ETHICS IN MARKETING

Learning Objectives After studying this module, you should be able to: –Explain the role of ethics in marketing –Use ethical standards to solve problems –Apply knowledge to marketing case studies –Understand marketing’s multiple responsibilities, and identify the major social and ethical challenges of marketing –Describe the principles of socially responsible marketing –Identify government and public agencies that regulate marketing activities and organizations –Define laws impacting marketing activities and organizations

Marketing ethics Marketing ethics addresses principles and standards that define acceptable conduct in the market place. Marketing usually occurs in the context of an organization, and unethical activities usually develop from the pressure to meet performance objectives. Some obvious ethical issues in marketing involves clear cut attempts to deceive or take advantage of a situation

Marketing Ethics & Consumer Rights The law and regulations are generally designed to protect the consumers from unethical practices by businesses These laws and regulations recognize that consumers have certain basic rights in the market place Each marketer must relay on his/her own value system to determine what is and is not ethical

THE POLITICAL-LEGAL ENVIRONMENT Political-legal environment Component of the marketing environment consisting of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights. GOVERNMENT REGULATION Antimonopoly period of the late 19th and early 20th centuries. Protecting competitors during the Great Depression. Consumer protection in past 40 years. Industry deregulation began in the 1970s and continues today. Newest regulatory frontier is cyberspace.

GOVERNMENT REGULATORY AGENCIES Federal Trade Commission has broadest regulatory powers over marketing. Others include Consumer Product Safety Commission, the Federal Power Commission, the EPA, and FDA.EPAFDA OTHER REGULATORY FORCES Consumer interest organizations. Self-regulatory groups. CONTROLLING THE POLITICAL-LEGAL ENVIRONMENT Complying with laws and regulations serves customers and avoids legal problems. Influencing the outcome of legislation through lobbying or boycotts.

ETHICAL ISSUES IN MARKETING Marketing ethics Marketers’ standards of conduct and moral values. Many companies create ethics programs to train employees to act ethically. Employees’ personal values sometimes conflict with employers’ ethical standards.

ETHICS IN MARKETING RESEARCH Invalid or unreliable research studies Invasion of consumer privacy, not respecting confidentiality Disguising sales as research Failure to secure voluntary and informed participation Competitive intelligence gathering Consumers are concerned about privacy, and Internet has increased privacy concerns FTC provides consumer information about privacy onlineconsumer information about privacy The U.S. government also maintains a Do Not Call registry to prevent unwanted telemarketing.Do Not Call registry

ETHICS IN PRODUCT/PACKAGE STRATEGY Example: Package strategy. Larger packages are more noticeable on the shelf. Oddly sized packages make price comparison difficult Actual versus apparent size Example: Product strategy. Misleading or inadequate information Excessive or environmentally-unfriendly packaging Product testing: on animals or insufficient testing to reveal safety concerns Marketing socially controversial products Marketing unsafe products

ETHICS IN DISTRIBUTION What is the appropriate degree of control over the distribution channel? Should a company distribute its products in marginally profitable outlets that have no alternative source of supply? ETHICS IN PROMOTION Truth in advertising is the bedrock of ethics in promotion. Marketing to children has come under increased scrutiny. Marketing beer to college students, including through providing promotional items such as shirts and hats, raises ethical questions. ETHICS IN PRICING Most regulated aspect of a firm’s marketing activities.

Deceptive Pricing: Where a salesperson tries to influence lure customers into a store. Thereafter, a salesperson tries to influence to buy a higher- priced item. Unfair Pricing: When competitors are driven out by low prices the company raises price back to their former level. FOUR AREAS OF PRICING ARE CONSIDERED UNETHICAL AND ILLEGAL:

Price Discrimination: It can be unethical if similar buyers are charged different prices for the same based on their ability to pay. Price fixing: It is an agreement among firms in an industry to set up prices at certain levels. Two types of price fixing: 1.Horizontal price fixing 2.vertical price fixing FOUR AREAS OF PRICING ARE CONSIDERED UNETHICAL AND ILLEGAL:

SOCIAL RESPONSIBILITY IN MARKETING Social responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective.

MARKETING’S RESPONSIBILITIES Marketing decisions must involve consideration of general well-being and even potential global effects. Some organization help promote social causes or practice socially responsible investing. MARKETING AND ECOLOGY Ecology is the study of the relationship between natural things and their environment. Protection of the environment influences all areas of marketing decision making. Marketing system produces billions of tons of packaging materials annually. Green marketing Production, promotion, and reclamation of environmentally sensitive products.

AMA has established a codes of ethics to provide guidelines for ethical conduct. It says, in part, that, “Marketers shall uphold and advance the integrity, honor and dignity of the marketing profession, by being honest in serving consumers, clients, employees, suppliers, distributors, and the public.” Marketing Ethics & Consumer Rights

ETHICAL VALUES Honesty: to be truthful and forthright in our dealings with customers and stakeholders. Responsibility : to accept the consequences of our marketing decisions and strategies. Fairness : to try to balance justly the needs of the buyer with the interests of the seller. Respect : to acknowledge the basic human dignity of all stakeholders.

CONTD……. Openness : to create transparency in our marketing operations. Citizenship : to fulfill the economic, legal and societal responsibilities that serve stakeholders in a strategic manner.

NATURE of MARKETING ETHICS Ethics –doing the“right” thing  Laws Laws Ethical vs Legal Personal & not punishable - Societal and Punishable

UNDERSTANDING ETHICAL BEHAVIOR 1 st Influence - Societal Culture and Norms  Culture dictates what is right and wrong, so “right” changes from culture to culture.

2 nd Influence - Business Culture & Industry Practices - B to C 1962, Kennedy’s Consumer Bill of Rights 1962, Kennedy’s Consumer Bill of Rights Early 1900s: Caveat Emptor –A Latin phrase meaning “let the buyer beware” - what you see is what you get,… not what you expected, too bad –Belief that competition in the marketplace corrects abuses

Consumer Bill of Rights (1962) The Consumer Bill of Rights (1962) is a law that codified (standardized what was not previously written down) the ethics of exchange between buyers and sellers. It includes the buyers rights: (1) to safety (2) to be informed (3) to choose, and (4) to be heard. The Consumer Bill of Rights (1962) is a law that codified (standardized what was not previously written down) the ethics of exchange between buyers and sellers. It includes the buyers rights: (1) to safety (2) to be informed (3) to choose, and (4) to be heard.

TODAY: Seller’s Versus Consumers’ Rights Sellers’ rights: –To introduce products of different styles and sizes, provided they are not hazardous –To set its own prices, provided no discrimination occurs –To spend to promote the product –To use any product message, provided it is not misleading –To use buying incentives Consumers’ rights: –To choose –To be informed –To safety –To be heard –To redress –To consumer education –To participate in marketplace decision making –To have access to basic services –To a sustainable environment

Business Culture & Industry Practices - B to B  Ethics of Competition Economic Espionage – stealing trade secrets Includes trespassing, wiretapping, dumpster diving Bribes -payment before service Kickbacks-payment after service Both are illegal in U.S., …but very common in developing nations

3 rd Influence- Corporate Culture & Expectations  Corporate Culture – shown in dress codes, work space, compensation  Whistle-blowers Whistle-blowers  Code of Ethics Code of Ethics  What’s in it? What’s in it?  What if its breached?

Personal Moral Philosophy and Ethical Behavior  Moral Idealism Moral Idealism  There is a right thing to do, There is a right thing to do, …no matter what the cost  Favored by religious &consumer groups Favored by religious &consumer groups  Utilitarianism Utilitarianism  The right thing to do is what hurts the fewest The right thing to do is what hurts the fewest  Favored by business executives and the military Favored by business executives and the military

Concept of Social Responsibility  Profit Responsibility-  company’s duty is to maximize profits  Profiteering- shrink supply to raise price & profit Green Marketing Green Marketing  Stakeholder Responsibility-  company’s duty is to protect the interests of owners  people who gain from it  Societal Responsibility –  company’s duty is to preserve environment  protect users of their products while reaping profit

Concept Check 2. What are three possible reasons for the present state of ethical conduct in the United States? A: (1) Pressure on businesspeople to make decisions in a society with diverse value systems. (2) Business decisions being judged publicly by groups with different values and interests. (3) Ethical business conduct may have declined.

Concept Check 1. What main rights are included in the Consumer Bill of Rights? A: The rights to safety, to be informed, to choose, and to be heard.

Concept Check 2. What is meant by moral idealism? A: Moral idealism is a personal moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome.

Concept Check 1. What is meant by social responsibility? A: Social responsibility means that organizations are a part of a larger society and are accountable to that society for their actions.

Concept Check 2. Marketing efforts to produce, promote, and reclaim environmentally sensitive products are called _____________. green marketing

Ethics Ethics are the moral principles and values that govern the actions and decisions of an individual or group.

Laws Laws are society’s values and standards that are enforceable in the courts.

Code of Ethics A code of ethics is a formal statement of ethical principles and rules of conduct.

Whistle-blowers Whistle-blowers are employees who report unethical or illegal actions of their employers.

Moral Idealism Moral idealism is a personal moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome.

Utilitarianism is a personal moral philosophy that focuses on “the greatest good for the greatest number,” by assessing the costs and benefits of the consequences of ethical behavior. Utilitarianism

Social responsibility means that organizations are a part of a larger society and are accountable to that society for their actions. Social Responsibility

Green marketing consists of marketing efforts to produce, promote, and reclaim environmentally sensitive products. Green Marketing

Some Morally Difficult Situations in Marketing You are considering hiring a product manager who just left a competitor’s company. She would be more than happy to tell you all the competitor’s plans for the coming year. What do you do?

Some Morally Difficult Situations in Marketing You have a chance to win a big account that will mean a lot to you and your company. The purchasing agent hints that a “gift” would influence the decision. Your assistant recommends sending a fine color television set to the buyer’s home. What do you do?

Some Morally Difficult Situations in Marketing You are interviewing a capable woman applicant for a job as a salesperson. She is better qualified than the men just interviewed. Nevertheless, you know that some of your important customers prefer dealing with men, and you will lose some sales if you hire her. What do you do?

Some Morally Difficult Situations in Marketing You are a sales manager in an encyclopedia company. Your competitor’s salespeople are getting into homes by pretending to take a research survey. After they finish the survey, they switch to their sales pitch. This technique seems to be very effective. What do you do?