Ethics and Social Responsibility in the Consumer Society and Public Policy

Welcome to Topic 11: Ethics and Social Responsibility in the Consumer Society and Public Policy.

Have you ever wondered how marketers track your online activity or how a supermarket is designed to encourage you to purchase certain items? Is it okay for marketers to do this, and how is it regulated? Public policy and codes of ethics are how.

This topic looks at corporate social responsibility as an essential component of any marketing strategy today and the use of public policy to support decision-making and protect the consumer. In this topic, you will learn about:

• Ethics and social responsibility in consumer marketing
• Consumerism
• Consumer manipulation
• Public policy and legislation in consumer protection.

These relate to the Subject Learning Outcomes:

1. Discuss the current trends in consumer behaviour and apply them to the marketing mix.
2. Identify the impact of social and cultural factors on consumer behaviour.
3. Discuss how consumers make decisions that impact on their buying behaviour.
4. Review the effectiveness and impact of advertising, promotions and media on consumer behaviour.
5. Write effective marketing plans to influence consumer decision-making.

Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.

Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.

Ethics and social responsibility in consumer marketing

Public policy

Public policy converges on the field of consumer behaviour when policymakers can improve the outcome of marketing exchanges for the benefit of society. This is especially important when marketers exploit vulnerabilities of target customers such as children, teenagers, illiterate consumers and the elderly. Through their knowledge of consumer behaviour, marketers may exploit consumers by engaging in unethical practices.

Government intervention to prevent such exploitation includes regulation, education and incentives to improve marketing initiatives for a more significant societal benefit. Consumer legislation exists at State and Federal levels and regulatory agencies such as the Australian Competition and Consumer Commission (ACCC) have considerable power in the marketplace. Besides legislation, governments focus on consumer education to enable consumers to make wise consumption decisions, for example, reading nutritional labels.

However, they cannot protect all customers from misleading marketing practices but can educate them, especially regarding harmful products such as alcohol, tobacco and drugs. Researchers frequently identify additional areas that need government intervention. Companies prosper when society prospers. Therefore, corporate social responsibility should be an indispensable element of marketing strategies.

The societal marketing concept is the appropriate conceptualisation of the traditional marketing concept that balances the needs of the individuals, the marketing organisation and society. Marketing in this context should satisfy the needs and wants of the target market while helping to preserve and enhance the well-being of the consumer and society. For example, per the societal marketing concept, fast-food restaurants should produce more nutritious foods containing less salt, fat and sugar; and tobacco companies should not use athletes in their advertisements as product endorsers.

Levels of regulation

Governments tend to regulate and legislate when needed in response to scams or scandals. However, on an industry level, many trade associations have developed industry-wide codes of ethics because they have found that industry self-regulation is both in the consumers' and marketers' best interests. In addition, some companies include social goals in their mission statements and make them essential components of their strategic planning process and operational effectiveness (Schiffman & Wisenblit 2019). Ethical and socially responsible initiatives are good business acumen, and consumers tend to reward those efforts with increased purchases and positive word of mouth.

Industry self-regulation, government regulation and consumer advocacy are the forces that frame public and consumer policy. Unethical marketing practices happen in every marketplace across the entire marketing mix, including product design, packaging, pricing, advertising and distribution. The ACCC informs consumers about recalls and scams. Unethical practices also encompass consumers acting unethically through shoplifting making false claims. Ethics is a 'give and take' process between marketers and consumers, and both should aim to behave ethically (Schiffman & Wisenblit 2019).

Codes of ethics

Many businesses and industry associations have developed codes of ethics to guide their decision-making by incorporating social goals into their mission statements. A mission statement or corporate philosophy usually reflects the personal philosophy of social responsibility by the leaders or founders of the organisation. A highly ethical environment encourages ethical practices by employees and leads to a more favourable brand perception by consumers, which ultimately results in increased sales. A lack of social responsibility on the part of the organisation can negatively affect consumer purchasing decisions. As such, self-regulation is in the best interest of companies. Therefore, industry associations typically develop codes of ethics or professional codes of conduct for their members (Schiffman & Wisenblit 2019).

The wisest path is to create corporate, business and industry-wide environments that encourage ethical business practices and ethical employee behaviours. Avoiding government regulations or legislation that may impact business operations in the long run by doing the right thing is in the interest of all businesses within an industry (Schiffman & Wisenblit 2019).

Privacy

The loss of privacy is becoming an ethical issue as marketers are narrowcasting their target audiences through innovative online media and sophisticated tracking. Narrowcasting is made possible through data providers who develop individual customer profiles from tax records, surveys, census data, warranties, direct-mail, credit card companies, bank records and internal customer records. Digital marketers track their customers' digital footprints on websites (with cookies) and via social media.

Many consumers are unaware of how they are being tracked. In some circumstances, the consumer can even be identified by name.

Many consumer advocates have raised their concerns about using this data through exchange networks. Consumer advocates are especially concerned about the fact that companies now not only know who you are but also where you are through GPS technology. This technology enables companies to provide tailored and personalised marketing that offers consumer convenience, especially if a consumer has given their prior consent. On the other hand, it can be seen as an invasion of privacy (Schiffman & Wisenblit 2019).

Consumerism

Consumerism has been traditionally seen as the activities by government, industry associations, businesses, independent organisations and citizens to protect the rights of consumers (Schiffman & Wisenblit 2019). Consumers can express their approval or disapproval of a company's business practices by their actions in the marketplace. Members of consumer advocacy groups encourage their members to act against companies through, for example, consumer boycotts. In some instances, these actions can successfully change the practices of entire industries, such as the cosmetic industry eliminating testing of products on animals. However, most boycotts appear to be unsuccessful and short-lived. Nevertheless, in some instances, even single consumers can change company policies.

It is expected that public attitudes towards consumerism will remain strong with many more consumers joining consumer groups, especially when consumers feel that the group leaders will represent their needs.

Consumer activism

Businesses can employ number of strategies of consumer activism, including:

• Improving quality and service
• Reducing greenhouse gas emissions
• Lowering prices and modifying advertisements to reduce dissatisfaction
• Initiating an active education program
• Cooperating with governments, not-for-profit organisations and consumer groups.

Consumer manipulation

Techniques such as product placements or advertorials blur the ability of a consumer to differentiate between entertainment, editorials and advertisement. The same applies to the blending of promotion and TV programs through the art of closely positioning a TV advertisement to the storyline of a program. Many governments limit the use of the latter to protect vulnerable groups such as children. For example, cartoon characters are prohibited for promotional use during children's programs (Schiffman & Wisenblit 2019).

Consumer advocates, researchers and governments have been progressively concerned about the growing consumption of unhealthy foods. Marketers often use their knowledge and skills regarding the perception of quantities to encourage more significant consumption. Marketers also aim to manipulate the perception and behaviour of consumers via altering the physical settings in which consumption takes place. For example, supermarkets move around products to encourage customers to wander through the store or use cold temperatures to make people hungrier, thus leading to increased purchases. Marketers can also tinker with consumers' perceptions regarding pricing by placing more expensive items into the relative context (Schiffman & Wisenblit 2019).

Covert marketing

Covert marketing is also known as masked or stealth marketing. In covert marketing, marketing communication or promotional materials that come from marketers are perceived by customers to come from independent sources, which are perceived to be more reliable. Some of these practices might violate laws or regulations issued by governments and may be regarded as deceptive advertisement. Some advocates believe that better rules need to be developed to deal with covert marketing. Some marketers may present marketing messages that transmit unrealistic stereotypes or images. In some instances, those ads may even portray violence or encouragement to engage in unsafe sexual activities or portray a target group in such a way that it violates their emotions and personal space (Schiffman & Wisenblit 2019).

Public policy and legislation in consumer protection

Public policy, also referred to as social policy, deals with social intervention by public policymakers to drive change that benefits the whole society. Usually, these policies result from an outcry by the public and consumer advocacy groups for better regulation of abuses in marketplaces.

Marketing abuses are said to cause concern with policymakers at every government level (federal, state and local). However, at the same time, these practices are short-lived, and businesses involved in marketing abuses do not tend to survive in the long term.

A common marketing abuse takes advantage of the longstanding consumer interest in the environment and healthier product options. This consumer interest is sometimes exploited by businesses using misleading and deceptive advertisements. For example, copying symbols, colours and product names that signal environmental sustainability or using terms such as 'light' or 'fat-free' without changing the ingredients of their products. Other abuses include offensive language, violence, and sex presented in television programs, computer games, graphic novel series and the Internet in general.

There are five (5) types of public policy intervention, including:

1. Regulation
2. Consumer education
3. Encouragement of industry regulation
4. Incentives
5. Complaints handling.

Legislations and regulations

Legislations and regulations follow outcries by consumers, parents and teachers. Greater regulations are sometimes required to ensure community safety (Schiffman & Wisenblit 2019). Australia has more regulatory legislation than many of its larger neighbours. The primary legislation used to be known as the Trade Practices Act 1974 but was updated and renamed the Competition and Consumer Act 2010 and is governed by the ACCC. It applies to all states and territories in Australia, while State legislation still applies. The Competition and Consumer Act 2010 incorporates the Australian Consumer Law (ACL), which addresses more contemporary regulations and laws around online buying and selling. For example, The Consumer and Competition Act 2010 established that all price advertisements and labels such as 'Made in Australia' must be truthful and accurate.

Other significant areas of regulation within the Act include anti-competitive practices, consumer protection, product liability, unconscionable conduct, product safety, and product information and industry codes. Its purpose is to prevent anti-competitive agreements such as price-fixing. Moreover, it aims to maintain competition and prevent predatory pricing. The notion of unconscionable conduct happens when a business takes unfair advantage of a superior market position or bargaining power. From a consumer perspective, the Act addresses consumer protection, product liability concerns and monitors misleading advertisements (Schiffman & Wisenblit 2019). The Act also outlines penalties for breaches.

The issues that gain immediate attention from government bodies and policymakers include abuses that are widespread fraud affecting many victims, careless action, repeat offences and unsafe products that may harm children. Marketers should be aware of the watchdogs within these bodies and agencies.

Marketers sometimes have difficulties in understanding regulatory guidelines regarding deceptive advertising. For that reason, consumer research studies have been conducted to provide clarity. One research study determined three (3) categories of deception, as shown in the following list:

1. False claims (unconscionable lies)
2. Omission of relevant facts leading to misinterpretation (claim/fact discrepancies)
3. I am creating a deceptive belief (claim/belief discrepancies) (Tipton et al. 2009).

Consideration also needs to be given to the fact that sometimes consumers have difficulties in understanding labels. Therefore, consumer research into attitudes, habits and purchase behaviour should be a necessary pre-condition for designing new laws and regulations.

Independent regulatory agencies have been established to police and enact the laws and regulations in a specific industry to enforce compliance and eliminate abuse. Legislation and regulation are also reviewed regularly and updated to align with the changing commercial and social environments (Schiffman & Wisenblit 2019).

Regulatory industry bodies

Since the 1960s, advertising regulations have seen a gradual shift from government agencies to industry bodies such as the Australian Association of National Advertisers (AANA) and Commercial Radio Australia (CRA). The Australian Communication and Media Authority (ACMA) investigates claims when the complainant is dissatisfied with the response by the relevant industry association. The Government has also maintained a regulatory system to deal with advertisements targeted at children through the ACMA's Children's Television Standards 2009 (Schiffman & Wisenblit 2019).

The ASB

Many complaints are channelled through the Advertising Standards Bureau (ASB). The ASB and the general public primarily deal with sexism in advertisements. The ASB is also responsible for investigating competitor claims, which often end up in the Federal Court of Australia because they are so difficult to resolve.

Since the mid-1990s, in Australia, tobacco advertisements have been banned from most mass media channels, including TV, print and billboards. In addition, the Government introduced high taxes and supporting bodies such as the Cancer Council to run anti-smoking campaigns. Alcohol advertisements cause equal consumer concern; thus, several industry associations, such as the Winemakers Federation of Australia, now support a self-regulatory policy known as the Alcohol Beverages Advertising Code Scheme, which has been supported by the general public (Schiffman & Wisenblit 2019).

The ACCC

The ACCC published 'Green Product' marketing guidelines, which have led to continuous backlash from marketers. Industry associations have released codes of conduct responding to claims advertisers make regarding their environmental practices, encouraging marketers to stay away from claims such as 'environmentally safe' or 'environmentally friendly' unless those claims can be significantly substantiated. The ACCC monitors misleading claims under the Competition and Consumer Act 2010. Consumer advocacy groups demanded more informative descriptions of products and waste reduction in response. The ACCC also advocates for water conservation, recycling and reducing global warming and pollution. Eco-labels and environmental credentials are important in sound business practices and compliance nowadays (Schiffman & Wisenblit 2019).

Regulating food advertising

There are very heavy restrictions on health claims that food manufacturers need to understand and adhere to. Using misleading labels, describing size in misleading terms, or filling packages only partly may lead to deceptive packaging claims regulated by the Competition and Consumer Act 2010.

Australia's and New Zealand's Food Standard Codes are developed by Food Standards Australia and New Zealand (FSANZ). These standard codes cover the labelling of:

• Ingredients
• Country of origin
• Date marking
• Genetically modified foods
• Health claims.

When manufacturers of foods make claims such as 'high in fibre' or 'low-fat', they must include a nutrition information panel listing the quantities of ingredients. However, many consumers do not understand nutritional content and, as such, nutritional labelling may not yet provide the benefits envisaged. Researchers have determined that more consumer education is required in this area (Schiffman & Wisenblit 2019).

Consumer education

Consumers need information, education, regulations, and legislation to make wise consumption decisions. Choice, a magazine published by the Australian Consumers' Association (ACA), provides consumers with valuable insights and information to make the right purchasing choices. Government at federal, state, and local levels also distribute consumer information. Corporations are also developing educational material to start a dialogue with their customers. Some even collaborate closely with consumer advocacy groups or not-for-profit organisations to enhance awareness of certain areas of relevance. For example, parents, consumer advocacy groups, government policymakers, and teachers agree that more must be done to educate children on building knowledge and expertise in nutrition. However, research suggests that children trust their mothers and teachers and themselves when it comes to nutrition (Schiffman & Wisenblit 2019).

In summary, there are many debates around ethics and social responsibility in consumer marketing, and it is important to be aware of these. The industry associations and public policy that support decision-making and consumer interests are critical in consumer marketing. In the future, regulations will continue to evolve, and as consumers become more sophisticated, so will the technology used to track and target them.

Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

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The following learning tasks will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

In-seminar learning tasks

The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.

Welcome to your post-seminar learning tasks for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if any of these are to be completed during your consultation session. Click on each of the following headings to read more about the requirements for each of your post-seminar learning tasks.

Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your consultation session.

Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

• The Economist 2018, The true cost of fast fashion, streaming video, YouTube.
• Roundtable 2019, Conscious consumerism: Does it make a difference, streaming video, YouTube.

References

• Acciona 2018, Consumer society – sustainability, streaming video, YouTube, https://www.youtube.com/watch?v=5pMymxlW2Qw
• Akdoğan, MS & Altuntaş, B 2015, 'Covert marketing strategy and techniques', Procedia Social and Behavioral Sciences, 207:135-148.
• Businesswire 2021, Vericast Study sees more socially conscious consumer, cautious return to normal, Businesswire, htt
• The Ethics Centre 2020, Ethical decision making, streaming video, YouTube, https://www.youtube.com/watch?v=n0uwTBrgqxI
• Farmshop 2021, What 2021 conscious consumer really wants, Speciality Food Magazine, https://www.specialityfoodmagazine.com/retail/what-2021s-conscious-consumer-really-wants
• Hackenberg, J 2021, Brands, you need to listen to the conscious consumer of the future, Forbes, https://www.forbes.com/sites/jonquilhackenberg/2021/04/29/brands-you-need-to-listen-to-the-conscious-consumer-of-the-future/?sh=4e10df751d46
• Niazi, L 2020, How retailers can thrive in the era of the "Conscious Consumer", Forbes, https://www.forbes.com/sites/ibm/2020/01/11/how-retailers-can-thrive-in-the-era-of-the-conscious-consumer/?sh=334a32952416
• One Minute Economics 2020, Consumerism after COVID-19? Post-pandemic consumer behavior changes explained in one minute, streaming video, YouTube, https://www.youtube.com/watch?v=a5GnpwDa9Xk
• Our changing climate 2020, The problem with consumerism, streaming video, YouTube, https://www.youtube.com/watch?v=x0ckvo2Z5BU
• Pecoraro, C 2021, What does the conscious consumer want in 2021?, Customer Experience Magazine, https://cxm.co.uk/conscious-consumer-in-2021/
• Schiffman, LG & Wisenblit, JL 2019, Consumer behavior, 12th edn., Pearson Education Ltd.
• Solomon, MR 2020, Consumer behavior: Buying, having and being, 13th edn., Pearson Education Ltd.
• TED-Ed 2020, Ethical dilemma: the burger murders – George Siedel and Christine Ladwig, https://ed.ted.com/lessons/ethical-dilemma-the-burger-murders-george-siedel-and-christine-ladwig 
• TEDx 2013, Ethical consumerism and the power of having a choice/voice, streaming video, YouTube, https://www.youtube.com/watch?v=GAG-t-kXcqE
• Tipton, MM, Bhardawaj SG, & Robertson, DC 2009, 'Regulatory exposure of deceptive marketing and its impact on firm value', Journal of Marketing, 73(6):227-243.
• University of Minnesota 2015, Principles of Marketing, University of Minnesota Libraries, https://open.lib.unm.edu/principlesmarketing/chapter/14-4-ethics-laws-and-customer-empowerment/
• White, K, Hardisty, DJ & Habib, R 2019, The elusive green consumer, Harvard Business Review, https://hbr.org/2019/07/the-elusive-green-consumer