Responsibility for Consumer Error
Who is responsible for a consumer’s subconscious and erroneous conclusions about a particular product? What if a manufacturer honestly and accurately says “our product does X”, and consumers mistakenly believe, as a result, that the product also does Y?
Case in point: a study was recently reported, indicating that consumers are more likely to perceive chocolate as low in calories when they are told that it is fairly-traded. This is a great example of the “halo effect,” according to which humans have a tendency to attribute a variety of unrelated positive attributes to any person or thing that they perceive in a positive light to begin with.
Now, it’s clear that consumers are being led astray, here, though presumably that deception is not the intention of the sellers of fair-trade chocolate. But, on the other hand, whatever their intentions in the past, the sellers of fair-trade chocolate now know that consumers are susceptible to this error. Do they now have a responsibility to disabuse consumers of this particular misconception about chocolate?
Now hold on, you say. Companies that label and advertise their products accurately and honestly can’t be responsible for every crazy, false idea that enters a customer’s head. Surely companies can assume a degree of common sense; and surely anyone with a bit of common sense knows that there’s no link between fair-trade and calories.
(It’s worth noting that companies sometimes do see fit to warn consumers about matters that ought to be common sense: “Don’t use hairdryer in tub;” “Results are not typical;” “Keep knives away from children.” Etc.)
But here’s the problem. The halo effect is a species of cognitive bias, which is the term applied to any of a large number of pervasive, subconscious mental leanings that tend to lead human reasoning astray. When subject to cognitive biases, humans tend to make decisions that are not rational, not in line with their own values and preferences. The point here is that no one is actually saying to themselves, “Gee, this is fair-trade chocolate, and therefore it must be low in calories.” That would be insane. But cognitive biases don’t work by rational processes; indeed, they short-circuit rational thought. That’s the whole problem.
So, do such effects, when discovered, result in new obligations for companies? Maybe. Sometimes. At least, if the effects of a particular cognitive bias are significant. The example cited above is pretty trivial — presumably the effect in question is not sufficiently powerful to send droves of consumers onto chocolate-eating binges. But more serious cases are easy enough to imagine. And surely some bit of responsibility comes with knowledge: companies tend to have sophisticated knowledge about their products, and are more likely than consumers to know when a dangerous bias is in the offing.
But the real challenge — for both companies and consumers — is that these sorts of subconscious effects are legion. And as more and more of them come to light, we’re going to understand better and better just how little we understand our own minds. Bit by bit, whatever is left of the idea that market exchanges occur under conditions of full information is going to evaporate. What that will mean for business ethics is hard to say; but the time to start thinking about it is now.
The Business Ethics Blog 
Thanks, really interesting post (as always). The fair-trade chocolate example was a good one!
The argument over who is responsible for the consumer’s subconscious and erroneous conclusions about a particular product is not a simple black or white matter. Although it would seem apparent that any individual of normal maturity has ownership regarding personal decision-making, it needs to be taken into account the manipulative techniques employed by the advertising industry. There are many types of advertising, but by and large they all seek to keep consumers from free-thinking and, instead, make the consumer’s purchasing decisions based on an emotional response; an effective advertisement entices the consumer to purchase the product only, not also to be happy with the product after the fact.
This where the ‘Halo Effect’ comes into play; ‘the halo effect is “the general human tendency to let an overall impression shape specific judgments,” says Phil Rosenzweig, author of The Halo Effect…and the Eight Other Business Delusions that Deceive Managers’ (“Blinded by the Halo Effect,” 2001). An example; consumers who know a company is highly profitable are more likely to believe its products are high-quality and its advertising honest. This may not necessarily be the correct conclusion, but it is the aim of companies to get people buying by brand, not product. Many consumers find it difficult to accept the suggestion that advertising is manipulative because of the belief that they are in complete control of their decision-making. So, how then are consumers supposed to recognize the use of halos to promote products without letting them hijack the determination of quality and/or value by the consumer?
Whilst the halo effect does not directly prevent (or repress) the autonomy of consumers, it influences, and dare I say, manipulates consumer perceptions and infringes on consumers right to make an informed decision. Observing a small amount of predominantly honest actions from an organisation has the potential to render other (neutral) actions to seem more honest. An example of this is the questionable marketing partnerships between the charity American Diabetes Association and corporate advertiser CadburySchweppes, and UNICEF, the United Nations Children’s Fund with candy-maker Cadbury Adams Canada Inc; Dr. Marion Nestle, NYU professor of nutrition and author of Food Politics and Safe Food, states: “It’s unlikely that businesses have altruistic intentions; rather, they are looking to associate themselves with good causes to create a ‘halo effect’ in the hopes of improving sales. It’s not because these people are evil. It’s because their job is to sell more product. These are eat-more, sell-more strategies. It is sugarwashing. It sends a message that if you buy this candy, you are doing good for uneducated kids in Africa” (Thomas, 2011).
One author criticising of the use of the halo effect in advertising has even stated first and foremost that, ‘the halo effect can be used to deceive’ (Bowditch, 2011). In light of this, should we not expect that some restraint be imposed on the use of such technique in advertising? Is there not an expectation that advertising should NOT be misleading or dishonest? If deception is not the intention of the sellers of fair-trade chocolate, yet they are aware that consumers are susceptible to this error, why would they not disabuse consumers via product labelling and advertising? Would this not be the socially responsible thing to do? Take, for example, smoking. Forty years ago smoking wasn’t considered bad for your health (and certainly wasn’t advertised as such), whereas today one in every ten deaths is caused by diseases related to smoking and in most countries health warnings are displayed clearly on packaging.
Is it fair then to expect that the mentally impaired, who are carelessly included in target audiences, to be less susceptible to this type of advertising? The finance industry seems to believe it is; ‘Discriminating against mentally disabled people in lending is illegal in some states, and some issuers say it’s unfair to treat mentally retarded people any different from other consumers when they get in over their heads’ (Cahill, 1998). This (dare I say it) heartless statement is offset by the response that mentally impaired people are ‘often lonely and trusting…[they] tend to believe that every telemarketing call is a sincere, act of friendship…they frequently agree to buy out of deference to perceived authority, or to hide a lack of comprehension’ (Cahill, 1998). Luckily, in New Zealand, the law states that any contract entered into with an individual who is mentally incapacitated can be negated in court.
Many companies exploit the ignorance of consumers. Take textiles for example; certain synthetic materials now mimic wool flawlessly that even experts have trouble distinguishing between them, but they may wear very different. This is not helped with many imitation fabrics either being labeled inaccurately, deceivingly, or not at all, and more often than not, sales people can offer no assistance to the customer – price disparity is often unsuccessful in indicating the actual discrepancy in quality. I believe this example helps to highlight the importance of providing consumers with essential facts about products in order that they can make an informed decision.
Whilst advertisers may not have a legal obligation to disabuse consumers of common misconceptions, it is becoming more expected that they have a social responsibility to do so. Furthermore, it would seem that taking this stance is good business practice, especially when we consider the increase in consumer lawsuits against fast food chains and tobacco companies.
Chris,
Really interesting post considering the question of our responsibility for customer error. I am new to your blog, but enjoying having the opportunity to read your thoughts and some of the comments they evoke.
On the question of responsibility for customer error, maybe the best approach is for a company to first establish a framework for ethical communication that they relentlessly apply to all situations, as opposed to considering what to do in just the case of an instance such as customer error.
Johannesen, Valde and Whedbee (2008) in their book Ethics in Human Communication offer a number of such frameworks to consider. Included among them is the TARES test put forth by Sherry Baker and David Martinson. TARES being an acronym for: Truthfulness of the message (honestly, trustworthiness, non-deceptiveness), Authenticity of the persuader (genuineness, integrity, ethical character, appropriate loyalty), Respect for the persuade (regard for dignity, rights, well-being), Equity of the content and execution of the appeal (fairness, justice, non-exploitation of vulnerability), Social responsibility for the common good (concern for the broad public interest and welfare more than simply self-interest, profit, or career) (p. 16).
It would seem according to this particular framework that within the points of equity and social responsibility, a company does have a responsibility to work to correct, or at least inform against, customer error.
Jerad