Marketing Ethics

1
Principles of Marketing
20

• Marketing Ethics
• and
• Social Responsibility

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

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Chapter Outline

• Social Criticisms of Marketing
• Citizen and Public Actions to Regulate Marketing
• Business Actions Toward Socially Responsible
  Marketing

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Social Criticisms of Marketing

• Marketings Impact on Individual Consumers
• High cost of distribution
• High advertising and promotion costs
• Excessive markups
• Deceptive practices

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Social Criticisms of Marketing
Marketings Impact on Individual Consumers High
Cost of Distribution

• Response
• Markups reflect the cost of the services that
  consumers expect
• Convenience
• Larger stores and assortments
• More service
• Return privileges

• Complaint Intermediaries mark up prices beyond
  their value due to inefficiencies and unnecessary
  or duplicative services

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Social Criticisms of Marketing
Marketings 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

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Social Criticisms of Marketing
Marketings 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

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Social Criticisms of Marketing

• Marketings 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

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Social Criticisms of Marketing

• Marketings 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 products 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

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Social Criticisms of Marketing

• Marketings Impact on Individual Consumers
• Deceptive Practices
• Legislation to protect consumer from deceptive
  practices
• Wheeler-Lea Actgives the Federal Trade
  Commission (FTC) power to regulate unfair or
  deceptive acts or practices
• Is it deception or 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

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Social Criticisms of Marketing
Marketings Impact on Individual
Consumers Deceptive Practices High-Pressure
Selling

• Complaint
• Salespeople use high-pressure selling that
  persuades people to buy goods they had no
  intention of buying

• Response
• Most selling involves building long-term
  relationships and valued customers. High pressure
  or deceptive selling can damage these
  relationships.

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Social Criticisms of Marketing
Marketings Impact on Individual
Consumers Deceptive Practices Shoddy, Harmful, or
Unsafe Products

• Response
• Todays marketers know that customer-driven
  quality results in customer value and
  satisfaction that creates 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

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Social Criticisms of Marketing
Marketings 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.

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Social Criticisms of Marketing
Marketings 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.

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Social Criticisms of Marketing
Marketings Impact on Society as a Whole False
Wants and Too Much Materialism

• 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.

• Response
• People do have strong defenses against
  advertising an 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.

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Social Criticisms of Marketing
Marketings Impact on Society as a Whole Too Few
Social Goods

• 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

• Complaint
• Businesses oversell private goods at the expense
  of public goods and require more public goods to
  support them

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Social Criticisms of Marketing
Marketings 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 the cost of newspapers and magazines down.
  Todays consumers have alternatives to avoid
  marketing and advertising from technology.

• Complaint
• Marketing and advertising creates cultural
  pollution

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Social Criticisms of Marketing
Marketings Impact on Society as a Whole Too Much
Political Power

• Complaint
• Businesses wield too much political power over
  mass media, limiting media to report
  independently and objectively

• Response
• American industries do promote their own
  interests, and regulators are seeking to balance
  the interests of big businesses against the
  public
• Microsoft
• Tobacco

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Social Criticisms of Marketing

• Marketings Impact on Other Businesses
• Acquisition of competitors
• Marketing practices
• Unfair competitive marketing practices

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Social Criticisms of Marketing

• Marketings 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
  setting prices below cost, threatening to cut off
  business with suppliers, or discouraging the
  buying of a competitors product can hurt or
  destroy other firms

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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
• Environmentalism is an organized movement of
  concerned citizens, businesses, and government
  agencies to protect and improve peoples living
  environment

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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

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Citizen and Public Actions to Regulate Marketing

• Environmentalism
• People and organizations should operate with more
  care for the environment
• The marketing systems 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.

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Citizen and Public Actions to Regulate Marketing

• Environmentalism
• Environmental Sustainability
• Pollution prevention
• Product stewardship
• Design for environment (DFE)
• New environmental technologies
• Sustainability vision

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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

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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 companys
  products, process, and policies must evolve and
  what is needed to get there

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Business Actions Toward Socially
Responsible Marketing

• Enlightened Marketing
• Enlightened marketing refers to a companys
  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

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Business Actions Toward Socially
Responsible Marketing

• Enlightened Marketing
• Consumer-oriented marketing means that a company
  should view and organize its marketing activities
  from the consumers perspective
• Customer-value marketing means that the company
  should put most of its resources into
  customer-value-building marketing
  investmentslong-term customer loyalty and
  relationshipsby continually improving the value
  consumers receive from the firms market
  offerings
• Innovative marketing requires the company to
  continually seek real product and marketing
  improvements

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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 companys requirements,
  and societys long-run interests
• Views societal problems as opportunities
• Designs pleasing and beneficial products

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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

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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

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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

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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

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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.