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CHAPTER OBJECTIVES When you finish reading this chapter, you should be able to:
2-1 Define business ethics and identify the elements that comprise the PESTLE framework. 2-2 Summarize how the political environment affects consumer decision making. 2-3 Discuss how the economic landscape affects consumers’ access to the marketplace. 2-4 Explain the ways marketers respond to social issues to shape consumer behavior.
2-5 Describe the technological changes that are creating new challenges for consumer protection. 2-6 Explain how the legal environment influences consumer behavior. 2-7 Describe how consumer behavior directly impacts the environment.
Consumer Ethics, the
Marketplace, and the Planet
I
f there’s one silver lining from the pandemic for Abriella, it’s learning how much more comfortable it feels to wear “soft” clothing made for lounging around the house. But she managed to wear out her sweats during the lockdown, so it’s time to splurge on a new, comfy sweatshirt. Abriella’s also a new convert to online shopping, so she starts to surf the web for options. Oops, a Google search for “women’s sweatshirts” yields about 2.6 million links, so that strategy isn’t going to work too well. During a Zoom call, her colleague Jayden mentions that Patagonia is doing some amazing things to “give back” to the planet. Jayden can’t stop talking about the company’s self-imposed Earth tax it calls 1% for the Planet. This money provides support to environmental nonprofits that work to improve our air, land, and water. And, Patagonia even encourages less consumption by selling used items in itsWornWear program. 1 This initiative really resonates with Abriella because she believes that every consumer’s choices have ramifications for the rest of us. She happily places an online order for a Women’s Re-Tool Snap-T ®^ Pullover (at about 12 the price of a new garment). She’s actually looking forward to her next Zoom call with Jayden (unlike most videochats!) to let him know that she’s doing her part to save the planet—and still stay comfortable.
Source: Ground Picture/Shutterstock.
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 27
What Is the “Right” Thing?
Regardless of whether they do it intentionally, some market- ers do violate their bonds of trust with consumers. In some cases, these actions are illegal, as when a manufacturer delib- erately mislabels the contents of a package. Or a retailer may adopt a “bait-and-switch” selling strategy that lures consumers into the store when it offers inexpensive products with the sole intent to get them to switch to higher-priced goods. In other cases, marketing practices have detrimental effects on society even though they are not explicitly illegal. Some companies erect billboards advertising alcohol and tobacco products in low-income neighborhoods; others sponsor com- mercials that objectify women as they pander to male viewers. Business ethics are rules of conduct that guide actions in the marketplace; these are the standards against which most people in a culture judge what is right and what is wrong, good or bad. These universal values include honesty, trustworthiness, fairness, respect, justice, integrity, concern for others, accountability, and loyalty. Companies that score high in customer satisfaction often benefit from a big competitive advantage—especially when so many firms skimp on the attention they pay to customers. A five-year study of customer satisfaction in the Canadian bank- ing industry provides typical results: Banks that provided better service commanded a larger “share of wallet” than did others (i.e., their customers entrusted them with a larger proportion of their money). 2 It’s hard to divorce consumer behavior from most of what goes on around us. The consumption choices we make are cen- tral to many of the big issues we read about and debate every day. These range from human rights and humane working condi- tions to the safety of what we eat, the future of our environment, and our relationships with governments, corporations, and other organizations. But consumer behavior can also be the solution to many of the crises we face. This chapter is organized around the widely used PESTLE framework (see Table 2.1). We’ll consider the
OBJECTIVE 2- Define business ethics and identify the elements that comprise the PESTLE framework.
P E S T L E
Political Economic Social Technological Legal Environmental Factors explored:
Consumer activism and slacktivism Culture jamming Corporate socio- political activism
Market access and literacy
Human traffick- ing and “red markets”
Social justice and cancel culture
Social marketing Transforma- tive consumer research
Data privacy Data accuracy and algorithm bias Data security Social media addiction Cyberbullying
Governmental regulations and agencies Corrective advertising Consumer theft and counterfeiting
Conscious consumerism Brand purpose Circular economy and fast fashion Green marketing Prosocial behavior
TABLE 2.1 The PESTLE Framework
Consumers increasingly are concerned about the impact of marketing activities on important issues like social justice. Source: Janine Wiedel Photolibrary/Alamy Stock Photo.
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 29
Corporate Activism
In the “old days” of marketing (like a decade ago), it was quite rare for a company to get out front on an inflammatory issue, for fear this would turn off a lot of loyal customers. For every activist marketer like Ben & Jerry’s or Patagonia, there were thousands of companies that worked really hard to stay out of the conversation. Fast forward to today: The explosion of social activism we’ve encountered both in the U.S.A. and in many other parts of the world over the past few years has encouraged some companies to engage in corporate sociopolitical activism (CSA) , where they deliberately take a stand on a controversial issue. This reversal comes at a time when many company stakeholders, including customers, expect companies to take stands on sociopolitical issues, like LGBTQIA2S + rights, voting rights, or Russia’s invasion of Ukraine in 2022. 8 Delta Airlines cut ties with the National Rifle Association after a deadly school shooting. Nike stood alongside football player Colin Kaepernick when he took a knee during the national anthem in protest of police brutality and in support of Black Lives Matter. The organization Chief Executives for Corporate Purpose (CECP), which moni- tors these activities, reported that during the peak of the pandemic in 2020, funding from companies “investing in society” increased by 41 percent. And ironically (despite the evident lack of trust in marketers), business is now the most trusted institution in America, as customers increasingly look to the pri- vate sector to help with deep-seated social issues.^9 But does social activism impact the (financial) bottom line? When Nike took a public stand on NFL players’ rights to kneel during the national anthem, some analysts predicted that more conservative cus- tomers would abandon the company in droves amid calls for a boycott—but as it turns out, Nike’s rev- enues actually increased by 10 percent for the year! As a business professor commented, “The demo that is willing to spend $200 on Nike sneakers is not the demo that’s going to boycott them because of Kaepernick.”^10 Nonetheless, the jury is still out on how con- sumers will treat companies that take a controversial stand on a social issue. A recent analysis of the stock market performance of companies that engaged in CSA found that this type of activity is a double-edged sword. 11 Investors tended to react negatively to CSA efforts that deviate from the value of key stakeholders
Consumers get creative when they want to vent their feelings about com- panies they don’t like. Source: Michael Matthews/Alamy Stock Photo.
Nike took a very controversial stand to support Colin Kaepernick’s efforts for racial justice. Source: © Richard B. Levine/Alamy Stock Photo.
30 Section 1 • Foundations of Consumer Behavior
but positively to those efforts that align with them. So, it looks like one unintended consequence of CSA may be that it also contributes to the polarization in our society by turning people on and off to a cause depending upon their prior political beliefs.
Slacktivism When an organization wants to encourage people to contribute to its cause in some way, it seems like a good idea to provide an initial token display of support, such as a T-shirt people can wear, a petition they can sign, or a Facebook group they can join. Makes sense, right? Not necessarily. Some critics are worried about the phenom- enon they term slacktivism : small and relatively meaningless expressions of support for important causes, such as liking a charity on Facebook rather than making a dona- tion or volunteering. One study found that if the initial display is visible to others, this public behavior can actually reduce the likelihood that the person will contribute beyond that. Under some circumstances, the need to make a positive impression on others is satisfied by the public display, so the person exhibits slacktivism and doesn’t bother to do anything else to support the cause.^12
PESTLE: The Economic
Environment
Many of us take for granted that we are free to shop any- where we want or that we can easily learn about our purchase options—everything we need is just a click of a mouse away, right? In reality, however, large numbers of people can’t make this claim. For one reason or another, their market access (i.e., their ability to find and pur- chase goods and services) is limited because of physical, mental, economic, or social barriers. A well-functioning, equitable society requires that everyone has equal access to products, services, and information in the marketplace. Yet we frequently see cases where individuals or groups face either perceived or real barriers to certain market offerings. The lack of access has many detrimental psychological consequences for those who experience it. A study found that people who are repeatedly denied access to a market offering (securing a mortgage or a rental lease agreement) feel more powerless and, as a result, are more likely to disengage from the market and to choose harmful market options (e.g., high-interest-rate loans). 13 Thus, market access denial is a vicious cycle, and strategies are required to break this harmful pattern.
Disabled Consumers The World Health Organization estimates that more than 10 million adult Ameri- cans live with a disability, and it puts the number of disabled people globally at over one billion! These numbers continue to grow as populations age and we see a surge in chronic health conditions. 14 About 11 million American adults have a condition that makes it difficult for them to leave home to shop, so they rely almost exclusively on catalogs and the internet to purchase products. The many people who have limited mobility may also be unable to gain easy access to entertainment venues, educational institutions, and other locations. In addition, bodily limitations or disfigurements may result in real or imagined stig- matization, so self-concept and interpersonal relationships may prove challenging.^15
OBJECTIVE 2- Discuss how the economic landscape affects consumers’ access to the marketplace.
As the number of people using wheelchairs increases, the market for adaptive clothing that provides a broader range of apparel options grows as well. Source: Photo courtesy of Smart Adaptive Clothing.
32 Section 1 • Foundations of Consumer Behavior
Literacy
The Latin phrase caveat emptor (“let the buyer beware”) implies that it’s the consum- er’s responsibility to decide whether marketing messages are accurate. But that’s a tall order, especially in today’s complicated media environment. Media literacy describes the extent to which a consumer can critically evaluate the messages they receive from the web, TV, and every other communications source that tries to persuade us.^26 It’s our job to critically evaluate this information—but not everyone has the skills to do that. This task is even more difficult in the age of Google, where many of us assume that whatever comes up in a Google search or on Wikipedia is completely true and accurate. (Hint: Not by a long shot.) And that’s also true for financial literacy : the degree to which a person under- stands key financial concepts and possesses the ability and confidence to manage personal finances through appropriate short-term decision making and sound long- range financial planning, while staying mindful of life events and changing economic conditions. 27 That’s a big challenge for many of us, and the pandemic’s disruptive effect on the economy hasn’t made the task any easier. Unfortunately, some of us have an even bigger problem with written information about what we buy: We can’t read it in the first place. The U.S. Department of Educa - tion estimates that about one in seven U.S. adults is functionally illiterate.^28 This term describes a person whose reading skills are not adequate to carry out everyday tasks, such as reading the newspaper or the instructions on a pill bottle. Almost half of the United States population read below a sixth-grade level. This limitation impedes market access for a couple of reasons: First, illiterate or “low-literate” consumers are at a disadvantage because they encounter difficulty in learning about the best purchase options. Second, they may experience feelings of shame or embarrassment that make them avoid market situations where they will be forced to reveal their illit- eracy. 29 For example, some of these people (whom researchers term social isolates ) may cope with the stigma of illiteracy by choosing not to eat at a restaurant with an unfamiliar menu or by not purchasing a product with a label they can’t fully read. Low-literate consumers rely heavily on visual cues, including brand logos and store layouts, to navigate retail settings, but they often make mistakes when they select similarly packaged products (for example, brand line extensions). They also encounter problems with numeracy (understanding numbers); many low-literate people have dif- ficulty knowing, for example, whether they have enough money to purchase the items in their cart, and unethical merchants may cheat them out of the correct amount of change. Not surprisingly, these challenges create an emotional burden for low-literate consumers, who experience stress, anxiety, fear, shame, and other negative emotions before, during, and after they shop.^30
OBJECTIVE 2- Explain the ways marketers respond to social issues to shape consumer behavior.
PESTLE: The Social
Environment
The 2020s have seen a proliferation of social causes that affect the marketplace in fundamental ways. In response to social justice movements, such as Black Lives Matter, companies are taking a close look at what their brands and marketing commu- nications look like. In 2020, the Uncle Ben’s and Aunt Jemima brands, whose imagery was rooted in racial stereotypes of black people, retired their long-time
Buying, Having, Being
Consumer Researchers Who Talk the Talk AND Walk the Walk Is it enough to document a con- sumer issue, or should research- ers try to improve the problem as well? Some consumer researchers are organizing not only to study but also to rectify what they see as pressing social problems in the marketplace. This perspec- tive is called participatory action research (PAR), or transformative consumer research (TCR). It promotes research projects that include the goal of helping people or bringing about social change. Scientists who subscribe to this perspective view consumers as collaborators who work with them to realize change rather than as a “phenomenon” on which to conduct research. Adherents of TCR work with at-risk populations—such as children, the disadvantaged, or the disabled—or address such topics as materialism, consumption of dan- gerous products, and compulsive consumption.^31 As the emerging TCR perspec- tive shows, the field of consumer behavior can help to improve our lives as consumers. Social marketing strategies use the techniques that marketers normally employ to sell beer or detergent instead to encourage positive behaviors, such as increased lit- eracy, and to discourage negative activities, such as drunk driving.^32 Many researchers help to evaluate or create public policies to ensure that products are labeled accu- rately, to certify that people can comprehend important information in advertising messages, or to pre- vent children from being exploited by program-length toy commer- cials that masquerade as television shows.
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 33
The negative racial stereotype of Uncle Ben was recently retired as the brand was renamed Ben’s Original. Source: Rosamar/Shuterstock.
The shoe company TOMS is well-known for its promise to give a child in need a pair of shoes for every pair it sells. Source: Ccpixx photography/Shutterstock.
mascots and changed their names to Ben’s Original and Pearl Milling Company (the name of the company that first produced the pancake mix). 33 Cancel culture refers to the phenomenon of the public calling out companies for missteps and recommend- ing that consumers boycott the guilty brands. It’s clear that many consumers today are especially interested in choosing brands that support causes they find personally relevant. These causes include medical cures and disease prevention, social change, faith-based initiatives, and animal and child welfare.^34 A brand’s philanthropic activities can influence shopper behavior and ultimately purchase decisions. Consumer research convincingly shows that, when all other things are equal, people are likely to choose a brand that gives back to the community. Cause marketing is a popular strategy that aligns a company or brand with a cause to generate busi- ness and societal benefits. Indeed, one survey reported that three out of five consumers bought a product or service in the previ- ous year because of its association with a cause. An executive observed, “As a whole, Americans do have a heightened sensi- tivity to how they can help make a difference.” 35 Many firms today try to integrate corporate social responsibil- ity (CSR) into their business models. CSR describes processes that encourage the organization to make a positive impact on the various stakeholders in its community, including consumers, employees, and the environment. When a company does a good thing (even when that good thing is unrelated to their core business), their reputation improves, their consumers’ goodwill also increases, and in turn so do consumers’ evaluations of the company’s product through what researchers have called a benevolent halo effect. 36 But beware: This effect vanishes when consumers sense that good behavior is motivated by self-inter - est rather than a genuine desire to give back. That’s why it’s really crucial to demonstrate good faith. Researchers have found that consumers especially appreciate companies’ CSR efforts in response to natural disasters (like avalanches or hurricanes), which are less controllable than human-caused calamities. This consumer appreciation is even greater when companies make in-kind donations, like food or clothing, rather than monetary ones.^37 In-kind donations show that companies genuinely care and are not just trying to benefit from the cause. New research shows that consumers also increasingly hold companies accountable for their corporate social irresponsi- bility (CSI). 38 Analyzing over 1,000 CSI events reported in 77 leading media outlets in the United States, Mexico, the United Kingdom, Ger- many, and France over a seven-year period, researchers found clear evidence that the damage, in terms of how much a company’s shares dropped in the U.S. stock market, was especially high when a CSI event is widely covered in the news media. Some factors further accentuated the damage, like when an irresponsible event happened domestically but was caused by a foreign brand.
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 35
Buying, Having, Being
Your Face Here Other technologies also threaten our privacy even while they make mar- keting efforts more efficient. Face- book introduced a “Tag Suggestions” feature that uses facial recognition to identify a user’s friends in photos they upload and automatically sug- gests nametags for them. Other pro- grams, like Picasa, also incorporate facial recognition technology. This handy little tool removes the need to keep typing the same friends’ names into photo albums. But is there a dark side to this capability? Because facial recogni- tion analyzes and stores people’s unique facial measurements, it may come with some serious privacy risks. For example, in the near future, it will be possible for mar- keters to identify people as they walk down the street—and link their faces to relevant information, such as credit scores and medical records. Some firms already offer smart billboards that detect the gender and age of a passerby and show that person relevant ad mes- sages. For now, these boards don’t analyze emotions or other personal characteristics, but what if they could detect a feeling like sadness and offer the person a message about antidepressants?^47 What is the tradeoff between meeting needs quickly versus sharing your most intimate information with marketers?
online if you know what you’re doing. In one study, he showed that it was possible to deduce portions of a person’s Social Security number from nothing but a photograph posted online.^43 A recent study of how consumers view technology revealed the paradox that technology is empowering but also creates vulnerabilities. 44 In that study, consumers created collages to represent how they live with technology. The collages revealed that technology has permeated all facets of consumer journeys and created both dreams and nightmares in that realm. On the one hand, consumers love the convenience of tech tools like geo-localization, and they appreciate customized promotional offers delivered directly to their phones at exactly the right time. On the other hand, once consumers realize that this enchanting world is only possible because of deceptive and invasive practices that create material and psychological dependence, they begin to view this empowerment as a latent vulnerability.^45 Recently, researchers conducted a comprehensive review on how consumers try to reduce this vulnerability.^46 Not surprisingly, they find that consumers care a great deal about online privacy, but perhaps more surprisingly, the review also shows that consumers take many actions to protect it: They may remove or mask their digital footprints, or take steps to prevent access to their social media profiles. Yet, individual actions alone are not sufficient, and more coordinated policy interventions are neces- sary to regulate how firms collect private online data and what they do with it.
Data Accuracy
Especially in the wake of the tumultuous 2020 presidential election and the pandemic, the failure of social media platforms, including Facebook and Twitter, to police “fake news” content prompted many to reconsider how “free” information should be. The internet’s reach makes it incredibly easy to spread rumors, false “facts,” and even conspiracy theories:
- Microsoft founder Bill Gates is using the COVID-19 vaccine to implant micro- chips in everyone so he can track their movements.
A collage that a research participant made shows how pervasive technology is in a customer journey: notifications, phone calls, and promotions popping up at any time of the day can turn what otherwise would seem dreamy into a nightmare. 48 Source: CélineDel Bucchia et.al (2021), “Empowerment as Latent Vulnerability in Techno- Mediated Consumption Journeys,” Journal of Business Research, 124 (January), 629–651.
36 Section 1 • Foundations of Consumer Behavior
- Democrats^ and^ Hollywood^ celebrities^ are^ ritually^ sacrificing^ children^ (as “exposed” by the shadowy QAnon movement).^49 - Advertisers embed “hidden” messages in ads to manipulate people into buying things (more on this in the next chapter!). Although these allegations and many others have virtually ZERO evidence to sup- port them, the theories persist. Indeed, in 2021 Amazon was forced to remove a slew of QAnon merchandise promoting the movement from its Marketplace. So, how do we know what’s “true” anymore? This is a huge problem: in fact, when it comes to medical issues, the World Health Organization now calls this glut of false information an infodemic that causes confusion and unhealthy risk-taking. 50 The issue is more complicated than it seems because a message may contain a mixture of accurate and erroneous information that makes it difficult to separate fact from fiction. That means we’re all obligated to do our homework by referring to multiple sources and perhaps verifying a story on websites like FactCheck.org and Snopes.com. Even so, because it’s so easy to post “fake news” and make it look credible, perhaps we need to take almost everything we read with a grain of salt. This issue underscores a huge problem that marketers face today: trust. The avalanche of false information “poisons the well” for the large majority of organizations that try to be accurate. According to one survey, only 3 percent of consumers consider sales- people to be trustworthy, while another found that only 4 percent of them trust ads. 51 Table 2.2 summarizes the different forms that “misinformation” may take.
Identity Theft Identity theft occurs when someone steals your personal information and uses it without your permission. They may charge items on a credit card or perhaps access medical services via your health benefits. Identity theft is the most common consumer complaint, according to the Federal Trade Commission. In many cases, criminals
When headlines, visuals or captions don’t support the content
No intention to cause harm but has potential to fool
Misleading use of information to frame an issue or individual
When genuine sources are impersonated
New content is 100% false, designed to device and do harm
When genuine content is shared with false contextual information
When genuine information or imagery is manipulated to deceive
False Connection
Satire or Parody Misleading Content Imposter Content Fabricated Content
False Context Manipulated Content
Claire Wardle, “Fake News. It’s Complicated,” First Draft, February 16, 2017, https://firstdraftnews.org/articles/fake-news-complicated/, accessed February 21, 2022.
TABLE 2.2 Poisoning the Well: Types of Misinformation
38 Section 1 • Foundations of Consumer Behavior
Technology Addictions Though we usually equate substance abuse with addiction to alcohol, drugs, or nico- tine, it seems we can become dependent on almost anything—there is even a Chap- stick Addicts support group with 250 active members!^58 Consumer addiction is a physiological or psychological dependency on products or services. Many companies profit from selling addictive products or from selling solutions for kicking a bad habit. 59 Online gambling is the latest frontier and the most controversial one: Not only is the currency consumers use to gamble intangible (you cannot touch it), but the gambling options come so fast that gamblers quickly lose control. 60 A Chinese man got so upset about the amount of time his adult son spent playing video games that he took a novel approach: He hired “digital hit men” in the form of other gamers to kill off all of his son’s characters in the games.^61 How is that for “tough love”? Psychologists compare social media addiction to chemical dependency, to the point of inducing symptoms of withdrawal when users are deprived of their fix. As one noted, “Everyone is a potential addict—they’re just waiting for their drug of choice to come along, whether heroin, running, junk food, or social media.” 62 In 2018, the World Health Organization classified “gaming disorder” as an official disease. 63 Entrepreneurs are looking at novel ways to “detox” smartphone users. One designer created a series of “substitute phones” that help people put down the real thing. 64 They allow people to mimic real actions—like swiping, zooming, and scrolling—to wean users from smartphones. Maybe more of us need this kind of “intervention”—a Gallup survey reported that 41 percent of American smartphone owners check their phone every few minutes. Another survey found that 71 percent of Americans aged 18 and over sleep with their phones. 65 Oops, time for a fix? Indeed, a survey reported one in three smartphone owners would rather give up sex than their phones! 66 And, as many of us realize, this fixation grows by the “enablers” around us as they exhibit the same behavior. Indeed, one study documented that college students are much more likely to pull out their phones when someone with whom they were sitting has just done so.^67 Other problems arise when people become overly involved in playing online games or posting on social network sites:
- In the United Kingdom, a 33-year-old widowed mother let her two dogs starve to death and neglected her three kids after becoming hooked on the online game Small World. A judge banned her from going on the internet. The woman slept only two hours a night as she played the virtual reality game (in which dwarves and giants battle to conquer the world) almost nonstop for six months. Her children— aged 9, 10, and 13—had no hot food and “drank” cold baked beans from tins. When the family’s two dogs died from neglect, she left their bodies rotting in the dining room for two months. 68 - A U.S. woman pled guilty to a charge of second-degree murder in the death of her three-month-old son. The 22-year-old mother lost her temper when her child began crying while she was playing FarmVille on Facebook; she shook the baby until he died. - Cyberbullying^ refers to the “willful and repeated harm inf licted through the use of computer, cell phones, and other electronic devices.”^69 One study reported that one in five middle school students in the United States were subject to cyberbullying. As one seventh-grade girl observed, “It’s easier to fight online, because you feel more brave and in control. On Facebook, you can be as mean as you want.”^70 The pandemic forced us to spend even more time online, and not surprisingly this transformation just accelerated
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 39
A government website focuses on the problem of cyberbullying. Source: StopBullying.gov, U.S. Department of Health & Human Services.
A French organization combats the sexual abuse of children by online predators. Source: Courtesy of Innocence en Danger.
the frequency of these attacks. One large survey reported that almost^12 of U.S. internet users experienced some kind of online harassment since 2020, while over 20 percent of children have been bullied online. 71 The problem has gotten so bad that the U.S. Department of Health and Human Services even has a website to combat it: stopbullying.gov. 72
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 41
Consumers Behaving Badly
A few years ago, a crowd assembled for a big holiday sale at a Walmart store in New York. When the doors opened, the crowd trampled a temporary worker to death as people rushed to grab discounted merchandise off the store shelves. A lawsuit filed on behalf of the man’s survivors claimed that in addition to providing inadequate security, the retailer “engaged in specific marketing and advertising techniques to spe- cifically attract a large crowd and create an environment of frenzy and mayhem.” 78 In subsequent years, there have been additional incidents of trampling and even gunfire, as people frantically jockey for position to scoop up the big sales. Just how far will consumers go to secure a bargain? Despite the best efforts of researchers, government regulators, and concerned industry people, sometimes we are our own worst enemies. We think of individuals as rational decision makers, who calmly do their best to obtain products and services that will maximize the health and well-being of themselves, their families, and their society. In reality, however, consumers’ desires, choices, and actions often result in negative consequences to individuals and the society in which they live. Some of these actions are relatively benign, but others have more onerous con- sequences. Harmful consumer behaviors, such as excessive drinking or cigarette smoking, stem from social pressures. The cultural value many of us place on money encourages activities such as shoplifting and insurance fraud. Exposure to unattainable
The popular contraceptive drug Yaz was required to run corrective advertising to address exaggerated or inaccurate claims. Source: Correctiveadvertising.blogspot.com/2009/11/.
42 Section 1 • Foundations of Consumer Behavior
ideals of beauty and success creates dissatisfaction with our bodies or our achieve- ments. We will touch on many of these issues later in this text, but for now, let’s review some dimensions of the “dark side” of consumer behavior.
Consumer Theft and Fraud
Who among us has never received an email offering us fabulous riches if we help to recover a lost fortune from a Nigerian bank account? Of course, the only money changing hands will be yours, if you fall for the pitch from a so-called advance-fee fraud artist. These con artists have successfully scammed many victims out of hun- dreds of millions of dollars. However, a small but intrepid group of “counterscam- mers” sometimes give these crooks a taste of their own medicine by pretending to fall for a scam and humiliating the perpetrator. One common strategy is to trick the con artist into posing for pictures while holding a self-mocking sign and then posting these photos on internet sites. Both online and offline, fraud is rampant.
Year Act Purpose 1953 Flammable Fabrics Act Prohibits the transportation of flammable fabrics across state lines. 1958 National Traffic and Safety Act Creates safety standards for cars and tires. 1958 Automobile Information Disclosure Act Requires automobile manufacturers to post suggested retail prices on new cars. 1966 Fair Packaging and Labeling Act Regulates packaging and labeling of consumer products. (Manufacturers must pro- vide information about package contents and origin.) 1966 Child Protection Act Prohibits sale of dangerous toys and other items. 1967 Federal Cigarette Labeling and Advertising Act Requires cigarette packages to carry a warning label from the Surgeon General. 1968 Truth-in-Lending Act Requires lenders to divulge the true costs of a credit transaction. 1969 National Environmental Policy Act Established a national environmental policy and created the Council on Environmental Quality to monitor the effects of products on the environment. 1972 Consumer Products Safety Act Established the Consumer Product Safety Commission to identify unsafe products, establish safety standards, recall defective products, and ban dangerous products. 1975 Consumer Goods Pricing Act Bans the use of price maintenance agreements among manufacturers and resellers. 1975 Magnuson-Moss Warranty-Improvement Act Creates disclosure standards for consumer product warranties and allows the Federal Trade Commission to set policy regarding unfair or deceptive practices. 1990 The Nutrition Labeling and Education Act Reaffirms the legal basis for the Food and Drug Administration’s new rules on food labeling and established a timetable for the implementation of those rules. 1998 Internet Tax Freedom Act Established a moratorium on special taxation of the internet, including taxation of access fees paid to America Online and other internet service providers. 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act
Prompted by the recession that began in 2008, intends to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail,” to protect the American taxpayer by ending bailouts, and to protect consumers from abusive financial services practices. 2016 Consumer Review Fairness Act of 2016 Passed in response to a number of incidents where companies tried to stifle negative online user reviews by including a “gag clause” in a contract that threatens legal action or monetary damages when customers say bad things about the company. The bill allows the FCC and individual states to take action against companies that try this tactic. 2021 Consumer Protection and Recovery Act This legislation authorizes the Federal Trade Commission (FTC) to expand its protec- tion of consumers from fraud in the marketplace by empowering the Federal Trade Commission to seek legal and monetary relief for victims.^77
TABLE 2.3 Sample of Federal Legislation to Enhance Consumers’ Welfare
44 Section 1 • Foundations of Consumer Behavior
were given to use in a writing task was counterfeit then used more disgust-related words in the writing task. In a second experiment, participants who were informed that their computer mouse was a counterfeit performed worse in a game of virtual table tennis!
OBJECTIVE 2- Describe how consumer behavior directly impacts the environment.
PESTLE: The Natural
Environment
Almost everyone today is concerned about saving our planet. Worries about climate change, entire species going extinct, widespread exposure to carcinogens and harmful bacteria, and many other life-and- death issues are front and center. The consumer’s focus on personal health is merging with a growing interest in global health. Some analysts call this new perspective that encourages us to make positive decisions throughout the buying process conscious consumerism. Examples of these choices might include buying used clothing, choos- ing natural toiletries, or eating Fairtrade chocolate. The U.S. Environmental Protection Agency defines sustainability as being “based on a simple principle: Everything that we need for our survival and well- being depends, either directly or indirectly, on our natural environment. Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.” 84 Momentum has been building for some time around the need to claim a brand purpose —a reason to exist beyond making money— and sustainability efforts are fulfilling that need for many businesses. The World Wildlife Federation describes this growth in awareness as eco-wakening —it’s happening among consumers in both developed and emerging economies.^85 In one survey that was conducted in the middle of the pandemic, 66 percent of all respondents, and 75 percent of millennial respondents, said they consider sustainability when they decide what to buy. 86 And this focus pays off for companies that lis- ten: Unilever’s portfolio of 18 “sustainable living” brands is growing 50 percent faster than its other brands.^87 A sustainable business model is not just about “do-gooder” efforts that reduce a company’s carbon footprint or the amount of plastic that goes into landfills. Indeed, about 6 out of every 10 com- panies that convert to a sustainable business model report that they have profited financially as well.^88 For example, Ørsted is a Danish electricity company that completely transformed its core business from being a coal-intensive energy producer to a focus on renew- able energy sources. By divesting from fossil fuels and investing in offshore wind power, Ørsted reduced carbon emissions by 83 percent and still managed to boost profits. 89 While some individual companies like Ørsted, Patagonia, and Native deodorant make heroic efforts toward sustainability, will this be enough to save us from environmental disasters down the road? Every action helps, but most likely we need to revisit the fundamental ways we use—and get rid of—natural resources. For example, apparel businesses (and fashionistas ) have been seduced by the allure of fast fashion —inexpensive garments that are manufactured and replaced quickly to keep up with fast-changing trends to feed the ever-changing
Environmental activist Greta Thunberg’s passion has fueled a global movement in which consumers are urging govern- ments and corporations to address the climate change crisis. Source: SOPA Images Limited/Alamy Stock Photo.
Chapter 2 • Consumer Ethics, the Marketplace, and the Planet 45
Native deodorant is a popular choice for some consumers because of its focus on sustainability. Source: Emma’sPhotos/Shutterstock.
tastes of shoppers at stores like H&M and Zara. The problem: These here-today, in-the-landfill-tomorrow garments require vast amounts of water—roughly 3,000 liters to make just one cotton shirt. The dyeing process releases toxic chemicals into what’s left of our water supply. 90 And because these items aren’t made to last, they quickly degrade and have to be replaced with the next fast fashion goodie. One promising economic model is the circular economy (CE).^91 Instead of the linear economy, which is on continual expansion through stimulation of mass production, mass consumption, and rapid disposal, the CE model proposes that sustainable growth can happen only through ongoing reutilization of resources and materials with the ultimate goal of generating zero waste. Circularity is “restorative and regenerative by design.” The circular economy model makes it easier for consumers to understand how to behave sustainability because sustainability becomes more concrete.^92 But we have a long way to go! According to the Circularity Gap Report presented at the World Economic Forum, the world is only 8. percent “circular,” which means that 91.4 percent of resources used for consumption are being squandered.^93 Sometimes the “solution” is part of the problem! For example, although we may benefit from drinking water instead of sugary bever- ages, by one estimate the energy (and subsequent climate change) used to produce the plastic bottles they come in is equivalent to filling them one-quarter full with oil. In addition, the bottles may be transported thousands of miles on gas-guzzling cargo ships, and then the discarded bottles can take thousands of years to decompose.^94 And to add insult
Figure 2.1 The Circular Economy Source: Sensvector/Shutterstock and Nikolae/Shutterstock.
Recycling
Raw Materials
Residual Waste Collection
Distribution
Production, Remanufacturing
Consumption, use, reuse, repair
Design
Circular Economy
