2 Ethical Considerations in Business-to-Business Marketing McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

2-2Agenda Marketing Ethics: An Overview Marketing Ethics: An Overview Marketing Strategy and Ethics Marketing Strategy and Ethics An Ethical Issue: The Organizational Buying Function and Buyer-Seller Relationships An Ethical Issue: The Organizational Buying Function and Buyer-Seller Relationships Ethical Issues in Marketing Research Ethical Issues in Marketing Research Ethics and the Management of the Pricing Function Ethics and the Management of the Pricing Function Ethics and Sales Force Management Ethics and Sales Force Management Ethics and Advertising Strategy Ethics and Advertising Strategy

2-3 Marketing Ethics: An Overview Marketers must be capable of formulating and implementing policies based not only on economic reasoning, but on ethical and professional values as well. Marketers must be capable of formulating and implementing policies based not only on economic reasoning, but on ethical and professional values as well. Influencing factors: Influencing factors: Individual factors – attitudes and values.Individual factors – attitudes and values. Opportunity presenting itself - likelihood of punishment, no professional codes of ethics, no corporate policies to discourage unethical decision making.Opportunity presenting itself - likelihood of punishment, no professional codes of ethics, no corporate policies to discourage unethical decision making. Values, attitudes, and behaviors of others – “culture” as illustrated by peers, supervisors, top management.Values, attitudes, and behaviors of others – “culture” as illustrated by peers, supervisors, top management.

2-4 Marketing Ethics: An Overview A Reputation for Integrity Takes years to earn. Takes years to earn. Takes one bad decision to destroy. Takes one bad decision to destroy. Once a bad decision is made, it is often impossible to reverse and may end business relationships. Once a bad decision is made, it is often impossible to reverse and may end business relationships.

2-5 Marketing Ethics: An Overview Respect, Honor, Integrity How would you feel about working for someone who had no integrity? How would you feel about working for someone who had no integrity? How would you feel about purchasing important products from someone with no integrity? How would you feel about purchasing important products from someone with no integrity? How would you feel about having people with no integrity working for you (where you are responsible for what they do)? How would you feel about having people with no integrity working for you (where you are responsible for what they do)?

2-6 Marketing Ethics: An Overview Ethics in the Future Businesses are increasingly operating as part of society, not only in their traditional role of improving standard of living (by generating jobs, offering products and services, and paying taxes), but also via a sensitivity that supports employees, empowers customers and investors, and deals with needs of local, national, and international communities.

2-7 Marketing Ethics: An Overview What Does Ethics Involve? What Does Ethics Involve? Three Views on Corporate Management ResponsibilityThree Views on Corporate Management Responsibility Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free-market system, not with managers or organizations. Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free-market system, not with managers or organizations.

2-8 Three Views on Corporate Management Responsibility (con’t.)Three Views on Corporate Management Responsibility (con’t.) Hand of government: Corporation has no moral responsibility beyond legal obedience. Regulatory hand of law and political process turn these objectives into common good. Hand of government: Corporation has no moral responsibility beyond legal obedience. Regulatory hand of law and political process turn these objectives into common good. Hand of management: Encourages corporations to exercise independent, noneconomic judgment over matters of morals and ethics that face them. Hand of management: Encourages corporations to exercise independent, noneconomic judgment over matters of morals and ethics that face them. Marketing Ethics: An Overview What Does Ethics Involve? What Does Ethics Involve?

2-9 Marketing Ethics: An Overview Sample Corporate Code of Ethics Integrity and ethics exist in the individual or they do not exist at all. They must be upheld by the individual or they are not upheld at all. In order for integrity and ethics to be characteristics of this company, we who make up the corporation must strive to be honest and trustworthy in all our relationships... (Courtesy of Boeing Company)

2-10 Marketing Strategy and Ethics Business Ethics is Not a One-Sided Proposition Business Ethics is Not a One-Sided Proposition Buying Centers may be faced with:Buying Centers may be faced with: Participating in collusive bidding Participating in collusive bidding Placing restrictive conditions when defining specifications Placing restrictive conditions when defining specifications Overestimating demand to receive a price concession Overestimating demand to receive a price concession Purchasing “sample order” that are magnified Purchasing “sample order” that are magnified Burying obscure contract clauses in small type Burying obscure contract clauses in small type Accepting bribes or gifts Accepting bribes or gifts

2-11 Marketing Strategy and Ethics Business Ethics is Not a One-Sided Proposition Business Ethics is Not a One-Sided Proposition Sellers may be faced with:Sellers may be faced with:  Overselling  Promising more than can be delivered  Exaggerated claims and lying  Failing to keep confidences or promises  Accepting bribes or gifts  Offering inappropriate or illegal entertainment

2-12 Ethical Issues in Marketing Research Society’s rights Society’s rights The right to be informed of research results that may impact society as a wholeThe right to be informed of research results that may impact society as a whole The right to expect objective research resultsThe right to expect objective research results Clients’ rights Clients’ rights The right to confidentialityThe right to confidentiality The right to expect quality researchThe right to expect quality research Researcher’s Rights Researcher’s Rights The right for protection against improper solicitation of proposalsThe right for protection against improper solicitation of proposals The right to accurate presentation of findingsThe right to accurate presentation of findings The right to confidentiality of proprietary information on techniquesThe right to confidentiality of proprietary information on techniques

2-13 Ethics and the Management of the Pricing Function Setting an unfair price Setting an unfair price Altering product quality without changing price Altering product quality without changing price Practicing price discrimination with smaller accounts Practicing price discrimination with smaller accounts Price fixing Price fixing

2-14 Ethics and the Management of the Pricing Function Typical Examples of Antitrust Violations Typical Examples of Antitrust Violations Bid RiggingBid Rigging Price FixingPrice Fixing TyingTying Market AllocationsMarket Allocations Using a Competitor’s Quote to Requote or RebidUsing a Competitor’s Quote to Requote or Rebid ReciprocityReciprocity

2-15 Ethics and Sales Force Management Ethics in Dealing with Customers Ethics in Dealing with Customers Taking Bribes – should be refused tactfullyTaking Bribes – should be refused tactfully Accepting or Giving Gifts – may or may not be improperAccepting or Giving Gifts – may or may not be improper Entertainment – may or may not be improperEntertainment – may or may not be improper Reciprocity – giving preference to a supplier who is also a customerReciprocity – giving preference to a supplier who is also a customer

2-16 Ethics and Sales Force Management Ethics in Dealing with Employers Ethics in Dealing with Employers Moonlighting - Holding more than one job.Moonlighting - Holding more than one job. Changing jobs to a competitor - May unavoidably involve taking company training, customer knowledge, customer goodwill, or confidential information.Changing jobs to a competitor - May unavoidably involve taking company training, customer knowledge, customer goodwill, or confidential information. Expense Accounts - Present special temptations and are most frequent areas for ethical abuse.Expense Accounts - Present special temptations and are most frequent areas for ethical abuse. Contests - May result in stockpiling orders until contest begins, selling unneeded products to friends for later return, overselling.Contests - May result in stockpiling orders until contest begins, selling unneeded products to friends for later return, overselling.

2-17 Ethics and Advertising Strategy Truth in Advertising Truth in Advertising It is immoral to:It is immoral to: Lie, mislead, or deceive in advertising. Lie, mislead, or deceive in advertising. Fail to indicate dangers that are not normally expected. Fail to indicate dangers that are not normally expected. It is not immoral to:It is not immoral to: Use a metaphor or other figure of speech if these will be understood as figurative language. Use a metaphor or other figure of speech if these will be understood as figurative language. Persuade as well as to inform. Persuade as well as to inform.

2-18 Ethics and Advertising Strategy Comparative advertising Comparative advertising If comparisons are made, then they must be accurate.If comparisons are made, then they must be accurate. Care must be taken not to imply that if a product is superior to competition in one characteristic, then it is superior overall.Care must be taken not to imply that if a product is superior to competition in one characteristic, then it is superior overall. Better to point out competitive differences, leaving business customer to judge superiority of product.Better to point out competitive differences, leaving business customer to judge superiority of product.