Topic: Deceptive Advertising
Characters: George Hansen, General Manager, Augusta Marigold Inn, Subsidiary of Hospitality Enterprises Sharon Coombs, Food Services Manager, Augusta Marigold Inn
George Hansen is General Manager for the Marigold Inn in Augusta, Georgia. Sharon Coombs is Restaurant and Food Services Manager for the Inn. She reports to George. T wo years ago, Sharon noticed a decline in room service business, the highest margin portion of her operation. This decline coincided with an increase in the national sales of pizza delivery and carryout firms as well as an increase in the number of empty pizza boxes from these firms being left in guest rooms in the Inn. Her immediate response was to install a pizza oven in the kitchen and offer room service pizza to guests. The effort met with modest success, though it was well below her expectations. Questionnaires completed by departing guests revealed a problem of product quality.
Focusing on this problem, Sharon improved the Inn’s pizza until blind taste tests judged it at least equal in quality to the products of the two major pizza delivery competitors in Augusta. Sales did not improve, convincing Sharon that the problem was a perceived mismatch between the hotel’s image and guests’ expectations of pizza makers. Guests simply did not seem to believe that the traditional steak and seafood restaurant at the Inn could make a high-quality, authentic pizza. Based on this conclusion, Sharon presented the following proposal to George:
“Sales of room service pizza are stagnant due to guests’ misperception that our product is lower in quality than that of competitors. This misperception is based on the belief that until we disassociate our pizza from the Marigold Inn name. Therefore, to capture more room service pizza business, we should create a ‘Napoli Pizza’ image for our guest room delivery service by:
- Preparing ‘Napoli Pizza’ brochures for each guest room, complete with a phone number with a prefix different from that of Marigold Inn. The number will reach a special phone in room service, which will be answered, Napoli Pizza, authentic Italian pizza from old, family recipes.’
- Using special ‘Napoli Pizza’ boxes for delivering room service pizza to guests.
- Issuing ‘Napoli Pizza’ hats and jackets to room service personnel for use in pizza delivery. Room service waiters and waitresses will wear these garments to deliver pizza. They will change to their regular uniforms for other deliveries.”
How should George respond to this proposal?
Author: Fred L. Miller, Associate Professor of Marketing, Murray State University
What Are the Relevant Facts?
- The Inn is losing room service business to independent pizza delivery firms.
- In general, consumers perceive hotel-prepared pizza to be of lower quality than that prepared by pizza delivery firms.
- The Inn’s pizza is judged to be equal in quality with those of competitors in blind taste tests.
- Sharon’s proposed marketing approach does not make the direct claim that “Napoli Pizza” is an independent pizza restaurant.
- No effort is made to inform the Inn’s guests that “Napoli Pizza” is a portion of the Inn’s operations.
- Creation of a clear, recognizable brand image is an accepted marketing technique for adding value to products in the eyes of consumers.
What Are the Ethical Issues?
- Is the proposed marketing program for “Napoli Pizza” deceptive?
- Does the proposed marketing program respect guests’ right of free consent?
Who Are the Primary Stakeholders?
- Marigold Inn’s employees and shareholders
- Hotel guests
- Competing pizza delivery firms
What Are the Possible Alternatives?
- Accept Susan’s proposal.
- A fruitful way to manage discussion of this case is to proceed with the ethical analysis of this alternative. The alternatives listed below usually emerge from the ethical evaluation of Susan’s proposal.
- Add an unobtrusive sentence to the bottom of the promotional brochure indicating that “Napoli Pizza” is a registered trademark of Hospitality Enterprises.
- Include the Inn’s name in the brochure, i.e., “Marigold Inn’s Napoli Pizza.”
- Establish a “Napoli Pizza” as a separate, visible part of restaurant operations, offering pizza delivery to guest rooms, meeting rooms and the pool as well as seating facilities for guests and consumers in general.
What Are the Ethics of the Alternatives?
- How does the AMA Code of Ethics affect this decision? (Optional. A copy of the Code is attached for instructors wishing to use it.)
- Relevant material may be found in the following sections of the Code:
- “Responsibilities of the Marketer”
- “Honesty and Fairness”
- “Rights and Duties of Parties in the Marketing Exchange Process – Promotions”
- Critics of the proposal usually cite the positive requirement for “being honest in serving consumers” and the prohibition against “false and misleading advertising.” Proponents usually argue that proposal is a legitimate effort to create a favorable brand image which does not directly represent the “Napoli” as an independent operation; therefore, no deception is present. This discussion offers instructors an opportunity to press students on both sides
of the issue relative to their perceptions of the requirement of the Code.
- Instructors may also wish to discuss the common marketing concepts of product image and family branding here. Pet Milk’s “Old El Paso” family brand and British Petroleum’s complete reliance on its “BP” initials for its U.S. service stations are good examples to cite. Both represent producers’ efforts to overcome potential perception problems by creating distinctive product images. Questions asking students to compare and contrast these instances with the proposed “Napoli Pizza” strategy allow instructors to explore the relationship of the AMA Code with these practices.
- What are the rights considerations in this decision?
- Comments here focus very quickly on the right of free consent. Critics of the proposal argue that the guests are being deprived of this right when information on the relationship between Marigold Inn and “Napoli Pizza” is withheld. Proponents of the proposal will often repeat the “no direct representation” argument and assert further that since product quality is consistent with guests’ perceptions of an independent operation, no breach of this right is present.
- The second and third alternatives are often identified by students as part of this discussion. The instructor may use them to focus on the issue of informing versus disclosing. An unobtrusive statement in the brochure is a form of disclosure, but it does not constitute information unless guests notice and read it. After making this observation, instructors may focus discussion on the question of what is required for proper respect of guests’ right of free consent.
What Are the Practical Constraints?
- Students may argue that the negative perceptions of hotel pizza are so strong as to prelude any form of identification of “Napoli Pizza” with Marigold Inn.
- The reliance upon Food Service operations for profits may be so great as to require George to accept this proposal.
What Actions Should Be Taken?
- Additional alternatives may arise during the discussion of those listed above. Add them to the list.
- Ask students to recommend an alternative or combination of alternatives from the list.
Ask students how the discussion of the AMA Code of Ethics and the right of free consent has affected their identification and analysis of alternatives.