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Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

I was struck by the claim that one in five parents in the Money Programme ‘Cost of Kids’ survey admitted to buying new gadgets after pressure from their children, with much of the resulting expenditure ending up on credit cards. The example was consumer electronics companies recruiting our kids to get us to buy gadgets that we don’t need at prices we can’t afford, and only they know how to work. But more worrying is the evidence that pester power, or the ‘nag factor’ as it’s known in America, could be costing us more than money. By encouraging them to ask for the wrong kind of food and drink it’s costing some of our children their health.

From the forum - "the trick to keeping costs down is to think differently and keep things natural"

Marketing first woke up to children in the middle of the 20th century, particularly their power to influence adult purchasing. It began to aim products directly at them rather than having them make do with modified versions of adult products. In many ways this has been a good thing. Taking account of children’s needs in designing products such as holidays, cars or clothing makes a lot of sense. But in other areas, such as fizzy drinks, pre-sweetened cereals and fast food, the effect has been to promote fun and taste well beyond any sense of nutritional value. The vast majority of the food advertising seen by children is for such high fat, salt and sugar (HFSS) foods. Any parent who wants to do the best for their children’s dietary habits has a struggle on their hands as a result.

Advertisers deny deliberately setting parents at odds with their children. Industry codes of practice explicitly forbid such tactics, and pundits argue that pestering has much more to do with age than ads. But there is plenty of evidence from consumer research that parents are uncomfortably aware of ceding to demands stimulated by child-directed advertising. One recent study in Sweden revealed that parents actively avoided supermarket shopping accompanied by their children because of the stress it caused. And a widely-used UK market research report on marketing to children underlines the importance of ‘influenced purchasing’.

Opponents in the pester power debate are not shy of throwing contradictory research findings at each other to support their respective positions. But how good is the evidence, and which way does it point? To answer this question OU Business School and our partners in the Institute of Social Marketing recently reviewed a selection of key research articles evaluating the effect of food promotion on children’s attempts to influence purchasing by adults. We only looked at studies meeting strict quality and relevance criteria. They covered children in different parts of the world (US, UK, Saudi Arabia and India), and used a variety of methodologies. Yet they all concurred that food promotion does indeed stimulate demands from children for HFSS foods, increasing conflict in the supermarket aisles and leading in many cases to exasperated expenditure on less healthy products.

The food advertising industry, pointing to its record of self-regulation in the UK, claims that tightening further the rules on advertising to children is disproportionate. It argues that advertising is only one of a number of factors guiding what children want to eat, and that its effect is negligible compared to, say, the influence of parents, schools or peers. But even if advertising on its own only accounted for 2% of the variation in children’s food choice and consequent obesity (as has been suggested by some researchers), the cumulative effect will leave a significant number with health problems.

Against this kind of controversy, Ofcom, the UK telecommunications regulator, has spent a year consulting on a number of different options to tighten up regulation. On 22nd February 2007 it issued new rules banning HFSS food ads from programming likely to be popular with under 16s by the end of the year. While this looks like good news for any harassed parents out there, it has been greeted with dismay by health campaigners for not going far enough (many wanted a total ban on such ads pre 9pm). Industry bodies are not happy either, criticising the definitional criteria for HFSS foods as inconsistent. Furthermore, Ofcom’s announcement included a commitment to reviewing the effectiveness and scope of the new arrangements in autumn 2008, which seems rather early in the day to be looking for conclusive results. You may be sure that this controversy will not be over till the, er, fat lady sings.

Further reading

• The price of parenthood – having children brings many changes
• Join the discussion – how does the cost of children affect your view of having kids?
• The cost of kids – the Money Programme investigates the rising price of parenthood 
• ‘Food Advertising, Pester Power, and Its Effects’ in International Journal of Advertising, November 2006
• Television Advertising of Food and Drink Products to Children published by Ofcom

About the author

Terry O'Sullivan is lecturer in marketing at the Open University Business School. He researches and teaches in the fields of fundraising, marketing communications and non-profit marketing.

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Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

“The Coca-Cola Company exists to benefit and refresh everyone it touches” (Coca-Cola’s mission statement)

Can Coca-Cola, one of only a handful of truly global brands, really be in trouble? Amidst adverse media coverage and concerns about the sugar content of its core brands, Coca-Cola’s share price has taken a nose dive. The drinks giant has been hit by the explosion of the obesity time bomb! Worse still, industry experts are accusing the company of panic as it struggles to bolster market share with a host of new product launches. Diagnosing Coca-Cola’s malaise reveals rising public expectations about the behaviour and responsibilities of such corporates. The danger is that consumers angered by food companies’ role in the obesity crisis will use their spending power to enforce higher ethical standards.

"Some consumers are becoming edgy"

The nation is suffering from a serious weight problem. With a 400 percent rise in obesity levels in just 25 years and weight problems set to overtake smoking as the main cause of premature death, the scale of the problem is huge. Faced with headlines dominated by scare stories about childhood obesity and ‘pester power’, some consumers are becoming edgy.

The problem for Coca-Cola is that these concerns are hitting sales of its core brands such as Coca-Cola, Sprite and Canada Dry. At a time when junk food and sugar-laden fizzy drinks are taking some of the blame for this weighty crisis, the government is getting tough on the food industry. Schools are switching off branded vending machines, campaigns to promote healthy lifestyles are in full flow and bans on junk food advertising may be just around the corner.

So are Coca-Cola and others in the food and beverages sector really responsible for the failing health of the nation? While health experts agree that inactive lifestyles and poor parenting are partly to blame, they are robustly critical of junk foods and carbonated drinks. The bad news for major brands is that public opinion against snack food manufacturers is growing along with suspicions that these corporates may not have consumers’ best interests at heart. With research showing a strong link between corporate social responsibility and profits, Coca-Cola cannot afford to be complacent.

Corporate social responsibility (CSR) has been described as a company’s obligation to maximise its positive impact and minimise its negative impact on society. Expert Archie Carroll writes about a pyramid of social responsibility, with four basic levels of responsibility:

1. Economic – the responsibility to be profitable
2. Legal – the need to obey the law
3. Ethical – an obligation to do what is right
4. Philanthropic – making a contribution to the wider community

At the heart of the obesity debate are the so-called Ethical responsibilities. These involve companies behaving in ways which are right, just and fair and - just as importantly in the current climate - not causing harm to a company’s stakeholders.

"The trouble is that behaving ethically just isn’t that easy"

Handling ethical issues can be tricky. Companies must quickly tune into changing consumer values and implement policies which reflect society’s desires. The trouble is that behaving ethically just isn’t that easy. Identifying consumer trends is tough enough for brands already striving to be noticed amongst the advertising noise in the marketplace.

There is a fine line between innovative marketing and unethical behaviour. Ethical concerns about the impact of unhealthy product lines are much clearer. Faced with such scrutiny, Coca-Cola has two options: make its existing products healthier or diversify. Beguiled by the promise of new brands, the company has decided to sharpen up its market offerings by extending into diet and health-related beverages.

This move into sports drinks, juices, energy drinks and waters it hopes will be the panacea to the company’s ills. Unfortunately, despite radical surgery to its brand portfolio, Coke’s prognosis remains uncertain. Less than three years after launch, the company has axed its much vaunted but unpopular Vanilla Coke and Vanilla Diet Coke. Now some retailers are refusing to stock the new lime and grapefruit-flavoured variants of the Powerade sports drink, accusing the company of spreading its brand too thinly. These are not the only problems. Few will forget the technical hiccup which caused bottled water brand Dasani to be contaminated, hastening the downfall of the company’s foray into bottled water.

Coca-Cola isn’t the only brand with problems. Falling foul of ethical principles is all too easy for food companies vying for consumer visibility. Cadbury thought it had backed a winner with its Get Active scheme, which swapped confectionary pack tokens for school sports equipment. The chocolate giant was swiftly chastised by educationalists for encouraging unhealthy eating practices in the young. Now some retailers are accusing Cadbury of misleading consumers with an ‘over-priced’ 99 calorie chocolate bar. Meanwhile Walker’s free books for schools scheme was criticised by the National Union of Teachers. Even family-favourite Heinz has been attacked for the high-salt content of its products.

Like businesses in all sectors, these companies know that they cannot afford to ignore consumers’ growing ethical demands. Failure to meet expectations for socially responsible behaviour is commercially dangerous, destroying consumer trust and hastening tough new regulations. The Food Standards Agency (FSA) is already naming and shaming the worst offending products for sugar, salt and fat content. With the government ready to reap legislative havoc should the food industry fail to comply, the FSA’s action may only be the start.

So what does the future hold for the world’s biggest drinks brand? Can Coca-Cola shake off its associations with tubby teenagers, bolster its brand and overcome poor performance in Europe? Success will depend on whether the drinks giant can persuade consumers and retailers that it has an answer to declining fortunes in its core markets. Regaining the confidence of consumers with a waist-line crisis will be critical. While no-one disputes the demise of the flavoured carbonated drinks sector, the question is whether Coca-Cola’s investment in healthier drinks and extending brand portfolio will be enough to rebuild its fortunes.

Further reading

• The importance of brands – the value of brands explained by this extract based on Open University Business School course material
• Business briefs: checks and chavs – can brands become victims of their own success?
• Corporate accountability and ethics – what are the forces that control and ensure corporate accountability?
• Marketing: Concepts and Strategies (Fifth Edition) by S Dibb, L Simkin, W Pride and O C Ferrell, published by Houghton Mifflin
• 'The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organizational Stakeholders' by A Carroll, in Business Horizons (Jul/Aug)
• Business Ethics by C Jones, R ten Bos and M Parker, published by Routledge
• Weight Matters for Children by R Pryke, published by Radcliffe Publishing

About the author

Sally Dibb is Professor in Marketing at the OU Business School. Sally chairs the Academy of Marketing's Special Interest Group in market segmentation.

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