Sandeep Shilawat,, Jamillah Prescott, Justin Panuski , Ali Abbas

NOT SO EASY!

BackgroundSTAPLES case is a similar to the video but

may involve false claims. (Video)Scenario -JA2009 wrote a complaint on

my3cents.com about STAPLES. The Story of JA 2009Common practice at other companies such

as Best Buy You will observe this online as well

You click on a item and then add to cart price changes

http://vimeo.com/17502536

Background

Market Basket StrategySTAPLES has a system called Market BasketAdd-on sells have to be > $200If staffer misses?

Coaching, Disciplinary action, Termination, Late Night and Week-end shifts

STAPLES District Manager“If you can’t do the job, you can go sell fries at

McDonald’s.”Terms Used

Walk the customer, Bounce the customer, Bait Advertising, Bait and Switch, Bait and Ditch

Different ways of cheating the customer

Is STAPLES Using False Advertising?

Federal Trade CommissionFocused on

correcting deceptive actions

Invokes civil actions (i.e. fines) often only after “cease and desist” letters are ignored

Image from: http://www.dailydealmedia.com/wp-content/uploads/2012/07/false-advertising.jpg

16 CFR PART 2381

Sec. 238.0 Bait advertising defined.Bait advertising is an alluring but insincere

offer to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. The primary aim of a bait advertisement is to obtain leads as to persons interested in buying merchandise of the type so advertised.

1http://www.ftc.gov/bcp/guides/baitads-gd.htm

16 CFR PART 2381, cont.Sec. 238.3 Discouragement of purchase of

advertised merchandise.No act or practice should be engaged in by an

advertiser to discourage the purchase of the advertised merchandise as part of a bait scheme to sell other merchandise. Among acts or practices which will be considered in determining if an advertisement is a bona fide offer are:

…(f) Use of a sales plan or method of compensation

for salesmen or penalizing salesmen, designed to prevent or discourage them from selling the advertised product. 

1http://www.ftc.gov/bcp/guides/baitads-gd.htm

ComplianceCorporate

“STAPLES’s policy does not require customers to buy a service plan”2

LegalIncentive Plan

Market Basket Average encourages “walking the customer”

Appears to violate 16 CFR Part 238.3 (f)Sales Associate

Lying to customers about availabilityParticipating in bait tactics violating 16 CFR

Part 2382http://www.nytimes.com/2012/09/09/your-money/sales-incentives-at-staples-draw-complaints-the-haggler.html?pagewanted=all&_r=2&

Contribution to the CompanyLower product sales for STAPLES

Products that offer add-ons such as laptops are not sold if add-on isn’t accepted.

Increase in revenue from add-onsEmployee pressure to sell add-ons likely

results in in increased sales.Diminished view of STAPLES

Unsatisfied customers voice their concerns through word of mouth.

Contribution to ShareholdersIncreased value

The possible increase in add-on sales makes performance appear high.

Loss in value Decrease in sales of certain products due to

walking the customer.False perceptions of company-wide

performanceMarket Basket Averages appear to be high,

BUT not all factors are considered.Upper management is satisfied with the

numbers.

Contribution to EmployeesAnother Ethical Dilemma

Employee’s must decide whether or not to lie to the customer.

Intense focus on selling add-ons.Happy work life

Employee keeps their job and favorable hours if they are able to sell add-ons.

Unhappy Work LifeEmployees may be coached or have

reduced/unfavorable hours for not selling add-ons. Managers may lose their jobs or have to face being

reprimanded by upper management.

Contribution to the CommunityMore service plans

Since STAPLES pushes for the service plans, more customer are likely to end up purchasing them.

Customers are not receiving the product they want when they want it.

Diminished customer service Strong employee focus on selling add-ons

minimizes helping the customer.Bad Taste

Customers who do not believe employees’ lies are left with a bad impression of STAPLES.

Consequences – Legal ActionTexas AG Greg Abbott charges two online camera

retailers for bait and switch. Seeks injunction and civil penalties of $20k.

CFPB (Consumer Financial Protection Bureau) took action against Capital One for add-on products. $25M penalty and $140M in refunds.

FTC action against Sears in 1974. $58 sewing machine. Currently can levy fines of $16k per day per ad for false advertising.

Potential for wrongful termination lawsuit.

Consequence - ReputationShort term gains take precedence over

customer service

Tactics could force ethical employees to find jobs elsewhere

Quality of service is diminished where best salesperson isn’t the one providing good customer service but the one selling the most.

Consequence - OtherDoing the right thing can have a long term positive

impact. Herman Miller example.STAPLES, through its incentives and employee actions,

is creating an image for the company it wants to be. It is anchoring its place in the marketplace. Low end, nickel and diming or high end customer solutions.

Butterfly effect - Customer gets upset. Punches employee in the face. Melee ensues. Store burns down. Wildlife in adjoining lot flees fire, into road, causing multiple accidents. Local repair shop’s revenue goes up.

Maybe nothing actually happens. Customers are desensitized.

The Slippery SlopeTricky promotions – Upset Customers

like JA2009- STAPLES, BEST

BUYFalse Local Advertising – Reputational Damages. BBB penalties. Civil Suits by FTC – Joe Camel, Broadway Photo, L.L.C. and Starlight Camera & Video Inc., Capital One

Persistent strategy of improving revenue by

unethical ways – Company future sealed- ENRON, Bears Stearns

Don’t use bait,

customer may

switch

SummarySTAPLES following recipe of unethical culture

DRIVERS + ENABLERS = UNETHICAL BehaviorSTAPLES is clearly cheating the customerWidespread Issue

o STAPLES is not aloneo Not an isolated incidento Everyone is doing it and getting away with it

Seems small crime hence weak enforcementAs evidence suggests, THE LAW WILL CATCH UP

Questions?