1. Marketing Ethics and Social Responsibility20

2. Learning Objectives
After studying this chapter, you should be able to:
Identify the major social criticisms of marketing
Define consumerism and environmentalism and explain how they affect marketing strategies
Describe the principles of socially responsible marketing
Explain the role of ethics in marketing

3. Chapter Outline Social Criticisms of Marketing
Citizen and Public Actions to Regulate Marketing
Business Actions Toward Socially Responsible Marketing

4. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
High cost of distribution
High advertising and promotion costs
Excessive markups
Deceptive practices

5. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
High Cost of Distribution
Complaint:
Intermediaries mark up prices beyond their value due to inefficiencies and unnecessary or duplicative services
Response:
Markups reflect the cost of the services that consumers expect
Convenience
Larger stores and assortments
More service
Return privileges

6. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
High Advertising and Promotion Costs
Complaint:
Prices are inflated to absorb advertising and sales promotion costs, and packaging only adds to the psychological not functional value of the product
Response:
Advertising does add to product cost
but also to product value by informing potential customers of the availability and merits of the product

7. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Excessive Markups
Response:
Most businesses try to deal fairly with consumers because they want to build relationships and repeat business
Complaint:
Companies mark up products excessively

8. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Complaint: Companies use deceptive practices that lead customers to believe they will get more value than they actually do. These practices fall into three categories:
Deceptive pricing
Deceptive promotion
Deceptive packaging

9. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Deceptive pricing includes practices such as falsely advertising “factory” or “wholesale” prices or a large price reduction from a phony high retail list price
Deceptive promotion includes practices such as misrepresenting the product’s features or performance or luring the customer to the store for a bargain that is out of stock
Deceptive packaging includes exaggerating packaging contents through subtle design, using misleading labeling, or describing size in misleading terms

10. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Legislation to protect consumers from deceptive practices
Wheeler-Lea Act—gives the Federal Trade Commission (FTC) power to regulate “unfair or deceptive acts or practices”
Is it deception, alluring, or puffery that is just an exaggeration for effect?
Products that are harmful
Products that provide little benefit
Products that are not made well

11. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
High-pressure selling
Response:
Most selling involves building long-term relationships and valued customers. High-pressure or deceptive selling can damage these relationships.
Complaint:
Salespeople use high-pressure selling that persuade people to buy goods they had no intention of buying

12. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Shoddy, Harmful, or Unsafe Products
Response:
Today’s marketers know that customer-driven quality results in customer value and satisfaction that create profitable customer relationships. There is no value in marketing shoddy, harmful, or unsafe products.
Complaint:
Products have poor quality, provide little benefit, and can be harmful

13. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Planned Obsolescence
Complaint:
Producers follow a program of planned obsolescence, causing their products to become obsolete before they actually need replacement. Producers also continually change consumers’ concepts of acceptable styles to encourage more and earlier buying.
Response:
Planned obsolescence is really the result of competitive market forces leading to ever-improving goods and services. Marketers know that customers like style changes and want the latest innovations even if older models still work.

14. Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Poor Service to Disadvantaged Consumers
Response:
Some marketers profitably target these customers and the FTC has taken action against marketers that do advertise false values, wrongfully deny service, or charge disadvantaged customers too much.
Complaint:
American marketers serve disadvantaged customers poorly. Some retail companies “redline” poor neighborhoods and avoid placing stores there.

15. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
False Wants and Too Much Materialism
Response:
People do have strong defenses against advertising and other marketing tools. Marketers are most effective when they appeal to existing wants rather than creating new ones. The high failure rate of new products shows that companies cannot control demand.
Complaint:
The marketing system urges too much interest in material possessions. People are judged by what they own rather than who they are, creating false wants that benefit industry more than they benefit consumers.

16. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
False Wants and Too Much Materialism

17. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Too Few Social Goods
Complaint:
Businesses oversell private goods at the expense of public goods and require more public goods to support them
Response:
There needs to be a balance between private and public goods
Producers should bear full social costs of their operations
Consumers should pay the social costs of their purchases

18. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Cultural Pollution
Response:
Marketing and advertising are planned to reach only a target audience, and advertising makes radio and television free to users and helps to keep down the costs of newspapers and magazines. Today’s consumers have alternatives to avoid marketing and advertising from technology.
Complaint:
Marketing and advertising create cultural pollution

19. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Cultural Pollution

20. Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Too Much Political Power
Response:
American industries do promote their own interests, and regulators are seeking to balance the interests of big business against the public
Microsoft
Tobacco
Complaint:
Businesses wield too much political power over mass media, limiting media to report independently and objectively

21. Social Criticisms of Marketing
Marketing’s Impact on Other Businesses
Acquisition of competitors
Marketing practices
Unfair competitive marketing practices

22. Social Criticisms of Marketing
Marketing’s Impact on Other Businesses
Acquisition of competitors can sometimes be good for society when the acquiring company gains economies of scale that lead to lower prices
Marketing practices can also bar new competitors from entering an industry and can create use patents, heavy promotional spending to drive out existing competitors
Unfair competitive marketing practices such as pricing below cost, threatening to cut off business with suppliers, or discouraging the buying of a competitor’s product can hurt or destroy other firms

23. Citizen and Public Actions to Regulate Marketing
Consumerism is the organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers

24. Citizen and Public Actions to Regulate Marketing
Environmentalism is an organized movement of concerned citizens, businesses, and government agencies to protect and improve people’s living environment

25. Citizen and Public Actions to Regulate Marketing
Consumerism
Traditional sellers’ rights include:
The right to introduce any product in any size and style, provided it is not hazardous to personal health or safety; or if it is, to include proper warning and controls
The right to charge any price for the product, provided no discrimination exists among similar kinds or buyers
The right to spend any amount to promote the product, provided it is not defined as unfair competition
The right to use any product message, provided it is not misleading or dishonest in content or execution
The right to use any buying incentive programs, provided they are not unfair or misleading

26. Citizen and Public Actions to Regulate Marketing
Environmentalism
People and organizations should operate with more care for the environment
The marketing system’s goal should not be to maximize consumption, consumer choice, or satisfaction, but rather to maximize life quality. Environmental costs should be included in both producer and consumer decision making.

27. Citizen and Public Actions to Regulate Marketing
Environmentalism
Environmental Sustainability
Pollution prevention
Product stewardship
Design for environment (DFE)
New environmental technologies
Sustainability vision

28. Citizen and Public Actions to Regulate Marketing
Environmentalism

29. Citizen and Public Actions to Regulate Marketing
Environmentalism
Environmental Sustainability
Pollution prevention involves not just cleaning up waste but also eliminating or minimizing waste before it is created
Product stewardship involves minimizing the pollution from production and all environmental impact throughout the full product life cycle
Design for environment (DFE) involves thinking ahead to design products that are easier to recover, reuse, or recycle

30. Citizen and Public Actions to Regulate Marketing
Environmentalism
Environmental Sustainability
New environmental technologies involve looking ahead and planning new technologies for competitive advantage
Sustainability vision is a guide to the future that shows the company that the company’s products, process, and policies must evolve and what is needed to get there

31. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Enlightened marketing refers to a company’s marketing effort supporting the best long-run performance of the marketing system and consists of five principles:
Consumer-oriented marketing
Customer-value marketing
Innovative marketing
Sense-of-mission marketing
Societal marketing

32. Social Criticisms of Marketing
Enlightened Marketing

33. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Consumer-oriented marketing means that a company should view and organize its marketing activities from the consumer’s perspective
Customer-value marketing means that the company should put most of its resources into customer-value-building marketing investments: long-term customer loyalty and relationships by continually improving the value consumers receive from the firm’s market offerings
Innovative marketing requires the company to continually seek real product and marketing improvements

34. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Sense-of-mission marketing means the company should define its mission in broad social terms rather than narrow product terms
Societal marketing means the company makes marketing decisions by considering consumers’ wants and interests, the company’s requirements, and society’s long-run interests
Views societal problems as opportunities
Designs pleasing and beneficial products

35. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Deficient products have neither immediate appeal nor long-term benefits
Bad tasting and ineffective medicine
Pleasing products have high immediate satisfaction but may hurt consumers in the long run
Cigarettes and junk food

36. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Societal marketing

37. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Salutary products have low appeal but may benefit consumers in the long run
Seat belts and air bags
Desirable products give both immediate satisfaction and high long-term benefits
Tasty and nutritious breakfast food

38. Business Actions Toward Socially Responsible Marketing
Enlightened Marketing

39. Business Actions Toward Socially Responsible Marketing
Marketing Ethics
Corporate marketing ethics are broad guidelines that everyone in the organization must follow that cover distributor relations, advertising standards, customer service, pricing, product development, and general ethical standards

40. Business Actions Toward Socially Responsible Marketing
Marketing Ethics
Philosophies
Issues are decided by the free market and legal system
Responsibility is not on the system but in the hands of the individual company and managers

41. Business Actions Toward Socially Responsible Marketing
Marketing Ethics

42. Discussion Question
In the chapter opening case Jeff Swartz is attempting to balance what he understands to be the complementary needs of social awareness and profit.
What do you think? Is one more important than the other?

43. Review Questions Identify the major social criticisms of marketing
Define consumerism and environmentalism and explain how they affect marketing strategies
Describe the principles of socially responsible marketing
Explain the role of ethics in marketing

44. PowerPoint created by:
Ronald Heimler
Dowling College, MBA
Georgetown University, BS Business Administration
Adjunct Professor, LIM College, NY
Adjunct Professor, Long Island University, NY
Lecturer, California Polytechnic State University, Pomona, CA
President, Walter Heimler, Inc.