Sustainable Marketing Social Responsibility and Ethics Chapter 16

Rest Stop: Previewing the Concepts Define sustainable marketing and discuss its importance Identify the major social criticisms of marketing Define consumerism and environmentalism and explain how they affect marketing strategies

Rest Stop: Previewing the Concepts Describe the principles of sustainable marketing Explain the role of ethics in marketing

First Stop: Sustainability at Unilever Under its Sustainable Living Plan, Unilever has set out to create a better future every day for people around the world Sustainability efforts span the entire value chain Works with final consumers to improve the social and environmental impact of its products in use Fuels innovation, resulting in new eco-friendly products and new customer benefits

Sustainable Marketing Socially and environmentally responsible marketing that: Meets the present needs of consumers and businesses Preserves or enhances the ability of future generations to meet their needs

Figure 16.1 - Sustainable Marketing Note to Instructor: The marketing concept means meeting the current needs of both customers and the company. But that can sometimes mean compromising the future of both. Sustainable marketing means meeting current needs in a way that preserves the rights and options of future generations of consumers and businesses.

Sustainable Marketing McDonald’s “Plan to Win” addresses issues related to: Food-supply sustainability Sustainable packaging Reuse and recycling Responsible store designs “Plan to Win” strategy has both created sustainable value for customers and positioned the company for a profitable future

Social Criticisms of Marketing Marketing’s impact on individual consumers has been criticized in terms of: High prices Deceptive practices High-pressure selling Shoddy, harmful or unsafe products Planned obsolescence Poor service to disadvantaged consumers

High Prices Three factors are cited as leading to high prices: High costs of distribution High advertising and promotion costs Excessive markups Heavily promoted brands cost much more than private labels virtually identical non-branded or store-branded product

Deceptive Practices Deceptive pricing - Falsely advertising factory or wholesale prices or large reductions from a phony high retail list price Deceptive promotion - Misrepresenting a product’s features or performance, or luring consumers to store for out-of-stock item Deceptive packaging - Exaggerating package contents, using misleading labeling, etc. Note to Instructor: Deceptive practices are common even to well-known brands. Coco-Cola’s vitaminwater is marketed as a super-healthy alternative to regular H2O, but critics say the claims don’t hold water. The National Consumers League (NCL) and other consumer groups recently filed complaints with the FTC and lawsuits alleging that the brand made “dangerously misleading” claims. Claims included: Print ad that suggested that vitaminwater served as a viable substitute for a seasonal flu shot A television ad that implied that vitaminwater boosts the immune system and helps fend off garden-variety sickness Language on the label reading, “vitamins + water = all you need.”

Deceptive Practices Deceptive practices have led to legislation and other protective consumer actions FTC governs deceptive practices Use of puffery is legal, but may harm consumers in subtle ways Deceptive practices are not sustainable as they harm a firm’s business in the long-run

High-Pressure Selling Tactics Salespeople are often accused of using high-pressure selling tactics: In persuading people to buy goods they had no intention of buying Because prizes are often given to top sellers Marketers have little to gain from high-pressure tactics Such actions damage relationships with the firm’s customers

Shoddy or Unsafe Products Products are not made well or services are not performed well Products are unsafe due to manufacturer indifference, increased product complexity, and poor quality control Products deliver little benefit or are even harmful Note to Instructor: Most manufacturers want to produce quality goods. It's the way the company deals with product quality and safety standards that determines its reputation. Marketers should be aware that good quality creates customer value and satisfaction and in turn sustainable relationships.

Planned Obsolescence Causing products to become obsolete before they actually need to be replaced Using materials and components that will break, wear, rust, or rot sooner than they should Holding back functional features, and introducing them later to make older models obsolete Perceived obsolescence - continually changing consumer concepts of acceptable styles to encourage more and earlier buying Note to Instructor: Most companies do not design their products to break down earlier because they do not want to lose customers to other brands. Instead, they seek constant improvement to ensure that products will consistently meet or exceed customer expectations. Much of the so-called planned obsolescence is the working of the competitive and technological forces in a free society—forces that lead to ever-improving goods and services. Clothing, consumer electronics, computer industries are frequently charged with perceived obsolescence. Marketers respond that consumers like style changes; they get tired of the old goods and want a new look in fashion or they want the latest high-tech innovations, even if older models still work

Poor Service to Disadvantaged Consumers They are forced to shop in small stores where they pay more for inferior goods National chain retailers practice redlining and refuse to open businesses in poor neighborhoods

Underserved Consumers Lack of supermarkets in low income areas, have left many disadvantaged consumers with little or no access to healthy, affordable fresh foods

Marketing’s Impact on Society as a Whole Marketing’s impact on society as a whole has been criticized in terms of: Creating false wants and encouraging materialism Overselling private goods at the expense of public (social) goods Creating cultural pollution, stemming from constant exposure to marketing messages Note to Instructor: Marketing has often been criticized for creating false wants and encouraging materialism. However, this criticism overstates the power of business and ignores consumers ability to defend themselves against advertising

Fuel for Thought Marketing messages are prevalent throughout the United States, and critics contend that this causes “cultural pollution Do you agree? Why or why not?

Marketing’s Impact on Other Businesses Critics charge that a firm’s marketing practices can harm other companies and reduce competition through: Acquisitions of competitors Marketing practices that create barriers to entry Unfair competitive marketing practices

Marketing’s Impact on Other Businesses Walmart was accused of predatory pricing practices by local pharmacists Wal-Mart countered charges by noting that their tremendous buying power allows them to sell at this price and still make a profit

An organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers Consumerism Note to Instructor: Consumerism is one of two major consumer actions to promote sustainable marketing.

Traditional Seller’s Rights Introduce any product in any size and style, provided it is not hazardous to safety; or, if it is, to include proper warnings and controls Charge any price for the product, provided no discrimination exists among similar kinds of buyers Spend any amount to promote the product, provided it is not defined as unfair competition

Traditional Seller’s Rights Use any product message, provided it is not misleading or dishonest in content or execution Use any buying incentive schemes, provided they are not unfair or misleading 16 - 23

Traditional Buyers’ Rights To not buy a product that is offered for sale To expect the product to be safe To expect the product to perform as claimed

Proposed Consumer Rights Consumer advocates call for additional rights: To be protected against questionable products and marketing practices To influence products and marketing practices in ways that will improve quality of life To consume now in a way that will preserve the world for future generations of consumers To be informed about important aspects of the product Note to Instructor: 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 should also make good consumption choices, rewarding companies that act responsibly while punishing those that don’t. Ultimately, the move from irresponsible consumption to sustainable consumption is in the hands of consumers.

Consumers’ Right to Information Product labels contain information about ingredients, nutrition facts, recycling, country of origin Jones Soda even puts customer submitted photos on its labels

An organized movement of concerned citizens and government agencies to protect and improve people’s living environment Environmentalism Note to Instructor: Environmentalism is the second consumer action to promote sustainable marketing.

Environmentalism Those who subscribe to environmentalism believe that marketing system’s goal should be to maximize quality of life Life quality includes the quantity and quality of consumer goods and services and quality of the environment

Environmentalism Is concerned with damage to the ecosystem caused by global warming, resource depletion, toxic and solid wastes, litter, etc. Over the past several decades, such concerns have resulted in federal and state laws and regulations In recent years, however, firms have accepted more responsibility and many have adopted a policy of environmental sustainability

Environmental sustainability Management approach that involves developing strategies that both sustain the environment and produce profits for the company Environmental sustainability 16 - 30

Figure 16.2 - The Environmental Sustainability Portfolio Note to Instructor: The figures shows a grid that companies can use to gauge their progress toward environmental sustainability. It includes both internal and external greening activities that will pay off for the firm and environment in the short run, and beyond greening activities that will pay off in the longer term. At the most basic level, a company can practice pollution prevention. At the next level, companies can practice product stewardship—minimizing not only pollution from production and product design but also all environmental impacts throughout the full product life cycle. The beyond greening activities identified in Figure 16.2 look to the future. First, internally, companies can plan for new clean technology. To create fully sustainable strategies, they will need to develop innovative new technologies. Finally, companies can develop a sustainability vision, which shows how the company’s products and services, processes, and policies must evolve and what new technologies must be developed to get there.

Sustainability Efforts—Pollution Prevention Subaru of Indiana claims that it now sends less trash to the landfill each year than the average American family

New Clean Technology Many companies are adopting design for environment (DFE) and cradle-to-cradle practices Design products that are easier to recover, reuse, recycle, or safely return to nature after usage Coke is researching and testing new bottles made from aluminum, corn, or bioplastics

Marketing at Work Sustainability means: Driving out hidden costs Conserving natural resources Providing sustainable and affordable products so customers can save money and live better

Figure 16.3 - Marketing Decision Areas That May be Called into Question Under the Law Note to Instructor: Ask students to look for examples of recent cases in which companies ran into legal trouble for any one of these issues.

Consumer-oriented marketing A principle of sustainable marketing that holds a company should view and organize its marketing activities from the consumer’s point of view Consumer-oriented marketing Note to Instructor: A company should work hard to sense, serve, and satisfy the needs of a defined group of customers—both now and in the future. Only by seeing the world through its customers’ eyes can the company build sustainable and profitable customer relationships.

Customer-value marketing A principle of sustainable marketing that holds a company should put most of its resources into customer-value-building marketing investments Customer-value marketing Note to Instructor: Many things marketers do—one-shot sales promotions, cosmetic product changes, direct-response advertising—may raise sales in the short run but add less value than would actual improvements in the product’s quality, features, or convenience. Enlightened marketing calls for building long-run consumer loyalty and relationships by continually improving the value consumers receive from the firm’s market offering.

A principle of sustainable marketing that requires a company to seek real product and marketing improvements Innovative marketing Note to Instructor: The company that overlooks new and better ways to do things will eventually lose customers to another company that has found a better way.

Sense-of-Mission Marketing A principle of sustainable marketing that holds that a company should define its mission in broad social terms rather than narrow product terms Note to Instructor: Sense-of-mission marketing means that the company should define its mission in broad social terms rather than narrow product terms. When a company defines a social mission, employees feel better about their work and have a clearer sense of direction. Brands linked with broader missions can serve the best long-run interests of both the brand and consumers. Sense-of-mission marketing has made Pedigree the world’s number one dog food brand

Marketing at Work Ben & Jerry’s, The Body Shop, Burt’s Bees, Stonyfield Farms, Patagonia, Timberland, and TOMS Shoes pioneered the concept of values-led Method’s mission is to inspire a happy, healthy home revolution

A company makes marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests Societal marketing

Figure 16.4 - Societal Classification of Products

Deficient products Pleasing products Salutary products Products that have neither immediate appeal nor long-run benefits Deficient products Products that give high immediate satisfaction but may hurt consumers in the long run Pleasing products Products that have low immediate appeal but may benefit consumers in the long run Salutary products Products that give both high immediate satisfaction and high long-run benefits Desirable products Note to Instructor: Companies should try to turn all of their products into desirable products. The challenge posed by pleasing products is that they sell very well but may end up hurting the consumer. The product opportunity, therefore, is to add long-run benefits without reducing the product’s pleasing qualities. The challenge posed by salutary products is to add some pleasing qualities so that they will become more desirable in consumers’ minds.

Desirable Products PepsiCo has hired a team of scientists to help it develop a larger portfolio of healthy product options, such as the Trop50 brand

Business Actions Toward Sustainable Marketing Firms need to develop corporate marketing ethics policies to serve as broad guidelines that everyone in the organization must follow

Business Actions Toward Sustainable Marketing Ethics policies should cover: Distributor relations Advertising standards Customer service Pricing Product development General ethical standards

Business Actions Toward Sustainable Marketing In solving issues on ethics and social responsibility, companies and marketing managers can rely on principles of: The free market and legal system Letting responsibility fall to individual companies and managers to develop a social conscience International marketers face the challenge of varying business practices and standards across countries

Rest Stop: Previewing the Concepts Define sustainable marketing and discuss its importance Identify the major social criticisms of marketing Define consumerism and environmentalism and explain how they affect marketing strategies

Rest Stop: Previewing the Concepts Describe the principles of sustainable marketing Explain the role of ethics in marketing

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