex, power, status
Sustainability Vision
(-) serves as a guide to the future. (-) This vision of sustainability provides a framework for other quadrants
Poor Service to Disadvantaged Consumers
(-) urban poor often have to shop in smaller stores that carry inferior goods and charge higher prices. (-) The presence of large national chain stores in low-income neighborhoods would help to keep prices down. (-) critics accuse major chain retailers of redlining, drawing a red line around disadvantaged neighborhoods and avoiding placing stores there.
Clean Tech
- Innovation (ex. Factory in Seiman moving to all green electricity)
3) Unfair Competitive Marketing Practices
- Low prices - threaten to cut off business with suppliers - discourage the buying of a competitor's products - r size and market dominance to damage rivals. (-) Although various laws work to prevent such predatory competition, it is often difficult to prove that the intent or action was really predatory. (?) How do we differentiate predatory practices from effective competitive strategy and tactics?
Responsible Marketing
- Responsible marketers discover what consumers want and respond with market offerings that create value for buyers and capture value in return.
Refute Against Critics of Deceptive Practices
- The toughest problem often is defining what is "deceptive." - Marketers argue that most companies avoid deceptive practices. - They aren't sustainable because they harm a company's business + consumer relationship in the long run - Profitable customer relationships are built on a foundation of value and trust. - If consumers do not get what they expect, they will switch to more reliable products. - Also Most consumers recognize a marketer's selling intent and are careful of deception; do not believe everything
Unilever: SLP - Is it advantageous for the company?
- Unilever's 26 Sustainable Living Brands grew 46 percent faster than the rest of its business - Sustainability saves money = reducing energy use + minimizing waste. - Fuels innovation = new products and new consumer benefits. - Creates new market opportunities = More than half of Unilever's sales are from developing countries, the very places that face the greatest sustainability challenges. - No conflict between sustainability and profitable growth -The daily act of making and selling consumer goods drives economic and social progress.
Unilever
- Unilever, the world's third-largest consumer products company. - has been named a sustainability leader in the food and beverage industry by the Dow Jones Sustainability Indexes.
Example of Predatory Practices (Google)
- manipulate search results to favor its services at the expense of rivals
North Face and Environmental Sustainability
- turbine, solar panels - water conservation - recycle and clothing renewal
Ethics in an International Perspective
Business standards and practices vary a great deal from one country to the next. (-) For example, bribes and kickbacks are illegal for U.S. firms, and various treaties against bribery and corruption have been signed and ratified by more than 60 countries. (-) Yet these are still standard business practices in many countries.
Two Types of Corporate Ethics Principals
1) Companies can in good conscience do whatever the market and legal systems allow. 2) responsibility not on the system but in the hands of individual companies and managers. - Companies and managers should apply high standards of ethics and morality when making corporate decisions, regardless of "what the system allows."
Standard Code of Ethics
1) Do no harm = avoiding harmful actions/omissions by embodying high ethical standards ; adhere to all laws and regulations 2) Foster trust in the marketing system -> good faith and fair dealing-> efficacy of the exchange process; avoid deception in product design, pricing, communication, and delivery or distribution. 3) Embrace ethical values = build relationships/enhance consumer confidence in the integrity of marketing by following values: honesty, responsibility, fairness, respect, transparency, and citizenship. (ex. Under Armor, employee policies and teams + SC Johnson getting rid of PVCs)
1. High Costs of Distribution
1. High Costs of Distribution (-) greedy marketing mark up prices beyond the value of their services. -> result, distribution costs too much and consumers pay for these excessive costs in the form of higher prices. (-) Resellers respond that intermediaries do work that would otherwise have to be done by manufacturers or consumers. - Their prices reflect services that consumers want—more convenience, larger stores and assortments, more service, longer store hours, return privileges, and others. - Retail competition is so intense that margins are actually quite low. - Discounters such as Walmart, Costco, and others pressure their competitors to operate efficiently and keep their prices down.
Unilever: Five Levers for Change
1. Make it a habit (reinforce) 2. Make it understood (awareness) 3. Make it easy (convenience/confidence) 4. Make it desirable 5. Make it rewarding (proof/payoff)
Two Ways to fix the problem of producing private goods at the cost of social goods
1. Producers bear the full social costs of their operations. (-) The government forces automobile manufacturers to build cars with more efficient engines and better pollution-control systems. Automakers will then raise their prices to cover the extra costs. If buyers find the price of some car models too high, these models will disappear. Demand will then move to those producers that can support the sum of the private and social costs. 2. Consumers pay social costs. (-) Many cities around the world are now levying congestion tolls and other charges in an effort to reduce traffic congestion.
Beyond Greening
= activities that will benefit the future 1. New cleantech (internal) 2. Sustainability Vision (external)
planned obsolescence
= causing their products to become obsolete before they actually need replacement. (-) They accuse some producers of using materials and components that will break, wear, rust, or rot sooner than they should. (-) Negative externalities of overproduction of new models
2) Deceptive Packaging
= exaggerating package contents w/subtle design, misleading labeling, or describing size in misleading terms
3) Deceptive Pricing
= falsely advertising "factory" or "wholesale" prices or a large price reduction from a phony high retail "list price."
perceived obsolescence
= if the products themselves don't wear out fast enough, continually changing consumer concepts of acceptable styles to encourage more and earlier buying. (-) An obvious example is the fast-fashion industry
Today Greening
= improving what companies already do to protect the environment. 1. Pollution Prevention (Internal) 2. Product Stewardship(external)
1) Deceptive Promotion
= misrepresenting the product's features/performance or luring customers to the store for a bargain that is out of stock.
Marketing Impact on other businesses
Can harm other companies and reduce competition 1) Acquisitions of competitors 2) Marketing practices that create barriers to entry 3) Unfair competitive marketing practices
Sustainable Marketing Concept
Considers both future welfare of consumers and future company needs
Importance of Consumerism
Consumers have not only the right but also the responsibility to protect themselves instead of leaving this function to the government or someone else. Consumers can take steps to protect themselves: including contacting the company; making their case through the media or social media; contacting federal, state, or local agencies; and going to small-claims courts. Consumers should also make good consumption choices, rewarding companies that act responsibly while punishing those that don't
Social Criticisms of Marketing (SC of M)
Critics claim that marketing practices hurt... 1) Individuals 2) Society as a whole 3) Other businesses
Deceptive Practices
Deceptive practices = lead consumers to believe they will get more value than they actually do 1. Deceptive Promotion 2. Deceptive Packaging 3. Deceptive Pricing
Marketing Concept
Determines the current needs and wants of target customers and fulfilling them more effectively and efficiently than competitors do. Customer value and mutual gain; it leads the economy by an invisible hand to satisfy the many and changing needs of consumers. (-) focuses on meeting the company's short-term sales, growth, and profit needs by engaging customers and giving them what they want now. (-) Satisfying consumers' immediate needs and desires doesn't always serve the future best interests of either customers or the business.
Customer Value Marketing
Enlightened marketing calls for building long-run consumer engagement, loyalty, and relationships by continually improving the value consumers receive from the firm's market offering. By creating value for consumers, the company can capture value from consumers in return.
CVS Sense of Mission Example
Ex. CVS got rid of Tobacco Products (initial loss of revenue and customers but didn't align with their mission) revenues jumped 10 percent after initial loss offset by revenues from new sources, including those resulting from the decision to quit selling cigarettes. Retailer of choice for those who want to quit ("w/let's quit together program")
McDonald's Unsustainable -> Sustainable Practices
Ex. McDonald's tasty fast foods = short term satisfaction for customers as well as sales and profits for the company → impact the obesity epidemic, consumer health, national health system. → consumers look for healthier eating options → decrease in sales and profits of the fast-food industry. (-) Criticized for wasteful packaging and solid waste creation to inefficient energy use in its stores. (-) Thus, McDonald's strategy was not sustainable in the long run in terms of either consumer or company benefit. (-) They turned to more sustainable marketing: diversifying to healthier food, education campaigns, more sustainable packaging
Example of harmful products
Ex. The CPSI accuses beverage companies of behaving much like the tobacco industry, marketing their harmful products to developing/emerging countries already struggling to provide health care to their citizens. (-) But is the soft drink industry being socially irresponsible by aggressively promoting overindulgence to ill-informed or unwary consumers in emerging markets? (-) Or is it simply serving the wants of customers by offering products that ping consumer taste buds while letting consumers make their own consumption choices?
Marketing Impact on Individual Customers
Hurts the Customers through: I. High prices II. Deceptive practices III. High-pressure selling, shoddy or unsafe products IV. Planned obsolescence V. Poor service to disadvantaged consumers.
Ingredient labeling
Ingredients in product
Grid for Environmental Sustainability
Investing only in the left half of the grid puts a company in a good position today but leaves it vulnerable in the future. In contrast, a heavy emphasis on the right half suggests that a company has good environmental vision but lacks the skills needed to implement it.
High Prices
Many critics charge that the American marketing system causes prices to be higher than they would be under more "sensible" systems because of 1. Costs of Distribution 2. Costs of Advertising/promotion 3. Excessive Markups
Refute of critics for shoddy/harmful/unsafe products
Most manufacturers want to produce quality goods. Product quality and safety problems can harm or help their reputation. (-) risk damaging conflicts with consumer groups and regulators. liability suits and large awards for damages. (-) consumers may avoid future purchases and talk to other consumers into doing the same. (social media)
Nutritional Labeling
Nutritional Value
Consumerism
Organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers. (Seller's rights vs. consumer rights)
Shoddy, harmful, unsafe products
Poor product quality or function: (-) Not made well, do not perform well (-) Unsafe (bc of company indifference, increased product complexity, poor quality control) (-) Product delivers little benefit and/or is harmful
Open Dating
Product Freshness
Marketing Ethics in Sustainability
Promotes sustainable marketing sustainable marketing goals can only be achieved through ethical marketing conduct.
Consumerism has lead to (part 2)
Proposals related to consumer protection : (-) strengthening consumer rights in cases of business fraud and financial protection (-) greater product safety (-) ensuring information privacy, and giving more power to government agencies. (-) Proposals relating to quality of life include controlling the ingredients that go into certain products and packaging and reducing the level of advertising "noise." (-) Proposals for preserving the world for future consumption include promoting the use of sustainable ingredients, recycling and reducing solid wastes, and managing energy consumption.
Sustainable Marketing Principles
Should support best long-term performance 1) consumer-oriented marketing 2) customer value marketing, 3) innovative marketing 4) sense-of-mission marketing, 5) societal marketing
Unilever: SLP - Upstream Supply Side
Suppliers must uphold the Supplier Code: 1) Help suppliers develop sustainable farming practices: Socially responsible actions on human rights, labor practices, product safety, and environmental safety. 2) Unilever Sustainable Agriculture Code - expectations for sustainable agriculture practices
Marketing's Impact on Society
The American marketing system has been accused of: 1) Creating too much materialism 2) Too few social goods, 3) Glut of cultural pollution.
Example of Deceptive Promotion/Product
The FTC accused LifeLock—which claims that it is "relentlessly protecting your identity"—of falsely advertising that it protected consumers' sensitive data with the same high-level safeguards as financial institutions and that it falsely claimed it protected consumers' identity around the clock by providing alerts "as soon as" it received any indication there was a problem.
Unilever: 10-year sustainable living plan (SLP)
The Sustainable Living Plan set out three major social and environmental objectives to be accomplished by 2020: (1) To help more than one billion people take action to improve their health and well-being (2) to halve the environmental footprint of the making and use of our products (3) to enhance the livelihoods of millions of people as we grow our business. These goals span the entire value chain, from how the company sources raw materials to how consumers use and dispose of its products. "Our aim is to make our activities more sustainable and also encourage our customers, suppliers, and others to do the same,"
Marketers are moving away from materialism (Patagonia, L.L Bean, REI)
These days consumers are also more supportive of environmental and social sustainability efforts by companies. As a result, instead of encouraging today's more sensible and conscientious consumers to overspend or spend wastefully, many marketers are working to help them find greater value with less.
Unilever: Their Mission
To answer the "why are we here" question and find a more energizing mission, Polman looked beyond the usual corporate goals of growing sales, profits, and shareholder value. Instead, he asserted, growth results from accomplishing a broader social and environmental mission. Unilever exists "for consumers, not shareholders," he said. "If we are in sync with consumer needs and the environment in which we operate, and take responsibility for our [societal impact], then the shareholder will also be rewarded."
Singapore forcing consumers to pay social costs of automobiles
To control traffic congestion and pollution, Singapore's government makes car ownership very expensive (-) 100% tax on purchase (-) Buy driving certificate (-) Expensive gas and tolling
Unit Pricing
True cost per unit
Societal Marketing
a company should make marketing decisions by considering consumers' wants, the company's requirements, consumers' long-run interests, and society's long-run interests
Corporate Marketing Ethics Policies
broad guidelines that everyone in the organization must follow Managers need a set of principles that will help them figure out the moral importance of each situation and decide how far they can go in good conscience.
Strategic Planning Concept
considers the future needs of the company.
Societal Marketing Concept
considers the future welfare of consumers
Innovative Marketing
continuously seek real product and marketing improvements (ex. Amazon)
Environmental Sustainability
generating profits while helping to save the planet.
Unethical Marketing
harms customers and society damages company reputation, effectiveness, survival
Desirable Products
high immediate satisfaction and high long-run benefits Tasty/nutritious breakfast Environmentally-friendly household products
Pleasing Products
high immediate satisfaction but may hurt consumers in the long run Cigarettes and junk food
Redlining
line around disadvantaged neighborhoods and avoiding placing stores there.
Consumer Orientated Marketing
means that the company should view and organize its marketing activities from the consumer's point of view
Deficient Products
no immediate appeal nor long-run benefits bad-tasting and ineffective medicine
Environmentalism
organized movement to protect and improve people's current and future living environment, decrease environmental costs - get rid of mindless consumption - maximize life quality
Salutary Products
products that have low immediate appeal but may benefit consumers in the long run Bike helmets, insurance
Unilever: SLP - Downstream Consumer Side
~ 68% of the greenhouse gas footprint of products and 50% of the water footprint occur post-purchase consumer use. - Unilever is working with its customers to improve the environmental impact of its products in use and customer wellbeing. Ex. wash clothes at lower temperatures and use the correct dosage of detergent. Brands use less packaging = cheaper and less polluting to transport. Reformulated to wash efficiently at lower temperatures = less energy and water. Fabric conditioner formulated to use less water for developing countries "Ultimately," says the company, "we will only succeed if we inspire people around the world to take small, everyday actions that can add up to a big difference for the world."
