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Retail Research Methods

In this video we’re going to look at the various ways that retailers can understand more about the customer to help anticipate needs and desires, discover the points of engagement and friction in the shopping process, and improve the real experience and measure how shoppers respond.

Retail Labs

The first retail research method—and the one many large retailers have the resources to invest in—is retail labs. Retailers typically try to re-create the authentic shopping experience for the shopper, so they will act naturally and provide valuable insights.  In retail labs, retailers can do a variety of things including simulating different retail formats (for example, small vs larger stores), they can test store layouts, various atmospheric decisions and different packaging planograms.

This can be accomplished through the use of eye tracking technologies which result is heat maps or gaze plots and through virtual reality stores. Here’s an image of Walmart’s Intelligent Retail Lab that features technology such as artificial intelligence-enabled cameras, interactive displays, and a massive data center.

Ethnographic Research

Retailers also engage in ethnographic research, or the study of individuals in their natural environment. So if you’re studying shoppers, you would study them as they go about shopping. If Starbucks wanted to engage in research to understand how customer from a specific neighborhood are using a new store location, they could place researchers in the store to observe usage patterns and typical activities.

Here’s some video of some ethnographic shopper research I did with Staples where I interviewed shoppers as they used in-store technologies.

Pop-Up Experiments

One of Amazon’s more puzzling retail experiments in Seattle is the Treasure Truck, a roaming delivery truck retrofitted with carnival-style lights and signs, from which customers can pick up items offered during flash sales through the Amazon mobile app. The truck, which seems like the offspring of a billboard and an ice cream truck, has sold wild mahi-mahi steaks, paddle boards and Nintendo game consoles. It’s through experiments like this that retailers can learn about new ways that shoppers want to engage with retailers and products that might sell better outside the retail environment.

While we’re on the subject of retail experiments. Here’s an example that a retailer did that was both an experiment and a PR stunt, or excuse me, what they call a “social experiment.”

Unfortunately, while their experiment was interesting and provide was valuable insight, it didn’t save them from poor management.

Scanner Data

Scanner data is all of the data that is generated by shoppers at checkout. Retailers can use this data to understand aggregate behaviors like products that are commonly purchased during specific holidays, or to understand individual buying patterns and preferences so product coupons can be tailored. Kroger works with the data research firm Dunnhumby to sell insights to manufacturers to help them improve product and create more effective promotions.

Let’s take a quick detour for a research insight from the book Why We Buy by Paco Underhill. One of his observations that has helped numerous retailers involves what he calls short-, medium- and long-term parking. He is, of course, referring to seating within the retail environment. Seating to extremely important to shoppers, yet most retailers neglect it. Think about how you shop and how you socialize when you shop. If having seating would make your shopping easier, then that means that you’ll shop longer. Retailer’s would be silly not to take advantage of this. Yet many still do.

Computer Vision & Sensor Fusion

Computer Vision and sensor fusion technologies have taken many retail locations by storm. With these technologies, the shopper and everything the shopper does, can be tracked within the store. This can provide valuable insights for retailers much as scanner data does, but we can also learn about what motivates shoppers to put items back on the shelf and the purchases they didn’t make. You can’t do that with scanner data! Amazon is using this technology to great effect in its AmazonGo stores. After you install their app on your phone and register, you just walk into the store, grab what you want and then leave. There is no checkout. The data from the camera systems are fused with shelf sensors to create a holistic picture of the shopper’s visit. The store knows everything the shopper is doing. As soon as you leave the store, you receive a receipt for your purchases on your phone. A lot of people think this is the future of convenience retail.

Surveys & Focus Groups

Finally, we have surveys and focus groups. They are considered the meat-and-potatoes of traditional marketing research methods. They are still used extensively and have a lot of value. Surveys are very inexpensive to do and give insights relatively quickly. Most large retailers have a panel of customers that they can quickly send surveys to to get the customer’s perspective should they have a question. Focus groups are also used quick a bit. Most look very similar to the picture you see here. There’s a moderator, participants, and typically a one-way mirror at the head of the room, where researchers from the retailer would watch as their questions are being answered or as the customers are sharing their thoughts.

Before we wrap-up, there’s one more thing I want to mention. And that’s what can happen if a retailer doesn’t do adequate research. Ron Johnson, the former retail chief of Apple and new CEO of JCPenney learned this lesson the hard way when he changed the fundamental pricing model of JCPenney from high-lo pricing to everyday low prices. This decision did not resonate with customers, and the retailer quickly had to backpedal and revert back to the old pricing model. The CEO lost his job as a consequence.

To recap, research methods are the means by which we accomplish retail research and this research is critical to understanding consumer needs and desires, discover points of engagement and friction, and improve the customer’s experience. The vast variety of retail research methods that retailers can tap into include retail labs using various measurement technologies, ethnographic research to understand consumer’s in their natural environment, pop-up experiments to get real-time feedback from consumers and quickly try out ideas, scanner data to see the purchase patterns of groups and individuals, computer vision & sensor fusion to gather insights in-store and power new checkout technologies, and finally, surveys and focus groups to connect directly with consumers and get their perspectives. We also saw that ignoring retail research when making changes to your strategy can have huge negative effects.

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Retail Loss & Prevention

Store managers are responsible for two very important assets: real estate, or the physical store, and employees. It’s no coincidence that these two are also the largest expenses any store manager must worry about. 

Also at the top of the list of most store manager’s worries is retail loss. 

According to a 2019 survey from the National Retail Federation, the following three risks are the top in-store priorities of retail managers:Organized retail crime, internal theft, Return fraud. All of these have elements related to two important issues we’re going to look at in this video: retail loss and prevention related to inventory shrinkage and employee theft.

What is Shrinkage?

Technically speaking, shrinkage is the difference between the recorded value of inventory and the value of the actual inventory. In other words, it’s the difference between what’s on the books and what’s actually physically in the store. If your store is suffering from shrinkage, there are a number of potential reasons for this. The biggest culprit might surprise you though: 

It’s actually employee theft, not shoplifting. Shrinkage related to employee theft  is 47%, which is substantial. We’ll talk more about employee theft here in a bit.

So how do we actual calculate inventory shrinkage? As mentioned before, it’s what’s on the books vs what’s on hand, so we take the recorded value of inventory and subtract the actual value of inventory on hand. All of these figures are expressed in retail prices by the way, not our cost. Then we divide this by our actual sales for the time period we’re looking at, or in this case a month.

Let’s look at an example. If a retailer has $825,000 of inventory on the books, but only counts $702,000 of inventory on hand, then it would have a difference of $123,000. If we divide this be the total sales for the time period we’re looking at, which is a month, then this would result in a shrinkage rate of 2.3%. Now, is that a lot? Let’s see what the Nation Retail Federation survey has to say. Of all of the retailers surveyed, you can see that the average shrink rate for retail in 2018 was 1.38%. So 2.3% would be on the high side. In fact, shrinkage is a $100 billion problem for retail worldwide every year. Now, let’s look at the second largest contributor to inventory shrinkage first: shoplifting.

Shoplifting

One of the biggest myths about shoplifting is that shoplifters are those in need who just can’t afford the basics to get by. Like they’re some modern-day Jean Valjean just grabbing a loaf of bread to feed his family.

Top Items Shoplifted

The reality is top items shoplifted at retail have far more to do with making a profit in black markets than feeding the hungry. Ink cartridges, High-end headphones, Razors, Makeup, Teeth whiteners are all very sought after. If you ever see an online auction for any of these items and the price is a little too good to be true. It’s probably stolen.

Oh and chances are, if you see a product in a store wrapped in one of these so-called spider wraps, then this is a product that’s been flying off the shelves…and not in the good way.

Spotting Shoplifters

But spotting shoplifters can be difficult. There’s no one “type” of shoplifter. One out of every 11 patrons shoplifts something, men and women engage in it at roughly the same rates; and children and teens only make up 25% of shoplifters. 

Let’s look at some ways we can spot shoplifters. First, don’t stereotype and don’t assume shoplifters will be poorly dressed. Oftentimes, they’re dressed well. Spot loiterers, or people just “hanging out” in the store and not making purchases. They could be casing the store to find vulnerabilities or patterns. Look for groups of people, Especially if they seemingly enter the store together and then immediately split up. Watch their eyes, hands, and body. Are they engaging in suspicious behaviors like spending more time looking at the cashier or sales associate than actually shopping or their eyes are not following their own hands? These could be tell-tale signs. Look for people with loose clothing – The images on the right show a woman who managed to fit a 12-pack of soda, a large container of cooking oil, two wine bottles, and two cans of meat under her dress by faking pregnancy. Shoplifters can be very creative.

Preventing Shoplifters

Here’s the thing. Catching shoplifters is fine, but it’s almost not worth the hassle. You’ve got to wait for the cops to show up, take a report, it’s a big time loss for a busy manager. It’s much better to just prevent the shoplifting in the first place. Retailers are only really going to be able to catch maybe 3% of the shoplifters that work their stores. If they engage in effective loss prevention strategies, they can lower shoplifting rates by 80-90%.

How can we prevent shoplifters in the first place?

You can adopt loss prevention technology in your stores. Magnetic tags, radio signal hard tags, and other systems discourage light fingers from stuffing items in bags and leaving the store.

The store layout itself is another important factor. If the store is laid out in such a way that provides cover for shoppers to steal, then your layout isn’t helping you. More expensive items should  toward the back of the store or in lockable cabinets. These are design considerations you also need to think about.

Also, making sure that you have closed-circuit cameras throughout the store will also discourage shoppers because they’ll never know when they’re being watched and the store will have evidence to use against them if the cameras record them in the act. 

And finally, the one thing that all shoplifters hate: Attention. In the early 1980s, Walmart noticed that having someone stationed at the entrance had a significant impact of shrinkage. A thus was born the Walmart greeter role. If you suspect someone of shoplifting, rather than passively spying on them and trying to catch them in the act, better to walk up to them, shower them with attention, and let them know that the store really values them as a customer and will keeps tabs on them to make sure they have everything they need. A shoplifter will hate it. But a real customer will love it. It’s a win-win.

Organized Retail Crime

As mentioned earlier, organized retail crime is the top area that retail managers are worried about. According, to the NRF, 92% of companies surveyed had been a victim of organized retail crime in the past year. In fact, shoplifting gangs cost US retailers upwards of $30 billion per year. Organized retail crime can be as simple as a pair working in tandem, one distracting employees while the other makes off with product. Or perhaps the most egregious example of organized retail crime, the “flash rob”. It’s kinda like a flash mob, but instead of some staged musical number or silly prank, it’s a hoard of people descending on a store at once and robbing it blind and there’s virtually nothing any employee can do about it.

Here’s a video of a flash rob event in a convenience store in Cedar Rapids, Iowa after a fireworks display.

And another nearby at the Pleasant Prairie Outlet Mall.

Employee Theft

We’ve seen that shrinkage is a problem because of shoplifting, but it’s an even bigger problem due to employee theft. 

On average, retailers lose $1,264 in inventory shrinkage per dishonest employee. That’s potentially a whole lot of money if you’re a large retail chain.

Employee theft can happen at any type of retailer, but fast food is where it is most prevalent. But sometimes the employee theft impacts the bottom line a little more directly, as when employees steal money directly from the retailer. One of the most common ways that employee theft can happen is at the cash register. 

If you notice an employee an employee working a register and see a series of stacked coins around the register, chances are that employee is engaging in cashier stacking. These employees are shorting the customer and are keeping track of the exact amount that they need to take from the register at the end of the shift so their cash drawer balances out. A penny equals a dollar, a nickel equals a five, and so on. It doesn’t even have to be coins. They might use paperclips, rubber bands, or even M&Ms.

If you are a retailer has a product that is commonly purchased and many customers end up receiving virtually identical receipts, then you might want to be on the lookout for employees working with an open register. In this scenario, an employee rings up the first customer, gives them the receipt, and then proceeds to print out multiple duplicate receipts of that transaction. When the next customer shows up with the exact same purchase, the employee will hand them a duplicate receipt and the customer’s money goes right into the employee’s pocket instead of the register. This can happen a restaurants with lunch specials, coffee shops, and so on.

One of the most prevalent scams that employees are using to steal funds from employers these days is through the use of gift cards. A customer might come in the store to return a product and the refund might be placed on a gift card. What is actually happening is the customer is a co-conspirator of the employee and the returned product may not even be real. The gift card can then be sold on websites like eBay. Many retailers now have loss prevention specialists who constantly troll auctions sites like eBay looking for their gift cards and tracking them back to their own employees. Employees working with friends to defraud the retailer is a very common practice. It even has a name: 

Service Sweethearting

Retailers lose billions annually to this practice. It’s a huge challenge.

Why does it happen?

First and most obvious, employees looking for financial gain. It could be providing free drinks to ensure higher tips or to share the profits on items rung up at a lower price. They could also be doing it for reciprocity reasons. They have friends at other stores that give them unearned discounts, so they return the favor.

Job-related factors might include work group norms, in other words everyone else is doing it, so what can’t I!. Low job satisfaction or the employee’s perception that the employer doesn’t care about them can also contribute.

There could be personal trait factors at play. Trying to look cool in the eyes of their friends. Employees that enjoy the thrill of taking risks. There are even personal traits that can predict employees who won’t engage in service sweethearting, namely those will clear moral beliefs.

So how can we reduce all of this employee theft activity? 

First, create a trusting, supportive work atmosphere. Since a lot of employee theft is the result of low job satisfaction and low organizational commitment, providing a positive work atmosphere could go a long way to minimizing the feelings leading to theft.

You also want to make sure you’re hiring and retaining the right people. 

Put security policies and control systems in place, so theft becomes more difficult or you could publicly shame thieves like Amazon does in its warehouses.

Finally, beneath it all, employee theft is a Human Resources problem. Meaning that the same procedures we use to keep our employees happy, healthy, and productive will also have an important role to play in minimizing employee theft.

Conclusion

To recap, inventory shrinkage is a $100 billion problem worldwide annually and employee theft is the largest contributor to the problem.

Shoplifting is motivated by greed not need. Most are seeking to profit from their activities. There is no one type of shoplifter, they come in all types and ages. The best approach is to prevent the activity in the first place and not try and catch them in the act.

Organized retail crime is a big deal and 92% of retailers have experienced it. “Flash robs” have become a new trend especially with younger shoplifters.

Finally, employee theft is not limited to inventory shrinkage or stealing products. Many employees steal cash directly. They also engage in service sweethearting for a variety of reasons.

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Infographics

So what are infographics? You may have heard this term before as it’s something that comes up quite a lot within digital marketing. You may have even seen some examples before. They are the combination of data visualizations, illustrations, and text used to communicated a specific topic. The term infographics used to be used synonymously with data visualization, but its use in content marketing has given it a more specific meaning now. In this video we’re going to walk through the four things that successful infographics do.

Tell A Story

First is, Tell a story. Consumers get more emotionally invested in a subject when they can hear a story. And that story narrative can do an affective job of pulling a reader through the story.

As we look at the infographic on the right, notice how this story of an animal foster parent and her pet is told in narrative fashion. We can literally follow the red path through their story and we arrive at the most important detail of the story, the outcome of the fostering process and how the reader can get involved. Overall, the story should be simple and easy to follow.

This infographic fails on both the simple and the easy to follow. Your eye does not know where to begin reading and it’s a bit of a visual jumble.

Put Info First

We also want to Put Info First. The information or data of your infographic should be the most important element. Design should always take a back seat to the content. If you’re going to tell a story, and you should, then the narrative should be structured with your information. 

You shouldn’t create an arbitrary structure and try and fit the data to it. Notice at the bottom of this infographic how the source of the data is given and actual details about how the data was generated. It’s always a good idea to cite your sources.

This example is probably one of the worst offenders in terms of not putting the information first. Not only is the actual content minimized, is so visually confusing it’s difficult to interpret as well. It’s certainly clever from a design standpoint, but is this really serving the data or is the data serving the design?

Make It Visually Engaging

Your building an infographic. Of course you want the design to be done well. You want to ensure that you’re using design best practices. Thinking through the color theory. Ensuring the best usage of typography. Giving the readers eyes room to digest information be providing adequate white space. 

That’s what makes this example so bad. The colors don’t work well. A mustard yellow background? Really? Green titles? There’s no white space. The text is dense and line spacing too tight. This really is a mess to look at. And what do these design choices have to do with the story or content being discussed. Overall, the design is just incoherent.

Contrast that with this design. Everything is well-organized. The use of color and typology help with communication rather than hinder.

Facilitate Sharing

Finally, infographics are an important communication vehicle on the internet and their popularity has exploded with the proliferation of content marketing. If you’re trying to get your message out—and you should be—then you need to provide your readers and easy mechanism for sharing your infographic. Utilize the technology you have available to you to help the reader share your infographic using whatever social media or communications platform you can.

To recap, your infographics should tell a story. Stories make your message easier to remember. You need to Put Info First. Design should always take a back seat to your actual information and data. Make your infographic engaging. Your design should be visually coherent and follow design best practices. And you should facilitate sharing. Help your readers spread your message as far and wide.

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Data Visualization

Data visualization is the practice of placing data in a graphic format to help convey the data’s significance. We also use the term data visualization to refer to the graphic itself, so it’s both a practice and the outcome of that practice. Data visualization or DataViz as some call it, is important because some patterns that might go unnoticed in tabular, text, or statistical form are more easily communicated and understood visually. DataVix is a crucial skill for those working with large datasets who need the ability to communicate the importance of that data…and that’s pretty much everyone in business these days. Let’s look at a few important reasons why dataviz is so crucial.

90% of information transmitted through the brain is visual in nature. As mammals, we are designed to take in information through our eyes. If we can format that data in such a way that it makes it easier to communicate and easier for the recipient to understand, why wouldn’t we?

Our brains also process images in as little as 13 milliseconds and visuals are processed 60,000 times faster than text . This means that the time it takes to comprehend complex data can be significantly decreased if we put that data in a format optimized to communicate visually. That’s dataviz!

Now that’s interesting and all, but how does that help us as marketers?

Presentations using visual aids are 43% more persuasive than those using text alone. And persuasion is the business we marketers are in.

Blog posts and articles with visuals perform 91% better than those without. It’d be silly to use blogging and content marketing and not include a visual component to ensure that your content is memorable.

Data Visualization Types

Let’s briefly go over the different categories of data visualizations from our reading, A Tour Through the Visualization Zoo.

Statistical

First are statistical visualizations. These visualizations take large datasets and use a variety of techniques to help make sense of the data, hopefully exposing patterns that we can use in some way. Scatter, violin, frequency or histogram, and box plots are typical examples.

Time-series

We also have time-series visualizations. We typically think of these as timelines. These visualizations organized items or events temporarily. In Western cultures, this would typically mean reading left to right as we move from the past to present. The ubiquitous stock value returns graph is another example, but notice this is also a line-graph. If a line graph is showing time-based information, we would consider it a time-series data visualization and not a statistical data visualization.

Maps

If the data is geographic in nature, then you can plot the information using the map type data visualization. For example, here’s a map showing the most well-known brands from each state. And another showing Doctor’s pay in America. Or a map showing the origins of articles in Wikipedia.

Networks 

Network maps show the interconnectedness between data points such as this visualization showing the financial connections between CEOs at the top Silicon Valley tech firms.

And while you might think this famous London Underground visualization is a map, it’s better described as a network data visualization because the actual line and station information is divorced from actual geographic placement. Does having a perfectly accurate representation of the distances between stations really matter to the passenger? No. This map shows only the information that’s really needed for the passenger and eliminates everything else extraneous. But this visualization does show the interconnectedness between the lines and stations quite effectively. 

In fact, this is what the London Underground map would look like if it was actually mapped geographically. Doesn’t exactly enhance communication and understanding does it?

Hierarchies

Finally, hierarchical data visualizations are similar to network visualization in that they show the interconnectedness between the data, but these data visualizations also show how portions of the data fit within or emerge from each other such as this family tree diagram of the Kennedy family. Or how pints, quarts, gallons and other forms of measurement fit within each other. Oh, and it’s quite possible, and rather common, to combine data visualization types together such as this statistical line graph that shows a time series. Or this front page visualization from The New York Times

Lying with Data Visualizations

Now that you’re familiar with the different types of data visualizations, there’s one more bit of information that’s important for you to know: 

how easy it is to lie with data visualizations. Perhaps you’ve heard the saying, “There are three kinds of lies: lies, damn lies, and statistics”? Don’t think because data is in a form intended for easier communication and understanding that it can’t be manipulated. Data visualizations are actually very easy to manipulate. Here are a few examples and the methods used to mislead, so you can know what not to do and how to avoid falling victim to it.

First, is ignoring conventions. We all know what a pie chart is right? It’s supposed to add up to 100%. So what does a pie chart mean that totals up to more than that? It doesn’t make much sense. This example is obviously wrong because the percentages are far too large. But what it the numbers didn’t seem wrong because the percentages were only subtlety too large. That can be a big problem and very confusing.

You can also hide negative trends but obscuring them in cumulative totals. Notices how the graph on the right looks so good. Everything’s great. Our revenue is growing like gangbusters. The graph on the right tells the true story. Yes, revenues are still in the positive but they are declining. Cumulative charts like the one on the left can hide all sorts of bad news. Don’t get suckered into believe them at first glance.

Omitting data points is another way to hide what’s really going on. For example, the graph on the left makes it look like it look like steep uninterrupted growth followed by consistent results. The reality is more complex and not a rosy. When you see a graph missing crucial data points like this, especially if it’s yearly results, question why. It could be someone is trying to fool you.

A very common approach to manipulating the visual display of results is truncating the y-axis. Really it could be either axis, but the y-axis is more common. The graph on the left makes the revenue results look a lot more dramatic. But when scaled correctly and the entire y-axis displayed, the truth is less impressive. Often this sort of misleading data visualization is not done intentionally. Typically, someone wants to show how some data series has changed, but because the amounts of change are so small, they end up visually amplifying those changes by truncating the y-axis. 

Finally, this is the most egregious example of lying through data visualization that I’ve ever seen. There’s virtually zero chance that the person who put the graph together didn’t know exactly what they were doing. Have you figured it out yet? It looks like Gun deaths in Florida went down after the “Stand Your Ground” law was passed in 2005, right? It may seem that way until you realize that 

The y-axis was flipped vertically. Now zero is at the top and 1000 is at the bottom. This is another example of defying conventions, but so bad it deserves its own category. The lesson to be learned here is that graphs that accompany politically charged stories should probably receive more scrutiny.

To recap,

Data visualization is crucial for business managers as it can help you see patterns and relationships that the raw data may not easily show.

It is both a process and an outcome.

There are five types of data visualizations: statistical, time-series, maps, networks, hierarchies

Data visualization types can be used in combination

Data visualizations can be used to mislead. Make sure you give extra scrutiny to visualizations in politically-charged topics.

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Ethical Traps in Digital Marketing

In this video we’re going to talk about four ethical traps that could potentially ensnare digital marketers on their road to success. Then we’ll wrap up the discussion by looking at how firms can steer their employees towards making the right ethical decisions.

False Online Identities

First up is false online identities. What we’re talking about here goes beyond that secret Pinterest account that you might use to obsessively collect cat videos. We’re talking about using false online identities to mislead consumers usually for the purpose of faking product reviews. These types fake accounts actually have name: 

sockpuppeting. It’s similar to “astroturfing” or a fake grassroots movement. It plays on the consumer’s bias to want to believe stories that seem authentic. If someone posts a long, elaborate product review about how they tested the product, how much they love it, and so on, it becomes more believable. Sockpuppeteers know this and take advantage of it.

The problem even extends to online chat where customer service chatbots and even online dating chatbots have proliferated.

Hidden Consideration

Some prominent Youtubers and social media celebrities have gotten in hot water over shilling products without disclosing the paid relationships that are motivating their product reviews or product placements. This is called hidden consideration. For example, the Kardashian/Jenner clan got in hot water with the Federal Trade Commission for promoting products on Instagram and neglecting to tell their followers of paid product placements. Marketers must disclose meaningfully and prominently all forms of consideration or compensation received from 

Amazon went after sellers when it was discovered that many were using the freelance worker site fiverr.com to pay people to complete reviews on Amazon.

Hidden relationship

Similar to hidden consideration is a hidden relationship. An online promoter might not be getting paid to talk about a product, but it viewers later discovered that the owner of the product’s manufacturer was the promoter’s own brother, that would probably put the video review in a different light wouldn’t it? It’s a clear conflict of interest. Marketers have an obligation to provide transparency of all material connections between a speaker and the company or brand of the product being promoted. So what is a “material connection?” It’s any connection that could affect the credibility audiences give to that speaker’s statements about a product, company or brand. A material connection could be a familial or business relationship, the receipt of any benefits or incentives such as free product, discounts, gifts, sweepstake entries or anything else of value.Admittedly, hidden consideration and hidden relationship are similar. The important thing to realize is if you’re hiding something from consumer, you’re betraying their trust and also breaking the law.

Here’s a great example of what not to do: In 2008, a husband and wife decided to buy an RV and take a trip across America stopping at many Walmarts along the way (Walmart is known for allowing RVs to park in its parking lots overnight, free from hassle). They decided to create a blog called “Walmarting Across America” and in their travels they interviewed a number of employees that were happy to talk about how much they loved working at Walmart and the great things Walmart did for their communities. You can probably guess where this is going. It was later discovered that the husband’s brother worked for Edelman, the PR agency that had a relationship with Walmart. Edelman actually paid the couple to do the blog, but there was no mention of any of this on the blog at the time. Obviously, this created a big PR mess for Walmart and Edelman and they both lost credibility because of it.

Dishonest Communication

Finally, product review and online reputation management systems provide a powerful incentive for unethical behavior. If you’re the retailer who controls the reviews on your own website, the motivation to improve the reviews of your products might be difficult to ignore. But firms should allow consumers to reflect their own honest opinions, findings, beliefs, or experiences.

Don’t be like this hotel owner who threatened charging newlyweds $500 for each negative review that anyone in their party posted to Yelp. Clearly, this is a short-lightened strategy that ended up backfiring on the hotel owner with plenty of bad PR.

Code of Ethics

I want to end this video by giving some guidance on how management can ensure that employees act ethically. After all, you might feel like your decisions are ethical, but that doesn’t necessarily mean that everyone else in your firm is going to act in the exact same way. The best way to ensure that everyone within a firm makes engages in the same ethical decision making is by having a 

Code of Ethics. A code of ethics communicates two things: it communicates to your customers and the rest of the world that you take ethical concerns seriously, and it gives everyone in the firm a standardized framework to help make ethical decisions in a consistent way. But isn’t developing a code of ethics a complicated and difficult process? Will it probably can be, but fortunately a lot of the work has already been done for you. 

The Word of Mouth Marketing Association has a Code of Ethics that they have developed that they encourage firms that engage in digital marketing to use. It’s thorough, well-considered, and, maybe best of all, free. In fact, the ethical pitfalls I outlined above are specifically addressed in this Code of Ethics, so it’s one that I always suggest.

The American Marketing Association also has its own Statement of Ethics. Every member of this association is expected to follow these ethical guidelines. This would be a good place to start for any organization as well.

The ease with which anyone can create false identities online, hide payments or relationships, and  conduct dishonest communications means that firms must be extra vigilant when it comes to ensuring ethical practices.