Attention
Paying customers for their attention is not unheard of, though traditionally it seems to always come with a catch: time-share companies give away “free vacations” if you’re willing to be hounded by salesmen the entire time (unless you’re willing to buy a product you don’t want for the simple privilege of being left alone) and in many instances the incentive isn’t worth the time spent. But I think that’s a matter of how the program is designed rather than the concept in itself.
In truth, firms have always paid to get the attention of the customers, but they have generally paid others to get it for them, and the subcontractors can often be subversive and dishonest, effectively stealing the time of a person who would rather be doing something else.
The idea of offering someone a specific payment for a specific amount of time (earn 100 points on your credit card’s rewards program for watching a 30-second commercial about a specified product) seems to me much cleaner, in an ethical sense, than the present practices in advertising and marketing.
Participation
Participation is a broader category, the author’s catch-all for doing anything that isn’t covered by the other categories or making an actual purchase. This, too, is not unheard of – car dealerships are constantly offering some incentive to come in for a test drive, any product give-away is a participation promotion in which the free sample itself is the reward for trying the product, or paying someone to participate in a marketing focus group (though getting them to buy is usually a secondary concern).
My sense is that none of this rankles, though any participation program could involve rough-handling the customer to make an immediate purchase. The breadth of the category is a bit hazy in general, and includes many things that could be clean or unclean in an ethical sense.
Advocacy
Advocacy is likely the area in which I have the greatest unease. People talk about the products they like and the brands with which they identify as an expression of themselves, and they recommend products that could help others as a kind of altruism (though like most altruistic acts, the motive is to gain social esteem for oneself by “fixing” other peoples’ problems for them). They do all of this without payment.
When a person is motivated to advocate for a product not by genuine interest but because they want to get some sort of reward or incentive, this is disingenuous and invalidates the credibility of the source. Salesmen do it all the time, but when you are interacting with a salesman, you are aware of their mercenary interest. What makes personal recommendations more valuable and credible is the reputation of the advocate – that they are not being paid to shill things they don't really value.
There are various workarounds that are suggested, but it all seems rather greasy. The only exception is a firm that sends a person a thank-you gift after the fact for advocating for them – but even that is a bit grey, as the firm not giving incentive to that particular person because the gift was granted after the review was written, but others who hear that someone got a reward for advocating might be motivated to advocate in hope of getting a gift as well. In those instances, it is the person rather than the firm that is acting on bad faith, but let's not pretend it did not cross the firm's mind that their generosity toward one person would motivate the behavior of others.
Loyalty
Rewarding regular customers as a means to keep them loyal in future doesn’t ruffle me at all. It’s often been pointed out that firms spend a great deal of budget attracting new customers, and offering them exclusive deals that their current customers are not eligible to receive seems like a clear indication that loyalty is not valued – and it ought to be.
But what strikes me as most odd, and I’ll get into this deeper momentarily, is that participants in loyalty programs are being hoodwinked in a way because they are paying for their own rewards. Sometimes it is fairly subtle – the cost to the company of providing a “free” gift is covered by the amount the firm has overcharged you for purchases. Other times, it is fairly obvious, such as the debit card program that rounded purchases to the next dollar and “gave” their customers their own change as a reward – such unabashed contempt for the intelligence of consumers is so outrageous it’s amusing and depressing that they were able to pull it off.
Who Really Pays?
The question, across all of these instances, becomes one of stewardship. In essence, a business as an institution provides goods and services to customers, who pay the price to create the things that they want, the variable and fixed expenses of its production, plus the cost of capital to finance production, plus a reasonable profit to the owner of the business. The marketing expenses of a firm are not related to anything necessary to produce the good, but to attract other customers to buy from the firm and increase its profits.
With that in mind, it’s long been my perspective that businesses don’t pay for anything. When dim politicos call for taxes on business to be increased, or for business to pay more wages to their workers, or for business to contribute to charitable causes, the firms must generate the capital to pay those expenses by raising the price of goods. So ultimately, a demand for “business” to pay for anything is a demand for the current customers to pay a higher price - for anything that a business purchases is paid for out of revenue taken from customers.
And in that sense, a business does not pay shoppers for the activities that are related to purchasing. The shoppers are paying themselves, because any premium, gift, or payment they receive is ultimately funded by the price they will pay or have paid for its product. Or more accurately, the customers who actually buy the products are paying to potential customers (because a person who receives a free sample or whatnot may not ever actually purchase the good) for activities that render them no benefit– that is, unless the firm borrowed the money for the promotion and will pay it back with interest from future revenues from the exact same customers who bought because of such promotions.
This troubles me, and the more I think about it, it is likely beyond the scope of the original topic: whether it is paying shoppers directly or paying an advertising firm, the marketing costs represent a burden on customers to pursue prospects – the conversion of which is in the interests of the owners (increased profits) rather than the consumers of the firm (who really don’t care how many units their company sells, so long as it’s enough for them to stay in business).
So all of this thinking has led me to the notion I have still more thinking to do.
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