Coursework two (Part 1) Ethical Marketing Reflection
Week 9: UBER – Price surging and False advertisement/promotion
You are required to reflect on the ethical marketing components of the given case. In your reflection, you are to demonstrate an understanding of ethically responsible practice in marketing as well as critical analysis of the cases. The real-life examples should be used and clearly presented to illustrate ethical marketing implications and learning.
You will read the case study and research further on UBER scandal relating to (un-)ethical issues from the case. Please cite the sources when you use that information in your work. Students are to develop a critical reflection that links to marketing principles.
*Key points to help developing the case analysis and reflection (choose some of these areas to discuss): 1) price surging, 2) false/misleading advertisement, 3) codes of conduct in marketing, and 4) relevant marketing practice. These are only some suggested areas to look at; students can reflect on other ethical issues that are relevant to the marketing mix and the case.
A mini case
Uber Technologies Inc. (Uber) is a tech startup that provides ride-sharing services by facilitating a connection between independent contractors (drivers) and riders with the use of an app. Uber has expanded its operations to 900 cities in 69 countries (Statista, 2020) around the world and is valued at around $82 billion (in 2019), making it one of the world’s most valuable startups. The company has experienced resounding success and is looking toward further expansion both internationally and within the United States by adopting the motto ‘Available locally, expanding globally’ as a key to its global expansion strategy.
However, Uber’s rapid success is creating challenges in the form of legal and regulatory, social, and technical obstacles. The taxi lobbies, for instance, is arguing that Uber hurts their businesses and has an unfair advantage because it does not face the same licensing requirements as they do. Others accuse Uber of not screening their drivers, creating potentially unsafe situations. Governments from different countries (e.g. France, India, UK, and Germany) responded by banning Uber services due to the lack of professional
licenses for drivers. Uber in London, for instance, was banned in 2019 by Transport for London (TFL) when it was found that the company allowed “unauthorised drivers to upload their own photographs to replace those of verified drives” (SMH news, 2019). From this incident, TFL indicated that all 14,000 trips carried out by Uber drivers were uninsured. This caused the regulator prosecuting Uber for causing and permitting the use of vehicles without the correct insurance policies in place.
By the nature of its sector, Uber operates in an industry where trust between strangers is vital. This trust ensures a safe and comfortable ride for both passenger and driver. Uber has developed a rating system to help assure this trust and reliability between passengers and drivers, called a ride-sharing ratings system. However, this ride-share ratings system poses a challenge for the independent contractors (i.e. the drivers). Because consumers have different views of what constitutes quality, it can be argued that Uber drivers are placed at the mercy of the consumer’s mood. Drivers have also expressed unhappiness with Uber’s pay. Uber will often lower fare rates in order to gain a competitive advantage, which cuts into driver earnings. Some also claims that after Uber takes its commission, they end up earning less than minimum wage. Many Uber drivers have joined the support from Unions, such as GMB Union for Uber drivers in UK.
Uber has been highly praised for giving independent contractors an opportunity to earn money as long as they have a car, while also offering convenient ways for consumers to get around at lower cost. Uber uses its app to determine pricing. Once the passenger completes his or her ride with an Uber partner-driver, the person’s credit card is charged automatically. Uber uses an algorithm to estimate fees charged when demand is high. This is called ‘surge pricing’ technique. It is considered as a peak pricing strategy that is similar to when utilities or flights charge higher prices when demand is high. However, the extent of the pricing increase has been questioned as some consumers believe that Uber uses this high demand to ‘price gouge’ passengers – price gouging is when a seller/server increases the prices of goods/services to a level much higher than is considered reasonable or fair. Uber’s surge pricing has led to considerable criticism. Consumers have reported in some situations, for examples, during one New Year’s Eve pricing surged up to seven times the normal price. During a hostage crisis, Lindt Café siege in Sydney, Australia, Uber charged as much as four times the normal price as an influx of people struggled to evacuate. Uber responded by claiming its price hikes encouraged more drivers to pick up passengers in the area, but consumers were outraged. Consumers
believe that this is a form of price gouging and that Uber capitalises on emergency situations.
Another controversy was around its promotion. A lawsuit was filed in the U.S. District Court in San Francisco stating that Uber violated the 1946 Lanham Act that prohibits false advertising. Taxi companies claimed, for instance, that Uber’s drivers do not have to undergo fingerprinting in California as part of background checks, and yet it used advertising such as “the safest ride on the road” and sets “the strictest safety standards possible.” According to the taxi driver, these deceptive advertising practices take customers away from their services and are therefore leading to economic harm.
As the challenges and critics are evident, Uber was viewed to have aggressive corporate culture against regulations, which in turn would place limitations on its services. For instance, in 2012 when Washington D.C. attempted to force Uber to accept a price floor to operate in the city, Travis Kalanick (the co-founder and CEO) accused regulators of price fixing and encouraged Uber users to contact their representatives. The result was a flood of angry responses. Kalanick’s approach to negotiate with regulators could be described as antagonistic as he often ignored his lobbyists’ advice to seek compromise. Under criticism of ‘toxic’ work environment, some prominent executives at Uber have left the firm, claiming that the corporate culture conflicted their values. With high pressure from the shareholders and investors, it led to Kalanick’s resignation as CEO in 2017 after a number of scandals.
[End of case study]
A suggested outline (but not to limited to) – An Ethical Marketing Reflective Essay – 500 words, excluding references
introduction of the case, including research evidence of the case. An introduction should also highlight what the topic of this reflection is, what the main points are, and what the reflective essay plans to do.
Body (each paragraph should have a topic sentence, points of critical reflection, supporting evidence, and signposting):
Paragraph one – the first point of your marketing reflection on the case
Paragraph two – the second point of your marketing reflection on the case
A conclusion paragraph is to summarise the main points of your marketing reflection and arguments. It should draw a final conclusion or judgement about the issues you have been reflecting and discussing. Points made should be connected to broader relevant issues or areas of further studies.