MINICASE: MKTG - 08 BUSINESS ETHICS PROGRAM

Justifying Price Increases

Topic: Marketing Research

Characters: Sam, Marketing research manager at a television station

John, General manager of a television station

Last year Sam was promoted to manager of marketing research for the sole television station
in a small metropolitan market. Sam had earned a bachelor’s degree in marketing research
three years earlier and immediately accepted an entry-level marketing research position at
the television station because its management had a reputation for honesty and helping small
businesses gain access to the mass media. The television station was sold six months ago to
an international conglomerate. At that time, the general manager was replaced by John. John
has developed a reputation in the industry of raising revenues and cutting costs.

John just finished reviewing the policies of the former general manager and noted that,
although the cost of servicing the numerous small business accounts was high, the profit
margin on these accounts was about the same as for large business accounts. John decided
that revenues and profits could be increased by 20 percent simply by charging small business
accounts proportionately more for television air time. John calls Sam and wants him to
conduct a survey that would guarantee data that would justify his price increase.

Sam is dismayed at the prospect of conducting such research. In his college coursework,
Sam had learned the importance of conducting objective, unbiased research studies.
Furthermore, Sam had won a national competition with his senior marketing research
project. Through the first two years with the television station, Sam was consistently
complimented by the small business owners that he worked with for his integrity in
conducting research studies. It was this work and these compliments that led to his
promotion to manager of marketing research.

After Sam got off the telephone with John, he stared into space and pondered his dilemma.
Jobs were not readily available in the town, and he did not wish to relocate elsewhere. Yet if
he produced the data that John wanted, it would go against his training and pride in
conducting proper research studies. And what about all of those small businesses that have
come to rely on the television station for their access to the mass media? How many would
be able to pay the higher price for television air time?

Author: Craig A. Kelley, Professor of Marketing, California State University, Sacramento.

1992 Arthur Andersen & Co, SC. All rights reserved. Page 1 of 1
MARKETING MINICASE: MKTG - 08
TEACHING NOTES
Justifying Price Increases
Teaching Notes
What Are the Relevant Facts?
1. Sam has a reputation for conducting research
projects with integrity-
2. Small businesses rely on the television station for
access to the mass media.
3. Small business accounts, although numerous and
costly to administer, have about the same profit
margin as large business accounts.
4. John has a reputation for raising revenues and
cutting costs.
5. John wants Sam to conduct a survey that would
produce data that would justify a price increase for
the small business accounts.
What Are the Ethical Issues?
1. How can Sam conduct a survey that he knows may
be biased? And should he do so?
2. What obligation does Sam have to the small
businesses that the television station serves and to
his employer?
Who Are the Primary Stakeholders?
• Sam
• John
• Owners of the television station
• Small business owners in the market
• Large businesses in the market
• Viewers of the television station’s programming
What Are the Possible Alternatives?
1. Tell John that he can’t conduct a survey that will
guarantee a certain result.
2. Let the small business owners know of John’s
intentions.
3. Conduct a survey and manipulate the data so that it
produces the results that John wants.
4. Appeal to the owners of the television station,
explaining the importance of developing small
businesses in the market.
5. Resign.
What Are the Ethics of the Alternatives?
• Questions based on the “utilitarian” perspective
1992 Arthur Andersen & Co, SC. All rights reserved.
BUSINESS ETHICS PROGRAM
1. Which alternative would provide the greatest
benefit for greatest number of stakeholders?
2. How should costs and benefits be measured
for (a) giving small business access to mass
media and (b) compromising the principles of
objective, unbiased marketing research?
3. Do the benefits of conducting objective,
unbiased research outweigh the profit
motivations of the television station
ownership?
4. What is the benefit of resigning if the next
marketing research manager is willing to
conduct the survey that John wants?
• Questions based on the “rights” perspective
1. What does each stakeholder have a right to
expect?
2. Which alternative is right for Sam? John?
3. Which alternative would you not want
imposed on you if you were a small business
owner?
• What are the rights of the viewers of the television
station?
1. Questions based on the “justice” perspective:
2. Which alternative allocates the benefits and
costs most fairly among the stakeholders?
3. Which stakeholders carry the greatest cost if
Sam resigns?
What Are the Practical Constraints?
1. There are limited job opportunities for Sam if he
decides to resign.
2. No marketing research is completely objective or
unbiased. However, efforts can be made to limit
the amount of bias and error present in the results
of marketing research studies.
3. Over time, some small businesses may or may not
be able to afford mass media exposure at any
price.
What Actions Should Be Taken?
1. What should Sam do?
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MARKETING MINICASE: MKTG - 08 BUSINESS ETHICS PROGRAM
TEACHING NOTES

2. Which alternative would you select if you were in Would you decide on the same alternative under
Sam's shoes? Why would you pick this all three theories? Why or why not?
alternative?
4. Regardless of what Sam does in this situation, how
3. Which of the ethical theories (utilitarian, rights, can he prevent this situation from arising in his
justice) make the most sense in this situation? future employment, whether at the television
station or elsewhere?

1992 Arthur Andersen & Co, SC. All rights reserved. Page 2 of 2