Is it Ethical to use Psychological Tactics to Benefit the Economy?

Sabrina Yeung, Year 12, Keller

It is vital to consider whether the uses of psychological ‘tricks ’ in areas such as marketing and advertising are ethical or not. There are a multitude of ways in which individuals can be manipulated to behave in certain ways, but whether it is ethical or not is still in debate, even if it leads to overall benefits in the economy.

One way in which they do so is by promoting exclusivity. Advertisements are created in a way such that people can feel that they are part of an exclusive group. For instance, a company may try to promote that only certain, prestigious people would be a good fit for their product, thus enticing customers to purchase their product. Companies often try to take advantage of this and therefore have the potential to exploit their customers. One of the most well-known examples of this exclusivity is in the American Express tagline, which reads “Membership Has Its Privileges ” . Another example is a customer loyalty program, where each band of customers have different statuses, such as gold and platinum. People who are labelled more “ superior ” than the others tend to spend more, and those in “ regular ” classes are not affected. People like being part of groups that imply some superior quality or level of status that has their approval. Even when given an artificial reason, people tend to take action in order to feel like they belong to an “ elite ” group of people. However, to make that exclusivity appeal to work in the long run, the company must act on what they have said since empty claims tend to be counterproductive. Overall, I think that it could be beneficial in some ways to promote exclusivity in order to help companies increase their retained profit, but it would only be ethical as long as the companies know the extent to which they implement this. It would not be ethical to exploit the consumers, especially because it is easy for them to spend more if they are on a higher tier of membership. The status gives them the feeling of confidence although the primary purpose is so that consumers would be “tricked” into spending more.

Another way in which marketers can employ psychology to appeal to consumers is through advertising emotional ideas. It has been suggested that emotional and psychological appeals resonate more with consumers than feature and function appeals. The benefits from the purchase of the product often outsell the factual information on the features of the products as they would have more of a clear and positive influence on the customer ’ s life. For example, demonstrating how a new phone will make a customer happy, tends to make them more likely to make a purchase rather than explaining how it works. In this case, this tactic would still be ethical to enact as there are no clear disadvantages in doing so, as long as

companies don ’t put out false information about their products in desperation of maximising their sales. However, there is also a risk of companies misleading consumers due to asymmetric information, which is when the companies have superior knowledge compared to the consumers. If consumers do not have all the information that they require to purchase products that maximise their utility, the only way they can go around this is to rely and trust on businesses to provide them with that knowledge, meaning that they can be easily tricked. Consequently, in this case, it would not be ethical.

Marketers are also able to use the sense of urgency in the right way to confer economic advantages. Scarcity means that people have infinite wants but there are only finite resources. Therefore resources are scarce as they are finite, which consequently drives the price up when the demand increases. Many companies have discount sales for a limited amount of time, and when the price of an elastic good decrease, the demand for that good increases at a greater proportion. Therefore, sales would boost revenue as it encourages more consumption through cheaper price, which provides incentives for customers to make a purchase. However, companies cannot have sales frequently as it lowers consumers expectations for prices as they would expect prices to further decrease in the future which stops them from consuming as much in the present. Therefore through strategies such as discount sales, companies could increase their number of transactions and boost their retained profit. I believe that this is in fact ethical since it is up to the consumers choice and patience whether or not to purchase the product or not. In conclusion, I believe that companies have definitely tried to increase sales through the use of psychological techniques, whether this is ethical or not is a large debate. It often depends on the situation and on the way the psychological tricks are implemented. The British Psychological Society has a Code of Ethics, focussed on four primary ethical principles: respect, competence, responsibility and integrity that are used as guidelines for day-to-day professional conduct. Within these, deception is a major ethical concern and it can be argued that companies often deceive their customers, especially in the case of there being information asymmetry. However, customers often do not experience any psychological harm so it could be contended that companies are employing these tactics in an ethical way. Overall, consumers should be careful when making economic choices and recognize when they may be in an unethical situation.