Chapter 8 - Ethics and Marketing

Introduction

 Marketing is at the heart of business activities. It is "an organizational

function and a set of process for creating, communicating, and delivering
value to customers and for managing customer relationships in a way that
benefits the organization and the stakeholders"
 Marketing involves all the aspects of creating a product or service and
bringing it to market where an exchange can take place
 Marketing ethics examines the responsibilities with bringing a product to the
market, promoting it to the buyers, and exchanging it with them
 Four P’s of marketing (product, price, place, promotion) raise important
ethical issues aside the whole marketing process.
 What responsibilities do producers have for the quality and safety of
their products?
 Who is responsible for harms caused by the product?
 Ethical constraint on fair pricing?

Marketing: An Ethical Framework

 The ethical framework for marketing does not determine the right answer
but instead identifies the rights, responsibilities, duties, obligations, causes
and consequences
 The simple issue in which two parties come together and freely agree to an
exchange is prima facie ethically legitimate.
 This assessment is prima facie because like all agreements certain conditions
must be met before we can conclude that autonomy has in fact been
respected and mutual benefit has been achieved
 The respect for autonomy refers to the right based ethical theory whereas
mutual benefit refers to the utilitarian approach
 Important to keep three concerns in mind as we approach any ethical issue in
marketing:
1. The rights based ethical tradition would ask to what degree the
participants are respected as free and autonomous agents rather than
treated simply as means to the end of making a sale
2. The utilitarian tradition would want to know the degree to which the
transaction provided actual as opposed to merely apparent benefits
3. Every ethical tradition would also wonder what other values might be
at stake in the transaction
 In order to determine if someone is being treated with respect in marketing
situations there are two conditions:
 The person must freely consent to the transaction
 Practices aimed at vulnerable populations such as children and the
elderly also raise questions of voluntariness
 Example: the more consumers need a product the less free they are
to choose and therefore they deserve more protection in the
marketplace
 Consent should not only be voluntary but also informed
 Deception and fraud violate this condition
 The complexity of many consumer products and services can mean
that consumers may not understand fully what they are purchasing
 An uninformed consumer can be an easy target for quick profits
 Serious ethical issues arise when marketing practices either deny
consumers full information or rely on the fact that they lack relevant
information understanding
 Second ethical concern looks to the alleged benefits obtained
through market exchanges. (Many purchases don’t result in actual
benefits)
 Unsafe products don’t further the utilitarian goal of maximizing overall
happiness
 Third set of factors that needs to be considered in any ethical analysis
of marketing are values other than those served by the exchange itself
(Such primary social values like justice, fairness, health, safety…can be
jeopardized by some marketing practices)
 One must also consider what the true costs of production are. Must
consider the externalities i.e. the costs that are not integrated within
the exchange between the buyer and seller (even if the buyer and
seller receive benefits there are other parties involved like the
environment or health benefits like pesticides…)
Responsibility for Products: Safety and Liability

 Business have an ethical responsibility to design, manufacture, and promote

its products in ways that avoid causing harm to consumers

 Contractual Standards for Product Safety:

 Caveat emptor (let the buyer beware) approach understands

marketing on a simple model of a contractual exchange between buyer
and seller
 This perspective assumes that every purchase involves that informed
consent of the buyer and therefore is ethically legitimate and buyers
have the responsibility to look out for their own interests and protect
their own safety when buying a product
 From this perspective, business has only the responsibility to provide
a good or service at an agreed upon price
 The social contract tradition in ethics holds that all ethical
responsibilities can be understood within this contractual model and
that the only duties we have are those that we have freely taken on
within a social contract
 Means that in a business unless a seller explicitly warrants a safe
product buyers are liable for any harm they suffer
 But even this approach places ethical constraints on the seller.
Sellers have a duty not to coerce, defraud, deceive buyers..
 Implied Warranty of Merchantability: In the law and holds that in
selling a product a business implicitly offers assurances that the
product is reasonably suitable for its purpose. Law holds that business
has duty to ensure that its products will accomplish their purpose
Although the contract approach believes that consumers
adequately understand products well enough that they can reasonably
be expected to protect themselves, consumers don’t always fully
understand products and aren’t always free to choose not to purchase
something’s
 Implied warranty shifts the burden of proof from consumers to
producers by allowing consumers to assume that products are safe for
ordinary use
 Ethical basis for this decision is the assumption that consumers
would not give their consent to a purchase if they had reason to
believe that they would be harmed by it when used in a normal way
(by bringing goods and services to the market producers implicitly
promising that their products were safe under normal use)
 Many businesses try to limit their liability by disowning any
promise or warranty (ex product sold as is or offer limited warranty)
 Tort Standards for Product Safety:

 Negligence provides a second avenue for consumer to hold producers

responsible for their products
 The difference between the contract law and the tort law (negligence)
calls for two different ways to understand ethical duties:
1. Under the contract model, the only duties that a person owes
are those that have been explicitly promised to another party
2. Under the tort law, we all owe other people certain general
duties even if we have not explicitly and voluntarily assumed
them (I owe people a general duty to not put them at
unnecessary and avoidable risk)
 Negligence is an important component of the tort law it involves a
type of ethical neglect specifically neglecting one’s duties to exercise
reasonable care not to harm other people
 Strict liability: producers owe compensation to consumers for any
harm caused by their products
 Negligence codifies two fundamental ethical precepts: ought implies
can & one not ought harm others
 It involves foreseeing the consequences of our acts and failing to
take steps to avoid the likely harmful consequences
 The standards of foreseeability raise challenges:
1. One standard would only hold people accountable for the
harms they actually foresaw occurring (not very good cause
someone could say they didn’t know of harm nor expect it and
get away with it)
 Preferable standard would require people to avoid harms
that if they haven’t actually thought of them should have
thought of them
 Reasonable person standard: standard most often used in legal cases
and seems to better capture the ethical goals of the very concept of
negligence. People are expected to act reasonably and are held
accountable when they don’t
 Problem with this is that the standard that we assume a reasonable
person to be might not always be a smart person.
 When applied to producers the standard of average person sets the
bar too low
SO: this causes us to use reasonable standard person as a normative
rather than descriptive standard

 Strict Product Liability:

 The negligence standard of tort law focuses on the sense of
responsibility that involves liability or fault
  It asks what the business should have foreseen or did foresee but
ignores that some cases a consumer may be injured by a product in
which no negligence was involved (so whose fault is it?)
 The legal doctrine of strict product liability holds manufacturers
accountable in such cases

 Ethical Debates on Product Liability:

 Defenders of the strict product liability defend it in two ways:

1. By holding the business strictly liable for any harm in their
products cause, society creates a strong incentive for
businesses to produce safer goods and services
2. Holding businesses liable allocates the costs to the party
best able to bear the financial burden
 Arguments:
1. Incentive argument ignores the nature of strict liability.
Holding someone accountable for harm can only provide an
incentive if they could have done otherwise but this would
mean that the harm was foreseeable and thus negligent but
strict liability is not negligence
Note: accountability can be seen as a matter of utilitarian efficiency
Note: when a business is held accountable, the costs for injuries will eventually fall
on those consumers who buy the product through higher costs.

Responsibility for Products: Advertising and Sales

 The ethically acceptable way to influence others through marketing are

persuading, asking, informing, and advising
 Unethical ways to market include threats, coercion, deception, manipulation,
lying
 To manipulate something is to guide or direct its behavior
 When I manipulate someone I explicitly don’t rely on their own reasoned
judgment but instead direct their behavior thus seek to bypass their
autonomy
 One way to manipulate is deception. When we know things like someone’s
motivations, interests, desires, beliefs, dispositions… (Psychology) easier to
manipulate. We use motivators like guilt, pity, anxiety, fear, desire to please,
pride, and conformity… to do so.
 This plays into marketing because marketing research reveals these
psychologies’ about people and the market and thus helps businesses deceive
people.
 The more we learn about ones psychology the more we are able to satisfy
their desires and manipulate their behavior
Ethical Issues in Advertising

 The general ethical defense of advertising reflects both utilitarian ethics and
Kantian ethics
 Advertising provides information for market exchanges and therefore
contributes to market efficiency and to overall happiness. Also contributes to
the information necessary for autonomous individuals to make informed
decisions assuming that the info is accurate and true (utilitarian)
 Kantian ethics has the strongest objection to manipulation no matter if it
is successful or not
 Utilitarianism offers a more conditional critique to manipulation is when
it’s done for the greater good. In general though, because most manipulation
is done to further the manipulators own ends at the expense of the
manipulated, utilitarian’s would be inclined to think that manipulation
lessens overall happiness.
 Marketing practices that seek to discover which consumers might already
and independently be predisposed to purchasing a product are ethically
legitimate.
 On the other hand, marketing practices that seek to identify populations that
can be easily influenced and manipulated are not ethically legitimate

Marketing Ethics and Consumer Autonomy

 The majority of advertisement provides information to consumers, and the

information contributes to an efficient function of economic markets
 Defenders of adverting say that advertising contributes to the overall
economy
 Believe that over time advertising will weed out deceptive ads and
practices
 People will benefit from business marketing efforts because they learn
about products they may need or want, get the information that helps them
make responsible choices.
 Economist John Kenneth Galbraith claimed that advertising and marketing
were creating the very consumer demand that production then aimed to
satisfy
 Called it the dependence effect: the products the consumers
demanded depended upon what producers had to sell
 Had three unwelcome implications:
1. by creating wants, advertising was standing the law of
supply and demand on its head. Rather than supply being a
function of demand, demand turns out to be a function of
supply.
2. Advertising and marketing tend to create irrational and
trivial consumer wants and this distorts the entire economy
 3. By creating consumer wants, advertising and other
marketing practices violate consumer autonomy.
Consumers who consider themselves free because they are
able to purchase what they want are not in fact free if those
wants are created by marketing
 Ethically the crucial point with this assertion is that advertising
violates consumer autonomy. The law of supply and demand is
reversed, and the economy of the affluent society is contrived and
distorted only if consumer autonomy can be violated and consumers
manipulated by advertisings ability to create wants
 One idea is that advertising controls consumer behavior whereas
autonomy involves making reasoned and voluntary choices and that
claim that advertising violates one’s autonomy means that advertising
controls consumer choice

Marketing to Vulnerable Populations

 When target marketing is used as a means for identifying likely customers

based on common beliefs and values is ethically acceptable
 On the other hand, when target marketing is done when it is targeting
specific people by exploiting specific things like fear or anxiety. This occurs
by trying to manipulate people by appealing to non-rational factors like fear
or anxiety instead of having straightforward informative ads. This isn’t
ethically acceptable
 A consumer is considered vulnerable when they are unable in some way to
participate as a fully informed and voluntary participant in the market
exchange.
Valid market exchanges make several assumptions about their
participants: they understand what they are doing, they have considered
their choice, they are free to decide....
 Consumer vulnerability therefore is when a person has impaired ability
to make an informed consent to the market exchange. They lack the
intellectual capacities, psychological abilities, or maturity to make informed
and considered consumer judgments (results in financial harm from
unsatisfactory market exchange)
 General vulnerability: occurs when someone is susceptible to some
physical, psychological, or financial harm
 Example of consumer vulnerability: targeting children would aim at
selling products to consumers who are unable to make thoughtful and
informed decisions
 Example of general vulnerability: target populations that are
vulnerable in the general sense. Like an insurance company markets
flood protection to homeowners living in an area that has lots of
floods
 Forms of marketing to a vulnerable population are:
 1. first marketing strategy appeals to the considered
judgments which consumers presumably have settled on
over the course of their lives
2. marketing strategy that aims to sell products by
manipulating people by appealing to non rational factors
like fear
3. marketing strategy that aims to sell to consumers that
become vulnerable to harm because they are vulnerable as
consumers (tobacco alcohol)
4. marketing strategy that is targeted at consumers who
become vulnerable because they are vulnerable in some
more general sense (law firms)
5. marketing strategy under campaign called stealth or
undercover marketing and involves potentially all consumer
targets. This campaign strategy refers to situations where
we are subject to directed commercial activity without our
knowledge
 Buzz marketing
 Word of mouth marketing
 Marketers believe that this campaign is extremely
effective because the consumer’s guard is down; she is not
questioning the message as she might challenge a
traditional advertising campaign. Consumers don’t seek out
the communicator’s vested interest, they see the
communication per person and trust the communicator
much more than they would trust an advertisement or
other marketing material
 Under this method subversion and deception is involved to
encourage a products use or deception surrounding the fact
that a practice is part of a marketing campaign or it is
challenging to argue that the practice remains ethical
 From a universal perspective, there is a violation of trust in the
communication which could also lead to a sense of betrayal so
the consumer can no longer trust in the communication which
could also lead to a sense of betrayal so the consumer may no
longer trust the company itself
 Utilitarianism doesn’t agree with this form of marketing
because if the consumer loses trust in the company and stop
buying its products then neither the company nor the
consumer is benefiting

Supply Chain Responsibility

 - In creating a product, promoting it, and bringing it to the market, the
marketing function of business involves a wide range of relationships with
other commercial entities
 Recently, in regards to ethics, we focus on the responsibility that a firm has
for the activities of these other entities in other words the supply chain
responsibilities
 The doctrine of respondent superior or let the master answer holds a
principle (ex employer) is responsible for the actions of an agent (ex
employee) when that agent is acting in the ordinary course of his or
her duties to the principle
Example: company held responsible for the damages caused by a
car crash caused by an employee doing company business
 The justification for this is that the agent is acting on the principles
behalf, at the principles direction, and that the principle has direct
influence over the agents actions
 In terms of businesses responsibility for their suppliers: suppliers
often act at the direction of the business and business often exercise
significant influence over the actions of its suppliers

Sustainable Marketing

 The four characteristics of marketing (4P’s) are a helpful way to structure

and understand sustainable green marketing
 Product:
1. the type of products we are creating
The most significant progress toward sustainability will
depend upon the sustainability of products themselves
Aside what the consumer wants, we need to develop
products that are also good for the environment
Meeting the real needs of present and future generations
within ecological constraints can be understood simply as
a refinement of this traditional marketing objective
 Need to find balance between financial and ecological
sustainability
2. Another aspect is the design and creating of the products:
environmental regulation creates a design problem.
A product or production process that pollutes and wastes
resources is a poorly design product or production process
 regulation prevents that
 Marketing departments should also be involved in the
design of products finding ways to build sustainability into
the very design of each product
3. Also, marketing professionals can influence the packaging
of products. Need to make sure packaging doesn’t harm the
environment
  These three things come together clearly within the context of
extended producer responsibility and take back legislation in
which a firm is held responsible to take back and recycle all the
products it introduces into the marketplace
 Take back legislation provides strong incentives for
redesigning products in ways that make it easier to reuse and
recycle

 Price:

 Sustainability asks to focus on the environmental costs of

resources, the “natural capital” on which most firms rely and
points out that environmental costs are seldom factored into
the price of most products
 Government regulation is needed to do so otherwise
internalizing the costs of natural capitalism into its products
will put a company at a comparative disadvantage
 A more reasonable sustainable marketing strategy is to price
sustainable products at a comparative advantage to other
products

 Promotion

 Marketing has a responsibility to help shape consumer

demand encouraging consumers to demand more sustainable
products from business
 Sustainable marketing can help create the social meanings and
consumer expectations supportive of sustainable goals
 A part of advertising is the educational aspect- consumers
learn from advertising and markets have a responsibility as
educators
 Consumers learn from advertising and marketers have a
responsibility as educators
 One part of product promotion is green labeling. Saying a
product is good for environment form of promotion
 Green washing is the practice of promoting a product by
misleading consumers about the environmentally beneficial
aspects of the product

 Placement:

1. Recent advances n marketing have emphasized just in time

inventory control, large distribution centers, and
sophisticated transportation schemes. New sustainability
options can be added to this model, which emphasizes fuel
efficiency, and alternative fuel technologies used in
 transportation, more localized and efficient distribution
channels, and a greater reliance on electronic rather than
physical distribution. More efficient distribution channels
can also serve the underserved base of the pyramid
consumers as well. (Example online publishing)
2. Reverse channels refers to the growing marketing practice
of taking back one’s product after their useful life. The life
cycle responsibility and take back models fall into
marketing departments
 the same department that is responsible for sending a
product out into the marketplace should expect the
responsibility of finding ways to take back the product to
dispose, recycle, or reuse it.