ETHICAL DECISION MAKING & SOCIAL RESPONSIBILITY PRINCIPLES OF MARKETING WEEK 05

LEARNING OBJECTIVES Ethics & Social Responsibility Understand the nature and significance of ethics in marketing. Identify factors that influence ethical & unethical marketing decisions. Distinguish among different concepts of ethics & social responsibility. Recognize the importance of ethical and socially responsible consumer behavior.

ETHICS What are ethics: Defined as the moral principles and values that govern the actions and decisions of an individual or group. They serves as guidelines on how to act justly and rightly when faced with moral dilemmas. Or the moral evaluation of decisions based on commonly accepted principles of behavior; the evaluation results in an action being judged right or wrong. Means doing the “right” thing Each person’s definition of what right is can vary—can lead to misunderstanding and unethical behavior.

NATURE OF MARKETING ETHICS Ethical vs. Legal Ethical = personal & not punishable Legal = societal and punishable Framework for understanding ethical behavior

UNDERSTANDING ETHICAL BEHAVIOR 1 st Influence: Societal Culture and Norms Culture dictates what is right and wrong so “right” changes from culture to culture. Societal culture and norms Societal culture and norms Business culture and industry practices Organizational culture and expectations Personal moral philosophy and ethical behavior

EXAMPLES Copyright In the US copyrights, trademarks and patents are considered intellectual property, and unauthorized use is illegal and unethical. However, outside of the US, sometimes due to the culture of a country, unauthorized use of copyrights, patents, and trademarks are not considered unethical or illegal in places such as China, Mexico, and Korea.

UNDERSTANDING ETHICAL BEHAVIOR 2 nd Influence: Business Culture and Industry Practices (B2C) Early 1900’s Caveat Emptor: let the buyer beware What you saw was what you got and if it wasn’t what you wanted then too bad Consumer Bill of Rights President John F. Kennedy created legislation that codified the ethics of exchange between buyers and sellers.

UNDERSTANDING ETHICAL BEHAVIOR Consumers have the right to: Safety Be Informed Choose Be Heard

UNDERSTANDING ETHICAL BEHAVIOR Business Culture and Industry Practices (B2B) Ethics of Competition Economic Espionage (stealing trade secrets which includes trespassing, wiretapping, and dumpster diving) Bribes (payment before service) Kickbacks (payment after service) Both are illegal in the US but very common in developing nations.

UNDERSTANDING ETHICAL BEHAVIOR 3 rd Influence Corporate Culture & Expectations Corporate Culture Shown in dress codes, work space and compensation What if its breached? Whistleblowers

POTENTIAL ETHICAL ISSUES IN MARKETING Overall Misrepresenting a company’s capabilities Manipulation of data or information Exploitation of children or disadvantaged groups (Apple) Invasion of Privacy Pricing Issues Price deception Reference pricing claims Price discrimination (Lowe’s) Price fixing between competitors Predatory pricing Fraudulent refund policies

POTENTIAL ETHICAL ISSUES IN MARKETING Product Issues Misrepresentation of goods or services Failing to disclose product defects Counterfeit or gray market products Misleading warranties Failure to disclose important product information Reducing packaging contents without reducing package size Promotion Issues Bait and switch advertising False or misleading advertising High pressure salespeople Bribery of salespeople or purchasing agents Entertainment and gift giving Lying Stereotypical portrayals Sexual innuendo

FACTORS THAT AFFECT ETHICAL DECISION MAKING Now that we have defined markets in a general sense, it is useful to discuss the characteristics of the primary types of markets: Moral Values Opportunity (codes, policies, rewards/punishment) Significant Others (management, peers)

EXAMPLE “Know When to Say When” Campaign for responsible drinking first appeared via posters in 1983 and two years later with television commercials. Such efforts have contributed to a SIGNIFICANT decline in fatal drunk-driving accidents and a 64% drop in teen drunk-driving deaths since In addition Anheuser Busch is an advocate and sponsor of numerous efforts to preserve the environment and is the world’s largest recycler of aluminum cans.

EXAMPLES OF UNETHICAL BEHAVIOR INDUSTRIAL ESPIONAGE The clandestine collection of trade secrets or proprietary information about a company’s competition. This is most prevalent in high technology industries such as electronics, specialty chemicals, industrial equipment, aerospace, and pharmaceuticals, where technical know how and trade secrets separate industry leaders from followers. Example ?

EXAMPLES OF UNETHICAL BEHAVIOR BRIBES & KICKBACKS The giving and receiving of bribes and kickbacks which are often disguised as gifts, consultant fees, and favors. They are most common in business to business and government marketing than in consumer marketing. Example ?

UNETHICAL BEHAVIOR FOREIGN CORRUPT PRACTICES ACT This legislation makes it a crime in for US corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country. Generally, ethical standards are more likely to be compromised in industries experiencing intense competition and in countries in earlier stages of economic development.

UNITED STATES CONDUCT What are some possible reasons for the present state of ethical conduct in the United States? Pressure on business people to make decisions in a society with diverse value systems. Business decisions being judged publicly by groups with different values and interests Ethical business conduct may have declined.

AMA American Marketing Association Code of Ethics Members of the American Marketing Association have joined together in subscribing to its code of ethics embracing the following topics: Responsibilities of the Marketer Rights and Duties of Parties in the Marketing Exchange Process Organizational Relationships

HOW TO IMPROVE ETHICAL BEHAVIOR Suggestions: Training programs that address specific ethical issues Create a well-developed structure of checks and balances including explicit penalties for unethical behavior. Producers are cognizant of the fact that successful marketing to resellers is just as important as successful marketing to consumers Recognize how the behavior of coworkers and superiors can influence others behaviors. In larger corporations use of an ethics committee Finally, eliminate bad apples

DEVELOPING AN ETHICAL CODE Considerations Examine areas of high risk. Identify values that specifically address current ethical issues. Make the code of conduct understandable by providing examples that reflect values. Communicate the code frequently and in language that can be understood Revise the code each year

SOCIAL RESPONSIBILITY What is Social Responsibility? Means that organizations are a part of a larger society and are accountable to that society for their actions. An organization’s obligation to maximize its positive impact and minimize its negative impact on society. Community Relations Green Marketing

MORAL PHILOSOPHIES Moral Idealism Considers certain individual rights or duties universal regardless of the outcome. A right thing to do, no matter what the cost—usually favored by religious and consumer groups. Utilitarianism Considers the greatest good for the greatest number by assessing the costs and benefits of the consequences. The right thing to do is what hurts the fewest—favored by business executives and the military.

CONCEPTS OF SOCIAL RESPONSIBILITY Profit Responsibility Company’s duty is to maximize profits Careful of Profiteering (shrink supply to raise price & profit) Stakeholder Responsibility Company’s duty is to protect the interests of the people who gain from it. Societal Responsibility Company’s duty is to preserve environment while reaping profits Known as Green Marketing

VALDEZ PRINCIPLES Encourages companies to: Eliminate pollutants, minimize hazardous wastes, and conserve non-renewable resources Market environmentally safe products and services Prepare for accidents and restore damaged environments Provide protection for employers who report environmental hazards Appoint an environmentalist to their board of directors, name an executive for environmental affairs and develop an environmental audit of their global operations to be made available for public inspection.

SOCIAL AUDIT Elements of a social audit Recognition of social expectations and rationale for engaging in social responsibility endeavors Identification of causes or programs consistent with the company’s mission Determination of objectives and priorities for programs and activities to be undertaken Specification of the type and amount of resources necessary to achieve objectives Evaluation of programs and activities and assessment of future involvement

SOCIAL AUDIT What is a social audit? Systematic assessment of a firm’s objectives, strategies, and performance in the domain of social responsibility.

TURNING THE TABLE: CONSUMER ETHICS AND SOCIAL RESPONSIBILITY Includes: Filing warranty claims after the period expires Fraudulent returns of merchandise Providing inaccurate credit information Pirating digital content Submitting phony insurance claims Improper disposal of environmentally sensitive material Costs taxpayers billions each year in higher prices and premiums “Everybody does it” is not an excuse for abuse

HOMEWORK In this week’s homework you will be expected to complete the following: Industry Analysis A description that includes, but is not limited to a definition of the industry, industry life cycle (growth or decline), industry history (how old), historical financial performance, industry trends (cyclical or seasonal, increased competition etc), influential factors (does economy, government, competition affect industry), primary competitors, etc.

HOMEWORK In this week’s homework you will be expected to complete the following: Executive Summary A description or overview of the marketing plan. The executive summary briefly addresses each topic in the plan and gives a concise explanation of the marketing plan. It may also be used to provide information to people outside the organization, especially those who might be considering investing in the company.

FINAL PROJECT SPECS The final project is the culminating academic endeavor of the class’s research over the quarter. It will provide you with the opportunity to explore a problem or issue of particular personal or professional interest and to address it in a thorough focused study and applied research. This project should demonstrate your ability to synthesize and apply the knowledge and skills acquired through the class, and it should not only exemplify your ability to think critically, but should utilize the variety of research methods introduced to come to a cohesive and logical conclusion.

FINAL PROJECT SPECS » Sections Executive Summary Industry Analysis Marketing Research SWOTT Analysis Hypothesis/Problem Statement/Purpose Research Objectives Limitations Methodology Sample Questionnaire Data Analysis Conclusions