Concept explainers
As cosmetics companies roll out line after line of products to satisfy consumers' quest for youth, the shelves are getting crowded. How can a company stand out? Products such as the Cosmedicine and Rodan+Fields lines promote their affiliation with research institutions and medical doctors to distinguish them from their competition.
Shortly after Johns Hopkins University began consulting with the then-owner by companies that produced Cosmedicine products, claiming that its consulting work does not imply any endorsement of Cosmedicine. "We have been pretty clear about our role," said Hopkins CEO Edward Miller. "We are reporting on the scientific validity of studies that were done by outside testing agencies." Consmedicine packaging includes a disclaimer that discloses the nature of the research and financial relationship between Hopkins and the cosmetics company. Similarly, Rodan+Fields, Beachbnody, and Plexus also is controversial to some. Basically, multi-levelmarketing enlists a new salesperson by making the individual purchase training and inventory of the company product at a discount and begin selling the product at retail prices, while also recruiting new salespeople as their "downline" salespeople. The idea is that eventually you will makemost of your income viathe results of your downline salespeople—the people you brought into the business.
There are numerous critiques of multi-level marketing, the most notable being investor Bill Ackman's accusation that weight loss company Herbalife was engaging in a pyramid scheme. A pyramid scheme is an arrangement whose entire whole purpose is the enrichment of the top of the pyramid at the expense of new recruits. Herbalife was able to refute Ackman's accusations in a lawsuit brought against them by that their results based on product sales rather than recruitment and that they offered money-back if the recruits unable to the product.
Ethical Dilemma: Is it for research institutions like Johns Hopkins and medical doctors to endorse products such as skin care? Is the practice of multi-level marketing ethical? Does the money-back guaranttee provided by Herbalife provide evidence that they are not engaged in a pyramid scheme?
Source: "Multi-Level Marketing," Investopedia.http://www.investopedia.com, accessed October l, 2017; Alissa Fleck, "How Women Making Men Rich Has Been Misbranded as Feminism."Huffington Post, http://huffingtonpost.com, August 28, 2017; Kristen Calderaro, "Why Are Doctors Becoming Rodan+Fields Consultants?" Linkedin, htttp://www.linkedin.com, October 29, 2015; Rhonda L. Rundle, "A NewName in Skin Care: Johns Hopkins,"The Wall Street Journal,April 11, 2006 p. Bl.
To determine:
The ethical impact of professionals endorsing products and multi-level marketing.
Introduction:
The concept of ethics stands in between the two extremes of codified law and personal freedom. It refers to what is considered to be as correct behavior based on the societies interpretation. As and when society interprets things differently, what is once the standard for ethics can change over time? For example: Slavery in the 18th century or smoking in the 19th century.
Explanation of Solution
Professionals like any other individual has the right to endorse a product if he/she believes that the product provides the benefits it explains. However, the dilemma lies in the fact as a professional you are supposed to be unbiased and most endorsements comes with monetary benefits to the endorser. Therefore, the question is whether the endorser is actually speaking his mind or is his judgement clouded by monetary benefits.
In terms of the concept of multi-level marketing as a concept it is nothing more than an another sales strategy. However, the problem is that it can very easily be converted into a pyramid scheme where members at the top benefit while members at the bottom loses it all. A well designed muti-level marketing strategy can actually benefit the community by providing jobs, but there is still the problem of early recruiters gaining more benefits than others.
Money back guarantee provided by H is no guarantee that they are not engaged in a pyramid scheme. The best way to identify this is by looking at the core business. While the core purpose of a pyramid scheme is to collect money from members, MLM's core purpose would be to move product. Apart from this you can test the legitimacy of MLM by calculating the amount of money one needs to invest, will the company buy back inventory?, support received to sell and move products etc.
Want to see more full solutions like this?
Chapter 11 Solutions
Introduction to Business
Additional Business Textbook Solutions
Principles of Management
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Financial Accounting (12th Edition) (What's New in Accounting)
Managerial Accounting (5th Edition)
Cost Accounting (15th Edition)
Construction Accounting And Financial Management (4th Edition)
- Advertisements help in convincing customers to buy a product or service. Advertisers and marketers should be careful in creating ads for the general public. This ad was pulled after figuring in some controversies; LBC's Spelling Bee Commercial (2009) The Department of Education called the attention of LBC (Luzon Brokerage Movement) management for showing a commercial that encouraged wrong spelling among children. In a spelling bee contest, the emcee played by Edu Manzano called the contestants to spell remittance, affordable, and instant. They spelled out "LBC" instead. DepEd said that the commercial was encouraging wrong spelling of words. What is the social responsibility of entrepreneurs or advertisers to customers based on the example given above?arrow_forwardWhile the FTC is tasked with oversight of false claims in advertisements, many marketers might still try to push the envelope in their claims. What are some advertisements seen recently that might push the ethical boundaries of truth in advertising? What regulatory agency (i.e. FTC, FDA, EPA, etc.) govern/controls it?arrow_forwardEvaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets.arrow_forward
- Read the Case Scenario and Answer ALL Questions In February 2005, Philip Morris Tobacco Company, one of the world’s leading marketers of tobacco products including cigarettes began a promotion in the USA that included sending direct mails to teens and young adults on their birthdays. The campaign, titled “Drinks on Us,” included a birthday greeting card as well as a set of drink coasters on which several recipes were printed for making many different concoctions of alcoholic beverages. The drink recipes were mixed drinks of fairly high alcoholic content and included many well-known brands such as Jack Daniels, Johnny Walker, Smirnoff and Finlandia Vodka. With the recipe on one side of the coaster, the flip side included a tag line switch phrases such as “Go ‘till Daybreak,” and Make Sure You’re Sitting.” From the start, the promotion was fraught with problems, coming under attack from a range of interest groups. Firstly, the promotion came under heavy scrutiny and started receiving…arrow_forwardRead the Case Scenario and Answer ALL Questions In February 2005, Philip Morris Tobacco Company, one of the world’s leading marketers of tobacco products including cigarettes began a promotion in the USA that included sending direct mails to teens and young adults on their birthdays. The campaign, titled “Drinks on Us,” included a birthday greeting card as well as a set of drink coasters on which several recipes were printed for making many different concoctions of alcoholic beverages. The drink recipes were mixed drinks of fairly high alcoholic content and included many well-known brands such as Jack Daniels, Johnny Walker, Smirnoff and Finlandia Vodka. With the recipe on one side of the coaster, the flip side included a tag line switch phrases such as “Go ‘till Daybreak,” and Make Sure You’re Sitting.” From the start, the promotion was fraught with problems, coming under attack from a range of interest groups. Firstly, the promotion came under heavy scrutiny and started receiving…arrow_forward1. Describe the CSR activities undertaken by any two large companies in your home country. 2. Justify: Responsible advertising is an important element of Corporate Social Responsibility (CSR). 3. List out some brands Doing Corporate Social Responsibility Successfully with suitable examples.arrow_forward
- You have a job as a county extension agent and lead workshops for home gardeners. Smith comes to the workshops convinced that mantids will give excellent pest control based on the advertisements. Smith tries to convince everyone that mantids will control all the garden pests, from aphids to cabbage worms. Why is this advertisement is misleading?arrow_forwardBelow is the statement of Mercedes when they withdrew advertisement from 'The O'Rielly Factor', a high rating program showed in Fox TV. Eventually, this program was cancelled as the host had a lot of allegations related to sexual harassment. "The allegations are disturbing and, given the importance of women in every aspect of our business, we don't feel this is a good environment in which to advertise our products right now," From the perspective of Mercedes, this is an example of sales promotion publicity personal selling advertisementarrow_forwardChoose a product for which you are interested in creating a marketing plan. It can be a product that already exists, or one you would like to launch. It must be a legal product. Specifically describe your product. The most important requirement for this assignment is that the reader has a clear understanding of your product, what it does for the consumer, and how it works or functions. Some information you should include is the name of your product. If you are choosing to create about a product you would like to launch, be sure to create a name for your product and try to be creative. Explain the features and benefits, making sure to differentiate between these two concepts. The “product” section is the most important of the four Ps of marketing: product, price, place, and promotion. Effectively completing this part of the project should set you up for success for the rest of the project.arrow_forward
- Appraise Unilever on how they handled the controversial Tresemme advert, and the impact the adverthad on the Unilever brand.arrow_forwardWith whom may Private sector businesses attach their own advertisements?arrow_forwardRecently, Domex, a Hindustan Unilever brand, has launched a new ad campaign across print, digital and other media, at least some of which explicitly compares itself to Reckitt Benckiser’s toilet cleaner brand ‘Harpic'. Comment with relevant case laws whether such kind of comparative advertisement is allowed or not?arrow_forward