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Transcript
No. 19-2004 ICCSR Research Paper Series - ISSN 1479-5124
Buyers be Wary:
Marketing Stakeholder Values and the Consumer
James A. Fitchett
Research Paper Series
International Centre for Corporate Social Responsibility
ISSN 1479-5124
Editor: Dirk Matten
International Centre for Corporate Social Responsibility
Nottingham University Business School
Nottingham University
Jubilee Campus
Wollaton Road
Nottingham NG8 1BB
United Kingdom
Phone +44 (0)115 95 15261
Fax
+44 (0)115 84 66667
Email [email protected]
http://www.nottingham.ac.uk/business/ICCSR
Buyers be Wary:
Marketing Stakeholder Values and the Consumer
James A. Fitchett
Abstract
Marketing theory has limited appreciation for stakeholder values. They sit
uncomfortably alongside the one-dimensional obsession with consumers propagated
by much marketing idealism. There is a real difficulty in reconciling an ideology which
declares the consumer supreme and sovereign on the one hand, with practices that
construct the consumer as malleable and passive on the other. Consumers gain
most voice and power through active disengagement from organisational initiatives
including those that acknowledge stakeholder and other relational values. It is in the
realm of consumption that individuals are most able to exercise opportunities for selfinterest, irresponsibility and irrationality and these characteristics run contrary to both
the rationalism and multi-interest orientation of stakeholder democracy.
The Author:
James Fitchett is a Senior Lecturer in Marketing at Nottingham University Business
School. Prior to appointment at Nottingham James held positions at the University of
Exeter and the University of Stirling. His main research interests are concerned with
cultural readings of consumption and marketing practices. He has published research
articles on a wide range of topics including environmentalism and consumption,
morality and consumer behaviour, the role of market place symbolism during cultural
transition, and intepretivist epistemology in marketing. James has held visiting
lectureships at several European and UK universities and colleges including Odense,
Reutlingen, Lanacaster, Yaroslavl and The European School of Management in
Paris.
Address for correspondence:
Dr James A Fitchett, Nottingham University Business School, Jubilee Campus,
Wollaton
Road,
Nottingham,
United
Kingdom,
NG8
1BB,
Email:
[email protected].
Introduction
This discussion piece begins by assessing the development of stakeholder theory in
the marketing literature by considering the parallels between core marketing
concepts and stakeholder concepts. It then questions the basis for assuming that
consumers constitute a legitimate stakeholder constituency by evaluating the
conditions and features of firm-consumer interactions. The final section looks at the
prospects for fostering stakeholder values within marketing activities and questions
the circumstances under which such initiatives could be considered to be of benefit to
consumers.
The rights of man(agement)
An interesting collection of Essays written by members of Lancaster University
Centre for the Study of Cultural Values were published in 1994 as an edited volume
titled The Authority of the Consumer. After locating the black and white photograph of
the Musee d’ Orsay on the cover one finds three bold pronouncements shouting out
from the blurb on the reverse: “Do processes of consumption rule our lives?” “What
power do consumers have?” “Does consumption undermine authority?”.
Usually we ignore the first page of most books we read. As with many academic
writers weaned on the fetishism of citation I have often been annoyed with myself
when I’ve photocopied a chapter from a book but failed to copy that first leaf giving
the authors details, date and place of publication and other information invaluable for
recording a full reference. But this time I read it closely. And here is what it said, just
below the cite:
“All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical or other means, now known or
hereafter invented, including photocopying, recording, or in any information
storage or retrieval system, without permission from the publishers.”
This passage resonated with me this time firstly because it seemed to stand in stark
contrast to the three emboldened questions posed on the book’s reverse, and
secondly because it reveals something of the unique character of consumer – firm
relations.
1
“All rights reserved” for instance, is an interesting turn of phrase. As well as stating
that the published retains all legal rights over the product it also implies that the
consumer has no rights despite purchase unless a benevolent publisher should grant
them. Not only is the consumer denied any right to rights here, but agreeing to the
terms of no rights is a condition of consumption. If you pay for this book you must
accept the terms. These rights are not negotiable, i.e. the consumer cannot request
that they be modified prior to purchase but they are legally enforceable if the
consumer disregards them once a purchase has been made.
We are informed that it may not be reprinted, reproduced, or utilised (i.e. used) in any
form or by any means. Thus I suppose I am allowed to tell you about the book, but
not about its contents, at least not in any detail. The publisher treats the purchaser as
an economic cul de sac, a dead end. Things go in but nothing comes out. These
“other means, now known or hereafter invented” reveals a deep fear among
producers than consumers are infinitely creative and entrepreneurial and will get
round the constraints placed upon them by some means or another. I am not sure if it
is legal to legislate for things not yet in existence but what really interests me is why
firms deem it necessary to constrain their consumers is such an authoritarian
manner. After all marketing is supposed to defend the consumers’ absolute
sovereignty.
These terms and conditions of sale are not unique to the publishing industry. Similar
and comparable terms are imposed, or rather implied on individuals when they make
any purchase, at least in advanced capitalist societies. In a contrasting gesture I
turned to a second-hand copy of Karl Marx’s A contribution to the critique of political
economy published by Progress Publishers in the USSR in 1970. The first leaf
contained no warning of trespass, no threat of sanction and no conditions applicable
to generations and technologies yet to be born. On the final leaf, which is fact the last
page of the index a small statement is given as a final post-script. Under the index
entry for “World Money” the statement reads:
2
REQUEST TO READERS
Progress Publishers would be glad to have your opinions of this book,
its translation and design and any suggestions you may have for future
publications.
Please send your comments to 21, Zubovsky Boulevard, Moscow,
USSR.
As well as bringing into question the assumption that the Americans invented
customer service, this short request also re-affirms the belief that many of us had
otherwise suspected, namely that the marketing concept was alive and well in the
USSR throughout the Cold War, at least at Progress Publishers, and that it was a
lack of market choice rather than a lack of an established marketing ideology that
finally sent Soviet consumers on their revolutionary path Westward.
The wide ranging centenary collection edited by the well respected Marxist Scholar
David Mclellan (1983) titled Marx: The first 100 years published by Fontana failed to
carry forward the ideals of customer sovereignty championed by Progress Publishers
on Zubovsky Boulevard, Moscow. Not only was this book sold on the condition that: it
shall not, by way of trade or otherwise, be lent re-sold, or hired out without the
publishers formal consent,” it further added, presuming the appropriate pardon be
granted by the publisher, that “this condition be imposed on the subsequent
purchaser.” In principle any subsequent consumer is bound by the conditions and
terms of sale laid down by Fontana even though the book was purchased
independently of them. As a consumer I am legally obliged to obey terms from an
organisation that are completely removed from the transaction I undertook with the
seller. So much for Marx’s view that “in consumption the product becomes the direct
object and servant of an individual need.” (Marx 1970: 194). It seems, at least for
Routledge, Fontana and other publishers, bar Soviet ones of course, intervention and
control of the free consumer market is absolutely necessary.
3
Publishing perestroika
These hypocrisies of democracy and consumer freedom are at once amusing and
bewildering. Why do we persist in propagating an ideology of consumer sovereignty
whilst seeking above all else to constrain, manage and bind the consumer into
submission? As if this wasn’t enough to muddy the waters of consumer democracy
there is ample evidence showing that consumers are forced to cope with an array of
corporate double standards. To illustrate this I will turn from the obscure world of
Marxist publications and criticism to the familiar consumer-scape of the Hollywood
blockbuster.
In its opening weekend in May 2002 the movie Spiderman grossed $114m at the US
box office and over 11m DVDs of the movie were sold in the first three days of
November following release. It is regarded as one of the most successful movies of
all time. Despite this overwhelming financial success, concerns remain over pirating
and the devastating impact it is expected to have on the industry unless controls and
prosecutions are enforced. Not only do pirates crack DVD encryption code and copy
movies either to other DVDs or straight to PC hard-drives so that they can be sold at
a fraction of the list price, they also remove otherwise unskippable commercials that
some movie studios are fond of shoving into their DVDs, and remove “region
controls”. As with all films bought by consumers in the UK the terms and conditions
are given prior to the opening credits and are even more restricting than those
imposed by publishers on readers. Not only do movie retailers put conditions on the
sale and re-sale of the item but also on how, where, when, who and under what
circumstances the product can be consumed, they typically read something like this:
WARNING
The copyright proprietor has licensed this programme (including, without
limitation, its soundtrack) contained in this Digital Versatile Disc for private
home use only. Unless otherwise expressly licensed by the copyright
proprietor, all other rights reserved. Use in other locations such as airlines,
clubs, coaches, hospitals, hotels, oil rigs, prisons, schools and ships is
prohibited unless expressly authorised by the copyright proprietor. Any
unauthorised copying, editing, exhibition, renting, hiring, exchanging,
lending, public performances, diffusion and/ or broadcast, in whole or in
part, is strictly prohibited. Any such action establishes liability for civil
action and may give rise to criminal prosecution.
4
Spiderman was produced by Columbia Pictures, a wholly owned subsidiary of the
SONY corporation. In addition to buying movie companies SONY has pioneered the
development DVD. Just as BETAMAX and VHS formats struggled for dominance
when video was first introduced there are currently two DVD formats commonly
referred to as DVD- and DVD+. Although the ‘–’ format looks like it may win through,
the format developed and promoted by SONY, the ‘+ format’ remains popular and
may come to dominate the DVD recording market. SONY was also a market leader in
the introduction of DVD players that would be capable of playing self recorded DVDs,
has a significant market share in the multimedia PC market, the main technology
used for pirating DVDs, as well as franchising its brand to a line of DVD-R disks that
boast a 4.7GB, 120min, Capacity for Video & PC convergence and are rewritable up
to 1000 times. SONY are also a market leader in the ‘Home Cinema System’ market
supplying products that quite literally bring the cinema into your living room.
This example illustrates a curious development in the types of relationships that firms
seek to foster with their global consumers. Not only do they provide products under
strict license and control that dictate to consumers how they can and cannot
consume the products they purchase, and enforce controls through legislation and
other social regulation introduced by intervening governments, they also pioneer,
mass market and promote the very instruments, means and technologies which
enable consumers to transgress these licenses. Where necessary they also
presumably prosecute their consumers whose only real crime is to take full
advantage, or in marketspeak, extract maximum value, from the company’s full
product range. It is in contexts such as these that one needs to evaluate the value of
stakeholder theories for consumers. If consumers are to be stakeholders then what
type of dialogue is being promoted?
Marketing theory and stakeholder theory
Marketing theory has given very limited attention to stakeholding. As with many
management sub-disciplines there has been a tendency for attention to focus on the
specifics of a perceived functional realm and to examine these functions in a
somewhat isolated fashion rather than one that is integrated or co-operative.
Marketing has laid claim to one specific stakeholder community, namely the
5
consumer, just as one suspects that professionals in the area of human resource
management have laid claim to the dynamics of employee relations, and operations
management researchers have laid claim to represent supplier and out sourced
stakeholders. The limited attention given to stakeholder concerns by marketing
theorists has tended to focus on those areas of marketing where multiple
constituency views are hard to ignore. Whysall (2000) and Arnould and Luthra (2000)
for example both call for stakeholder theory to be given a much more prominent
place in retail studies, especially in assessing marketing entry strategies for large
retailers where the impact of location decisions clearly influence a plethora of local,
regional, national and international stakeholder interests.
Although there are barely a handful of articles on stakeholder theory written from a
specifically marketing orientation or for a specific marketing audience (Jackson 2001,
Miller and Lewis 1991) there are clear parallels between theoretical developments in
marketing and some stakeholder theory. It appears for example, that stakeholder
theory became popular at the same time as marketing scholars were heralding the
merits of relationship marketing theory and other conceptual developments based on
the acknowledgement of networks and other community influences (see for example
Gronroos 1997). This perhaps suggests that the growing interest in stakeholder
values over the last decade or so is at least in part attributable to broader trends with
management and social science research more generally that examine management
concerns from multiple and network perspectives rather than singular ones.
The stakeholder literature is diverse and wide-ranging. It seems that it has developed
into a mature sub-discipline all of its own, that is abundant with alternative theories,
view-points and analyses. There are traditionalist critiques of stake-holding (e.g.
Sternberg 1997, Barry 2002), debates over the normative and descriptive credibility
of stakeholder theory (e.g. Reed 1999), radical stakeholder manifestos, as well as
conventional pragmatic defences that point to the proposed benefits of stakeholding
for the firm (Vinten 2001). Like many areas of management studies it appears that
stakeholding theory is dogged by early contributions, which on reflection appear
naïve, wildly idealistic and somewhat superficially justified in terms of theoretical
credibility. It is amusing to read the scathing criticisms of those early theorisations
that defined the stakeholder as all and any group that is either affected by or affects
6
the organisation. Critics point out that such crude theorisation demands that all and
sundry be considered legitimate stakeholders, whether generations unborn, terrorists
and organisational saboteurs, not to mention competitors and environmentalists.
It is interesting that almost all stakeholder theory, despite this apparent aspiration for
diversity, examines stakeholder issues from a small number of viewpoints and
interests, principally from the perspective of management and company directors and
from the perspective of the supposed principal objectors, namely stock holders. It is
perhaps an irony, if not a contradiction that stake holder theory is rarely presented
from the point of view of stakeholders themselves. It is a paradigm very much for
stakeholders rather than one authored or designed by stakeholder groups. As
Frooman (1999: 191) argues in his comment on the archetypal stakeholder
contribution from Freeman (1984):
“The stakeholder model [is] a map in which the firm is the hub of a wheel and
stakeholders are at the ends of spokes around the wheel…In this hub-spoke
conceptualisation, relationships are dyadic, independent of one another,
viewed largely from the firm’s vantage point and defined in terms of actor
attributes.”
The decision, or at least the discussion to grant, deny or withdraw stakeholder status
remains within the prerogative of organisational interests, and it is this inability to
conceptually ‘let go’ as it were that provides a serious stumbling block for the
establishment of stakeholding across other sub-disciplines of management such as
marketing.
Parallels between marketing theory and stakeholder theory
There are parallels between the origins and axioms of the stakeholder concept and
the axioms of the marketing concept, and insights from stakeholder theory can be
used to interpret and further justify this main stream marketing paradigm. The first
principle of departure for the marketing concept is based on a questioning of the
assumption that the firm should be organised on the premise that managers have a
primary ethical obligation to the firm’s shareholders (to return profit etc). With regards
to other stakeholders however, managers only have an obligation to treat them
7
strategically (Cragg 2002). The marketing concept attempts to redefine this obligatory
motive by proposing that consumers are the primary ethical obligation for the firm.
The marketing concept was in some respects a proto-stakeholder theory in that it
proposed that the principle objective and interest for the firm lay not its investors and
stock holders but rather in its consumers. Given the management conditions
prevalent in the 1950s and 1960s when the marketing concept was developed and
proposed it is not surprising that it was initially conceived as an instrumental rather
than normative theory. Firms were called upon to implement the marketing concept
on the promise that it would secure long term competitive advantage, help protect
and build market shares, as well as providing a framework for organising and
coordinating business priorities. Discussions over whether firms had a civic or moral
responsibility to implement such procedures were far from common place. And yet
within the tight orthodoxy of the marketing concept one cannot help but observe a
sense of progressive idealism, that somehow it constituted the right thing to do. One
of the earliest advocates of the marketing concept, Peter Drucker, writes:
“Marketing is not only much broader than selling, it is not a specialized activity
at all. It encompasses the entire business. It is the whole business seen from
the point of view of the final result, that is, from the customer’s point of view.
Concern and responsibility for marketing must therefore permeate all areas of
the enterprise. There is only one valid definition of business purpose: to create
a customer.” (Drucker 1954/1986: 37)
The parallels with stakeholder theories are more than evident, principally in terms of
the sentiment that the firm exists to attend to the expectations of a constituency or
constituencies other than its investors. Underlying this early proclamation of the
marketing concept is the belief that the modern firm is the result of various political,
legal and social regulations. The concept of the firm is sanctioned and protected by
social forces for the benefit of society as a whole, or in the case of the marketing
concept, for the benefits of individuals via consumption. These parallels do of course
need to be reviewed in context. There are some fundamental differences, specifically
that the marketing concept is organised around the needs of a single constituency
rather than the recognition of multiple claims. Jackson (2001) for example argues
8
that the marketing concept effectively defined the consumer as a type of default
priority stockholder. In this regard stakeholder theories can be contrasted against the
marketing concept in the same way that they can and are contrasted against
stockholder theories. The proposition that managers, employees and other
organisational constituencies should operate on the basis that they have been
granted authority to act as trustees on behalf of the consumer interest is, in this
respect at least, consistent with stockholder theories of the firm. The paradox of the
marketing concept was, or rather is, that on the one hand it heralded consumer
sovereignty, yet on the other it sought to establish and maintain absolute
organisational control (Gronroos 1989). Within the marketing area as presumably
with other management sub-disciplines there is a tendency for stakeholders to be
represented as forces that management need to overcome or ‘win over’. Both the
marketing concept and stakeholder theories are open to the criticism that they imply
and further legitimise a type of managerial hegemony despite the use of mutually
participative rhetoric (Mellahi and Wood 2003).
From a classic shareholder perspective the firm exists to return on investment which
is achieved through profit returns on sales. Consumers are in a sense a specific
means to a very important organisation end, namely sales. Interestingly, the narrative
of the marketing concept is based firmly within this stakeholder principle, that
consumers needs, wants and desires are the purpose and priority for the firm, i.e.
that consumers are neither a means to an end, nor only one end of many, but rather
the end. I would suggest that consumers are on the whole sceptical of such claims of
organisational devotion as a result of both reason and experience. The consumer is
unable to reconcile the belief that organisations are driven by any other motive, or
have any other interest in them, other than as a means to secure sales. In short, the
consumer believes that most organisations are governed by a classical shareholder
orientation whatever the rhetoric of the marketing concept may state. That said, it is
also worth pointing out that consumers have come to believe that it is their
prerogative to expect that organisations will prioritise the consumer interest if only
because it makes the sales imperative more likely. If consumers feel that
organisations are not attending satisfactorily to their needs, wants and desires, and a
credible alternative is available then they will presumably switch. Another question
then is whether consumers see the organisations as a means to fulfil their own
9
interests or whether they perceive organisations as ends in their own right. After all, a
stakeholder orientation must be mutual and cooperative. Consumers do not believe
that they have any duty of care or level of responsibility for the firms with whom they
choose to engage. Consumers believe it is their right to choose between competing
marketing offerings without regard for the implications for different firms, or for that
matter, to the other stakeholders affected by their actions.
Do consumers constitute a legitimate stakeholder constituency?
From a straight reading of stakeholder theory it would appear that consumers
constitute a legitimate and important stakeholder group. Consumers are typically
considered to be a core or immediate stakeholder group, along with employees,
suppliers and shareholders. As a stakeholder group, consumers are certainly
singular if not unique. The first thing to acknowledge is that consumers are only
agents of themselves. They have no formal obligation to represent the interests of
any other group as part of the legitimate practice of consumption, and nor do they
hold in trust the resources or intentions of others. The consumer, unlike the
employee or manager, does not act on behalf of, or for the benefit of another
stakeholder group. And unlike the shareholder the consumer does not cede
responsibility for his or her own interests to others. Thus, the consumer has no
ethical responsibility other than the satisfaction of his or her own needs, wants and
desires. Unless there were realisable and substantive gains for the individual, there is
little
reason
why
the
consumer
should
voluntarily
undertake
stakeholder
responsibilities.
Despite whatever the rhetoric of much marketing theory might claim, it is also clear
that consumers have no ethical basis to expect other stakeholder constituencies,
such as employees and managers, to act in their interests since arguably both these
groups have an ethical and legal responsibility to represent the stockholders of the
firm and not consumers. There may be times when it appears that employees and
managers are acting on behalf of the consumer interest when it seems that the
consumer interest is equivalent and common to the interest of stockholders, but this
is nothing more than a welcomed coincidence. The intent of stockholders is to return
on their investment, which they expect will be achieved by an efficient organisation
delivering customer value to consumers more effectively than competitors.
10
Consumers on the other hand are primarily motivated by extracting the maximum
value from organisations for the minimum cost.
As with any assessment of stakeholder legitimacy it is helpful to set in place a
broadly accepted set of principles and then evaluate the extent to which these
principles are applicable to the constituency concerned. The stakeholder literature
contains many such charters and classifications (e.g. Freeman 1994, Kaptein and
Van Tulder 2003). By definition most manifestos for normative theories of
stakeholding are generic, i.e. they present a set of universal values which have
relevance and applicability to wide set of activities, roles and practices. Freeman’s
(1994: 416) ground rules for effective stakeholder management propose six core
principles. Under The principle of entry and exit any contract between the firm and its
stakeholders should have clear entry, exit and re-negotiation conditions. This
principle assumes that both firm and stakeholder interests can only exist on the
premise that both parties understand the procedures for embarking and terminating
the relationship.
To what extent can this principle be applied to consumer stakeholder constituencies?
Market exchange (purchase) transactions are regulated by a wide range of
legislation, codes of practice and self-regulatory frameworks which demand that
consumers are able to access terms and conditions of sale prior to committing to
purchase. The process of terminating on-going contracts has to be specified prior to
the contract being signed and re-negotiation terms must also explicitly stated before
any purchase is agreed. With on-line purchases for example, sellers are required to
provide a link to all of the terms and conditions of sale so that the consumer can,
should he or she wish to do so, peruse them before clicking agreement to buy. A
mobile phone, cable television, or insurance policy contract, for example, must
specify exactly what commitment is implied and for how long, as well as giving details
of procedures for terminating the agreement. Firms are also required to specify if,
when, and under what conditions they will vary the terms of a contract once the
agreement has been entered into.
There is a strong case to suggest that the majority of legitimate consumer-firm
interactions sustain Freeman’s (1994) first principle and consequently one might
11
conclude that the consumer is well on the way to being granted full stakeholder rights
and status. One problem with this conclusion is the relative status of firms and
consumers in respect of defining the terms of entry exit and negotiation. These terms
are largely if not totally imposed by firms rather than arrived at through dialogue,
concession and consensus between consumers and the firm (see also Fitchett and
McDonagh 2000). This is not necessarily a disadvantage and nor should it
automatically be assumed that this constitutes an unjust process. It does however
bring into focus the potential limitations of applying stakeholder dialogue principles to
firm-consumer relationships at least if one assumes that Freeman’s stakeholder
ground rules are accepted as constituting a reasonable set of criteria.
The second principle, the principle of governance requires that the procedure for
changing the rules of the game must be agreed on by unanimous consent. It could
be argued that consumers implicitly accept this condition in their relationships with
firms. Consumers agree freely as an implied result of any consumer choice that it is
acceptable for the agreement to be pre-determined and therefore non-negotiable.
Firms specify the rules as well as the means and prerogatives for changing the rules.
Consumers have a role in governance only to the extent that they choose the
structures by which they are to be bound from the options and choices available on
the market at any given time or place. Arguably this is in reality only a limited
opportunity because in many cases competing firms apply similar if not identical
governance principles thus removing any basis of consumer choice. Furthermore,
there is a slight conflict of interest in that for the consumer to be active in terms of
selecting the basis for governance multiple and often contradictory selection criteria
must be managed. Unless the preferred choice also happens to be offered by the
firm with the preferred terms of governance, the consumer must either choose
unfavourable terms so that the preferred choice is obtained, or choose an inferior
alternative so that preferred governance structures are entered into. The main reason
why this is rarely a major concern for consumers is because the terms and conditions
of governance tend not to vary a great deal especially within product classes. Thus
most credit cards tend to have similar terms and conditions, as do most vacation
providers, airlines, supermarkets and so on. One might rightly conclude therefore that
the consumer has little real principle of governance.
12
A political analogy might be thus: Let us consider an imaginary consumer-based
democracy whereby ones choice of political governance was determined by ones
choice of a particular commodity, such as an automobile or a brand of bread. One
could argue that democratic freedom was preserved because the people retained the
right to choose between parties and their policies simply by making an informed
consumer decision. It would also have the benefit of promoting higher political turnout
especially if the commodity selected to function as the political surrogate was a
necessity. The only problem, assuming that all of the people are to afford the
commodity used as the political surrogate, would be that consumers might have a
strong personal preference for the taste of a brand A loaf or the driving experience of
a brand X saloon but subscribe to the policies of the political authority associated
with brand B bread or brand Y automobiles. The consumer is thus required to weigh
up product choice against choice governance. To extend the analogy one stage
further, one could question whether the people’s choice would be made all the more
easier if all political parties agreed to adopt broadly similar policies and manifestos
leaving consumers to focus on satisfying their preferences for one brand over
another.
This governance dilemma is a feature of many consumer decisions. Should
consumers choose fair trade products despite their preference for cheaper
alternatives? Should they boycott clothing manufacturers exposed as having
exploitative labour practices despite a desire for the brand and its supposed role in
self and social identity? Should they choose to buy a desirable automobile despite
knowledge that such choices are likely to contribute to worsening environmental and
social conditions? It is not that consumer decisions are unique in having a multidimensional quality but rather than the link between governance issues and product
features, at least at the point of sale, appears spurious and disassociated. The
competing demands involved with consumer decision-making together with the
nature of largely prefabricated governance alternatives mean that consumers are
poorly placed to exercise an active governance role.
Freeman also discusses the principle of externalities, stating that if the contract
between firm and consumer imposes a cost on a third party, this third party has the
option to become a party in the possible re-negotiation of the contract. This is a
13
particularly difficult rule to incorporate into consumer-firm interactions. Consumers
tend not to be in a position to evaluate the impacts on third parties since their
relationship with firms is defined in an exclusively dyadic form. Firstly it is
questionable whether consumers are ever in a position to have enough information to
determine and assess all of the third party consequences of their actions. Secondly,
since (as stated above) consumers are rarely in a position to enter into negotiations
with the firm with regards to the terms of entry, exit or governance they are equally
impotent in terms of permitting or supporting third party involvement or in fact
discouraging it were such interventions deemed to have a deleterious impact on their
own interests.
The principle of contracting costs states that all parties to the contract must share the
cost of contracting. This is again a difficult rule to apply to firm-consumer interactions
since consumers must ultimately bear all of the costs of contracting, together with all
of the costs of production, marketing, research and development and general firm
administration. Although the firm may have alternative sources of revenue that it can
use to offset some of these costs, they must be retrieved through sales whether
directly or indirectly. A credit card company might sell off bad debt to a third party so
as to retrieve at least some of the revenue it has nominally forfeited due to customers
defaulting on loans, but this cost must eventually be factored into a business model
that determines rates and terms of lending and repayment.
The point of relevance here is not to critique Freeman’s ideal types or to suggest that
the list of principles is either poor or adequate to define stakeholder relations.
Although it differs in some respects to other typologies it is reasonably coherent as
an ethical framework for governing contractual terms between some stakeholder
interests and the firms in which they have a stake. This brief application clearly
shows that consumers do not and cannot be classified or conceived of in the same
fashion as other core organisational stakeholders. Such terms are perhaps
appropriate ideals for dealings between firms and suppliers, labour unions or
pressure groups but not to the mass consuming public. For them to be treated as
such it would be necessary for individuals to be granted both the moral and economic
rights and responsibilities to interact with organisations on a more or less equal
basis. This presumably means that they must collaborate and organise themselves
14
together in some formative, constitutive manner so that they are in some capacity
equal with the firms they choose to contractually engage. For consumers to become
active stakeholders and fulfil the kinds of obligations outlined in these principles they
are in effect required to become a kind of quasi-organisation and as such cease to
retain many of the characteristics that define the consumer stakeholder role in the
first place. Whilst there are many examples where consumer interests have been
consolidated in some way to provide a basis for collective action, such initiatives are
hardly typical of the majority of consumer behaviour. Consumer Unions (Winward
1994, Furlough and Strikwerda 1999), boycotts (Smith 1990) and other forms of
consumer protests can and often do coerce organisations into changing policies
deemed to be detrimental or harmful. However, it would be difficult to argue that
these forms of expression are typical or even common place features of most
consumer behaviour and the motives underpinning these forms of action are far from
homogenous.
Necessary – but incompatible
The stakeholder status of consumers can be further examined in the context of
issues regarding parity, conflict and dependency. Friedman and Miles (2002) for
example attempt to illustrate the differences between various types of stakeholders
based on the extent to which they are necessary or contingent to the firms’ activities,
and the degree to which stakeholder activities are either compatible or incompatible
with those of the firm. Through their analysis of the impact of environmentalist lobby
groups they also show that there is often a marked difference between the way that
firms perceive their stakeholders, and how or whether other communities or groups
perceive themselves as stakeholders to the firm. A group may consider itself to
constitute a legitimate stakeholder interest although the firm may not recognise it as
such. Alternatively the firm may acknowledge stakeholder status yet deem the
concerns of particular groups to be unimportant and otherwise incompatible with their
own objectives and commitments.
The firm-consumer relationship is described as having a ‘necessary incompatible’
configuration (Friedman and Miles 2002: 10). Consumers are grouped in same
quadrant of the stakeholder matrix of relationship as Trade Unions, Low-level
employees, government, suppliers and other creditors. This status acknowledges
15
that the consumer interest cannot generally be dismissed or ignored by firms. They
have an interest, obligation and commitment to interact and deal with consumer
demands at some level. At the same time the objectives of the firm are deemed to be
largely incompatible with the objectives of consumers. Just as Trade Unions would
be expected to prefer improved working conditions rather than worsened ones, or
more secure employment contracts versus more flexible contracts, consumers would
be expected to prefer lower rather than higher prices, wider rather than less choice,
longer rather than shorter opening hours, and interest free payment terms rather than
interest charged. The best interests of the firm on the other hand have tended to be
predicated on the highest possible returns on per unit sold, standardised rather than
customised market offerings and so on.
Of course the long term viability of trade union members is also dependent on a
viable and profitable firm, as is the long term viability of consumer expectations.
Although interests of the firm and its customers are incompatible there is a
recognition that some necessary contractual obligation exists and that a key function
of the firm is to compromise or convince such groups that stakeholder concerns have
been listened to and addressed. This conceptualisation recognises that the
stakeholder relationship between the firm and its customers may not be all together
positive, active or constructive but rather combative, and that the way firms perceive
customer stakeholder interests may differ significantly to the way customers perceive
their own stakeholder rights. Perhaps the best way to conceptualise the relationship
between firms and consumers is as one of mutual contempt or mistrust, or
constrained opportunism. Both customers and firms seek to exploit one another to
the maximum extent without destroying the future potential for further interactions.
The consumer motto is thus “Offer us more for less or be warned that we may go
elsewhere and get should the opportunity arise.”
It is also logical to assume that customers do not represent a coherent stakeholder
interest, but rather one that is highly fragmented and disparate. Although most
customers might be ‘necessary incompatible’ others may be(come) ‘contingent
incompatible’. For example Relationship Marketing theory suggests that less
profitable, highly promiscuous or highly unpredictable customers might be deemed
irrelevant to the firms’ objective of generating and maintaining sales. The cost of
16
retaining such customers might outweigh their lifetime value to the firm and as such
they might be re-classified as a contingent (i.e. non-necessary) and incompatible
stakeholder sub-group. Although customers have grown to expect that firms will
always respond favourably to the threat to leave, in reality the firms response to
some customers may actually be: “Good riddance, don’t come back until you can
give us more”, or “You do not merit the expense we would incur to seduce you.”
The relative status of consumer stakeholder values
It might seem logical, obvious, even common sense to assume that employees,
consumers or suppliers would want, value and take responsibility for their status as
stakeholders but such assumptions deserve closer scrutiny. Defining consumers as a
stakeholder community is technically accurate according to most stakeholder
literature, and rarely questioned but it is practically inappropriate.
In one sense consumption is simply an activity that individuals undertake. The
concept of the ‘consumer’ is in this regard a managerial reification. Of course the
individual is aware that he or she buys, shops, desires and even consumes, but the
means of becoming a consumer are largely organisational means. The question is
not whether consumers constitute a stakeholder community or not, but rather
whether individuals seeking stakeholder expression and representation are able to
do so via their consumer behaviour as opposed to the other roles they inevitably fill
as part of their every day lives, as members of civil communities, as employees,
trade union members, members of political parties, investors, as activists, or as
members of other cultural and sub-cultural groups. Miller (1995: 20) questions the
real opportunities that non-consumption based modes of representation can offer to
individuals in an increasingly globalising economy stating that “Consumption... is the
one arena where most of us still feel we have some power left to influence what we
might become.”
Although this view promotes consumption from a passive to an active function and
appears to offer an optimistic and representational capacity to the consumer, it is in
fact a fundamentally pessimistic perspective. The benefits and potential of
consumption as a form of representation is predicated on the acknowledgment that
other forms of non-consumption expression are being gradually disabled and
undermined. In short consumer representation may not be perfect but it is becoming
17
the only form of representation for the majority of the worlds consumer-citizens.
Inevitably the values of the consumer contrasts vividly with many non-consumption
values in terms of opportunity for self expression and representation. After all the
consumer ethos is founded not on the principle of stakeholder but rather on the
principle of sovereignty, i.e. of privileged status and as such the extent to which
stakeholder values can be incorporated into consumer relations is highly spurious.
The first question to be considered then is whether individuals are more or less able
at present to enact stakeholder responsibilities and receive stakeholder rights when
undertaking consumer activities compared to the other roles they perform as part of
their social lives. Debates regarding citizenship versus consumerism have clear
relevance here. At present, at least in western democracies, there is an assumption
that the political establishment has precedence over any one particular group or
commercial interest. As a citizen of that democracy individuals are able to exercise
choice through elections and other public pressure (popularity, participation in polls
etc) which in theory has a direct influence over the means and direction of
government. The right to vote provides the individual with stakeholder status together
with the responsibilities that go with it. A rational model would expect that, where
possible, an individual would seek to be consistent in terms of values, behaviour and
actions across the range of activities they undertake.
The problem here of course is that individuals do not necessarily behave in a
congruent manner across all of the roles and actions they undertake. Thus, for
example, an individual might vote for a political party that has given a manifesto
pledge to address environmental problems whilst continuing to desire and purchase
automobiles that are less than fuel-efficient. As Miller (1995) shows, in some cases
consumer decisions have far greater political consequences than voting decisions,
especially in developing economies. Furthermore this is more likely to be the case
given the trend towards globalisation which often directly undermines national
government efforts to instigate policy. Equally an individual may be a member of a
trade union that seeks to safeguard employment conditions by, for example,
opposing the relocation of certain organisational activities to developing economies
where labour in cheaper and working conditions poorer, but at the same time
purchase goods and services purely on the basis of value for money. On an even
18
more abstract level, individuals may strongly criticise fund managers who invest in
firms that are exposed as exploiting cheap labour, low environmental standards, and
undertaking anti-competitive trading practices yet base investment decisions solely
on good financial performance so that they will more than likely gain higher interest
returns or sustain more favourable pensions that will allow them to retire earlier.
These examples illustrate that consumer actions can and often do conflict with other
actions, many of which have a direct impact on the same individuals making the
consumption choices in the first place. To be fair, consumers often lack the
necessary information to make fully informed choices although one assumes that if
consumers demanded it firms would respond by supplying it. That consumption is
largely defended on the grounds of the individual’s right to choose, and that it is
socially constructed as an activity that is undertaken in isolation or small groups also
limits the prospect of greater consideration for different stakeholder consequences.
There is a strong argument to suggest that individuals are far more empowered when
they accept the boundaries and conditions of collective action, whether this is
through trade union membership, membership to groups seeking to support the
advancement of particular issues (e.g. environmental groups, campaigns to address
third world debt), or membership to political parties. It is only through formal
organisation and channels of representation that legitimate stakeholder status can be
enacted, including both the rights and responsibilities that come with it. Although
there is a case to suggest that individuals are emancipated and liberated through
their ability to participate in mass consumer society (Firat and Venkatesh 1995) this
freedom is mainly limited to the boundaries of the self, and adoption of prefabricated
agendas and actions. Consideration of an holistic view of social action and
stakeholder representation would probably conclude that clearer demarcation
between the individual’s expectations from consumption and his or her expectations
from other activities, as for example, workers, voters, or investors, is probably the
most sustainable way forward. Whilst efforts that blur the boundaries between these
very different types of roles is to certain extent inevitable, this is likely to undermine
stakeholder relevance, especially if more and more individual behaviour becomes
represented as consumption behaviour and inherits the corresponding consumption
characteristics identified above.
19
A further question then is whether individuals are likely benefit from being granted
stakeholder status by those firms who actively target them with products and
services. To address this issue it is necessary for us to briefly consider how firms and
consumers protect themselves against each other from what has been termed here
mutually constrained opportunism. Firms can manage the uncertainty associated with
consumer interests in a number of ways. They can compete with rival firms and seek
to offer a better product or service alternative on the assumption that consumers will
gravitate around superior product offerings at the most competitive price. They can
attempt to construct barriers to exit, such as loyalty schemes on the assumption that
consumers will become less promiscuous if they are offered marginal perceived
benefits and incentives. They can attempt to monopolise a particular product through
aggressive competition or dumping and thus limit the potential variety of choice
consumers have available. They can try to attract and seduce the consumer by
enthralling and ensnaring them through playful marketing communications and
appealing to the consumers’ insatiable desire for the desirable (Brown 2001). The
consumer has only one means of defence against the powerful strategic efforts of
organisations, the freedom to choose. That this choice can be made on the grounds
on rational preference, irrational desire, or on no apparent grounds at all and thus
appear completely random is a principle means of consumer empowerment.
Stakeholder values, like relationship marketing initiatives can be interpreted as an
organisational effort to colonise and constrain the unmanageable consumer (Gabriel
and Lang 1995). Individual, relatively weak consumers are protected against the
collective and relatively powerful efforts of firms only by the mechanism of the market
together with legislative and other restrictions that provide for the basic rules of
engagement.
A radical stakeholder theory of marketing would require firms to focus their efforts on
the types of relationships and interactions they have with their customers rather than
on the types of products and services they deliver. The golden axiom of marketing is
still the satisfied customer - which translates into the provision of a product or service
that delivers, or enables the consumer to enact, satisfaction. It is simply not sufficient
for firms to liase with customers about the types of products they do and do not want.
Consumers do not necessarily know what they will and will not want in the future,
20
especially for new and innovative products and services. Furthermore even if they do
have a clear idea about their future wants and needs it is far from certain that they
will be willing to make these explicit or that they will remain consistent for any definite
period of time. The suggestion that formal routine marketing research provides a
means for consumer representation with firms or affords them a voice in the strategic
development of, for example, new product development is in this respect doubtful.
Marketing research as a marketing function is organised not by consumers but by
firms. In short, marketing research is conducted by firms to establish intelligence
deemed useful by firms. For commercial marketing research to function as a
democratic instrument a system would be needed whereby firms are obliged to
conduct research so that consumers can voice their preferences and requirements
and that some method be established to evaluate the extent to which these
preferences are instituted. In some ways a stakeholder theory of marketing calls for
the firm to be less, rather than more customer focussed. Marketers would need to
examine, implement and offer social, even moral innovations in a similar fashion to
the way that new technological innovations are introduced into the market place.
Consumer democracy and freedom
As long as firms legitimise their commercial activities on the grounds that there is
consumer demand, prospects for progressing an alternative marketing paradigm
other than one based on mutual mistrust and competition are severely limited.
Likewise if individuals legitimise their choices and the consequences of these choices
using a justification of consumer sovereignty then there is limited scope for any
notion of individual responsibility to be fostered. Embedding stakeholder values of cooperation, human rights and democracy within certain product offerings only serves
to commodify these values so that they become a set of choice criteria like any other.
As Abercrombie (1994) argues, authority rests in the power to control meaning, the
meaning of goods, the meaning of roles, and the meaning of transactions. All
practices, even ones that appear subversive, are contained within the jurisdiction of a
given institutional authority. Extending consumer choice to more and more products
and services cannot be defined as democratising process because consumer choice
is only potentially endless so long as it remains largely politically harmless. Bauman
(1988: 88) summarises this argument well:
21
For most members of contemporary society individual freedom, if available,
comes in the form of consumer freedom, with all its agreeable and not-sopalatable attributes. Once consumer freedom has taken care of individual
concerns, of social integration and of systematic reproduction (and consumer
freedom does take care of all three), the coercive pressure of political
bureaucracy may be relieved, the past political explosiveness of ideas and
cultural practices defused, and a plurality of opinions, life-styles, beliefs, moral
values, or aesthetic views may develop undisturbed. The paradox is, of course,
that such freedom of expression in no way subjects the system, or its political
organisation, to control by those whose lives it still determines, though at a
distance. Consumer and expressive freedoms are not interfered with politically
so long as they remain politically ineffective.
If the fight for fair trade is to take place on the supermarket shelves then the fight is
already lost. Likewise if the protection of the environment comes down to effective
branding efforts then there is limited prospect for stakeholder values to be fostered.
Furthermore there is limited evidence to suggest that marketing theorists have yet to
establish an alternative mainstream paradigm that incorporates some of the broader
ethical and moral issues raised here despite recommendations as to how the
development of alternatives might be approached (Crane and Desmond 2002), and
what they might contain (Kilbourne et al 1997). Authority and democracy in
consumption are not really about who has the right to own and buy, or whether
consumers have a legitimate right to complain or be adequately represented. Before
the issue of stakeholder democracy can be given serious consideration in the context
of consumer-firm interactions it is necessary to establish who or what group has
legitimate claims to sovereignty and authority, who or which group has the legitimate
charge to represent those deemed to have sovereignty, and how do those with
sovereignty make their claims and actions known to those charged with representing
them. Until such a time that a consensus on these issues emerges consumer
interests are probably best served by adopting a healthy scepticism and wariness to
organisational initiatives such as stakeholding which are likely to diminish the already
limited opportunities for resistance and the implicit protection afforded them by a free
market ideology.
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24
Research Paper Series
International Centre for Corporate Social Responsibility
ISSN 1479-5116
Editor: Dirk Matten
The ICCSR Research Papers Series is intended as a first-hand outlet for research output of ICCSR.
These include papers presented at symposiums and seminars, first drafts of papers intended for
submission in journals and other reports on ongoing or completed research projects.
The objective of the ICCSR Research Papers Series is twofold: First, there is a time goal: Given the
quality of ICCSR publication, the targeted journals normally require large time spans between
submission and publication. Consequently, the ICCSR Research Papers Series serves as a
preliminary airing to working papers of ICCSR staff and affiliates which are intended for subsequent
publication. By this, research output can be made available for a selected public which will not only
establish ICCSR’s lead in advancing and developing innovative research in CSR but will also open the
opportunity to expose ideas to debate and peer scrutiny prior to submission and/or subsequent
publication. Second, the ICCSR Research Papers Series offers the opportunity of publishing more
extensive works of research than the usual space constraints of journals would normally allow. In
particular, these papers will include research reports, data analysis, literature reviews, work by
postgraduate students etc. which could serve as a primary data resource for further publications.
Publication in the ICCSR Research Paper Series does not preclude publication in refereed journals.
The ICCSR Research Papers Series consequently is interested in assuring high quality and broad
visibility in the field. The quality aspect will be assured by establishing a process of peer review, which
will normally include the Editor of the ICCSR Research Papers Series and one further academic in the
field. In order to achieve a reasonable visibility the ICCSR Research Papers Series has full ISSN
recognition and is listed in major library catalogues worldwide. All papers can also be downloaded at
the ICCSR website.
Published Papers
No. 01-2003
Wendy Chapple & Richard Harris
Accounting for solid waste generation in measures of regional productivity growth
No. 02-2003
Christine Coupland
Corporate identities on the web: An exercise in the construction and deployment of
‘morality’
No. 03-2003
David L. Owen
Recent developments in European social and environmental reporting and auditing
practice – A critical evaluation and tentative prognosis
No. 04-2003
Dirk Matten & Andrew Crane
Corporate Citizenship: Towards an extended theoretical conceptualization
No. 05-2003
Karen Williams, Mike Geppert & Dirk Matten
Challenges for the German model of employee relations in the era of globalization
No. 06-2003
Iain A. Davies & Andrew Crane
Ethical Decision Making in Fair Trade Companies
No. 07-2003
Robert J. Caruana
Morality in consumption: Towards a sociological perspective
No. 08-2003
Edd de Coverly, Lisa O’Malley & Maurice Patterson
Hidden mountain: The social avoidance of waste
No. 09-2003
Eleanor Chambers, Wendy Chapple, Jeremy Moon & Michael Sullivan
CSR in Asia: A seven country study of CSR website reporting
No. 10-2003
Anita Fernandez Young & Robert Young
Corporate Social Responsibility: the effects of the Federal Corporate Sentencing
Guidelines on a representative self-interested corporation
No. 11-2003
Simon Ashby, Swee Hoon Chuah & Robert Hoffmann
Industry self-regulation: A game-theoretic typology of strategic voluntary
compliance
No. 12-2003
David A. Waldman, Donald Siegel & Mansour Javidan
Transformational leadership and CSR: A meso level approach
No. 13-2003
Jeremy Moon, Andrew Crane & Dirk Matten
Can corporations be citizens? Corporate citizenship as a metaphor for business
participation in society (2nd Edition)
No. 14-2003
Anita Fernandez Young, Jeremy Moon & Robert Young
The UK Corporate Social Responsibility consultancy industry: a phenomenological
approach
No. 15-2003
Andrew Crane
In the company of spies: The ethics of industrial espionage
No. 16-2004
Jan Jonker, Jacqueline Cramer and Angela van der Heijden
Developing Meaning in Action: (Re)Constructing the Process of Embedding
Corporate Social Responsibility (CSR) in Companies
No. 17-2004
Wendy Chapple, Catherine J. Morrison Paul & Richard Harris
Manufacturing and Corporate Environmental Responsibility: Cost Implications of
Voluntary Waste Minimisation
No. 18-2004
Brendan O’Dwyer
Stakeholder Democracy: Challenges and Contributions from Accountancy
No. 19-2004
James A. Fitchett
Buyers be Wary: Marketing Stakeholder Values and the Consumer
No. 20-2004
Jeremy Moon
Government as a Driver of Corporate Social Responsibility: The UK in Comparative
Perspective
No. 21-2004
Andrew Crane and Dirk Matten
Questioning the Domain of the Business Ethics Curriculum: Where the Law ends or
Where it Starts?