In-Depth Notes on Marketing Ethics and Consumer Behavior

Abstract

• Marketing deception typically focuses on two primary areas:
  • Cases of intentional deception affecting individuals with compromised intelligence (e.g., children and the elderly).
  • Cases involving intentional falsehoods or withholding crucial information (e.g., Bernie Madoff).
• This article explores marketing practices that, while generally truthful, mislead a broad audience, including rational individuals.
• Marketers exploit behavioral tendencies, such as the love for 'free' offers, leading to irrational choices.
• Behavioral economists argue that human decision-making is predictably irrational, presenting a case for a new moral evaluation of marketing.

Marketing Ethics Overview

• Persuasion vs. Deception:
  • Generally accepted that persuasion is acceptable, but deceptive practices are unethical.
  • Examination of marketing techniques that appear truthful yet deceive.

Case Study: Art Van Furniture

• Art Van, a Michigan furniture chain, employs frequent sales campaigns (e.g., inventory reduction, anniversary, etc.).
• Sales create a false perception of value, leading customers to feel they are saving even when prices are similar to non-sale periods.
• Results in both marketing success and customer attraction despite lack of actual discounts.

Predictably Irrational

• Dan Ariely's Findings:
  • Traditional economic theory assumes rational decision-making in markets.
  • Behavioral economics reveals consistent irrationalities in consumer behavior.
  • Examples of marketing strategies that exploit irrational tendencies:
  • Decoy Effect: Options presented that seem irrelevant can impact choices (e.g., a subscription offer with an unattractive option swaying preferences).
  • Illusion of Bargains: Pricing strategies that make items seem more valuable when compared to inflated alternatives (e.g., expensive bread makers causing cheaper ones to sell better).
  • Free Offers: The allure of free items often leads to irrational decision-making, as seen in preference shifts when a lower-priced item becomes free.

Moral Assessment of Marketing Practices

• Legitimacy of Marketing Actions:
  • Defenders argue that marketing fulfills consumer demand, creating wants and desires versus satisfying them only.
  • Critics highlight that marketers manipulate consumer desires (e.g., introducing a high-priced item to elevate perceived value of moderately priced items).

Standards of Consumer Rationality

• Rational Person Standard:

  • Suggests that only deceptive practices impacting rational consumers are immoral.
  • Challenges arise as most consumers exhibit irrational behaviors.

• Ignorant Consumer Standard:

  • Proposes marketers are responsible for practicing truthfulness, protecting naive consumers from deception.
  • Legal cases (e.g., FTC vs. Standard Education) recognized the need for consumer protection against deceptive practices.

Reflective Rational Person Standard

• Proposes that consumers, after considering marketing techniques, are not being used as mere means if they accept perceived treatment.
• Acknowledges entertainment value while emphasizing avoidance of serious deception.
• Supports consumer rights to reflect upon and evaluate marketing practices post-purchase.
• This model allows for manipulation as long as consumers find it acceptable and can reject outright deception combined with informed consent.