09-12-2022

Consumers and Business Ethics Ethical issues and the consumer

Module - 7

MISSION VISION CORE VALUES MISSION VISION CORE VALUES

CHRIST is a nurturing ground for an individual’s Excellence and Service Faith in God | Moral Uprightness CHRIST is a nurturing ground for an individual’s Excellence and Service Faith in God | Moral Uprightness
holistic development to make effective contribution to Love of Fellow Beings holistic development to make effective contribution to Love of Fellow Beings
the society in a dynamic environment Social Responsibility | Pursuit of Excellence the society in a dynamic environment Social Responsibility | Pursuit of Excellence

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Consumers as stakeholders (I) Ethical issues, marketing and the consumer

• Commonplace argument that businesses are best served
by treating their customers well Area of marketing Some common ethical
problems
Main rights involved

Product policy Product safety Right to safe and efficacious products

Fitness for purpose
• So why continued ethical abuses of consumers and poor Marketing Deception Right to honest and fair
reputation of marketing and sales professions? communications Misleading claims
Intrusiveness
communications

Promotion of materialism Right to privacy

Creation of artificial wants
• Examples of organizations accused of treating customers Marketing
management
Perpetuating dissatisfaction
Reinforcing stereotypes
in a questionable manner:
Pricing Excessive pricing Right to fair prices
Price fixing
Predatory pricing
– Multinational drug companies Deceptive pricing

– Fast food and soft drink companies Distribution Buyer-seller relationships Right to engage in markets
– Banks and credit card companies Gifts and bribes
Slotting fees Right to make a free choice
– Mobile phone companies Marketing strategy Targeting vulnerable Right to be free from discrimination
– Technology companies consumers Right to basic freedoms and amenities
Consumer exclusion
– Schools
Market research Privacy issues Right to privacy

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Consumers as stakeholders (II) Ethical issues in marketing management – product policy

• At the most basic level, consumers have a right to products
Consumer rights can be seen as: and services which are safe, efficacious, and fit for the
• inalienable entitlements to fair treatment when purpose for which they are intended
entering into exchanges with sellers. They rest upon
the assumption that consumer dignity should be
respected, and that sellers have a duty to treat • Manufacturers ought to exercise due care in establishing
consumers as ends in themselves, and not only as that all reasonable steps are taken to ensure that their
means to the end of the seller. products are free from defects and safe to use (Boatright, 2009:
295)
– Debate over what constitutes fair treatment
• Consumers’ right to a safe product is not an unlimited right
– In the past, consumer rights based on caveat emptor
• But Caveat emptor eroded by changing expectations &
consumer laws • Safety also a function of the consumer and their actions
and precautions

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Ethical issues in marketing management – marketing Ethical issues in marketing management – pricing
communications (I)
Criticisms of advertising broken down into two • Pricing issues are central to the notion of a fair exchange
levels between the two parties, and the right to a fair price - key
rights of consumers as stakeholders
• Individual
– Concerned with misleading or deceptive practices that
seek to create false beliefs about specific products or • 4 types of pricing practices where ethical problems may
companies in the individual’s consumers’ mind arise:
• Social – Excessive pricing
– Concerned with the aggregate social and cultural – Price fixing
impacts, such as promoting materialism – Predatory pricing
– Deceptive pricing
https://www.youtube.com/watch?v=qN3wckZTSwU
– https://www.youtube.com/watch?v=j0RtPoM2O80

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Ethical issues in marketing management – marketing

communications (II)
Misleading and deceptive practices
• Marketing communications aimed to:
– Inform consumers about goods and services
– Persuade consumers to purchase

• “Deception occurs when a marketing communication either

creates, or takes advantage of, a false belief that
substantially interferes with the ability of people to make
rational consumer choices” (Boatright, 2009: 285)

• The UK’s Advertising Standards Authority says ads should

be “legal, decent, honest and truthful”
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Ethical issues in marketing management – marketing Ethical issues in marketing management – distribution
communications (III)
Social and cultural impact on society • Concerned with relations between
• Objections that marketing communications: manufacturers and firms, and firms and
– Are intrusive and unavoidable market
– Create artificial wants • Primary concern is product supply chain
– Reinforce consumerism and materialism
– Example: retailers demanding ‘slotting fees’ from
– Create insecurity and perpetual dissatisfaction
manufacturers in order to stock their products
– Perpetuate social stereotypes
• Such criticisms have been common for at least the last 30 • Dealt with in detail next chapter
years
• competition
• https://www.youtube.com/watch?v=j9AEtFdb1_4

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Ethical issues in marketing strategy – vulnerable customers

• Criticisms when there is a perceived violation of the

consumers right to be treated fairly (duty of care):

– Targeting vulnerable consumers

– Consumers may be vulnerable because;
• Lack sufficient education or information
• Easily confused or manipulated due to old age and
senility
• Are in exceptional physical or emotional need
• Lack the necessary income
• Too young
– Perceived harmfulness of the product
• Examples: cigarettes and alcohol
• Here, the focus shifts from rights/duties to consequences

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Ethical issues in marketing strategy –customer exclusion

• Takes variety of forms

– Access exclusion
– Condition exclusion
– Price exclusion
– Marketing exclusion
– Self-exclusion

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Ethical issues in market research

• Main issue is possible threats posed to the

consumer’s right to privacy

• Recent areas of concern: Globalisation and consumers

– Personal information available online
• Example: Phorm’s advertising targeting service, which British
Telecom trialled without consent The ethical challenges of the global marketplace
– Use of genetic testing results by insurance companies
• Predict likelihood of an individual’s genetic predisposition to
certain conditions and illnesses
• ‘genetic discrimination’?
MISSION VISION CORE VALUES
CHRIST is a nurturing ground for an individual’s Excellence and Service Faith in God | Moral Uprightness
holistic development to make effective contribution to Love of Fellow Beings
Excellence and Service the society in a dynamic environment Social Responsibility | Pursuit of Excellence
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Issues around marketing in a global marketplace Consumer sovereignty

Globalization has brought a new set of problems and ● Concept suggests that under perfect competition, consumers drive
issues relevant to consumer stakeholders market
● Two ethical limitations based on fairness
• Different standards of consumer protection ● Consumer sovereignty – customer is king
– Consumer protection varies widely in terms of government ○ Consumer sovereignty has three elements (Smith, 1995)
regulation and company standards
■ Consumer capability
– Example of tobacco ■ Information
• Exporting consumerism and cultural homogenization ■ Choice
– Global brands’ huge success has led to increasing concerns over ● How is consumer sovereignty to be assessed? Consumer
standardization and uniformity sovereignty test
– Considerable debate around role of advertising in promoting
consumerism in emerging and transitional economies

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Consumer sovereignty test

● The role of markets in addressing poverty and development
Globalization also raises prospect of firms targeting
products to low income consumers
• ‘Bottom of the pyramid’ concept
• Examples of successful initiatives:
– Microcredit institutions (e.g. Brazil)
– High nutrition yoghurt company (Bangladesh)
– One Laptop Per Child
• Criticism
– Bottom of the pyramid is a mirage: profit opportunities limited
– Social purpose and CSR probably more important than profit
motive in developing inclusive markets

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Ethical consumption
Ethical consumption is the conscious and deliberate decision
to make certain consumption choices due to personal
moral beliefs and values
• Recent 51-market survey on consumer attitudes:
– 70% of global consumers said their purchase decision could be influenced
by a product supporting a worthy cause

Consumers and corporate citizenship – But socially-desirable answers may not correspond to behaviour

Consumer sovereignty and the politics of purchasing • Consumer activism on increase – positive

• Downside of ethical consumption

MISSION
CHRIST is a nurturing ground for an individual’s
holistic development to make effective contribution to
the society in a dynamic environment
– Motives of corporations will be primarily economic rather than moral
– Consumers may decide they no longer want to or can afford to pay extra
for these ethical ‘accessories’
– If purchases are ‘votes’ then rich get more power than poor
VISION CORE VALUES
Excellence and Service Faith in God | Moral Uprightness
Love of Fellow Beings
Social Responsibility | Pursuit of Excellence Excellence and Service
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Product recapture
The challenge of sustainable consumption From a linear to a circular flow of resources

(a) Linear flow of resources

Extraction Manufacture Distribution Consumption Disposal

(b) Circular flow of Extraction

Manufacture
resources

Product
Distribution
recapture

Consumption
Disposal

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Sustainable consumption

Sustainable consumption is the uses of goods and services that responds to

basic needs and bring a better quality of life , while minimizing uses of natural
resources, toxic materials, and emission of waste and pollutants over the life
cycle, so as not to jeopardize the needs of future generations.

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Steps towards sustainable consumption

• Producing environmentally responsible products
– e.g. Eco-labels are important
• Product recapture
– See Figure, next slide
• Service replacements for products
– Selling (e.g.) mobility rather than cars, or leasing photocopiers
• Product sharing
– Examples: car-sharing, washing-machine-pooling
• Reducing demand
– Example of China’s ban on free plastic bags
– Implementing the polluter pays principle to create financial
incentive for lower consumption

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