1. Business 303 Sheppard Business Society & Ethics, Week 4: Marketing Seduction and Product Responsibility Business Society & Ethics, Week 4: Marketing Seduction and Product Responsibility

2. Wk. 9-2 BUSINESS ETHICS WEEK 9: MAIN QUESTIONS 1.What is the Dependence effect? 2.Do producers really create demand? 3.Are there honest reasons for advertising? 4.How do we address the lies Ads tell? 5.What are the ethics of sales? 6.Why has tort liability expanded?

3. Wk. 9-3 1. Censorship or Protection? [311] Right of businesses to free speech.Right of businesses to free speech. –Right to promote. –Need to inform. Protection of the naive consumer.Protection of the naive consumer. –Those without technologic savvy. –Information asymmetries. –Children.

4. Wk. 9-4 2a. The Dependence Effect (1 of 4) Theory of Consumer Demand [313]:Theory of Consumer Demand [313]: –Wants are insatiable.  Urgency of wants doesn’t diminish as satisfied  As lower levels are satisfied higher 1s take over –Wants originate with the consumer. Flaws in the theory [313-317]Flaws in the theory [313-317] –Are wants insatiable? –Are desires original?  Do advertising & salesmanship create demand?  Can tastes be delayed? –Are wants dependent on production?

5. 2a. The Dependence Effect (2 of 4) The decline of public goods [316-317]The decline of public goods [316-317] –The public servant who dreams up a new public service is a wastrel. –Public services vs. private production:  Outsourcing.  Core functions/ feeding an army. Wk. 9-5

6. 2a. The Dependence Effect (3 of 4) How might demand be created [321-325]?How might demand be created [321-325]? –Associate the product with fulfillment of other needs (the new Cadillac ads). –Sales Puffery  Liberty with reality like an artist or Priest.  Influence with: illusions, symbols, implications.  Promise of more than functionality (Rolex).  Functions beyond design (Axe). Would consumers make other choices:Would consumers make other choices: –If they had more objective information? –If they hadn’t confused steak with sizzle? –If they had a wider range of choices? Wk. 9-6

7. 2a. The Dependence Effect (4 of 4) Are our desires truly Autonomous?Are our desires truly Autonomous? –What is an Autonomous purchase?  Grecian Formula Ad & I’m not a granddad… –Rational Desire and Choice  Positive Freedom to pursue desires not originating from an advertisement –Free Choice  Impulses we do not or could not resist.  Does advertising create compulsive behavior?  Voluntary habit, whim or impulse.  Subliminal Advertising. http://www.youtube.com/watch?v=LMzbwa6PvEE

8. Wk. 8-8 2b. The Libertarian reply On shaping of desires [318-320]On shaping of desires [318-320] –We’re social beings:  Our desires are influenced by others.  Need for things only existing in civilization. –Literature provoking the demand for literature. –There have never been independent determined desires for literature? Entertainment? –Example of our fellows would correct us.  Maybe not. –Conspicuous Consumption –Theory of the Leisure Class [333]

9. 3. Advertising Justification [326-330] (1 of 2) Provision of informationProvision of information –About the product or its existence. –Purchase ease & Consumer Loyalty. Subsidization of the Media.Subsidization of the Media. –Debase taste to lowest common dominator.  Lowbrow media products.  Loss of innovation? –New shows: Some are innovative, some are lowbrow. –The remake of everything (music & movies). Wk. 9-9

10. Wk. 8-10 3. Advertising Justification [326-330] (2 of 2) If consumers are misled, ability of Ads to inform & produce utility max. is lost.If consumers are misled, ability of Ads to inform & produce utility max. is lost. –Repetition may produce sales but is not informative. –Persuasion by rational means allows us to treat others as equals. –Regulation  Forced support of factual claims may raise puffery.  Regulation may make ads seem more believable.  Protection against Ads aimed at Kids.  Rights to Advertise do not include a moral right to deceive, mislead, harass or foster insecurities.

11. Wk. 8-11 4. Com. Culture / Critical Thought (1 of 2) Expectations of the Sponsored LifeExpectations of the Sponsored Life –Regular blips of excitement & resolution [332]  Resolution is in the form of something buyable. Protection from Advertising? [332-335]Protection from Advertising? [332-335] –Watch OUT: View Ads as an outsider  Especially with ads that may seek to flatter you.  Who’s the Ad praise for qualities they don’t have?  Realize that Advertisers want you to feel you’re part of the ad.

12. 4. Com. Culture / Critical Thought (2 of 2) More Protection from Advertising? [332-335]More Protection from Advertising? [332-335] –Ask what is the big lie in the commercial? –Read the box: what part of the ad Style vs. Info.?  Assume no relation between a brand & its image.  Know you’re not buying the world a product shows. –Be aware of the political in the promotion:  Insiders & Outsiders: being in the ‘in group.’  Individuality via consumer group memberships? –Realize you’re part of the ad:  It succeeds only if you react & close the deal.

13. Wk. 9-13 5. The Ethics of Sales [336-343] (1 of 4) Caveat Emptor & the UCC.Caveat Emptor & the UCC. –Buyer owns the goods being sold. –Implied warranty of merchantability. Holley’s theory [337]Holley’s theory [337] –Both buyer & seller understand what they are getting & giving-up. –Parties not compelled to enter exchange.  Coercion, restricted alt.s, constraints on choice. –Parties are able to make rational judgments.

14. Wk. 9-14 5. The Ethics of Sales [336-343] (2 of 4) Criticisms of HolleyCriticisms of Holley –Salespeople have limited time to give all info.  S.P. may not know state of buyers’ knowledge. –Implies Salesperson should inform buyer of competitor’s prices. –Unacceptable consequences where buyers alternatives are severely constrained. Golden Rule to the rescue:Golden Rule to the rescue: –If you think it’s morally permissible to treat a customer a certain way you should expect similar treatment in a similar circumstance.

15. 5. The Ethics of Sales [336-343] (3 of 4) Plausible Ethics of Sales / Salespeople:Plausible Ethics of Sales / Salespeople: –Should provide safety warnings. –Should refrain from lying & deception. –Should, as much as time & knowledge allow, fully answer all questions. –Should Not try to ‘steer’ customers toward purchases that they will regret. Suggested Ethics of Sales / Salespeople:Suggested Ethics of Sales / Salespeople: –Should Not sell customers goods that they may regret buying later on. –Should Not sell items that are defective or of poor quality without alerting customers (LP).

16. 5. The Ethics of Sales [336-343] (4 of 4) Four Case Examples [341]:Four Case Examples [341]: –A: Used Car with bad brakes –B: Poor starting car –C: False aid in finding a suitable product –D: Medical insurance  Reciprocity? Case 9.: Marketing Malt Liquor:Case 9.: Marketing Malt Liquor: –What’s the Praise for qualities they don’t have? –What is the big lie in the promotion? –What part of the promotion is Style vs. Info.? –What’s the world the product presents? –What’s the ‘in group?’

17. 6. Who is Responsible? (1/3) Firm, consumer, or government? [373]Firm, consumer, or government? [373] Who assumes the risk and liability [355]Who assumes the risk and liability [355] Is there an even playing field?Is there an even playing field? Legal Responsibility Legal Responsibility –Tort Liability [356] –Unintended injuries [357]  Pricey way to handle a market info. failure?  A peculiarly American institution?  A lack of desire to regulate arbitration?  The move from contractual consent to coercion to pay a liability tax.

18. 6. Who is Responsible? (2/3) Legal Responsibility & Tort Liability [361] Legal Responsibility & Tort Liability [361] –Implied warranties [360] –No-fault system [365] http://archives.cbc.ca/IDD-1-75-88/science_technology/thalidomide/ “Drugs & pharmaceutical devices were among the last products to be swept up in the design defect litigation. Until well into the 1970s, most courts accepted that potent drugs often have unavoidable side effects… Courts began to find design defects in… [a list ending with] morning sickness drugs, & intrauterine devices.”

19. 6. Who is Responsible? (3/3) Responsibility of the Consumer?Responsibility of the Consumer? –Calculation of risk and benefit [362] –Imposed versus voluntary risk [362]  The need for personal responsibility Responsibility of the firm? Responsibility of the firm? –Strict (not absolute) product liability [367]? –Reduce the risks of the product [369] –Avoid deception and fraud [370] –Access to information [371] –Compensatory justice [372]

20. B y e B y e