Kotler Pom15 Im 20

Chapter 20SUSTAINABLE MARKETING: SOCIAL

RESPONSIBILITY AND ETHICS

MARKETING STARTER: CHAPTER 20Sustainability at Unilever: Creating a Better Future Every Day

Synopsis

When Paul Polman took over as CEO of Unilever in 2009, he was determined to discover why the company was really in business, and to find a more energizing mission. He asserted that growth results from accomplishing a broader social and environmental mission. In late 2010 Unilever launched its Sustainable Living Plan—an aggressive long-term plan that takes capitalism to the next level. The Sustainable Living Plan sets out three major social and environmental objectives to be accomplished by 2020. On the “upstream supply side,” more than half of Unilever’s raw materials come from agriculture, so the company is helping suppliers develop sustainable farming practices that meet its own high expectations for environmental and social impact. But Unilever’s Sustainable Living Plan goes far beyond simply creating more responsible supply and distribution chains. Unilever is also working with final consumers to improve the social and environmental impact of its products in use. The sustainability plan is not just the right thing to do for people and the environment, claims Polman, it’s also right for Unilever. The quest for sustainability saves money by reducing energy use and minimizing waste. It fuels innovation, resulting in new products and new customer benefits. And it creates new market opportunities: More than half of Unilever’s sales are from developing countries, the very places which face the greatest sustainability challenges. Sustainable living is not a pipedream. It can be done, and there is very little downside.

Discussion ObjectiveA 10-minute discussion of the chapter-opening Unilever story will give students a realistic look at the virtues and challenges of implementing a global sustainability program. Unilever’s history and recent performance shows that a complete business strategy centered on social and environmental responsibility not only helps the world and its citizens, but that it can also generate healthy long-term profits. In such a situation, everyone can win.

Starting the Discussion A visit to the Unilever website at www.unilever.com will provide an interesting entry point into Unilever and its Sustainable Living Plan. As a class, review the company’s home page. Which corporate values are immediately evident? Go further, exploring the “Brands in Action” and “Sustainable Living” links. Review with students the many different ways in which sustainability can be defined, and how a major corporation such as Unilever can make a real difference. Any of the “Sustainable Living” links will provide an interesting departure point. You can also view a catalog of Unliever’s recent reports on its Sustainable Living Plan at http://www.unilever.com/sustainable-living/news/publications/. Throughout, it will be important to help students to understand that sustainability and profit making can go hand in hand and that, in fact, sustainable practices enhance profitability in the long term.

Use the following questions to guide the discussion.

Discussion Questions

1. Describe Unilever’s Sustainable Living Plan. What are its key objectives and goals? (The Sustainable Living Plan sets out three major social and environmental objectives to be accomplished by 2020: (1) To help more than one billion people take action to improve their health and well-being; (2) to halve the environmental footprint of the making and use of our products; and (3) to source 100 percent of our

Copyright©2014 Pearson Education

http://www.unilever.com/sustainable-living/news/publications/

http://www.unilever.com/sustainable-living/news/publications/

http://www.unilever.com/

agricultural raw materials sustainably. Students should also understand Unilever’s sustainability goals. These goals span the entire value chain, from how the company sources raw materials to how customers use and dispose of its products.)

2. What is one example of how a product innovation can promote sustainability? (Unilever’s website provides a number of interesting examples. For instance, almost one-third of households worldwide use Unilever laundry products to do their washing. Approximately 68 percent of the total greenhouse gas footprint of Unilever’s laundry products, and 95 percent of the water footprint, occur during consumer use. One Unilever product, Persil Small & Mighty laundry detergent, is a concentrated detergent that uses less packaging, making it cheaper and less polluting to transport. More importantly, it washes better at lower temperatures and uses less energy. Students need to know that such energy and water savings don’t show up on Unilever’s income statement, but they will be extremely important to the people and the planet.)

3. How does the Unilever story relate to the concepts in Chapter 20 on sustainable marketing? (Unilever provides an excellent example of a company pursuing a sustainable marketing strategy. It presents a nice bridge to discussing the principles of sustainable marketing and the opportunities and challenges it presents. As students will discover as the move through the chapter, almost every company these days is adding environmental and social responsibility goals to its profit objectives.)

CHAPTER OVERVIEW Use Power Point Slide 20-1 here

In this final chapter, we look at the concepts of sustainable marketing, meeting the needs of consumers, businesses, and society—now and in the future—through socially and environmentally responsible marketing actions.

The chapter begins with a definition of sustainable marketing and then looks at some common criticisms of marketing as it impacts individual consumers and other businesses. Next, it covers consumerism, environmentalism, and other citizen and public actions that promote sustainable marketing.

Finally, the chapter looks at how companies themselves can benefit from proactively pursuing sustainable marketing practices that bring value not just to individual customers but also to society as a whole.

Sustainable marketing actions are more than just doing the right thing; they are also good for business.

CHAPTER OBJECTIVESUse Power Point Slide 20-2 here

1. Define sustainable marketing and discuss its importance.

2. Identify the major social criticisms of marketing.

3. Define consumerism and environmentalism and explain how they affect marketing strategies.

4. Describe the principles of sustainable marketing.

5. Explain the role of ethics in marketing.


CHAPTER OUTLINE

p. 580 INTRODUCTION

Unilever is the world’s third-largest consumer products company. For 13 years running, It has been named sustainability leader in the food and beverage industry by the Dow Jones Sustainability Indexes.

The company recently launched its Sustainable Living Plan, by which it intends to double its size by 2020 while at the same time reducing its impact on the planet and increasing the social benefits arising from its activities.

The quest for sustainability saves money by reducing energy use and minimizing waste. It fuels innovation, resulting in new products and new customer benefits.

And it creates new market opportunities: More than half of Unilever’s sales are from developing countries, the very places which face the greatest sustainability challenges.

p. 581Ad: Unilever

Assignments, ResourcesUse Web Resources 1 and 2 here

Opening Vignette Questions1. What are some of the ways in which Unilever

promotes sustainability through its products and global initiatives?

2. How might Unilever’s philosophy be adopted by the fast-food industry? The automotive industry? Provide examples.

3. Where does Unilever go from here? From an environmental sustainability standpoint, what might be next for the company?

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SUSTAINABLE MARKETING

Sustainable marketing calls for socially and environ-mentally responsible actions that meet the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.

Figure 20.1 compares the sustainable marketing concept with other marketing concepts from earlier chapters.

Chapter Objective 1

p. 582Key Term: Sustainable Marketing

p. 583Figure 20.1: Sustainable


The marketing concept recognizes that organizations thrive from day to day by determining the current needs and wants of target group customers and fulfilling those needs and wants more effectively and efficiently than the competition.

It focuses on meeting the company’s short-term goals by giving customers what they want now.

However, satisfying consumer’s immediate needs and desires doesn’t always serve the future best interest of ether customers of the business.

Whereas the societal marketing concept considers the future welfare of consumers and the strategic planning concept considers future company needs, the sustainable marketing concept considers both.

Sustainable marketing calls for socially and environ-mentally responsible actions that meet both the immediate and future needs of customers and the company.

Marketing

p. 583Ad: McDonald’s

Assignments, ResourcesUse Discussion Question 1 hereUse Think-Pair-Share 1 and 2 here

Troubleshooting TipMost of the concepts in this chapter will be new. Some students cast an uncritical eye on the opinions of activist groups and think that not a single company can be trusted to “do the right thing.” The task in this chapter is to present both sides, both good and bad, so that students can see that although problems do exist, there are solutions, and industry does tend to work toward reining in those who would create problems for consumers, society as a whole, or other businesses.

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SOCIAL CRITICISMS OF MARKETING

Marketing’s Impact on Individual Consumers

Consumer advocates, government agencies, and other critics have accused marketing of harming consumers through high prices, deceptive practices, high-pressure selling, shoddy or unsafe products, planned obsolescence, and poor service to disadvantaged consumers.

Chapter Objective 2


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High Prices

Many critics charge that the American marketing system causes prices to be higher than they would be under more “sensible” systems. They point to three factors—distribution, advertising and promotion, and markup.

High Costs of Distribution. A long-standing charge is that greedy channel intermediaries mark up prices beyond the value of their services.

How do resellers answer these charges? They argue that intermediaries do work that would otherwise have to be done by manufacturers or consumers.

High Advertising and Promotion Costs. Modern market-ing is accused of pushing up prices to finance heavy advertising and sales promotion.

Excessive Markups. Critics charge that some companies markup goods excessively.

Marketers respond that most businesses try to deal fairly with consumers because they want to build customer relationships and repeat business.

Deceptive Practices

Deceptive practices fall into three groups:

1. Pricing 2. Promotion 3. Packaging

Deceptive pricing includes practices such as falsely advertising “factory” or “wholesale” prices or a large price reduction from a phony high retail list price.

Deceptive promotion includes practices such as misrepresenting the product’s features or performance, or luring the customers to the store for a bargain that is out of stock.

Deceptive packaging includes exaggerating package contents through subtle design, using misleading labeling,

p. 584Photo: Listerine

p. 586Photo: Deceptive Practices


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or describing size in misleading terms.

The Wheeler-Lea Act gives the Federal Trade Commission (FTC) power to regulate unfair or deceptive acts or practices.”

“Puffery” is defined as innocent exaggeration for effect.

High-Pressure Selling

In most cases, marketers have little to gain from high-pressure selling.

Such tactics may work in one-time selling situations for short-term gain. However, most selling involves building long-term relationships with valued customers.

Shoddy, Harmful, or Unsafe Products

Typical product complaints:

Products are not made well and services are not performed well.

Product safety due to company indifference, increased product complexity, and poor quality control.

Many products deliver little benefit, or that they might even be harmful.

Planned Obsolescence

Critics also have charged that some companies practice planned obsolescence, causing their products to become obsolete before they actually should need replacement.

Marketers respond that consumers like style changes; they get tired of the old goods and want a new look in fashion. Or they want the latest high-tech innovations, even if older models still work.

Poor Service to Disadvantaged Consumers

The American marketing system has been accused of serving disadvantaged consumers poorly.

Critics accuse major chain retailers of “redlining,” drawing

p. 587 Photo: Soft Drink

p. 588Photo: Underserved Consumers


a red line around disadvantaged neighborhoods and avoiding placing stores there.

For example, the nation’s poor areas have 30 percent fewer supermarkets than affluent areas do. As a result, some 23.5 million Americans—including 6.5 million children—live in low-income areas that lack stores selling affordable and nutritious foods.

Assignments, ResourcesUse Discussion Question 2 here Use Critical Thinking Exercise 1 hereUse Marketing by the Numbers hereUse Additional Projects 1, 2, and 3 hereUse Think-Pair-Share 3 hereUse Web Resources 3 and 4 here

Troubleshooting Tip Unless the university is in an urban environment, most students will be surprised that many large retailers stay away from disadvantaged neighbor-hoods, and that banks and insurance companies might discriminate against customers living in these areas. Even at urban universities this could be cause for surprise, because most urban schools are not located in the truly disadvantaged areas. A discussion on the pros and cons of, say, a Walmart or a major grocery retailer locating in an inner-city neighborhood can aid in the comprehension of the risks and rewards for the company, as well as for the consumers.

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Marketing’s Impact on Society as a Whole

False Wants and Too Much Materialism

Critics have charged that the marketing system urges too much interest in material possessions.

People are judged by what they own rather than by who they are.

Marketers respond that these criticisms overstate the power of business to create needs.

Too Few Social Goods

Business has been accused of overselling private goods at

p. 588Photo: Materialism

p. 589Photo: Private and


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the expense of public goods.

A way must be found to restore a balance between private and public goods.

Options:

Make producers bear the full social costs of their operations.

Make consumers pay the social costs.

Cultural Pollution

Critics charge the marketing system with creating cultural pollution.

Marketers answer the charges of “commercial noise” with these arguments:

Because of mass-communication channels, some ads are bound to reach people who have no interest in the product and are therefore bored or annoyed.

Ads make much of television and radio free to users and keep down the costs of magazines and newspapers.

Today’s consumers have alternatives.

Marketing’s Impact on Other Businesses

Critics charge that a company’s marketing practices can harm other companies and reduce competition.

Three problems are involved:

1. Acquisitions of competitors2. Marketing practices that create barriers to entry 3. Unfair competitive marketing practices

Public Goods

p. 590Photo: Walmart

Assignments, ResourcesUse Additional Project 4 here

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CONSUMER ACTIONS TO PROMOTE SUSTAINABLE MARKETING

Consumerism

Chapter Objective 3

p. 591Key Term:


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p. 592

Consumerism is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers.

Traditional sellers’ rights include:

The right to introduce any product in any size and style, provided it is not hazardous to personal health or safety; or, if it is, to include proper warnings and controls.

The right to charge any price for the product, provided no discrimination exists among similar kinds of buyers.

The right to spend any amount to promote the product, provided it is not defined as unfair competition.

The right to use any product message, provided it is not misleading or dishonest in content or execution.

The right to use any buying incentive programs, provided they are not unfair or misleading.

Traditional buyers’ rights include:

The right not to buy a product that is offered for sale.

The right to expect the product to be safe. The right to expect the product to perform as

claimed.

Consumer advocates call for the following additional consumer rights:

The right to be well informed about important aspects of the product.

The right to be protected against questionable products and marketing practices.

The right to influence products and marketing practices in ways that will improve the “quality of life.”

The right to consume now in a way that will preserve the world for future generations of consumers

Environmentalism

Environmentalism is an organized movement of concerned

Consumerism

p. 591Photo: Buyer’s Rights


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citizens, businesses, and government agencies to protect and improve people’s living environment.

The first wave of modern environmentalism in the United States was driven by environmental groups and concerned consumers in the 1960s and 1970s. The second environmentalism wave was driven by federal government, which passed laws and regulations during the 1970s and 1980s governing industrial practices impacting the environment.

The third environmentalism wave is a merging of the first two waves in which companies are accepting more responsibility for doing no harm to the environment.

More and more companies are adopting policies of environmental sustainability.

Figure 20.2 shows a grid that companies can use to gauge their progress toward environmental sustainability.

Pollution prevention involves eliminating or minimizing waste before it is created.

Product stewardship involves minimizing not just pollution from production and product design but all environmental impacts throughout the full product life cycle, and all the while reducing costs.

Design for environment (DFE) and cradle-to-cradle practices are practices that involve thinking ahead to design products that are easier to recover, reuse, or recycle and developing programs to reclaim products at the end of their lives.

The “beyond greening” activities identified in Figure 20.2 look to the future.

New clean technology. Many organizations that have made good sustainability headway are still limited by existing technologies. To create fully sustainable strategies, they will need to develop innovative new technologies.

A sustainability vision serves as a guide to the future. It shows how the company’s products and services, processes,

p. 592Key Term: Environmentalism

p. 592Key Term: Environmental Sustainability

p. 592Figure 20.2: Then Environmental Sustainability Portfolio

p. 594Photo: Pollution Prevention, Honda

p. 593Photo: Chipotle


and policies must evolve and what new technologies must be developed to get there.

p. 595Photo: Walmart

Assignments, ResourcesUse Real Marketing 20.1 hereUse Discussion Question 3 hereUse Additional Project 5 hereUse Small Group Assignment 1 hereUse Individual Assignment 1 hereUse Think-Pair-Share 4 hereUse Web Resource 5 and 6 here

Troubleshooting TipConsumerism and environmentalism are two important concepts for the students to know. It is unlikely that either of these movements will go away any time soon, and because the Internet has made so much information available to so many, these issues will likely only become more in the forefront of consumers’ minds. Product recalls have become commonplace, but it is worth discussing in class any recalls that have affected students. Comparing the number of recalls today to the number in the 1960s and 1970s will also help. As for environmentalism, it can be useful to ask how many students have traveled to cities in other countries where the pollution controls are not as stringent as in the United States. Also, discuss how your own university recycles.

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Public Actions to Regulate Marketing

Many of the laws that affect marketing are listed in Chapter 3.

The task is to translate these laws into the language that marketing executives understand as they make decisions.

p. 597Figure 20.3: Major Marketing Decision Areas That May Be Called Into Question Under the Law

Assignments, ResourcesUse Outside Example 1 here

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BUSINESS ACTIONS TOWARD SUSTAINABLE MARKETING

Sustainable Marketing Principles

Chapter Objective 4


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Under the sustainable marketing concept, a company’s marketing should support the best long-run performance of the marketing system.

It should be guided by five sustainable marketing principles:

Consumer-Oriented Marketing

Consumer-oriented marketing means that the company should view and organize its marketing activities from the consumer’s point of view.

Only by seeing the world through its customers’ eyes can the company build lasting and profitable customer relationships.

Customer-Value Marketing

Customer-value marketing means the company should put most of its resources into customer value-building marketing investments.

By creating value for consumers, the company can capture value from consumers in return.

Innovative Marketing

Innovative marketing requires that the company continuously seek real product and marketing improvements.

Sense-of-Mission Marketing

Sense-of-mission marketing means that the company should define its mission in broad social terms rather than narrow product terms.

Societal Marketing

Societal marketing means a company makes marketing decisions by considering consumers’ wants and interests, the company’s requirements, and society’s long-run interests.

Products can be classified according to their degree of

p. 596Key Terms: Consumer-Oriented Marketing, Customer-Value Marketing

p. 597Key Terms: Innovative Marketing, Sense-of-Mission Marketing

p. 598Photo: PEDIGREE

p. 601Key Terms: Societal Marketing

p. 599Photo: Method

p. 601Figure 20.4: Societal Classification of Products


immediate consumer satisfaction and long-run consumer benefit. (Figure 20.4)

Deficient products have neither immediate appeal nor long-run benefits.

Pleasing products give high immediate satisfaction but may hurt consumers in the long run.

Salutary products have low appeal but may benefit consumers in the long run.

Desirable products give both high immediate satisfaction and high long-run benefits.

p. 600Key Terms:Deficient Products, Pleasing Products, Salutary Products, Desirable Products

p. 600Ad: Nau

Assignments, ResourcesUse Video Case hereUse Discussion Question 4 hereUse Small Group Assignment 2 here

Troubleshooting TipThe concepts of sustainable marketing should not be difficult to understand; however, you should go through them carefully. Consumer-oriented market-ing should certainly not be new, but the term will be.

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Marketing Ethics

Corporate marketing ethics policies are broad guidelines that everyone in the organization must follow.

What principle should guide companies and marketing managers on issues of ethics and social responsibility?

One philosophy is that such issues are decided by the free market and legal system.

A second philosophy puts responsibility not on the system but in the hands of individual companies and managers.

Written codes and ethics programs do not ensure ethical behavior.

THE SUSTAINABLE COMPANY

Sustainable companies are those that create value for customers through socially, environmentally, and ethically responsible actions.

Sustainable marketing provides the context in which

Chapter Objective 5

p. 602Table 20.1: Some Morally Difficult Situations in Marketing

p. 604Photo: Mattel


companies can build profitable customer relationships by creating value for customers in order to capture value from customers in return, now and in the future.

Assignments, ResourcesUse Discussion Question 5 hereUse Critical Thinking Exercises 2 and 3 hereUse Marketing Technology hereUse Marketing Ethics hereUse Company Case hereUse Additional Project 6 hereUse Individual Assignment 2 hereUse Think-Pair-Share 5 hereUse Outside Example 2 here

END OF CHAPTER MATERIAL


1. What is sustainable marketing? Explain how the sustainable marketing concept differs from the marketing concept and the societal marketing concept. (AASCB: Communication)

Answer:

Sustainable marketing calls for meeting the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs. Figure 20.1 compares the sustainable marketing concept with other marketing concepts we studied in earlier chapters. The marketing concept recognizes that organizations thrive from day to day by determining the current needs and wants of target group customers and fulfilling those needs and wants more effectively and efficiently than the competition. It focuses on meeting the company’s short-term sales, growth, and profit needs by giving customers what they want now. However, satisfying consumers’ immediate needs and desires doesn’t always serve the future best interests of either customers or the business.

Whereas the societal marketing concept identified in Figure 20.1 considers the future welfare of consumers and the strategic planning concept considers future company needs, the sustainable marketing concept considers both. Sustainable marketing calls for socially and environmentally responsible actions that meet both the immediate and future needs of customers and the company.

2. Critics claim that advertising and promotion results in higher prices for consumers. Discuss the bases for this claim and how marketers refute them. (AACSB: Communication)


Answer:

Critics charge that advertising and promotion adds only psychological, not functional, value to the product. Marketers respond that although advertising adds to product costs, it also adds value by informing potential buyers of the availability and merits of a brand. Brand name products may cost more, but branding gives buyers assurances of consistent quality. Moreover, consumers can usually buy functional versions of products at lower prices. However, they want and are willing to pay more for products that also provide psychological benefits—that make them feel wealthy, attractive, or special. Also, heavy advertising and promotion may be necessary for a firm to match competitors’ efforts; the business would lose “share of mind” if it did not match competitive spending.

3. What is consumerism? What rights do consumers have and why do some critics feel buyers need more protection? (AACSB: Communication)

Answer:

Consumerism is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers.

Traditional buyers’ rights include: • The right not to buy a product that is offered for sale

• The right to expect the product to be safe

• The right to expect the product to perform as claimed

Many believe that the balance of power lies on the seller’s side. True, the buyer can refuse to buy. But critics feel that the buyer has too little information, education, and protection to make wise decisions when facing sophisticated sellers. Consumer advocates call for the following additional consumer rights: The right to be well informed about important aspects of the product The right to be protected against questionable products and marketing practices The right to influence products and marketing practices in ways that will improve the

“quality of life” The right to consume now in a way that will preserve the world for future generations of

consumers

4. What is environmental sustainability? How should companies gauge their progress toward achieving it? (AACSB: Communication)

Answer:

Simply put, environmental sustainability is about generating profits while helping to save the


planet. Today’s enlightened companies are taking action not because someone is forcing them to or to reap short-run profits but because it’s the right thing to do—because it’s for their customers best interests, the company’s well-being, and the planet’s environmental future.

Figure 20.2 shows a grid that companies can use to gauge their progress toward environmental sustainability. It includes both internal and external greening activities that will pay off for the firm and environment in the short run, and beyond greening activities that will pay off in the longer term. At the most basic level, a company can practice pollution prevention. This involves more than pollution control—cleaning up waste after it has been created. Pollution prevention means eliminating or minimizing waste before it is created. Companies emphasizing prevention have responded with internal green marketing programs— designing and developing ecologically safer products, recyclable and biodegradable packaging, better pollution controls, and more energy-efficient operations.

5. Describe the two philosophies regarding what principle should guide companies and marketing managers on issues of ethics and social responsibility. (AACSB: Communication)

Answer:

One philosophy is that such issues are decided by the free market and legal system. Under this principle, companies and their managers are not responsible for making moral judgments. Companies can in good conscience do whatever the market and legal systems allow. A second philosophy puts responsibility not on the system but in the hands of individual companies and managers. This more enlightened philosophy suggests that a company should have a “social conscience.” Companies and managers should apply high standards of ethics and morality when making corporate decisions, regardless of “what the system allows.” Each company and marketing manager must work out a philosophy of socially responsible and ethical behavior.

Critical Thinking Exercises

1. Conduct an online search for “green awards” to learn about the various awards programs recognizing environmental consciousness and sustainable practices. Select one that recognized a business for a sustainable marketing practice and develop a brief presentation explaining why the company received the award. (AACSB: Communication; Use of IT; Reflective Thinking)

Answer:

There are several recognition programs, such as Green Awards, Green Dot Awards, Hearts of Green Awards, Edison Green Awards, and so on, that students can research to find examples. For example, see www.greenawards.com/winners for winners of the Green Awards, which is an international awards program. Other examples may be specific to a particular industry, such as the Green Enterprise IT Award (see www.greenitawards.com/), or more local in


http://www.greenitawards.com/

http://www.greenawards.com/winners

nature, such as the city of Boston’s Green Awards (see www.cityofboston.gov/environmentalandenergy/greenawards/).

2. Many consumers want to recycle, but varying rules across localities make it difficult for consumers to know if something is recyclable. Voluntary “How2Recycle” labels are starting to appear on products to help consumers. Visit www.how2recycle.info to learn about these voluntary labels and the types of products that will be carrying them. Will these labels make it easier for consumers to recycle? (AACSB: Communication; Use of IT; Reflective Thinking)

Answer:

The voluntary labels consist of five pieces of information: the recycling icon, special instructions, packaging material, packaging component referenced by the label, and the program Web site. The recycling icon will indicate whether the component is widely recycled (meaning at least 60% of the U.S. population can recycle it at curbside or drop-off locations), limited recycling (20-60 percent), not yet recycled, and store drop-off. Overall, it looks to be a complicated label and only dedicated recyclers will likely take the effort to fully understand the labeling. Although some manufacturers are going to carry the label, it is not legally required.

Marketing Technology: Compostable Packaging

Corn-based packaging is hitting the shelves for everything from bottles to bags. But one such endeavor had unintended consequences. Frito-Lay came out with a 100 percent compostable bag for its Sun Chip line of chips. The package, made from 100 percent polylactic acid (PLA), a corn-based biopolymer that fully decomposes within 14 weeks, had one drawback—it was terribly noisy. An Air Force pilot posted a video on YouTube showing the sound reaching 95 decibels when the bag was touched, leading him to claim it was “louder than the cockpit of my jet.” Others likened the sound to “revving motorcycles” or “glass breaking.” The package soon became the butt of jokes, even resulting in a Facebook group called “Sorry But I Can’t Hear You Over This Sun Chips Bag.” Frito-Lay relented and reintroduced a less-noisy bag.

1. Search the Internet for more examples of compostable packaging. Discuss three of them. (AACSB: Communication; Use of IT)

Answer:

Some examples include Stonyfield Farm yogurt in corn-based packaging as well as other packages made from banana peels and potato skins (see www.eatingwell.com/food_news_origins/green_sustainable/waste_less_packaging). Students can Google “examples of corn-based packaging” to find more examples.

2. Is corn-based compostable packaging a sustainable solution to replace petroleum-based plastic packaging? Discuss the pros and cons of this alternative. (AACSB: Communication; Reflective Thinking)


http://www.eatingwell.com/food_news_origins/green_sustainable/waste_less_packaging

http://www.how2recycle.info/

http://www.cityofboston.gov/environmentalandenergy/greenawards/

Answer:

For a comprehensive discussion of this material see www.smithsonianmag.com/science-nature/plastic.html?c=y&page=1. This article explains the product and discusses the pros and cons of using this material.

There are several pros of this type of packaging: It’s made from a renewable resource (corn), it’s cheaper than petroleum-based packages as the price of oil increases, it’s compostable given the right conditions, and producing it uses 65 percent less energy, produces fewer greenhouse gases, and involves no toxins compared to producing petroleum-based plastic.

There are downsides to this using this type of packaging. The major one is that it is only compostable under “controlled composting conditions” that require the temperature to be maintained at 140 degrees for ten days, which most consumers do not have access to. One study found the package was unchanged after six months in a typical home composter. Moreover, the 113 available composting sites in the country cannot handle large truckloads; indeed, that quantity could be detrimental to the composting system. Plus the PLA material should not be put with petroleum-based material, which means they would have to be separated from other refuse before composting. Ironically, another criticism comes from environmentalists. They question the wisdom of making packaging from foodstuffs when so many people in the world are hungry. Also, the cultivation of corn uses fertilizer and creates other environmental concerns.

Marketing Ethics: Mobile Medical Apps

With the explosion of mobile devices and apps, it’s not surprising that medical apps are taking off. There are apps to identify pills, track pregnancy, check for melanoma skin cancer, and even teach medical professionals how to read electrocardiograms. Some apps are replacing devices used by healthcare professionals in hospitals and doctors’ offices. There are more than 40,000 medical applications available and the market is still in its infancy. The market’s growth has caught the attention of the Food and Drug Administration, the agency regulating medical devices. So far, medical apps have been unregulated, but that is about to change. The FDA released guidelines requiring developers to apply for FDA approval, which could take years. According to the Government Accountability Office, it takes the FDA six months to approve a device that is similar to an existing one and up to 20 months for new devices. According to another report, approval costs $24 million to $75 million. Not all apps would require FDA approval—only ones making medical claims. Although many developers think regulation is necessary to protect the public, most believe that the current process is too slow and a new regulatory framework is necessary.

1. Describe two examples of mobile apps for healthcare providers. (AACSB: Communication; Use of IT)

Answer:


http://www.smithsonianmag.com/science-nature/plastic.html?c=y&page=1

http://www.smithsonianmag.com/science-nature/plastic.html?c=y&page=1

There are thousands of health-related apps, but not all of them are specifically for healthcare providers. Students can search “medical apps” at an app store such as Apple’s App Store. One example is MelApp, which analyzes pictures of moles for melanoma skin cancer, which can replace microscopes used by skin doctors. Pedi STAT is a reference for pediatric healthcare professionals. Epocrates is a drug reference. Other examples can be found at http://toporthoapps.com/.

2. Is regulatory approval of medical mobile apps necessary? Will the Food and Drug Administration’s requirement for approval constrain innovation? Explain. (AACSB: Communication; Ethical Reasoning; Reflective Thinking)

Answer:

Students’ opinions will vary. A news release with the FDA’s initial statement on this matter can be found atwww.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm263340.htm, and it clearly states that not all apps will need approval. For example, an app that converts a mobile device to a mobile EKG machine would require approval. An app that merely tracks calories would not.

Marketing by the Numbers: The Cost of Sustainability

One element of sustainability is organic farming. But if you’ve priced organic foods, you know they are more expensive. Organic farming costs much more than conventional farming and higher those costs are passed on to consumers. For example, a dozen conventionally farmed eggs costs consumers $1.50, whereas a dozen organic eggs costs $2.80. However, if prices get too high, consumers will not purchase the organic eggs. Suppose that the average fixed costs per year for conventionally-farmed eggs are $1 million per year but they are twice that amount for organic eggs. Organic farmers’ variable costs per dozen are twice as much as well, costing $1.80 per dozen. Refer to Appendix 2, Marketing by the Numbers, to answer the following questions.

1. Most large egg farmers sell eggs directly to retailers. What is the farmer’s price per dozen to the retailer for conventional and organic eggs if the retailer’s margin is 20 percent based on the retail price? (AACSB: Communication; Analytical Reasoning)

Answer:

price cost Markup percentage on price = ——————

price so,

Cost at each level = price (price markup%)


http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm263340.htm

http://toporthoapps.com/

The retailer’s cost for conventional eggs = $1.50 ($1.50 0.20) = $1.20 per dozen, which is the price the farmer sells it to the retailer.

The retailer’s cost for organic eggs = $2.80 ($2.80 0.20) = $2.24 per dozen, which is the price the farmer sells it to the retailer.

2. How many dozen eggs does a conventional farmer need to sell to break even? How many does an organic farmer need to sell to breakeven? (AACSB: Communication; Analytical Reasoning)

Answer:

total fixed costs Breakeven volume = ———————— contribution per dozen

Where contribution per dozen = price – variable cost

For the conventional farmer, total fixed costs are $1,000,000 and the organic farmer’s total fixed costs are twice that, or $2,000,000. The variable cost per dozen for organic farmers is $1.80, and the conventional farmer’s variable cost is half that, or $0.90. So, the breakeven volumes rounded up to the nearest whole dozen are:

$1,000,000Breakeven volumecon = ———————— = 3,333,334 dozen

($1.20 – $0.90)

$2,000,000Breakeven volumeorganic = ——————— = 4,545,455 dozen

($2.24 – $1.80)

Thus, the organic farmer would have to sell almost 27% more eggs than a conventional farmer to break even.

Company Case Notes

International Paper: Combining Industry and Social Responsibility

Synopsis

The most socially responsible company in the world is…a paper producer. That’s right. A large, industrial company that thrives on cutting down trees has been dubbed the most socially responsible company in the world by Fortune magazine. This alone should be enough to spark


interest in the minds of student readers. This case lays out various reasons for why International Paper (IP) has achieved this status. While many specifics are given, the heart of the matter is that IP’s mission, strategy, and corporate culture are based on sustainable practices.

Teaching Objectives

The teaching objectives for this case are to:

1. Allow students become familiar with social criticisms of marketing.2. Help students understand that social responsibility is a strategic issue.3. Give students practical experiencing analyzing the Environmental Sustainability

Portfolio.4. To expose students to a company that practices enlightened marketing.5. To demonstrate the relationship between sustainability and financial success.


1. Give as many examples as you can for how International Paper defies the common social criticisms of marketing.

While there may be various responses here, the following are just a few examples.

Shoddy, harmful, or unsafe products. IP makes everyday paper products. While such products would seem to provide little hope of being unsafe, it is very easy to see how paper products could be shoddy or harmful. The case provides many examples for how IP has applied innovative practices to ensure insure quality and reduce the harmful effects of its products on the environment.

Planned obsolescence. IP has a long-term vision. Many of its products (and the industry’s products) are tried and true. Envelopes and printer paper for example change very little. Packaging materials would seem to have more opportunity for planned obsolescence. However, while IP’s innovations could be construed as obsolescence, it is much easier to demonstrate that such innovations are in the interest of product quality and reducing harm to the environment.

Too few social goods. Societies have needed paper goods ever since paper existed. Thus, the very products that IP makes are truly needed by consumers of all kinds. Not only this, but IP is finding innovative ways to improve the lives of consumers (new packaging concepts) while at the same time reducing the harmful effects to the environment. The examples given in the case of IP going above and beyond to help the environment, even where it may not necessarily help its business (the lagoons in Brazil) demonstrate that this company is all about social good.

2. Why is International Paper successful in applying concepts of sustainability?

Take any company that is successfully at applying any principles or concepts and you


will find that the reason is that such principles drive the very core of the organization. They are not gimmicks, add-ons, or catch phrases. With IP, the corporate mission is based on principles of sustainability. That translates into a corporate strategy that is also based on sustainability. This has been going on for so long, the very corporate culture is oriented around sustainable practices. Employees believe in the principles and are knowledgeable of them.

3. Analyze International Paper according to the Environmental Sustainability Portfolio in

Figure 20.2.

Pollution prevention – reducing fossil fuel consumption and greenhouse gas emissions, making environmental performance information public, reducing hazardous waste, reducing solid waste, turning obsolete lagoons into nature preserves. Product stewardship – leader in promoting the planting and growing of trees, management of forest resources, developing ways to use all parts of trees New clean technology – using byproducts to power a paper mill, thus reducing fossil fuel consumption and greenhouse gas emissions. Sustainability vision – IP’s mission and corporate strategy revolve around sustainability.

4. Does International Paper practice enlightened marketing? Support your answer with as many examples as possible.

The answer to this question is an indisputable “yes.” While students should be able to find support for all five principles of enlightened marketing, the clearest and most specific example would be for sense-of-mission marketing. IP does not define its mission in narrow product terms. It defines its mission in broad social terms. From the case:

“Sustaining a better world for generations, the IP way.” That’s not just a catch phrase. It lies at the heart of IP’s corporate mission statement and has created a culture based on a set of supporting principles. According to company literature, “We have always taken a sustainable approach to business that balances environmental, social, and economic needs. This approach has served our company and society well.” IP constantly maintains this balance by adhering to three key pillars that transform the concepts into action: managing natural resources, reducing the environmental footprint, and building strategic partnerships.

5. Would International Paper be more financially successful if it were not so focused on social responsibility? Explain. To answer this question, students must consider short-term and long-term issues. Any company could reap short-term profits by making cuts in costs. In IP’s case, if it were to cut back on research, development, and implementation of various sustainability practices, it would reap short-term profits. However, more than most companies, IP is a company that relies on long-term perspective. IP has been around for 110 years. Its industry has been around much longer. It is in a low-growth industry. Thus, short-term profits are not going to benefit this company much. One example is its management of


forest resources. If IP were not replenishing its tree supply, it would find in short order that it would have fewer resources to draw from.

Teaching Suggestions

This case provides only a brief summary of some of the sustainability strategies and efforts of International Paper. This case should be accompanied by a visit to IP’s website at http://www.internationalpaper.com/US/EN/Company/Sustainability/index.html. This could be done as a presentation to the class by the instructor either before or after the case is read by students. Students could also be assigned to visit the site to provide perspective. A greater level of integration could be achieved by requiring students to pull additional material from the website, not found in the case, to use in responding to the discussion questions.

This case goes well with the marketing environment chapter (Chapter 3).

ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES

Projects

1. From a marketing concept point of view, is it wrong to sell cigarettes? Defend your position. (Objective 2)

2. What is planned obsolescence? Think about the fashion industry. How (or is) planned obsolescence employed in this industry? If it is, do you believe its practice to be ethical? (Objective 2)

3. Examine the urban area of your town. Do you find examples of what you would consider redlining? Explain. (Objective 2)

4. Discuss the statement “Marketing creates false wants and too much materialism.” (Objective 2)

5. Environmentalism has really become a major movement in recent years. Why do you think it has taken so long for businesses and consumers to really pay attention? (Objective 3)

6. In your town, find an example of a company you believe is practicing sustainable marketing. (Objective 4)

Small Group Assignments

1. Form students into groups of three to five. Each group should read the opening vignette to the chapter on Unilever. Each group should then answer the following questions and share their answer with the class. (Objectives 1 and 3)a. What are some of the ways in which Unilever promotes sustainability through its

products and global initiatives? b. How might Unilever’s philosophy be adopted by the fast-food industry? The

automotive industry? Provide examples.


http://www.internationalpaper.com/US/EN/Company/Sustainability/index.html

c. Where does Unilever go from here? From an environmental sustainability standpoint, what might be next for the company?

2. Form students into groups of three to five. Each group should answer the following questions and share their answer with the class. (Objective 4)

a. What is consumer-oriented marketing? Give two examples of companies you believe practice this principle.

b. What is customer-value marketing? Give two examples of companies you believe practice this principle.

c. What is innovative marketing? Give two examples of companies you believe practice this principle.

d. What is sense-of-mission marketing? Give two examples of companies you believe practice this principle.

e. What is societal marketing? Give two examples of companies you believe practice this principle.

Individual Assignments

1. Traditional buyers’ rights include the following three items:

a. The right not to buy a product that is offered for sale.

b. The right to expect the product to be safe.

c. The right to expect the product to perform as claimed.

Do you believe these rights are sufficient to adequately protect consumers? Defend your answer. If you do not believe the rights are sufficient, what additional rights would you suggest and why? (Objective 3)

2. Table 20.1 lists some difficult ethical issues marketers could face during their careers. How would you answer each of the questions raised in this table? (Objective 5)

Think-Pair-Share

Consider the following questions, formulate an answer, pair with the student on your right, share your thoughts with one another, and respond to questions from the instructor.

1. How would you define sustainable marketing? Do you believe it is a realistic business goal? (Objective 1)

2. What is really the difference between sustainable marketing and societal marketing? (Objectives 1 and 4)

3. What is planned obsolescence? Do you believe marketers make a habit of using this concept? (Objective 2)

4. How would you define consumerism? (Objective 3)


5. Do you believe marketers should be responsible to their shareholders or to environmentalists? Why? (Objective 5)

Outside Examples

1. People for the Ethical Treatment of Animals, known as PETA, claims animals have rights, and humans have no right to eat them, use them to produce clothing (leather goods and furs, for example), or for testing purposes. They are against practices they say are cruel and barbaric, including everything from corporate animal farming to breeding dogs and cats to supply our nation’s pet supply.

The organization targets high profile companies and their practices, recently targeting Perdue Farms and KFC for cruelty to chickens. Their activists have been known to break into test labs and release the animals there. Others have released dogs that were with their owners at dog shows.

Some have decried PETA as the lunatic fringe, although others praise their efforts to force us all to treat animals humanely.

Read about PETA (www.peta.org). What do you think about the organization, their goals and methods? (Objective 3)

Possible Solution:

The answer to this question definitely depends on the student’s point of view. So, you can expect anything and everything from PETA are gods to PETA are devils.

2. A lot of things have changed since the advent of the Internet. Communication is much different than it used to be. Consumers have a lot more access to information. But, is everything as it seems on the Web? Guerilla marketing is the practice of applying unconventional marketing techniques in order to get maximum results from minimal resources. In many ways, the Internet has provided numerous opportunities for companies to engage in very effective guerilla marketing. But are all guerilla techniques ethical? Consider the following two examples and be the judge. (Objective 5)

Dodge’s Ram truck made a splash with a Web site that fans supposedly generated to organize drag races in several cities. The site features amateurishly shot footage of a drag race and contains no reference to the Dodge connection, just a shot of the Ram’s grill. Staged drag races were held where, of course, only Ram trucks emerged victorious. To enhance the “outlaw” image of this activity, the company sent bogus letters to editors of local newspapers protesting the rise in street racing and mentioning the Dodge Ram involvement. Supposedly, the guerrilla campaign was so hush-hush even the top brass at the car company were kept in the dark.i

When RCA records wanted to create a buzz around then new-on-the-scene pop singer Christina Aguilera, it hired a team of young people to swarm the Web and chat about


http://www.peta.org/

her on popular teen Web sites. Posing as fans, they posted entries raving about her new material. Just before one of her CDs debuted, RCA also hired a direct-marketing company to e-mail electronic postcards filled with song snippets and biographical information to 50,000 Web addresses.ii The CD quickly went to number one on the charts.

Possible Solution:

Although doing nothing illegal, both companies engaged in practices that, at best, could be called “questionable. By giving the impression that these actions were initiated and carried out by customers and fans, both Dodge and RCA can be said to have misled customers. Neither of these companies could be considered engaging in “enlightened marketing.”

Web Resources

1. http://247.prenhall.comThis is the link to the Prentice Hall support link.

2. www.unilever.com Take a look at Web home of Unilever as you read the opening vignette.

3. www.ftc.gov The homepage for the FTC.

4. www.hardees.comHere you can look up the nutritional information on the burgers and other items served at Hardees.

5. www.jonessoda.comCheck out Jones Soda and learn how you can get your photo on the soda’s label.

6. www.ups.comHere you can find out about United Parcel Service and their commitment to the environment.


http://www.ups.com/

http://www.jonessoda.com/

http://www.hardees.com/

http://www.ftc.gov/

http://www.unilever.com/

http://247.prenhall.com/

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ii

Documents

Kotler Pom15 Im 20