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Rice University researcher studies whether engaging with unethical consumers pays off

A Rice University researcher studied certain online shopping initiatives to see if targeting unethical shoppers paid off for retailers. Pexels

Conventional wisdom, grounded in ethical theory, is clear: ethical retailers shouldn't tolerate unethical customers. But what if some unethical behavior is good for business? Is it really so wrong?

Rice Business professor Utpal Dholakia and colleagues Zhao Yang and René Algesheimer of the University of Zurich recently explored whether ethical transgressions that appear harmful to retailers might actually create benefits in the long run. Think, for example, of such unsavory-but-not-illegal scams as returning used items for a refund or bringing back damaged goods.

To analyze how retailers conceive of and deal with such transgressions, Dholakia and his colleagues created a theoretical framework bookended by two opposing moral philosophies. On one end was the deontological perspective, based on Kantian ethics, which focuses on the inherent rightness or wrongness of an action regardless of outcomes. On the other end was the teleological perspective, rooted in the Utilitarianism School of British philosophers Jeremy Bentham and David Hume, which weighs the cumulative positive and negative effects of consequences rather than the behavior itself. In the teleological view, behavior should be considered moral and worthy of encouragement when its beneficial consequences outweigh its harmful ones.

Retailers by nature, tend to line up on the deontological team. To a manager at Trader Joe's, unethical and unlawful customers are pretty much interchangeable. Because of the belief that all unethical behavior is bad for the bottom line, when unethical customer behavior is detected, retailers want to stamp it out.

Dholakia's team, though, argues for a different view. The retailer, they propose, should distinguish between behavior that is unlawful and behavior that is lawful, albeit unethical. When a customer's action is unethical but lawful, the retailer ought to consider what makes it unethical and then choose the consequences accordingly: punish the customer, do nothing — or encourage them.

To grasp the implications of unethical customer behavior, Dholakia and his colleagues analyzed datasets covering 70 weeks and more than 48,000 accounts from a popular Swiss online retailer. This company provides its customers an engaging shopping experience by using social gaming and price promotions. Customers actively collect and trade virtual cards associated with each offer. In return, they enjoy discounts corresponding to the number of cards collected.

The site sells a variety of goods — the Samsung Galaxy, the Apple iPad, various branded clothes and handbags, prepaid salon and spa services, restaurant meals and trips. When an offer is first listed, a set of ten virtual cards is generated. If a customer can collect all ten cards, they receive the listed item free. So it stands to reason that the company explicitly forbids customers having more than one account.

But, the researchers found, the minority of rapscallion consumers who ignored that rule actually did the company a favor. When customers violated company policy and registered multiple accounts, the business enjoyed higher revenues and customer engagement. In fact, while less than 12 percent of the customers had multiple accounts, they generated more than 27 percent of the retailer's revenue. The fibbing customers used the site more actively than their counterparts, resulting in more revenue.

Dholakia and his team's findings open the door for retailers to take another look at customer policies. The dichotomy between right and wrong, as the double-dipping Swiss customers revealed, may not be quite as obvious as it seems. Might businesses also profit, for example, from customers who violate return policies? What if a shopper insists on trying to return a pressure cooker clearly past its return date — then stays on and spends significant money on food and books? If that second shopping trip brings in more money than the original Instapot did, is the customer really wrong?

Crafting a compromise that bridges the gap between the teleological and deontological philosophical views could allow retailers to change their policies, the researchers say. A customer might be permitted to openly create more than one user profile on a site without stooping to the deception of listing fake telephone numbers or email addresses. Netflix already deploys this attitude, inviting customers to share their accounts with others and create up to five different user profiles.

In addition to unleashing philosophical questions fit for a college all-nighter, the scholars' findings offer retailers a bracingly practical new strategy. Reconsidering consumers' ethical transgressions in a more nuanced and balanced way hurts no one — and can bump profits. This is especially true when the transgression is little more than violating policies created by the retailer that may have no real basis in ethics.

A bit of tolerance for customers who color outside the lines can benefit all, Dholakia's team argues. Consider the client who lies and claims he is returning a jacket because it doesn't fit (rather than admitting the shade of mauve makes him look ill). The pricey shoes he buys on the way out profit the store nonetheless. Tolerating bad behavior may be considered codependent in relationships. But in business, acceptance of errant customers, as long as they're on the right side of the law, can help the dollars to flow.

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This article originally appeared on Rice Business Wisdom.

Utpal Dholakia is the George R. Brown professor of marketing at Jones Graduate School of Business at Rice University.

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Five research teams are studying space radiation's effect on human tissue. Photo via NASA/Josh Valcarcel

A Houston-based organization has named five research projects to advance the understanding of space radiation using human tissue. Two of the five projects are based in Houston.

The Translational Research Institute for Space Health, or TRISH, is based at Baylor College of Medicine and funds health research and tech for astronauts during space missions. The astronauts who are headed to the moon or further will be exposed to high Galactic Cosmic Radiation levels, and TRISH wants to learn more about the effects of GCR.

"With this solicitation, TRISH was looking for novel human-based approaches to understand better Galactic Cosmic Rays (GCR) hazards, in addition to safe and effective countermeasures," says Kristin Fabre, TRISH's chief scientist, in a news release. "More than that, we sought interdisciplinary teams of scientists to carry these ideas forward. These five projects embody TRISH's approach to cutting-edge science."

The five projects are:

  • Michael Weil, PhD, of Colorado State University, Colorado — Effects of chronic high LET radiation on the human heart
  • Gordana Vunjak-Novakovic, PhD of Columbia University, New York — Human multi-tissue platform to study effects of space radiation and countermeasures
  • Sharon Gerecht, PhD of Johns Hopkins University, Maryland — Using human stem-cell derived vascular, neural and cardiac 3D tissues to determine countermeasures for radiation
  • Sarah Blutt, PhD of Baylor College of Medicine, Texas — Use of Microbial Based Countermeasures to Mitigate Radiation Induced Intestinal Damage
  • Mirjana Maletic-Savatic, PhD of Baylor College of Medicine, Texas — Counteracting space radiation by targeting neurogenesis in a human brain organoid model

The researchers are tasked with simulating radiation exposure to human tissues in order to study new ways to protect astronauts from the radiation once in deep space. According to the release, the tissue and organ models will be derived from blood donated by the astronaut in order to provide him or her with customized protection that will reduce the risk to their health.

TRISH is funded by a partnership between NASA and Baylor College of Medicine, which also includes consortium partners Caltech and MIT. The organization is also a partner to NASA's Human Research Program.

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