Facebook’s Slow Burn

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Facebook has been plagued by negative publicity for the past couple of years but according to this article from AdAge, they don’t appear to be losing any advertising dollars.  From all appearances, Facebook seems immune to issues resulting from high-profile hacks, Russian political interference, privacy issues, negative press, and more.  Perhaps Facebook’s plethora of problems stems from their long-time motto:  Move Fast, Break Things.

The lack of impact in advertising dollars to Facebook seems to fly in the face of a consumer society (primarily millennials) who value transparency and social responsibility.  According to the AdAge article, many industry executives are urging caution and suggesting the tide might turn against Facebook if they can’t get a handle on their business.

I find the situation interesting, especially considering the fact that Facebook is now considered “old person social media” (at least according to my students).  Perhaps the millennial desire for social responsibility won’t have an impact if advertisers aren’t focusing on that demographic.

As a side note, the article also talks about efforts made by a firm with ties to the Republican party that have tried to push lawmakers off of Facebook and onto Google and Apple.  This can provide a good example for students of how the political/legal environment can potentially influence the business environment.

Ever-Increasing Airline Fees

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Jet Blue and United Airlines recently raised their checked baggage fees from $25 to $30 for the first bag checked (see this article to read more).  Just 10 years ago checked baggage fees were unheard of but they are the norm today and airlines are increasingly looking for ways to add charges and fees to improve their bottom line.  Air travel is basically commoditized and, as a result, leisure travelers tend to search for the lowest price when booking travel.  This significantly hurt airline profitability until they started charging additional fees for checked bags, carry-on bags, early check-in, seat reservation, leg room, in-flight snacks, entertainment, and more.  Now airlines can benefit from the high margin they get on these fees yet still advertise low fares.

This topic presents numerous angles for a conversation with students.  Is it ethical for airlines to advertise low prices when the end price a consumer will pay will likely be significantly higher?  Why were the airlines able to enact this trend in adding supplemental charges?  i.e. if one airline started charging for checked bags, why didn’t others push free bags as a differentiator?  How does the airline industry’s status as an oligopoly affect this market dynamic?  How do business travel and loyalty programs make it easier for airlines to push price increases like this?

 

IHOP Publicity Stunt

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Over the summer one of the most talked about marketing campaigns was the IHOb campaign.  The International House of Pancakes announced they were changing from IHOP to IHOb and later announced that the “b” stood for “burgers”.  Shortly afterward they admitted it was all a publicity stunt to help build awareness of their line of burgers.  This campaign has potential for a couple of class discussions.  First, was it successful?  Clearly they succeeded in getting people talking about their company but whether it drove sales is more ambiguous.  This article from the USA Today suggests it did not drive a material increase in sales.  Another article from geomarketing.com indicates that there was an increase in male traffic but the net result was negative due to lower traffic by females.

Another angle to discuss is the ethicality of the campaign.  Is it ethical for a company to say “we’re changing our name” when they have no intention to do so?  Does this create a bad precedent or does it cause other companies to push the boundaries of deceptive marketing?  How far is too far when trying to gain publicity?

Amazon Backing Off Hospital Sales

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Amazon is a juggernaut that seems to enter one market after the next.  Most of these ventures are successful for the firm but not all work out well.  A recent example relates to Amazon’s plans to sell pharmaceuticals to hospitals as detailed in this USA Today article.  Amazon’s goal was to apply their logistics expertise and bulk savings benefits to pharmaceuticals and start supplying hospitals directly.  According to the article, this is looking harder than they originally intended for a a couple of reasons.  The biggest issue seems to be challenges disrupting the existing purchasing process.  Hospitals have existing processes and suppliers and they appear to be unwilling to change those processes.  Another possible issue could be logistical – transporting materials that need to be refrigerated.

There are several marketing concepts that could be tied to this article.  There’s a logistics management issue Amazon would have to address, there’s a direct link to personal selling and the potential advantages that is providing incumbents, a general opportunity to discuss the buying behavior of business and organizational customers, and there’s the specific issue with the existing buying centers being unwilling to change their purchasing processes – presumably even when that change could result in lower cost.  That last issue could potentially represent an ethical discussion as well.  If insurance companies pay the bill, should hospitals be worried about cost management?

Facebook Loses Face

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It was recently discovered that back in 2015 Facebook allowed 3rd party Cambridge Analytica to access private data from over 50 million Facebook users without consent from those users.  Cambridge Analytica used that data to build psychographic profiles and use those profiles for targeted political campaigns.  Facebook actually discovered the issue in 2015 and told the offending parties they needed to certify that they deleted the data but they didn’t verify that deletion and they never notified users.  Now it looks like that data was not deleted and has continued to be used for political purposes by Cambridge Analytica.  You can read more about the incident in this article.

Facebook has received a fair amount of negative publicity recently that continues to erode their brand and the trust their customers have in them.  Ask your students how Facebook should respond.  Ask if they think the negative publicity will actually have a material impact on the number of facebook users or ad sponsors.  If students say it won’t have a material impact, ask whether Facebook should do anything about it or not if that’s the case.  This can lead to a rich discussion that covers business ethics, opportunities for competitors to differentiate, opportunities for startups, and more.  What role should the government play, if any, when it comes to regulating use of consumer information for marketing or other purposes?