Has Facebook Heard of ‘Corporate Social Responsibility’?

By Dr. Todd Bacile | September 30, 2013

Facebook & Corporate Social Responsibility

For such a young company, Facebook already has created numerous debates about its ethical / legal use of consumers’ information and questionable business decisions. Today’s businesses are expected to maintain a certain level of corporate social responsibility (CSR), defined as a company being responsible for its actions – socially, ethically, and environmentally. CSR often captures headlines in the environmental context. But, it is the ethical context where Facebook skates on the proverbial thin ice.

It seems there is a fine line between a firm being innovative versus unethical. On the one hand, Facebook has continued to push the envelope to develop technologies and a marketing platform never before possible. On the other hand, the push toward new and innovative technologies at times borders on invasive or illegal behavior. The following is a brief list of some of Facebook’s marketing / managerial debacles and legal challenges.

Beacon

The first ad platform Facebook created was called Beacon, which was quickly shut down due to the illegal use of users’ private information. Beacon transmitted data from external websites to Facebook in an effort to create targeted ads. Beacon also made updates in users’ news feeds to announce certain purchase activities. The unethical angle was that Beacon was publishing users’ private information without explicit consent. Ultimately, the courts forced the termination of Beacon and made Facebook cough up a $9.5 million settlement.

The class action lawsuit (Lane v. Facebook) was born from the following sympathetic tale: Sean Lane purchased an engagement ring on Overstock.com. Unbeknownst to Lane, Overstock was one of 44 firms participating in the Beacon system. As soon as Lane bought the ring, Beacon sent purchase data to Facebook, where the social giant then posted a status update of the purchase details in Lane’s profile! Lane began receiving congratulatory wall posts from friends. The only problem was that he had yet to pop the question. Awkward! And illegal according to the courts.

Sponsored Stories

This is how Sponsored Stories worked: a user ‘Liked’ a brand, which then enabled the brand to create an ad-like proposition to that user’s Facebook friends. The ad-like template featured the user’s name and image; and looked as if the user was recommending the brand to friends. This design was an attempt to feature an ad that appeared to be organic consumer support (because consumers hate, distrust, and ignore most ads). There was the problem: users claimed Facebook used their likeness to “trick” friends with an ad – without explicitly telling the user.

Taking this a step further, Facebook allows minors to create a profile and use the social network. Facebook’s Sponsored Stories came under attack when some parents began seeing their minor children ‘Liking’ various companies or products, then seeing their child’s name and image used in the ads to target friends. Facebook was forced to kill Sponsored Stories due to consumer backlash and legal pressures: the courts ordered a $20 million settlement.

Postmortem Profiles

Question: what happens to your Facebook account, images, videos, and content when you die? A possible answer: Facebook maintains it status quo of using a person’s information in advertisements. People actually have seen Sponsored Stories featuring a deceased friend. Really.

Then there is the story of Karen Williams and her deceased son. Williams fortunately had her son’s Facebook user name and password. She wanted to review his photos and messages to friends. However, when Williams contacted Facebook to ask that the deceased’s profile be left open, Facebook administrators immediately changed the password and locked her out of the account. The reason: Facebook was concerned about user privacy. Williams pursued and received a court order to allow her access to her son’s account.

These stories have amplified the debate of who owns a person’s digital assets upon death. Facebook has claimed that such instances were accidental; and has since created a memorialized state option. Accidental or not, new legislation is attempting to address postmortem profile access and ownership.

Facebook’s IPO

Facebook has been under the microscope for allegedly misleading investors prior to its initial public offering. A class action lawsuit claims Facebook execs purposely inflated growth forecasts in an effort to manipulate the IPO stock price upward. More than 40 lawsuits have been filed by investors regarding the IPO.

Gee whiz… whether it is marketing programs, privacy issues, or managerial decisions on finance, Facebook appears to have a history of turning a blind-eye to anyone and everyone in pursuit of its own corporate goals. And that, my friends, is the antithesis of corporate social responsibility.

Dr. Todd Bacile (@toddbacile) is a Marketing Professor at Loyola University New Orleans and holds a Ph.D. in Marketing from Florida State University. Social Media Marketing Magazine ranks him as one of the Top 100 Marketing Professors on Twitter. Have a question or comment? Post it here and you will receive a response.

Mobile Showrooming in the Age of Information Transparency (Part 2 of 2)

By Dr. Todd Bacile | July 29, 2013

Synopsis: showrooming is a new challenge that brick-and-mortar retailers are sizing up as a threat. However, this phenomenon must become an accepted part of retail business models in the era of empowered consumers and ubiquitous information. In this two-part post showrooming is juxtaposed to the power of firms versus consumers in the traditional business model and the modern day’s changing information economy. Click here to read Part one.

The Information Economy

Showrooming is one of many phenomenon to cause a seismic shift in the current information economy. Many people think of an economy as goods and services exchanged between firms and consumers. However, an economy also exists for the exchange of information. An information economy is transparent when all information is easily available on-demand.

Web 1.0 was a colossal shift in media, where additional information was available to the masses of consumers. However, in the Web 1.0 environment firms still had much control over the type of information made available online. Easy-to-use publishing tools and social networks had not yet evolved to allow consumers to easily share information. True information transparency was absent.

The shift to Web 2.0 (and Web 3.0) was a major move toward a transparent information economy. Suddenly, all information – any type of information – about even the most remote goods or services could be shared, tweeted, blogged, yelped, pinned, and published by consumers. The all-inclusive power firms had over available information was now supplanted by the power of connected consumers. In effect, consumers are now driving an information economy based on transparency.

The Political Economy of Information

The political economy of information is an early theory researchers discussed concerning the power of information. In this context, “political” is not related to governmental elections. Greek philosophers used the terms political and politics to mean the practice of influencing other people at the individual level. Stemming from this context is the use of the term “political” in social sciences, which represents the ability to influence the behavior of people in a social structure, such as consumers in a target market.

Traditional business models: The power of firms

These early definitions concerning the ability of one party to influence another party carried over well to a marketing and advertising context via mass media. In the early days of television and radio only the largest firms with available resources could afford broad marketing campaigns in these new media of the time. Like the old adage said,  “if it is on T.V. then it must be true,” was believed by many consumers to be a fact. That was power.

In a political economy of information, the group with more information has more power over a group with access to less information. In mass media, firms possessed and controlled more information over a less informed market of consumers. The balance of marketing power was heavily tilted toward companies.

Firms could control a message. Individual consumers could not add information to that message, except verbally in extremely small groups through word-of-mouth. Marketers were in control of information. That was the power possessed over a passive consumer audience. In an information economy, information is the power currency.

Modern day business models: The power of consumers

Showrooming, like connected consumers participating in social networks, is a major power shift from the boardrooms of firms to the mobile devices of consumers. A political economy of information still exists, only now it is consumers who often possess the power currency of more information (or are at least on par with firms). Any business models in use by firms in an attempt to stifle or control the power of connected consumers will be met with strong opposition.

In other words, firms clinging to a traditional business model mentality are failing to adapt to a new electronic business landscape. Such a failure to adapt new strategies will negatively affect the corporate bottom line.

Showrooming, online reviews, social media complaints, status updates, citizen influencers though PeerIndex and Klout, are a few examples of connected consumers creating and accessing more information about goods and services. Decades of firms using a power position to hold and control select information has come to an end in this new age of information transparency.

The Future of Marketing

To date, many firms are still struggling with their loss of power in a marketing and advertising context. Some of the strategies to respond to showroomers, such as price matching, support the philosophy of information transparency. However, a price war may not be the answer. Other strategies, such as information blackout, support a power-play attempt by firms to regain information control. Both types of strategies are not optimal.

One outlook from a noted expert reveals what firms must seek in new marketing strategies moving forward. Lin Humphrey is a mobile marketing researcher, marketing doctoral candidate at Texas Tech University, and was recently awarded the Mobile Marketing Academic of the Year by the Mobile Marketing Association. Speaking specifically about showrooming Lin stated via e-mail, “It’s shifted the power back to the consumer, which forces brands to be more competitive. Price guarantees, easy return policies, added values such as additional warranties at no cost are all things that retailers should be playing up (because the internet retailers are playing on price).”

The key is to offer value-added services. Price matching is a nice move by retailers, but a pure price war between brick and mortar retailers and internet retailers is a war to be won by online firms. As the digital information economy evolves, firms will need to implement strategies other than simple price matching tactics or an attempt to control information access. Create value-added services, value that consumers recognize, and market these added services. That is how to respond to showrooming.

This was part two of a two-part of a showrooming post. You can read part one here.  Comments are welcome!

Todd Bacile (@toddbacile) is a showroomer in his free time and a Marketing Professor at Loyola University New Orleans. He holds a PhD in Marketing from Florida State University. Social Media Marketing Magazine ranks him as one of the Top 100 Marketing Professors on Twitter. Questions and comments are welcome.

Mobile Showrooming in the Age of Information Transparency (Part 1 of 2)

By Dr. Todd Bacile | July 25, 2013 | Showrooming Part 1 | Part 2

Synopsis: showrooming is a new challenge that brick-and-mortar retailers are sizing up as a threat. However, this phenomenon must become an accepted part of retail business models in the era of empowered consumers and ubiquitous information. In this two-part post showrooming is juxtaposed to the power of firms versus consumers in the traditional business model and the modern day’s changing information economy.

Showrooming

Statistics show that close to 70% of consumers showroom in a retail store. Out of the consumers who do showroom, close to 25% will purchase the product from a different source if they save 5%-10%. Due to these facts showrooming is being met with combative strategies by firms.

To be clear, showrooming is the act of consumers visiting brick-and-mortar stores and scanning bar codes with a mobile device in an effort to find more information – and perhaps purchase – the product from a competing online retailer. I believe some anti-showroom strategies are shortsighted and I will support this position using a real-world example.

A Showrooming Example

Pre-purchase consumer activity

A friend of mine invited me along in his quest to buy a BBQ smoker at a brick-and-mortar retailer (he knew I was a BBQ guy). Based on the store’s inventory he focused on one smoker in particular. I am a showroomer, so we scanned the bar code. Surprisingly, there was not a product match found by Google. I then typed in the brand and model number, yet found no matches.

This wasn’t my first rodeo. I knew what was happening. Google is never stumped. Despite an inability to access to more online information sources, he made the purchase.

Post-purchase consumer activity

A few days later he was upset. It seems he did some in-depth research after the fact and found a virtually identical product under a different brand name and model number. The highly similar smoker was less expensive.

He told me he felt cheated. He felt duped. He felt as if the brand restricting his access to information cost him his hard earned money. “I’m never going back to that store,” he told me.

Anti-Showroom Strategies

Information blackout: control

Firms using the strategy above, referred to as information blackout, need to consider the ramifications. Preventing access to information by the retailer in my example is an attempt to control what is usually seen as freely accessible information. Brands accomplish this by blocking cell signals in a retail store or by using custom bar codes that will not link to other products; and therefore, will not produce price comparison results.

Clever, but somewhat of a ruse.

This strategy is akin to the brand saying, “We control our product inventory. And we want to control any comparable information online that is available to you. This is our product in our store – you have no right to find more information in real-time.”

This is clearly a misguided strategy, one that may be beneficial at the single transaction-level, yet harmful for a brand at the cumulative-level sought in long-term relationships.

Information transparency: price matching

Another anti-showroom strategy is to price match competitors. This strategy illustrates information transparency – such as a price for a product – is becoming an accepted norm in the modern business landscape.

This strategy is akin to the brand saying, “We don’t care if you view product information and prices from competitors. Go ahead. You won’t find a better deal.” Transparency at its finest.

Older business models devised around a firm controlling available information to a less-powerful consumer audience are being supplanted by new models featuring information transparency. Relying on an older, controlling business model in the age of consumer empowerment and always-on connectivity is a fast method to losing customers.

Click here to read Part Two of this post.

Todd Bacile (@toddbacile) is a showroomer in his free time and a Marketing Professor at Loyola University New Orleans. He holds a PhD in Marketing from Florida State University. Social Media Marketing Magazine ranks him as one of the Top 100 Marketing Professors on Twitter. Questions and comments are welcome.