Ethical Marketing:

A discussion on the usage of the findings of new developments in economics in marketing campaigns.

ERASMUS UNIVERSITY ROTTERDAM
Faculty of Economics of Business
Marketing, Entrepreneurship, and Organization
Name: / Andreas Constantinou
Exam number: / 316530
E-mail address: /
Study: / Marketing
Thesis: / Bachelor (FEB13100)

Table of Contents

Abstract / 2
Introduction / 3
New developments in Economics / 4
Behavioral Economics / 4
Experimental Economics / 5
Neuroeconomics / 6
Contributions of New Developments / 8
Perception Formation / 8
Learning and Memory Model / 10
Attitude Formation and Behavior Models / 11
High vs. Low involvement Decision making models. / 13
Models and methods developed to assist in influencing Behavior / 15
Branding / 15
Mind Mapping / 16
Rossiter- Percy - Bellman grid / 19
CESLIP Model / 21
Argumentative Discussion / 23
Arguments For / 23
Arguments Against / 26
Implications of Discussion / 28
Conclusion / 30
Reference List / 31

Abstract

In their book, “Marketing Management” Kotler and Keller make a distinction between a social and managerial definition of marketing. Social marketing is defined as “a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others”[1]. From a managerial perspective, marketing is “the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value”[2]. Although these definitions do differ, they circle around the same underlying notion of economics; the creating, communicating, and delivering value to satisfy consumer needs and wants.

However, when analyzing recent marketing campaigns and tactics this definition does not seem to be just. Although the defined aim of the marketeer is to satisfy the consumer’s needs and wants, their concurrent personal goal is to sell the product. The problem with this is that many products in the modern marketplace are neither needed nor wanted. So, in order to sell their products, marketeers of today use clever tactics to make their “not sought out” products more desirable. In other words, in many cases they do not focus on satisfying consumer needs and wants, but rather creating them. Therefore my definition of marketing would be the same as before, but I would restructure it as “…satisfying consumer needs and satisfying and creating consumer wants”. With this effort I feel that, in my opinion, I attempt to provide a dimension of honesty as well as a more ethically correct approach to defining marketing.

Introduction

The topic of ethics in marketing is very vast and hard to define, as what is ethical in one person’s eyes can be unethical in another’s. As with any discussion there are always two sides to the argument. There are those who support the natural law, that is, as in nature, a larger predator will easily use their superiority to tackle a weaker prey, but should nature’s law be the acceptable philosophy in the marketplace?

There are two elements in play when addressing this question: using your own advantages, and exploiting another party’s weaknesses. Taking advantage of one’s superior position is ethically acceptable, as this is the foundation of our economical system; each business aspires to grow, as with growth, prosperity and safety follow. However, an ethical issue arises when we are referring to taking advantage of someone else’s weaknesses.

As the findings of the new developments in economics grow, the weaknesses of the human mind become apparent. For this paper, I would like to redefine ethical marketing as the design and execution of marketing campaigns without exploiting the weaknesses of the consumer. However, in some situations it is acceptable to exploit these weaknesses. So the question remains, “When is it ethically justifiable to influence consumer behavior?”

This article is centered around the argument of whether or not it should be ethically acceptable to employ the findings of the new developments in marketing campaigns in order to persuade the general consumer to purchase and/or use a certain product, good, or service. In the first part of the article I will focus on and describe the new developments in economics that I am referring to. Afterwards, I will denote some of the major contributions of these combined fields. In the third section I will illustrate and describe marketing tools and models which have been derived from these contributions in order to enhance the marketeer’s toolbox when promoting and selling their goods or services. Thereafter, in the fourth and fifth section of the article, I will engage in a discussion focusing on situations where it is ethically justifiable to apply the tactics and models discussed in part three as wells as instances where it is not. Finally, I will go on to denote the implications of this discussion as well as provide the necessary conclusions to the discussion as I attempt to answer my research question.

1. New developments in Economics

In this first section I will give a brief overview of the new developments in economics. More specifically I will be discussing Behavioral Economics, Experimental Economics, and Neuroeconomics. Each of these fields attempts to uncover the mechanisms behind consumer behavior. I will give a brief definition of each field, state their goals, and mention some of the methods that the respective economists use to achieve them.

Behavioral Economics

Behavioral Economics is “a branch of economic research that adds elements of psychology to traditional models in an attempt to better understand decision-making by investors, consumers and other economic participants”[3]. Behavioral economists apply various methods and techniques in order to uncover the mechanisms behind the individual’s decision making processes, as well as to test previously developed socio-related economic theory. The methods that are usually used by economists in this field are: experiments, surveys and questionnaires, interviews, observation.

Experiments:For many years, this method of research has been the main platform for testing economic theory and viewing individuals’ behavior. “Experiments played a large role in the initial phase of behavioral economics because experimental control is exceptionally helpful for distinguishing behavioral explanations from standard ones”.[4] (see Experimental Economics section pg. 5 for further information on experimentation techniques)

Surveys and Questionnaires: this form of research requires the subject to answer a set of predetermined questions. For instance, the questions in this method could address specific behavior or attempt to place the subject in a hypothetical situation where he/she would have to specify the decision they would make. Although this technique is cheaper to conduct, subjects’ responses are not completely reliable as their behavior in the hypothetical situation might differ if they were confronted with the same situation in real life.

Interviews: are usually conducted by an expert in the respected topic. This method allows for flexibility as the interviewer can choose to escape from the predefined format of the interview if they wish to focus on a certain specific response of the interviewee. However, the difficulties with this method are that the interviewer must be experienced with this technique, and the interviewee must usually be compensated for the extra time and effort required of them to take part in the interview.

Observation: this technique allows the researcher to view the actual behavior of the subject in the real world. Although very effective to attain real behavior, it is very limited to situations where it can be applied and to the information that can be retrieved.

Economists have often debated the goals of behavioral economists, that is, whether or not behavioral economists’ goal is to prove that individuals are irrational or to disprove the assumption that they do behave rationally. Either way, the contribution of this field to the science of economics has, without a doubt, been substantial.

Experimental Economics

Experimental Economics, as the name suggests, is the science of adopting experimental methods in order to test current economic concepts, as well as for the development of new theory. Though experimental economics is a field in its own, it is hard to distinguish an experimental economist from a behavioral one, as most experiments are focused on observing the subject’s behavior. However, it is the restriction of the type of research that aids in the distinction between the two fields. “Behavioral economists are methodological eclectics. They define themselves not on the basis of the research methods that they employ but rather on their application of psychological insights to economics. Experimental economists, on the other hand, define themselves on the basis of their endorsement and use of experimentation as a research tool”[5].

The main concern that any experimenter has to address when carrying out his/her experiments is the reliability of their findings. In other words, are my results true or was my experiment prone to biased outcomes? For this reason experimental economists are in a constant battle to receive more reliable results. For instance, traditionally, experiments would be carried out in a laboratory or a closed space, but as subjects would grow weary of the experiment, the economist’s results would not be reliable. Therefore, more recent and modern experimenters have undertaken field experimentation. In addition, experimental economists can use means such as monetary incentives in order to entice the cooperation of their subjects.

Experimental economists can carry out real and hypothetical experiments in order to serve their purpose. The reason for this is that experimental economists also have the issue of morality and ethics when creating an experiment. For example, one cannot force someone to starve in order to see how they react when they are offered a piece of bread. Therefore experimental economists will always have to juggle the reality of the experiment, the information they provide, and the circumstances of which their subjects are put in, in order to provide for the most reliable and fruitful outcomes.

Neuroeconomics

Neuroeconomics can be described as the cooperative efforts of economists and psychologists to analyze brain activity when confronted with certain economic related issues. Neuroeconomists employ recent neuroscientific methods in order to analyzeeconomically relevant brain processes[6]. In his paper, “A neuroeconomic brain model”, (see et al. Larsen T. 2008) Larsen describes the goal of neuroeconomics as “to provide a descriptive decision-making theory, which is not restricted to economic theory and more realistic than that of economic man”[7].

One of the most important findings of neurology, which in turn assists neuroeconomists in there line of work, is that the human brain is segmented; that is, certain behavior and emotions are controlled by different areas of the brain. This allows neuroeconomists to see which emotions are triggered when their subjects are faced with an economically related decision. Neuroeconomists can monitor brain activity through two means: by observing neural activity and metabolic circulation. In order to measure neural activity Neuroeconomists can employ Elektroencephalography (EEG) and Magnetecephalography (MEG). EEG, through electronic stimulation, can monitor the sequence of neural activity on the surface of the brain, but being the eldest technique is limited to the activity only on the surface. This drawback is compensated by MEG which can indeed observe activity in deeper areas of the brain structure as it can depict magnetic currents on individual nerve fibers.

For measuring metabolic circulation neuroeconomists can apply three methods: Positron emissions tomography (PET), functional transcranial Doppler sonography (FTCD), and Functional magnetic resonance tomography (fMRI). PET measures blood circulation by inserting a radioactive substance in the blood stream. This radioactive substance can then be monitored with detectors, and therefore the experimenters can observe elevated blood circulation in different areas of the brain, and thus concurrently observe the stimulated behavior of the subject. With FTCD neuroeconomists can measure blood circulation by simultaneously measuring blood flow on both sides of the brain (both left and right cerebral arteries) and therefore determine which side has increased activity. This method, although relatively limited, is the least expensive of all the neurological procedures mentioned in this article. The final method fMRI is extremely accurate, and is the most popular amongst recent neuroeconomists. This method utilizes magnetic fields and can distinguish between different body tissues, which in turn allow the experimenter to observe direct activity in specific part areas of the brain.

The problem with neuroeconomics is that observing brain activity does not come cheap as most of the prior mentioned methods are very expensive to administer. Furthermore, neuroeconomists have come under scrutiny as although these methods have, in many cases, successfully proven certain previously developed behavioral mechanisms, they have not provided any new major contribution to today’s economic theory. However, this field shows a lot of potential; for instance, it would be possible to see if a person will prefer to buy a certain product either because they are familiar to it and prefer it, or because it is the cheaper choice. In other words, certain products will stimulate a particular emotion for a one consumer and different emotions for others. Therefore, if one could understand which emotions and behavior is observed when confronted with a certain choice set, then they could effectively play on these emotions in order to influence the consumer’s behavior.

It is implications such as this that make this study so promising to the field of economics and the development of economic theory. “Behavioral economics has mostly been informed by a branch of psychology…. But other cognitive sciences are ripe for harvest. Some important insights will surely come from neuroscience, either directly or because neuroscience will reshape what is believed about psychology which in turn informs economics.”[8]

Contributions of New developments

This section focuses on some of the contributions of the new fields in economics. Due to the vast amount of findings of these subjects I will only illustrate a few, but enough so I can show the correlation between these findings and the techniques developed by marketeers. More specifically the contributions which will be discussed in this section are: Perception Formation, Learning and Memory Model, Attitude Formation and Behavior Models, and High vs. Low involvement Decision making models.

Perception Formation

Perception describes the process whereby sensory stimulation is translated into organized experience[9]. It refers to a person’s reaction to a stimulus and the process by which they form their view of that certain entity, may it be real or imaginary. This should not be confused with the attitude that one forms towards an object (discussed in later part; see attitude formation pg. 11). For instance, if two people are shown an image of another person, one might perceive them as tall, whilst the other could perceive them as short. Either way, they are both correct. Although in some cases a person’s perception of an object is not based on real and/or reliable information, it is in reality the truth of how that person sees that certain entity.

When subjected to a stimulus individuals follow certain processes when forming their perception of that entity: Exposure, Attention, Comprehension, Acceptance, and Retention. Figure 1 displays this information processing model.

Fig. 1 Perception: the information processing model

Exposure: This is the initial stage of perception formation and refers to how long an individual is subjected to the stimulus. The longer one is exposed to the stimulus, the higher the possibility that they will create a more holistic perception of the stimulus.

Attention: Although the time of exposure is crucial, if the individual is not paying any attention to the stimulus, then no perception will be formed, regardless of how long they are being exposed to it. For instance, if a song is playing in the background and the individual is not cognitively aware of it, then their perception of that song would be different than someone else’s who was focusing on that song. Also if the individual is being subjected to numerous stimuli, chances are that they will attend to some, but ignore others.

Comprehension:This section refers to the individuals attempt to analyze and understand what they are being subjected to. At this point, the subject will most likely categorize the stimulus automatically in order to assist them in the acceptance and retention process. In other words, they will create a mental shortcut to assist them in understanding what they are being subjected to. This automatic process of categorization of the stimulus allows the individual to quickly process multiple stimuli concurrently without having to exert a large amount of cognitive effort. However it leaves them susceptible to biases as they might not distinguish unique characteristics of each individual stimulus, or might even miss an important feature presented to them that could influence their perception of those stimuli.

Acceptance and retention: These are the final stages in the information processing model of perception formation. After the information has been analyzed, it is accepted as such and then retained into the individual’s memory, finally forming their perception of the stimulus.

Learning and Memory model

The development of the learning and memory model is one of the most important steps in understanding how individuals retain information through their experiences. By comprehending the mechanisms involved in turning short term memory (STM) into long term memory (LTM) economists can map the easiest route in order to get their messages across to their intended consumer. Figure 2 denotes the learning and memory model in further detail.

Fig. 2: Memory Model: Learning and Retention

When the individual is subjected to the stimulus, it enters first into their sensory memory through their sensory input. For example, if the stimulus is a picture, then the sensory input would be the eyes. Once attention is given to the stimulus, the information is transferred into the subjects STM. Seeing as the STM is limited to 10-15 seconds, information will be lost unless it is encoded and transferred into the LTM of the individual. However, this process is the most difficult part of the memory retention process.