Ethicality of DCHL’s Marketing Activity
Digital Crown Holdings Limited (DCHL), so-called Lampe Berger (LB), is a private company which is famous for using Multi-level marketing as their operating method, but in fact, the situation is more serious, it can be called as a pyramid selling. Multi-level marketing is illegal in mainland, Macau etc. actually, these places banned all kinds of Multi-level marketing, but in Hong Kong, there are no such kinds of laws to ban this method. So, they can still make profit by utilizing the weakness of the law, their behaviour in public’s eyes is totally unethical.
First, let’s give an introduction for DCHL’s marketing activity. The main product of this firm is fragrance. This fragrance is actually a famous brand called Lampe Berger in France in nearly one hundred years ago. However, one hundred years is a very long period and the patent of the inventor had been expired. So, many others factories owner produce and sell identical products. DCHL is a local example. The quality of the fragrance is one of the problem as they are not produced in France anymore.
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The biggest problem is not the product, but the selling method of the firm. As the discussion above, they are doing a pyramid selling under the name of Multi-level marketing. Their operating method is, a person find new members to become his ”partner”, maybe four to five people, these people have to paid a large amount of money to join the company, usually at least a few thousand dollars, after they paid, a fixed amount of fragrance that is equal to the entrance fee, will be given to them.
Then, the people who join the company continuously finding “partners”, “partners” find “partners” again, one block goes under one block, when the lower block “partners” successfully find a new member, the upper block can enjoy a fixed percentage of commission of each new entrance fee, so, the profits are indirectly come from the entrance fee paid by the new members, but not from the fragrance. Here, we can see that there is a serious moral question and will be discuss in the following paragraph. In an ethical marketing activity, honesty is an important factor.
It is stated that the marketers should be trustful, always tell the truth. They should also claim the products value and if they fail to deliver their claimed benefits, they should stand behind products. But in DCHL, this kind of honesty is not easy to find, even some negative news had been reported. According to Singtao newspaper (19/05/2008), the victim said that they were guaranteed with a handsome amount of money, so the victim invest over ten thousand, hundred thousand or even million to possess the fragrance and operating rights. The company even told the members to borrow money and invest more.
However, the victim finally found that the efficiency of the fragrance do not match the price and lead to a great economic loss. Some products even not yet distribute to the victim and the company refuses to refund. In this case, we can see that the company hasn’t stand behind the product when it fail to claim those they have guaranteed. The company swindles the victim out of their money, they only concern about how many people become their members and own profits, but not the people’s benefits whether the fragrance is suitable for them or not.
This also violates the concept of fairness in an ethical marketing. Marketers should balance the needs of the buyer with the interests of the seller, do not engage in predatory pricing. But the seller didn’t balance the interest between two parties, under the method of multi-level marketing, they only emphasis on acquiring new members and earn the commission. Furthermore, the mismatch of quality and price felt by the victim also prove that it is not fair about the pricing.
Besides, the firm usually find some youngster or mainlander to be the “partner” because they are more inexperienced when compared with the Hong Kong adults. According to Apple Daily (19/06/2009), a 19-year old female borrow money from loans company to join this company, which is instigate by the people in the company. But the company didn’t give her the product after she paid sixty thousand dollars and they didn’t share the commission with her even she find an “partner”.
An ethical marketing activity should fully disclose list prices and terms of financing or adjustments, this is what we called openness. But the company makes it very vague, so the female can’t argue for the products or commission back. In general, DCHL is doing an unethical marketing activity. They sell “members” more likely than the fragrance. Also, they are not honest, fair and openness as they only concern about how to acquire more members.