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| Social Criticisms of Marketing and Deceptive Practices |
Marketing's Impact on Individual Consumers
Consumers have many concerns about how well
marketing and businesses, as a whole, serve their interests. Consumer
advocates, government agencies, and other critics have accused marketing of
harming consumers through high prices, deceptive practices, high-pressure
selling, shoddy or unsafe products, planned obsolescence, and poor service to disadvantaged
consumers.
• High Prices
Many critics charge that marketing
practices raise the cost of goods and cause prices to be higher than they would
be if clever marketing were not applied. They point to three factors: high
costs of 'distribution, high advertising and promotion costs, and excessive
mark-ups.
HIGH COSTS OF DISTRIBUTION.
A long-standing charge is that greedy intermediaries mark up prices beyond the value of their services. Critics charge either that there are too many intermediaries, or that intermediaries are inefficient and poorly run, provide unnecessary or duplicate services, and practice poor management and planning. As a result, distribution costs too much and consumers pay for these excessive costs in the form of higher prices. How do retailers answer these charges? They argue, first, that intermediaries do work that would otherwise have to be done by manufacturers or consumers. Second, the rising markup reflects improved services that consumers themselves want - more convenience, larger stores, and more assortment, longer store opening hours, return privileges, and others. Third, the costs of operating stores keep rising, forcing retailers to raise their prices. Fourth, retail competition is so intense that margins are actually quite low: for example, after taxes, supermarket chains are typically left with barely 1 percent profit on their sales. If some resellers try to charge too much relative to the value they add. other resellers will step in with lower prices. Low-price stores and other discounters pressure their competitors to operate efficiently and keep their prices down.
HIGH ADVERTISING AND PROMOTION COSTS.
Modern marketing is also accused of
pushing up prices because of heavy advertising and sales promotion. For
example, a dozen tablets of a heavily promoted brand of aspirin sell for the
same price as 100 tablets of less promoted brands. Differentiated products -
cosmetics, detergents, toiletries - include promotion and packaging costs that
can amount to 40 percent or more of the manufacturer's price to thy retailer.
(Metrics charge that much of the packaging and promotion adds only psychological value
to the product rather than real functional value. Retailers use additional
promotions - advertising, displays, and competitions - that add even more to
retail prices.
J &
J's concern for societal interests is summarized in a company document called
'Our Credo', which stresses honesty, integrity, and putting people before
profits. Under this credo. Johnson & Johnson would rather take a big loss
than ship a bad batch of one of its products. And the company supports many
communities and employee programs that benefit its consumers and workers and
the environment. J & J's chief executive puts it this way: 'If we keep
trying to do what's right, at the end of the day we believe the marketplace
will reward us.'13 Consider the tragic tampering ease in which eight people
died from swallowing cyanide-laced capsules of Tylenol, a Johnson & Johnson
brand. Although J & J believed that the pills had been altered in only a
few stores, not in the factory, it quickly recalled all of its products. The
recall cost the company $240 million in earnings. In the long run, however, the
company's swift recall of Tylenol strengthened consumer confidence and loyalty,
and Tylenol remains the leading brand of pain reliever in the US market.
Marketers answer these charges in several
ways. First, consumers ^ant more than the merely functional qualities of
products. They also want psychological benefits - they want to feel wealthy,
beautiful, or special. Consumers can usually buy functional versions of
products at lower prices but are often willing to pay more for products that
also provide desired psychological benefits. Second, branding gives buyers
confidence. A brand name implies a certain quality and consumers are willing to
pay for well-known brands even if they cost a little more. Third, heavy
advertising is needed to inform millions of potential buyers of the merits of a
brand. If consumers want to know what is available on the market, they must
expect manufacturers to spend large sums of money on advertising. Fourth, heavy
advertising and promotion may be necessary for a firm to match competitors'
efforts. The business would lose 'share of mind' if it did not match
competitive spending. At the same time, companies; are cost-conscious about
promotion and try to spend their money wisely. Finally, heavy sales promotion
is needed from time to time because goods are produced ahead of demand in a
mass-production economy. Special incentives have to be offered in order to sell
inventories.
EXCESSIVE MARK-UPS.
Critics also, charge that some companies mark up goods excessively. They point to the drug industry, where a pill costing 5p to make may cost the consumer 40p to buy. Or to the pricing tactics of perfume manufacturers, who take advantage of customers' ignorance of the true worth of a 50-gram bottle of Joy perfume, while preying on their desire to fulfill emotional needs. Marketers argue that most businesses try to deal fairly with consumers because they want repeat business. Most consumer abuses are unintentional. When shady marketers do take advantage of consumers, they should be reported to industry watchdogs and to other consumer interest or consumer-protection groups. Marketers also stress that consumers often don't understand the reason for high mark-ups. For example, pharmaceutical mark-ups must cover the costs of purchasing, promoting, and distributing existing medicines, plus the high research and development costs of finding new medicines.
• Deceptive
Practices
Marketers
are sometimes accused of deceptive practices that lead consumers to believe
they will get more value than they actually do. Deceptive marketing practices
fall into three groups: deceptive pricing, promotion, and packaging. Deceptive
pricing includes practices such as falsely advertising 'factory' or 'wholesale
prices or a large price reduction from a phony high retail list price.
Deceptive promotion includes practices such as overstating the product's
features or performance, luring the customer to the store for a bargain that is
out of stock, or running rigged contests. Deceptive packaging includes
exaggerating package contents through subtle design, not filling the package to
the top, using misleading labeling, or describing size in misleading terms.
Positive Deceptive :
practices have led to legislation and other consumer-protection actions.
steps have already been taken, for example, with regard to European directives aimed at the cosmetic industry. Council Directive 93/35/EEC of 14 June 1993 introduced far-reaching changes to cosmetic laws. The legislation controls the constituents of cosmetic products and their associated instructions and warnings about their use and specifies requirements relating to the marketing of cosmetic products, which cover product claims, labeling, information on packaging, and details about the dying product's intended function. Where a product claims to remove 'unsightly cellulite or make the user! ook, '20 years younger', proofs must be documented and made available to the enforcement authorities. These laws also require clear details specifying where animal testing has been carried out on both the finished product and/or its ingredients. The EU has recognized increased public resistance to animal testing and has proposed a limited ban on animal testing for cosmetic ingredients from 1 January 1998. Similar directives are found to regulate industry practices in the United States.
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