Today’s Topics n Discuss the Corporation and the Consumer

The Corporation and the Consumer n Patterns of Production and Consumption n Marketing Practices n Consumer Protection and Defective Products

Why Should We Be Concerned About Patterns of Production and Consumption n U.S. is less than 5% world population, yet consumes: 60% of the world’s beef 50% of the world’s gasoline 35% of the world’s electricity 80% of the world’s cocaine

Can Business Justify Satisfying Such Demand? Is the Production that Feeds this Demand Morally Defensible?

YES! The Theory of Consumer Demand--All Businesses do is Satisfy Consumer Desires.

Galbraith Challenges the Use of Consumer Demand to Defend Production and Consumption Practices

2 Key Elements of Consumer Demand n Urgency of wants does not diminish as they are satisfied. n Wants originate in the consumer.

The Second Point is Key-- Wants MUST Originate in the Consumer

If Production Creates the Wants it Satisfies, the Urgency of the Wants No Longer Justifies the Production

Advertising and Sales Practices Show that Production Creates Demand n Advertising Expenditures for new products n Created desire for a new product n That demands can be synthesized, catalyzed and shaped shows that they are not very urgent.

Advertising Works Only in Conditions of Abundance (High Discretionary Income)

The Dependence Effect n As society becomes increasingly affluent, wants are increasingly created by the processes by which they are satisfied.

What Does an Affluent, Productive Society Produce? n Opulent supply of some goods, miserly supply of others. n This difference causes social ills. n The dividing line is precisely the line between private consumer goods and public goods

“Our wealth in privately produced goods is, to a marked degree, the cause of crisis in the supply of public goods. We have failed to see the importance, the urgent need, of maintaining a balance between the two.”

Positive Thesis--A society that maintains a balance between the production of public and private goods is more efficient than one that does not.

How do we Distinguish: n Rational Persuasion (good) n Manipulation (OK, but troublesome) n Coercion (bad)

Marketing and Advertising as Relational Activities

n A 4-place relation involving 2 parties, a product, and a purpose n ‘X’ advertises ‘Y’ to ‘Z’ in order that ‘W’ n We MUST specify the purpose

What is the Goal of Marketing? n To sell more product

What is the SOCIETAL Goal of Marketing? n To increase the likelihood and frequency of free and informed transactions in the marketplace.

Do Contemporary Marketing Practices Reach this Goal? n Blatant deception is rare. n Partial truths that misrepresent are common. n “Hard facts” are pretty rare in advertising.

Common Advertising “Hooks:” n Symbolic value n Sexually provocative campaigns n Shared values n Shared fears

The Problem of Parity Products

Parity Products are Virtually Indistinguishable from one Another n Soaps n Premium beers or sodas n Certain car models

The Problem of Parity Products: n How Do You Market Products that are Identical From a Performance Perspective?

Do Moral Considerations Enter into Sales Transactions?

Albert Carr Argues that they Do NOT: n Business is more like poker than church bingo n “Falsehood ceases to be falsehood when no one expects that the truth will be spoken.” n Business bluffing is like poker bluffing and not wrong.

But what if one accepts our goal for marketing and sales? n To increase the likelihood and frequency of free and informed transactions in the marketplace.

A Voluntary Transaction: n Both parties understand the transaction n Neither is compelled to enter the transaction n Both parties make rational judgments about costs and benefits

Many Sales Tactics Are Designed to Overcome Rational Decision- Making Practices n Provide irrelevant or misleading information n Promote common reasoning errors n Appeals to guilt, emotion or fear

Legitimate and Illegitimate Uses of Fear and Emotion n Illegitimate emotional appeals cloud one’s ability to make decisions based on genuine satisfaction of desires.

Nestle’s and Marketing Infant Formula in the 3rd World n Mixed product using local, impure water supplies n Consumers must be able to read the instructions n Relatively expensive n False suggestion of health benefits (better than mother’s milk)