Many critics charge that the American marketing system causes prices to be higher than they would be under more “sensible” systems. Such high prices are hard to swallow, especially when the economy gets tight. Critics point to three factors—high costs of distribution, high advertising and promotion costs, and excessive markups.

A long-standing charge is that greedy marketing channel members mark up prices beyond the value of their services. As a result, distribution costs too much and consumers pay for these excessive costs in the form of higher prices. Resellers respond that intermediaries do work that would otherwise have to be done by manufacturers or consumers. Their prices reflect services that consumers want—more convenience, larger stores and assortments, more service, longer store hours, return privileges, and others. In fact, they argue, retail competition is so intense that margins are actually quite low. And discounters such as Walmart, Costco, and others pressure their competitors to operate efficiently and keep their prices down.

Modern marketing is also accused of pushing up prices to finance unneeded advertising, sales promotion, and packaging. For example, a heavily promoted national brand sells for much more than a virtually identical store-branded product. Critics charge that much of this promotion and packaging adds only psychological, not functional, value. 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 assures buyers of consistent quality. Moreover, although consumers can usually buy functional versions of products at lower prices, they want and are willing to pay more for products that also provide psychological benefits—that make them feel wealthy, attractive, or special.

Critics also charge that some companies mark up goods excessively. They point to the drug industry, where a pill costing five cents to make may cost the consumer $2 to buy, and to the high charges for auto repairs and other services. Marketers respond that most businesses try to price fairly to consumers because they want to build customer relationships and repeat business. Also, they assert, consumers often don’t understand the reasons for high markups. For example, pharmaceutical markups help cover the costs of making and distributing existing medicines plus the high costs of developing and testing new medicines. As pharmaceuticals company GlaxoSmithKline has stated in its ads, “Today’s medicines finance tomorrow’s miracles.”

Marketers are sometimes accused of deceptive practices that lead consumers to believe they will get more value than they actually do. Deceptive practices fall into three groups: promotion, packaging, and pricing. Deceptive promotion includes practices such as misrepresenting the product’s features or performance or luring customers to the store for a bargain that is out of stock. Deceptive packaging includes exaggerating package contents through subtle design, using misleading labeling, or describing size in misleading terms.

Deceptive pricing includes practices such as falsely advertising “factory” or “wholesale” prices or a large price reduction from a phony high retail “list price.” For example, retailers the likes of JCPenney and Kohl’s were hit with lawsuits last year alleging that they used inflated original prices. A class-action suit against Macy’s accused the retailer of duping customers with a “phantom markdown scheme” and of “purporting to offer steep discounts off of fabricated, arbitrary, and false former or purported original, regular or ‘compare at’ prices.”3 And Overstock.com was recently fined $6.8 million by a California court as a result of a fraudulent pricing lawsuit filed by the attorneys general of eight California counties. The suit charged that the online giant routinely advertised its prices as lower than fabricated “list prices.” It recites one example in which Overstock sold a patio set for $449 while claiming that the list price was $999. When the item was delivered, the customer found that it had a Walmart sticker stating a price of $247.4

Deceptive practices have led to legislation and other consumer protection actions. For example, in 1938 Congress enacted the Wheeler-Lea Act, which gave the Federal Trade Commission (FTC) power to regulate “unfair or deceptive acts or practices.” The FTC has since published several guidelines listing deceptive practices. Despite regulations, however, some critics argue that deceptive claims are still common, even for well-known brands. For example, Luminosity recently agreed to pay $2 million to settle FTC charges that it deceived consumers with unsupported claims that its “brain training” games would protect them against cognitive decline. “Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease,” said the director of the FTC’s Bureau of Consumer Protection. “But Lumosity simply did not have the science to back up its ads.”5

The toughest problem often is defining what is “deceptive.” For instance, an advertiser’s claim that its chewing gum will “rock your world” isn’t intended to be taken literally. Instead, the advertiser might claim, it is “puffery”—­innocent exaggeration for effect. However, others claim that puffery and alluring imagery can harm consumers in subtle ways. Think about the popular and long-running MasterCard Priceless commercials that once painted pictures of consumers fulfilling their priceless dreams despite the costs. The ads suggested that your credit card could make it happen. But critics charge that such imagery by credit card companies encouraged a spend-now-pay-later attitude that caused many consumers to overuse their cards.

Marketers argue that most companies avoid deceptive practices. Because such practices harm a company’s business in the long run, they simply aren’t sustainable. Profitable customer relationships are built on a foundation of value and trust. If consumers do not get what they expect, they will switch to more reliable products. In addition, consumers usually protect themselves from deception. Most consumers recognize a marketer’s selling intent and are careful when they buy, sometimes even to the point of not believing completely true product claims.

Salespeople are sometimes accused of high-pressure selling that persuades people to buy goods they had no thought of buying. It is often said that insurance, real estate, and used cars are sold, not bought. Salespeople are trained to deliver smooth, canned talks to entice purchases. They sell hard because sales contests promise big prizes to those who sell the most. Similarly, TV infomercial pitchmen use “yell and sell” presentations that create a sense of consumer urgency that only those with strong willpower can resist.

But in most cases, marketers have little to gain from high-pressure selling. Although such tactics may work in one-time selling situations for short-term gain, most selling involves building long-term relationships with valued customers. High-pressure or deceptive selling can seriously damage such relationships. For example, imagine a P&G account manager trying to pressure a Walmart buyer or an IBM salesperson trying to browbeat an information technology manager at GE. It simply wouldn’t work.

Another criticism concerns poor product quality or function. One complaint is that, too often, products and services are not made well or do not perform well. A second complaint concerns product safety. Product safety has been a problem for several reasons, including company indifference, increased product complexity, and poor quality control. A third complaint is that many products deliver little benefit or may even be harmful.

For example, think about the soft drink industry. For years, industry critics have blamed the plentiful supply of sugar-laden, high-calorie soft drinks for the obesity epidemic and other health issues in the United States. They are quick to fault what they see as greedy beverage marketers for cashing in on vulnerable consumers, turning us into a nation of Big Gulpers. Although U.S. consumption of soft drinks has dropped in recent years, beverage companies are now looking to emerging markets for growth. According to a report by the Center for Science in the Public Interest (CSPI) titled “Carbonating the World,” in 2008 emerging markets such as China, India, and Mexico accounted for just over half of global soft drink consumption. But by 2018 nearly 70 percent of soft drinks will be sold in such markets. The CPSI accuses beverage companies of behaving much like the tobacco industry, marketing their harmful products to countries already struggling to provide health care to their citizens.6

Is the soft drink industry being socially irresponsible by aggressively promoting overindulgence to ill-informed or unwary consumers in emerging markets? Or is it simply serving the wants of customers by offering products that ping consumer taste buds while letting consumers make their own consumption choices? Is it the industry’s job to police public tastes? As in many matters of social responsibility, what’s right and wrong may be a matter of opinion. Whereas some analysts criticize the industry, others suggest that responsibility lies with consumers. Maybe companies shouldn’t sell Big Gulps. Then again, nobody is forced to buy and drink one.

Most manufacturers want to produce quality goods. After all, the way a company deals with product quality and safety problems can harm or help its reputation. Companies selling poor-quality or unsafe products risk damaging conflicts with consumer groups and regulators. Unsafe products can result in product liability suits and large awards for damages. More fundamentally, consumers who are unhappy with a firm’s products may avoid future purchases and talk other consumers into doing the same. In today’s social media and online review environment, word of poor quality can spread like wildfire. Thus, quality missteps are not consistent with sustainable marketing. Today’s marketers know that good quality results in customer value and satisfaction, which in turn create sustainable customer relationships.

Critics also have charged that some companies practice planned obsolescence, causing their products to become obsolete before they actually should need replacement. They accuse some producers of using materials and components that will break, wear, rust, or rot sooner than they should. And if the products themselves don’t wear out fast enough, other companies are charged with perceived obsolescence—continually changing consumer concepts of acceptable styles to encourage more and earlier buying. An obvious example is the fast-fashion industry with its constantly changing clothing fashions, which some critics claim creates a wasteful disposable clothing culture. “Too many garments end up in landfill sites,” bemoans one designer. “They are deemed aesthetically redundant and get discarded at the end of the season when there are often years of wear left.”7

Still others are accused of introducing planned streams of new products that make older models obsolete, turning consumers into “serial replacers.” Critics claim that this occurs in the consumer electronics industries. If you’re like most people, you probably have a drawer full of yesterday’s hottest technological gadgets—from mobile phones and cameras to iPods and flash drives—now reduced to the status of fossils. It seems that anything more than a year or two old is hopelessly out of date.

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. No one has to buy a new product, and if too few people like it, it will simply fail. Finally, most companies do not design their products to break down earlier because they do not want to lose customers to other brands. Instead, they seek constant improvement to ensure that products will consistently meet or exceed customer expectations.

Much of the so-called planned obsolescence is the working of the competitive and technological forces in a free society—forces that lead to ever-improving goods and services. For example, if Apple produced a new iPhone or iPad that would last 10 years, few consumers would want it. Instead, buyers want the latest technological innovations. “Obsolescence isn’t something companies are forcing on us,” confirms one analyst. “It’s progress, and it’s something we pretty much demand. As usual, the market gives us exactly what we want.”8

Finally, the American marketing system has been accused of poorly serving disadvantaged consumers. For example, critics claim that the urban poor often have to shop in smaller stores that carry inferior goods and charge higher prices. The presence of large national chain stores in low-income neighborhoods would help to keep prices down. However, the critics accuse major chain retailers of redlining, drawing 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, many low-income consumers find themselves in food deserts, which are awash with small markets offering frozen pizzas, Cheetos, Moon Pies, and Cokes but where fruits and vegetables or fresh fish and chicken are out of reach. The U.S. Department of Agriculture has identified more than 6,500 food deserts in rural and urban areas of the United States. Currently, some 23.5 million Americans—including 6.5 million children—live in low-income areas that lack stores selling affordable and nutritious foods. In turn, the lack of access to healthy, affordable fresh foods has a negative impact on the health of underserved consumers in these areas.9

Many national chains, such as Walmart, Walgreens, SuperValu, and even Whole Foods Market have recently agreed to open or expand more stores that bring nutritious and fresh foods to underserved communities. Other retailers have found that they can operate profitably by focusing on low-income areas ignored by other companies. Consider Brown’s Super Stores, Inc., in Philadelphia:10

When Jeff Brown opened his first grocery store in a low-income Southwest Philly neighborhood, most people thought he was crazy. How could he make money in a food desert? But Brown now operates seven profitable ShopRite stores in low-income areas in and around Philadelphia. Brown knows that serving consumers in low-income areas takes more than just opening a store and stocking it with healthy foods. Prices have to be low. At the same time, food quality and service have to be good. So Brown takes cues from high-end grocers by doing things like hand-stacking fresh fruits and produce to avoid bruising and make it more eye-catching. His ShopRite stores also hire skilled butchers, fishmongers, and in-store chefs to entice shoppers to choose healthier options, such as “fire-grilled chicken,” cooked right in the store.

Perhaps most important, Brown’s ShopRite stores have become parts of the communities in which they operate. Brown and his associates work with local leaders even before a store opens to learn exactly what they seek in a neighborhood grocery store. They research neighborhood demographics and tailor offerings to community preferences. Brown’s ShopRite stores are also community gathering places, providing community center space in stores for local meetings and events. The company even works with local nonprofits to provide free services such as credit unions, social workers, and health clinics. Such services help the community but also help Brown’s ShopRites by building a more frequent and loyal customer base. “In the end, it’s really about putting the supermarket at the center of the community,” concludes one food retailing expert.

Clearly, better marketing systems must be built to service disadvantaged consumers. In fact, like Brown’s, marketers in many industries profitably target such consumers with legitimate goods and services that create real value. In cases where marketers do not step in to fill the void, the government likely will. For example, the FTC has taken action against sellers that advertise false values, wrongfully deny services, or charge disadvantaged customers too much.

Critics have charged that the marketing system urges too much interest in material possessions, and that America’s love affair with worldly possessions is not sustainable. Too often, people are judged by what they own rather than by who they are. The critics do not view this interest in material things as a natural state of mind but rather as a matter of false wants created by marketing. Marketers, they claim, stimulate people’s desires for goods and create materialistic models of the good life. Thus, marketers have created an endless cycle of mass consumption based on a distorted interpretation of the “American Dream.”

In this view, marketing’s purpose is to promote consumption, and the inevitable outcome of successful marketing is unsustainable overconsumption. According to the critics, more is not always better. Some groups have taken their concerns straight to the public. For example, the Center for a New American Dream is a nonprofit organization founded on a mission to “help Americans to reduce and shift their consumption to improve quality of life, protect the environment, and promote social justice.” Through educational videos and marketing campaigns such as “More fun! Less stuff!” the organization works with individuals, institutions, communities, and businesses to help conserve natural resources, counter the commercialization of culture, and promote positive changes in the way goods are produced and consumed.11

Marketers respond that such criticisms overstate the power of business to create needs. They claim people have strong defenses against advertising and other marketing tools. Marketers are most effective when they appeal to existing wants rather than when they attempt to create new ones. Furthermore, people seek information when making important purchases and often do not rely on single sources. Even minor purchases that may be affected by advertising messages lead to repeat purchases only if the product delivers the promised customer value. Finally, the high failure rate of new products shows that companies are not able to control demand.

On a deeper level, our wants and values are influenced not only by marketers but also by family, peer groups, religion, cultural background, and education. If Americans are highly materialistic, these values arose out of basic socialization processes that go much deeper than business and marketing could produce alone. Consumption patterns and attitudes are also subject to larger forces, such as the economy. As discussed in Chapter 1, therecent Great Recession put a damper on materialism and conspicuous spending.

These days consumers are also more supportive of environmental and social sustainability efforts by companies. As a result, instead of encouraging today’s more sensible and conscientious consumers to overspend or spend wastefully, many marketers are working to help them find greater value with less. For example, Patagonia’s recent “conscious consumption” campaign actually urges its customers to buy less, telling them “Don’t buy what you don’t need.” and “Think twice before you buy anything.” Similarly, L.L Bean’s “When” campaign encourages customers to buy and hang onto products that last rather than always buying new ones. It asks, “When did disposable become our default?” The answer: “At L.L. Bean, it never did. When you buy something from us, we want you to like it for a long time #llasting.”12

Business has been accused of overselling private goods at the expense of public goods. As private goods increase, they require more public services that are usually not forthcoming. For example, private automobile ownership (private good) requires highways, traffic control, parking spaces, and police services (public goods). The overselling of private goods results in social costs. For cars, some of the social costs include traffic congestion, gasoline shortages, and air pollution. For example, American travelers lose, on average, 42 hours a year in traffic jams, costing the United States more than $160 billion a year—$960 per commuter. In the process, they waste 3.1 billion gallons of fuel (enough to fill the New Orleans Superdome more than four times).13

A way must be found to restore a balance between private and public goods. One option is to make producers bear the full social costs of their operations. For example, the government is requiring automobile manufacturers to build cars with more efficient engines and better pollution-control systems. Automakers will then raise their prices to cover the extra costs. If buyers find the price of some car models too high, these models will disappear. Demand will then move to those producers that can support the sum of the private and social costs.

A second option is to make consumers pay the social costs. For example, many cities around the world are now levying congestion tolls and other charges in an effort to reduce traffic congestion. The island nation of Singapore—about the size of three and a half Washington, DCs—has taken such measures to extremes:

To control traffic congestion and pollution, Singapore’s government makes car ownership very expensive. New car purchases are taxed at 100 percent or more of their market value and buyers must purchase a “certificate of entitlement,” which costs tens of thousands of dollars. As a result, a Toyota Corolla purchased in Singapore runs close to $96,000; a Toyota Prius goes for about $154,000. That plus the high cost of gas and “Electronic Road Pricing” tolls collected automatically as cars are driven around the country makes car ownership prohibitively expensive for most Singaporeans. Only about 15 percent of the population owns a car, keeping congestion, pollution, and other auto evils to a minimum and making Singapore one of the greenest urban areas in Asia.14

Critics charge the marketing system with creating cultural pollution. They feel our senses are being constantly assaulted by marketing and advertising. Commercials interrupt serious programs; pages of ads obscure magazines; billboards mar beautiful scenery; spam fills our email inboxes; flashing display ads intrude on our online and mobile screens. What’s more, the critics claim, these interruptions continually pollute people’s minds with messages of materialism, sex, power, or status. Some critics call for sweeping changes.

Marketers answer the charges of commercial noise with these arguments: First, they hope that their ads primarily reach the target audience. But 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. People who buy magazines they like or who opt in to email, social media, or mobile marketing programs rarely complain about the ads because they involve products and services of interest.

Second, because of ads, many television, radio, online, and social media sites are free to users. Ads also help keep down the costs of magazines and newspapers. Many people think viewing ads is a small price to pay for these benefits. In addition, consumers find many television commercials entertaining and seek them out; for example, ad viewership during the Super Bowl usually equals or exceeds game viewership. Finally, today’s consumers have alternatives. For example, they can zip or zap TV commercials on recorded programs or avoid them altogether on many paid cable, satellite, and online streaming channels. Thus, to hold consumer attention, advertisers are making their ads more entertaining and informative.