6 4 Product integrity

Summary

This transcript delves into the ethical considerations of consumer rights, emphasizing the importance of product integrity. It discusses the balance between persuasion and coercion in communication, the avoidance of exploitative relationships, and the manufacturer's responsibility to ensure product safety and honesty. The narrative uses examples, such as the consequences of compromising on product quality for cost reduction, to illustrate the impact on consumer trust. It also touches on pricing ethics, including the dangers of price gouging and the long-term effects of undercutting competition. The summary concludes with the necessity of ethical leadership from the top down to maintain product integrity and responsible business practices.

Takeaways

• 🧐 The discussion emphasizes the importance of understanding consumer psychology, particularly the 'pleasure principle', which influences their purchasing decisions.
• 🚫 It warns against the misuse of psychological insights, such as the pleasure principle, in unethical ways to manipulate consumers.
• 🗣️ Communication with customers should be a balance between persuasion and coercion, with a focus on transparency and clarity.
• 🤝 The nature of the relationship between consumers and manufacturers/sellers should avoid extreme views like the contract view or the social cost view, opting for a middle-ground approach.
• 🛡️ Product integrity is crucial, and manufacturers have a responsibility to ensure the safety and accuracy of their products' claims.
• 🛒 The perspective of a business, like Stu Leonard's, is highlighted, emphasizing customer expectations and experiences as the foundation of product definition.
• ❌ A case study of a small appliance business illustrates the consequences of compromising on product safety for cost reduction, leading to significant recalls and brand damage.
• 🏭 The integrity of a product is affected by how a company manages its workforce, as unhappy employees can lead to product defects and recalls, as seen with Johnson & Johnson's recalls.
• 💸 Pricing strategies should maintain integrity, avoiding unethical practices like price gouging during crises or predatory pricing to eliminate competition.
• 🌐 The impact of large retailers on local markets is discussed, with concerns about the potential for market disruption and subsequent price increases after eliminating competition.
• 🔝 Ethical decision-making in product integrity starts at the top of an organization and should permeate through all operational levels to ensure responsible business practices.

Q & A

What is the 'pleasure principle' discussed in the script in relation to consumer behavior?

The 'pleasure principle' refers to the deep psychological motivation that consumers bring when purchasing a product, which is based on the idea that they seek pleasure and avoid pain in their buying decisions.

How can the pleasure principle be misused in marketing?

The pleasure principle can be misused by marketers who exploit consumers' desires for pleasure, potentially leading to deceptive or manipulative advertising practices that prioritize profit over consumer well-being.

What is the importance of maintaining transparency in communication between a seller and a buyer?

Maintaining transparency is crucial because it ensures that the communication is clear and honest, which helps build trust and prevents misunderstandings or deceptive practices that could harm the relationship between the seller and the buyer.

What are the two prejudicial natures of relationships between consumers and manufacturers mentioned in the script?

The two prejudicial natures of relationships are the contract view and the social cost view. The contract view is slanted towards the manufacturer's interests, while the social cost view is slanted towards the consumer's interests, both potentially neglecting the needs of the other party.

Why is product integrity important for manufacturers?

Product integrity is important because it ensures that the product is safe, meets the claims made by the manufacturer, and respects the consumer's autonomy. It is a reflection of the manufacturer's ethical standards and has a direct impact on consumer trust and the company's reputation.

What is the example given in the script to illustrate a lack of product integrity?

The example given is of a small appliance business that was asked to produce a toaster with reduced steel casing to meet a lower cost, which would result in the product being unsafe and likely to burn users.

How did the script describe the consequences of the unsafe toaster example?

The unsafe toasters led to customer injuries and mass returns, causing the retailer to lose confidence in the product and the manufacturer, resulting in a significant financial loss for the manufacturer who compromised on safety.

What is the significance of the Johnson & Johnson recall mentioned in the script?

The Johnson & Johnson recall signifies a major breach in product integrity, where millions of units had to be recalled due to quality issues, leading to a loss of consumer trust and potential legal consequences.

How does the treatment of employees by a company like Malden Mills relate to product integrity?

The treatment of employees can significantly impact product integrity. A happy and well-treated workforce, as in the case of Malden Mills, can lead to higher quality products with fewer defects, demonstrating a positive correlation between employee satisfaction and product integrity.

What is the role of pricing in maintaining product integrity according to the script?

Pricing plays a critical role in product integrity as it can reflect the true value and quality of a product. Unethical practices such as price gouging or predatory pricing can undermine product integrity and consumer trust.

Why is it important for companies to adopt a warrior perspective when dealing with product integrity?

Adopting a warrior perspective, which emphasizes ethical behavior and long-term customer relationships, is important because it ensures that companies prioritize product safety, quality, and ethical business practices, leading to sustainable success and a positive brand reputation.

Outlines

00:00

🛒 Ethical Considerations in Consumer Relations

The discussion begins with an exploration of consumer rights and the psychological motivations that drive purchasing decisions, known as the pleasure principle. It emphasizes the importance of ethical communication with consumers, avoiding manipulation and ensuring transparency. The relationship between consumers and manufacturers is examined, highlighting the pitfalls of extreme contract views or social cost views, advocating for a balanced approach. The integrity of the product is introduced as a critical aspect of this relationship, with the manufacturer's responsibility to ensure the product's safety and adherence to claims being paramount.

05:02

🔍 The Consequences of Compromised Product Integrity

This section delves into the importance of product integrity through the lens of a small appliance business owner who faced a moral dilemma when asked to produce a cheaper toaster that compromised safety. The narrative illustrates the consequences of prioritizing cost over safety, leading to product recalls and damaged reputations. It contrasts the decision-making process with that of a responsible manufacturer who values customer safety and product quality, underscoring the long-term benefits of ethical production.

10:02

🚫 The Impact of Human Error and Recalls on Product Integrity

The focus shifts to the widespread issue of product recalls, exemplified by Johnson & Johnson's massive recall of 300 million units due to various product defects. The discussion suggests that these issues stem from systemic problems within the company, including poor working conditions and employee dissatisfaction. It contrasts this with Malden Mills, which maintained a high standard of product integrity through a committed and satisfied workforce, highlighting the correlation between employee treatment and product quality.

15:03

💸 Ethical Pricing and Market Dominance in Product Integrity

The final section addresses ethical concerns in product pricing, including price gouging during emergencies and predatory pricing strategies that disrupt markets and eliminate competition. It discusses the role of retailers like Walmart and Amazon in market dominance and the subsequent ethical implications of their pricing strategies. The summary emphasizes the importance of ethical business practices in maintaining product integrity, customer trust, and fair competition, advocating for a top-down approach to ethical decision-making.

Keywords

💡Pleasure Principle

The Pleasure Principle refers to the psychological motivation that consumers have when they purchase products, seeking pleasure and satisfaction. In the video, it is discussed as a deep insight into consumer behavior, which can be abused if not handled ethically. The principle is central to understanding how businesses should communicate with consumers to ensure that their marketing appeals to the consumers' desire for pleasure without misleading or exploiting them.

💡Persuasion vs. Coercion

This concept contrasts two methods of communication with customers. Persuasion is ethical communication that informs and influences customers without forcing them, while coercion is a heavy-handed approach that may involve manipulation or pressure. The video emphasizes the importance of being on the continuum of persuasion to ensure transparency and respect for the customer's autonomy, as exemplified by the discussion on how businesses should communicate the benefits of their products without resorting to deceptive practices.

💡Product Integrity

Product Integrity pertains to the consistency of a product with its advertised claims and the safety and reliability of the product. The video discusses the manufacturer's responsibility to ensure that the products they provide are not only safe but also accurately represent what is claimed. This is illustrated by the story of a vendor who was asked to produce a cheap toaster, compromising safety for cost, highlighting the ethical dilemmas in maintaining product integrity.

💡Contract View

The Contract View is one of the two prejudicial natures of the relationship between consumer and manufacturer discussed in the video. It represents a transactional relationship where the focus is solely on the agreement without considering broader social implications. The video suggests that this view is too one-sided and that a more balanced approach, considering both the contract and the social cost, is necessary for ethical business practices.

💡Social Cost View

The Social Cost View is the other extreme in the relationship between consumer and manufacturer, focusing on the broader social implications of a product or service beyond the immediate transaction. The video argues that while this view is important, it should not overshadow the contractual obligations. A balanced approach that considers both the social cost and the contract is advocated for to ensure ethical business conduct.

💡Ethical Communication

Ethical Communication is the practice of conveying information honestly and transparently, respecting the recipient's autonomy. In the context of the video, it is discussed as a critical aspect of the relationship between a business and its customers. The video emphasizes that businesses should communicate in a way that does not exploit the pleasure principle but rather informs and respects the consumer's decision-making process.

💡Price Gouging

Price Gouging is the unethical practice of significantly raising prices on goods or services during a crisis, taking advantage of the urgent needs of consumers. The video mentions this as an example of how not to conduct business, highlighting the importance of ethical pricing strategies that do not exploit consumers in times of need.

💡Price Fixing

Price Fixing is an illegal practice where companies conspire to set prices at an artificially high level, eliminating competition and harming consumers. The video touches on this concept as part of the discussion around unethical business practices related to product pricing, emphasizing the legal and moral implications of such actions.

💡Market Disruption

Market Disruption refers to the act of entering a market and drastically changing its dynamics, often by undercutting competitors' prices to gain market share. The video discusses how certain retailers have been accused of this practice, leading to the elimination of competition and subsequent price increases, which is seen as unethical and harmful to consumer choice.

💡Warrior Perspective

The Warrior Perspective is a term used in the video to describe a proactive and ethical approach to business decisions. It involves considering the long-term implications of actions, such as product quality and customer satisfaction, over short-term gains. The video suggests that adopting this perspective can lead to better outcomes for all stakeholders, including customers, employees, and shareholders.

💡Human Error

Human Error in the context of the video refers to mistakes made by employees that can lead to product defects or recalls. It is discussed as a significant issue in a company's product integrity, suggesting that a dissatisfied workforce may lead to higher rates of human error. The video implies that treating employees well and creating a positive work environment can reduce human error and improve product quality.

Highlights

The importance of understanding the psychological motivation of consumers, known as the pleasure principle.

The potential for the pleasure principle to be misused in marketing and sales strategies.

The balance between persuasion and coercion in customer communication.

The significance of transparency and clarity in the relationship between consumer and manufacturer.

The avoidance of extreme contract views and social cost views in favor of a balanced perspective.

The manufacturer's responsibility for product safety and integrity.

The perspective that manufacturers have a deeper understanding of the product than consumers.

Stu Leonard's viewpoint on creating products that meet customer expectations.

The ethical considerations of product claims and truthful advertising.

A case study of a small appliance business and the ethical dilemma of product safety versus cost.

The consequences of prioritizing cost over safety in product manufacturing.

The impact of product integrity on customer relationships and brand reputation.

Johnson & Johnson's recall crisis and its implications for product integrity.

The role of human error in product failures and its connection to workplace satisfaction.

The example of Malden Mills and the correlation between employee treatment and product quality.

Ethical considerations in product pricing, including price gouging and price fixing.

The impact of retailer practices on market disruption and the ethics of gaining market dominance through pricing.

The concept of power pricing and its unethical aspects in the context of market competition.

The necessity of ethical leadership from the top down to ensure product integrity.

The benefits of adopting a partnership approach for the greatest benefit to all stakeholders.

Transcripts

we have spoken so far

about

the nature of the rights

and the relationship

that we have with the consumer

we started off talking about the

pleasure principle

which essentially was an insight

into the deep psychological motivation

that consumers bring to the table when

they come to buy a product

and we discussed about how

that

pleasure principle can be abused and

used incorrectly

then we talked about

different

means of communication that we have with

the customer and again

on a continuum

between

persuasion and coercion we wanted to be

sure that the communication and the

transparency of what we said was

clear

and finally we had just looked at the

nature of the relationship itself

between the consumer

and the manufacturer or the buyer and

the seller and there again we realized

that

there are

two

highly prejudicial

natures of relationship that we can have

the contract view and the social cost

view

each one slanted to one side of the

equation and therefore certainly it

makes the most sense

to adopt the middle of the road

perspective that allowed us to um

that allowed us to engage with our

customers

in a positive way

and in a responsible way

i'd like to look at now

the integrity of the product

that we provide for

the

for the buyer

because just as we have a responsibility

to be ethical in our communication

just as we have a responsibility to be

ethical

in our

relationship

similarly when we provide a product to

the

to the buyer

we have a responsibility to make sure

that the product is safe

we have a responsibility to make sure

that it is

what we have claimed it to be

uh and and

we come to that responsibility from the

perspective but as the manufacturer we

know more about the product

than obviously the consumer does who is

uh generally

who is um purchasing it

i think uh the integrity of a product

is explored like from two perspectives

first of all we can take a look at it

from stu leonard

viewpoint

his viewpoint was

nobody comes into the store to tell me

what they can do for me

they want to know what i can do for them

and so in creating the products that i

create for them which in the case of stu

lemar leonard was a

food service store

i am trying to understand

what my customers

expect when they walk through those

doors

so they expect a fun experience they

expect low prices they expect

proper stock levels they expect

cleanliness

they expect

courteous staff

they expect

something

different

than the experience that they would get

at any other

um

food store

so

that therefore becomes the beginning

definition of the product that stu

leonard is going to be giving

his customers

clearly

at the same time

he wants to be sure that he doesn't

interfere

with their free will choice or their

autonomy so he's not going to advertise

something that is uh

claims to be let's say i don't know

a tuna sandwich and there's really no

tuna in the tuna sandwich

that

that again would be inappropriate

an example of how

we can kind of get off the rails

on product integrity i'll just tell you

happened with a friend of mine who was

in the small appliance business

so he had one of his clients was walmart

in the us

and

they came to him and said look we need

to get a toaster

that

we can retail for 6.99

which means we can pay around

four to five dollars for it

my friend said to them

after looking into what they wanted he

said well

you know the only way that i can make a

toaster like that is to

maybe use the

casing the steel around the casing

maybe if i just cut it in half if it's

12 gauge i can make it 24 gauge

and they say well that's okay

we can do that and then we can hit our

price point he said yeah but the problem

with doing that is by reducing the

thickness of the steel cage

by

50

anybody who touches the toaster while

it's toasting will immediately be burned

because there won't be enough uh

protection between the uh the elements

and the customer

they didn't care

he said well i can't make that for you

so

i have to decline the order they

declined the order

and or he declined the order and they

went to another vendor who was

desperate for that account

and of course they made the toasters

shipped approximately

i think it was something like ten

thousand toasters

into uh their warehouse

uh then the toasters were distributed to

the stores and within two weeks

the store started calling up the buying

office and and telling them of these

horrible stories

of people who who've come back they were

turning the toasters their fingers were

burned their children's fingers were

burned all kinds of

issues they're returning all the

toasters

stores packed up the toaster sent them

back to the head office

distribution center and of course the

distribution center promptly called the

manufacturer and said sorry uh we don't

want the toasters anymore

the new vendors said what do you mean i

made them exactly the way you wanted yes

but you know what they're burning the

customers

so like

you knew that

the previous vendor didn't want to make

them

for you because of that reason and you

came to me specifically because i would

make it for you for that reason

yes yes we realized that but we didn't

think it would really

uh make a difference but apparently it

does

so now this vendor has an interesting

choice

if he doesn't take the stuff back from

them

and absorb the uh what ten thousand

four dollars a piece forty or fifty

thousand dollar loss

if he doesn't absorb that

then uh they're never going to do

business with him

so

when you're playing with the customer

integrity

of a product

he should have known

that if this was unsafe and the other

vendor chose not to do it why did he do

it

what made him feel that that made sense

now he's got to either absorb the return

or absorb the loss of one of the largest

retailers on the planet

what do you do

well if you had been thinking from a

warrior perspective

never would have made the product in the

first place

the way my friend

concluded

he says i know i'm gonna make it or have

it made

it'll get to the stores the customers

will react and we'll just get it back

there's no point i'm better off to say

no to start with

and then be there

if and when they decide to repurchase

the product

with the proper amount of steel in the

casings on the side

product integrity

is a critical component of the

relationship

that a seller has with his buyer

and also another company called johnson

and johnson

um

i'm sure you've heard of them they make

tylenol they make

st john's

and they have a number of

very popular brand names and in all

honesty johnson johnson is

a brand

uh promoter that's their essential

business

they create they take the product and

then they

uh market and distribute it in an

effective way

the only problem with them

it was a big write-up actually in

the new york times

is that

in the year

2014 i believe

they had

close to 300

million

recalls

whether it was tylenol or something from

st john's or

or their baby shampoo like a baby powder

line

whatever it was

300 million units have to be recalled

and the

the problems with the with the product

covered the entire spectrum of factories

that they have and they have if i'm not

mistaken close to 300 factories

worldwide and these problems were coming

from all of them

what's going on here

how do you have 300 million in recalls

it got so bad

that the new york times

article quoted the fact

that cvs pharmacies in the united states

told johnson and johnson

that if they continued on this pace of

recalls they would drop

this their brands from their stores

because the customers themselves are

losing faith

in a brand that has to keep getting

recalls

that means you never know what you might

be eating or ingesting

from this company because clearly

their standards

are

not able to properly

safeguard the customer

that's a question of product integrity

now it's a very interesting issue

because at the end of the day all of the

failures with the products that they had

could all be traced to human error

so you have to wonder

to yourself

what

what would cause so many people

to make so many mistakes

and i can tell you without ever going to

any of the factories there's only one

answer for that

and that is people hate working there

whatever their hr policies are however

those hr policies are implemented

whatever the working conditions are

across the board for them

it is creating a workforce

that is

um

unhappy in the work they're doing

contrast that with malden mills

malden mills had a workforce

that was creating one percent defects

in their in their uh production which is

unheard of since the north was 10

how you treat your employees will

ultimately obviously impact

what and how they produce and when you

have a company that's making

pharmaceuticals and you discover

that 300 million pieces have to be

recalled

well it's great that they're recalling

it but i'm presuming that the recalls

are on the basis of the fact that they

understand the lawsuits would be far

worse than the

they're not doing the recall

so you can see

that in product integrity

there is uh of many different aspects

that you have to consider how you manage

your workforce is going to affect the

type of product you make how you

determine the relationship with your

customer is going to determine whether

you make the toasters thick or thin

all of those things you can see how they

begin to mesh

and play together

similarly we have issues with product

pricing

you know they're also open to abuse in

some cases

companies when there is a desperate

situation a natural disaster a flood

whatever

they'll turn around and they'll uh

and they'll price gouge now the laws

have come in

to stop that from happening

but those things do happen

price fixing

another issue

all of those are involved in the

integrity of the product

now today

because of instant information we can

tell you what the price of oil is pretty

well anywhere

so

companies that would normally perhaps

have been able to get away with

gouging 5 very

excuse me

very very difficult

now also

in the issue of pricing again we're just

talking all about product also the issue

of pricing are sometimes

retailers

who come in and they disrupt markets

in order to gain dominance in those

markets

and then once they've disrupted the

market and essentially forced the

competition in

then the prices go up beyond what they

normally would have been and that again

is unethical behavior

it's something that walmart has been

accused of numerous times

of going into small towns

undercutting the mom-and-pop pricing

until the mom and pop stores

can't survive because ultimately the

customer's going to go to the lowest

price and then

once the mom and pop stores are gone

once the downtown core is eradicated

then the suburban walmart stores upped

their prices and nobody had any choice

in terms of what to do

you had the same thing happen actually

to walmart you know you're not immune

amazon came along and undercut so many

of the prices

and has grown immensely at the expense

of

walmart

and other retailers as well that have

suddenly found themselves

uh in a non-competitive competitive

situation

um with a company like amazon that's

doing the same thing attempting to

corner the market on certain product

categories

by pricing the competition

out of existence and again that's not

ethical

because first of all it reduces

the selection and the variety that

people have

and second of all it's called unfair

business practices and we have laws

against that in canada

you can't collude in price fix and they

have laws against that as well in the

united states

so i think these are called like power

pricing is the is the term

so how do you deal with all these issues

that that becomes the final question

how do we deal with these issues

if we're trying to have product

integrity and we agree yes we want to do

it but now you know we want the order

from walmart

we want the market share

we want the sales volume and we say well

you know we're going to have to

compromise in what we do in order to

accomplish that

so

what

allows you to make all the wrong

decisions

is nobody determines

and takes responsibility

for acting in an ethical way and that's

why as i mentioned to you before

the strategy to be ethical

starts at the top

and it works its way down

into

the operational decisions

so here again with product integrity as

with advertising

as with marketing

um we realize that the warrior approach

the the partnership approach

produces the greatest benefit

for the customer

for the employees

ultimately for the shareholders

and and certainly for the environment