C HAPTER 16 Marketing Ethics and Social Responsibility

Copyright 2007, Prentice-Hall Inc.16-2  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. Roadmap: Previewing the Concepts

Copyright 2007, Prentice-Hall Inc.16-3 Background  Nike has been heavily criticized for NOT being socially responsible.  Accusation: use of sweatshops and child labor overseas, and horrible working conditions.  Accusation: targeting low-income families by making shoes an expensive status symbol for poor urban street kids. Behavior  Code of conduct and six- point plan ensures more socially responsible labor practices & commissioned an independent study of Nike factories abroad.  Created a huge social responsibility department and publishes CRS report.  Donates more than $37 million to sports programs and 3 percent of earnings to charity. NIKE – Socially Responsible?

Copyright 2007, Prentice-Hall Inc.16-4 Criticisms of Marketing  High prices  Deceptive practices  High-pressure selling  Shoddy, harmful, or unsafe products  Planned obsolescence  Poor service to disadvantaged consumers

Copyright 2007, Prentice-Hall Inc.16-5 High Prices  Caused by: –High costs of distribution –High advertising and promotion costs –Excessive markups Why such a difference between generic and branded product prices? Critics contend it is due to the cost of advertising.

Copyright 2007, Prentice-Hall Inc.16-6 Let’s Talk! Many consumers feel that gasoline prices are too high because of excessively high markups. Do you feel this criticism is justified? Explain.

Copyright 2007, Prentice-Hall Inc.16-7 Deceptive Practices  Deceptive Pricing: –Falsely advertising “factory” or “wholesale” prices or large reductions from phony high retail list prices.  Deceptive Promotion: –Overstating a product’s features or performance, running rigged contests.  Deceptive Packaging: –Exaggerating package contents through subtle design, using misleading labeling, etc.

Copyright 2007, Prentice-Hall Inc.16-8 High-Pressure Selling  Salespeople are trained to deliver smooth, canned talks to entice purchase. –High-pressure selling persuades people to buy goods they had no intent of buying. –High-pressure selling can occur because of prizes going to top sellers. –High-pressure selling is not good for long- term relationships.

Copyright 2007, Prentice-Hall Inc.16-9  Includes: –Products that are not made well or services that are not performed well. –Products that deliver little benefit or that may even be harmful. –Unsafe products due to manufacturer indifference, increased production complexity, poorly trained labor, and poor quality control. Shoddy or Unsafe Products

Copyright 2007, Prentice-Hall Inc McDonald’s and Obesity A 2002 lawsuit unsuccessfully sued McDonald’s on behalf of obese children, claiming McD’s marketed food that is high in “fat, salt, sugar, and cholesterol.” Marketing in Action

Copyright 2007, Prentice-Hall Inc Even otherwise “safe” products can be used (or consumed) in an unintended fashion which is inherently unsafe. What can firms do to protect themselves from misuse of the product and the annoying (and typically expensive) lawsuits which often follow? Let’s Talk!

Copyright 2007, Prentice-Hall Inc Planned Obsolescence  Refers to: –Products needing replacement before they should because they are obsolete. –Producers who change consumer concepts of acceptable styles. –Intentionally holding back attractive functional features, then introducing them later to make old model obsolete.

Copyright 2007, Prentice-Hall Inc  Disadvantaged consumers are served poorly when: –Poor are forced to shop in smaller stores where they pay more for inferior goods. –“Redlining” by national chain stores occurs in disadvantaged neighborhoods.  Redlining charges have also been leveled against insurers, banking, health care providers and others. –Poor are targeted for “rapid refunds.” Poor Service to Disadvantaged Consumers

Copyright 2007, Prentice-Hall Inc Marketing’s Impact on Society as a Whole  False wants and too much materialism.  Producing too few social goods.  Cultural pollution.  Too much political power.

Copyright 2007, Prentice-Hall Inc Marketing and Materialism Does the Rolex Web site promote materialism?Rolex Web site Marketing in Action

Copyright 2007, Prentice-Hall Inc Cultural Pollution Critics contend that the constant exposure to advertisements assaults our senses. Marketing in Action

Copyright 2007, Prentice-Hall Inc  Critics charge that a firm’s marketing practices can harm other companies and reduce competition. –Acquisitions of competitors. –Marketing practices that create barriers to entry. –Unfair competitive marketing practices. Marketing’s Impact on Other Businesses

Copyright 2007, Prentice-Hall Inc Unfair Business Practices? Marketing in Action Microsoft has been accused of predatory “bundling” practices -- adding features to Windows system software that is installed on 90% of the desktop computers. This makes it easy to get consumers to Use Microsoft’s other products, which stifles competition and innovation.

Copyright 2007, Prentice-Hall Inc Key Citizen and Public Actions  Attempts to regulate marketing include citizen and public actions.  Citizen Actions: –Consumerism –Environmentalism  Public Actions: –Legislative proposals

Copyright 2007, Prentice-Hall Inc Consumerism Consumerism is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers. Visit the Adventures in Ethical Consumerism Web site at

Copyright 2007, Prentice-Hall Inc  The right to... 1.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 warnings and controls. 2.charge any price for the product, provided no discrimination exists among similar kinds of buyers. 3.spend any amount to promote the product, provided it is not defined as unfair competition. 4.use any product message, provided it is not misleading or dishonest in content or execution. 5.use any buying incentive schemes, provided they are not unfair or misleading. Sellers’ Rights

Copyright 2007, Prentice-Hall Inc  The right to: 1.not buy a product that is offered for sale. 2.expect the product to be safe. 3.expect the product to perform as claimed. 4.be well informed about important aspects of the product. 5.be protected against questionable products and marketing practices. 6.influence products and marketing practices in ways that will improve “quality of life.” Buyers’ Rights

Copyright 2007, Prentice-Hall Inc Environmentalism An organized movement of concerned citizens and government agencies to protect and improve people’s living environment. Environmentalists are NOT against marketers, they simply want marketers to exercise more care for the environment.

Copyright 2007, Prentice-Hall Inc  A management approach that involves developing strategies that both sustain the environment and produce profits for the company.  Levels of environmental sustainability: –Pollution prevention –Product stewardship –New environmental technologies –Sustainability vision Environmental Sustainability

Copyright 2007, Prentice-Hall Inc Environmental Sustainability Dell understands that sustainability means handling their products at the end of their useful lives. The Dell recycling program helps customers recycle or donate old computer equipment. Marketing in Action

Copyright 2007, Prentice-Hall Inc Figure 16-1 The Environmental Sustainability Grid

Copyright 2007, Prentice-Hall Inc Figure 16-2 Marketing Areas That May be Called into Question Under the Law

Copyright 2007, Prentice-Hall Inc Enlightened Marketing  A marketing philosophy holding that a company’s marketing should support the best long-run performance of the marketing system. –Customer-oriented marketing –Innovative marketing –Customer-value marketing –Sense-of-mission marketing –Societal marketing

Copyright 2007, Prentice-Hall Inc Enlightened Marketing  Consumer-Oriented Marketing: –The philosophy of enlightened marketing that holds that the company should view and organize its marketing activities from the consumer’s point of view.  Innovative Marketing: –A principle of enlightened marketing that requires that a company seek real product and marketing improvements.

Copyright 2007, Prentice-Hall Inc Innovative Marketing In less than a decade, Samsung has given its brand a cutting edge image by unleashing a torrent of innovative and stylish new products targeted at high-end users. Marketing in Action

Copyright 2007, Prentice-Hall Inc Enlightened Marketing  Customer-Value Marketing: –A principle of enlightened marketing that holds that a company should put most of its resources into value-building marketing investments.  Sense-of-Mission Marketing: –Principle of enlightened marketing that holds that a company should define its mission in broad social terms rather than narrow product terms. Learn more about the NFL’s sense-of-mission marketing efforts by watching this clip. Video Snippet

Copyright 2007, Prentice-Hall Inc Enlightened Marketing  Societal Marketing: –Principle of enlightened marketing that holds that a company makes marketing decisions by considering consumers’ wants and interests, the firm’s requirements, and society’s long-run interests.

Copyright 2007, Prentice-Hall Inc Figure 16-3 Societal Classification of Products

Copyright 2007, Prentice-Hall Inc Salutary Products Insurance is one example of a salutary product. Can you think of some others? Marketing in Action /

Copyright 2007, Prentice-Hall Inc Let’s Talk! Based on the societal classification scheme, how would you classify the following products? Credit cards Cigarettes Vitamins Diapers

Copyright 2007, Prentice-Hall Inc Marketing Ethics  Corporate Marketing Ethics Policies: –Broad guidelines that everyone in the organization must follow.  These should cover: –Distributor relations –Advertising standards –Customer service –Pricing –Product development –General ethical standards

Copyright 2007, Prentice-Hall Inc Let’s Talk! The use of sex in advertising is often criticized. Marketers justify its use by noting its power to function as an attentional lure. What type of advertising standards would you suggest to govern the use of sex in advertising by a firm?

Copyright 2007, Prentice-Hall Inc Code of Conduct Marketing in Action PricewaterhouseCoopers established a thorough ethics program, which begins with the code of conduct. Click below to learn more. Link to code of conduct

Copyright 2007, Prentice-Hall Inc International Marketing Ethics  Business standards and practices vary greatly between countries. –While bribery and kickbacks are illegal in the U.S., they are legal, or standard business practice in other countries.  Companies should commit to a standard set of shared standards to be used worldwide.

Copyright 2007, Prentice-Hall Inc  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. Rest Area: Reviewing the Concepts