5

- DR. TRILOK SHARMA

- 9081900911 / drtriloks@gmail.com
 5
Where we were

In last Session we discussed about the importance of Code of conduct and Whistle
Blower Policy.
The key take away were:
✔ Creating an Ethical Organization involves three components-
1. Creation of the appropriate structure and systems
2. Creation of an appropriate culture, and
3. Providing an Ethical Leadership
✔ The role of leadership consists of three components-
1. Defining the Ethical Values and Standards
2. Monitoring Compliance, and
3. Institutionalizing the values
✔ Structure provides the Hardware : Culture provides the Software
✔ It is the leadership which is the power supply. An organization can only be as Ethical
as its Leader wants it to be.
✔ Of these, institutionalization is the hardest and requires a consistent and persistent
push in the early stages of the organization. Leadership plays a vital role in it.
 5
ETHICS IN MARKETING

Marketing Ethics:
Marketing ethics is an area
that deals with the moral
principles behind marketing.
Ethics in marketing applies to
different spheres such as in
product, pricing, Placing
(Distribution), promotion &
advertising etc...
 5
ETHICS IN MARKETING

❖ In this session we will attempt to highlight various Ethical issues involved

in dealing with consumers:
1. The Ethical obligation to deliver the product or service that is
supposed to be delivered,
2. To offer it at a reasonable price, not taking advantage of any possible
monopoly position
3. In case the product does have a problem, there is an obligation to
make suitable amends
4. Ethics in advertising concerns the truthfulness of the content,
standards regarding obscenity and offensiveness, not hurting the
feelings of any group, and not maligning competitors.
5. Creation of demand, especially in children and adolescents, is a
sensitive issue
 5
ETHICS IN MARKETING

The issues are

undoubtedly complex
and need to be dealt
with at multiple levels.
The resolution will
ultimately depend on the
ethical standards of its
decision makers
 5
ETHICS IN MARKETING

There is
difference
between
Legal
issues and What is
Ethical legal need
issues not to be
Ethical
 5
ETHICS IN MARKETING

CAVEAT EMPTOR : BUYER, BE

AWARE

This was the credo in the early days of capitalism. The Buyer
was expected to look at a product to his satisfaction before
buying it; but once he had bought it, the responsibility of
seller ceased.
 5
ETHICS IN MARKETING

⮚ This is still in existence…most second hand sales are still done on “as is-
where is basis”….but it is understood in such deals

⮚ But this is not the way corporation have to function today. They have certain
duties towards their customers

⮚ They have to be truthful about the product/service offered and its features;
the price to be charged; warranty against defects…and above all, not to
coerce a buyer into buying a product.
⮚ They have to follow the truthfulness in advertising, misleading
advertisements and promotion practices.
⮚ Here, besides corporations, advertising agencies are also involved.
 5
ETHICS IN MARKETING

Relationship between a Corporation and a

Buyer
⮚ Buying constitutes a contract between the buyer and seller (even though no
contract might have been formally entered into)

⮚ The sales contract is governed by the Contract Act and the Sale of Goods Act,
and a seller cannot get away with saying that there is no written contract with
buyer

⮚ This contract implies the fulfilment of certain obligations by both the parties
(Buyer has to pay and use the product with due prudence and diligence, on
the other hand seller has the obligation that the product must be what it is
purported to be, and do what it meant to do, it must be free from defects and
it should not cause any harm to buyer; if it carries risks, these need to be
disclosed….and so on. (Railway amenities are good examples)
 5
ETHICS IN MARKETING

What we
discussed above
are
Legal requirements…
 5
ETHICS IN MARKETING

Ethical Requirements
1. Duty to disclose the features of a Product
2. Pricing
3. Dealing with Defective Product/Service
4. Ethics in Advertising
4.1 Truthfulness in Advertising
4.2 Avoidance of Offensive and Indecent Material
4.3 deliberate Maligning of Competitors
4.4 Awareness about Impact on Society
 5
ETHICS IN MARKETING

The above issues may be described by using 4P’S OF MARKETING as well :

• PRODUCT & PACKAGING
• PRICE
• PLACING (DISTRIBUTION)
• PROMOTION (ADVERTISING & BRANDING)
 5
ETHICS IN MARKETING

PRODUCT &
PACKAGING 4 Ps of PRICE
Marketing
Duty to
disclose
the
Pricing
features
of a PLACING PROMOTION
Product

Dealing
with Ethics in
Defective Advertisin
Product/S g
ervice
 5
ETHICS IN MARKETING

1.Duty to Disclose the Features of a Product

⮚ Part of this comes from advertisements while part of it also comes from company
broachers, verbal marketing, information on packings.
⮚ The purpose should be to inform, not to conceal. (Also see the box 4.1 about the ULIPs
story on page 61 of your text book)

The case of pharmaceuticals

This implies a full disclosure of what the product will do or will not do, and the possible
side effects it may have. But a special problem with this category is that they are
recommended by Doctors, and it is a tricky question as to what kind of information
should be put on the packaging for the benefit of the patient. Usually companies put
some information on the product packaging but this is rarely read or understood by a
typical patient.
SO, here the Doctors also have the obligation, as a part of his
 5
ETHICS IN MARKETING

⮚ Financial Products are generally complex, and the consumer need to be

informed of all aspects of a product.
⮚ This is rarely done; on the other hand, financial companies give such
incentives to their agents that actually encourage them to suppress
vital information (Such as hidden charges).
⮚ Such deliberate non-disclosure violets all the Ethical approaches.
⮚ These kinds of unethical behavior restrict the free choice of customers
and do not recognize their right to be fully informed.
⮚ From utilitarian point of view, such behavior leads to disutility for a
vast number of people to benefit a few, and even the firms themselves
stand to lose in the long run, since they invite a regulatory backlash
and loss of trust from customers.
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖You need to fully disclose all the features of

the product and ensure that the customers
understand them.

❖Deliberate misrepresentation is, of course,

unethical beyond question, but subtle
disguising and distortions, while they can
pass the legal test, would fail to pass the
ethical test.
 5
ETHICS IN MARKETING

2. PRICING
⮚ In a free and competitive market, pricing is supposed to be decided by
the market
⮚ But markets are not necessarily free or competitive in many cases.
⮚ Monopolies are examples where the market mechanism breaks down.
⮚ Setting a monopoly price is usually not illegal but besides the ethical
aspects, extortionate pricing by monopolies attracts regulatory
attention.
⮚ The case of Microsoft’s monopolistic practices is a great example of
legal intervention (See box no. 4.2 on page63 of your text book)
 5
ETHICS IN MARKETING

⮚ Pharmaceutical Companies are also subject to constant scrutiny. These

companies are highly profitable, allegedly because of their monopoly power
with regard to lifesaving medicines for particular diseases such as
tuberculosis and for cancer treatment
⮚ Another problem is the collusion in pricing between the majors in an
Industry.
⮚ There are legal safeguards such as anti-trust regulation, but collusion is
notoriously difficult to prove. Yet when companies indulge in such unethical
behavior, it is not long before it gets noticed and public pressure is exerted
on them.
⮚ When prices for a product or service are to be recovered over a period of
time, the pricing pattern also becomes important. The so called teaser
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

You need to go not strictly by rule of

what the market can bear, but by
considering what is fair price, and
whether the consumers targeted can
actually afford that price.
 5
ETHICS IN MARKETING

3. Dealing with a defective Product/Service

⮚ It is the duty of a manufacturer or service provider to ensure that the
product/service delivers what it purports to deliver.
⮚ If it fails to do so, there are legal obligations to repair or replace the product and/or
offer suitable compensation. Such obligations are covered under warranty clauses.
⮚ Ethical issues arise in the way warranty claims are actually dealt with, the
disclaimers that covers a wide variety of contingencies, and in drawing up the
warranty clauses in such a manner that the document is outright in
comprehensible to the consumer, and difficult or costly to enforce.
 5
ETHICS IN MARKETING

⮚ The firms have many ways to hold the warranty null and void. One of them is to
say that the user has not used the product with due care; where due care would
be decided at the sole discretion of the manufacturer
⮚ Another way is to require the customer to ship back the defective product to the
manufacturer at the user’s expense; which manufacturer knows very well that
the expense of shipping will exceed the possible warranty benefits the consumer
might get under a variety of circumstances.
⮚ A particularly important case is when the defective product leads to heavy
consequential damages, or to loss of life or limbs. This was the case with the
famous case of Ford Pinto (see box 4.4 on page 67 of your text book).
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖ You need to have clear and fair policies regarding

defective products and services.

❖ It should be possible for consumers to actually use

the redress mechanism regarding their
complaints.

❖ Special care needs to be taken regarding the

safety of the product
 5
ETHICS IN MARKETING

4. ETHICS IN ADVERTISING
⮚ Our focus is on Ethics in Advertising rather than on Ethics of Advertising. It
is basically a philosophical issue.

Ethics of Ethics in Advertising

Advertising
❑ Advertising add to the cost and
eventual price to consumer
❑ It creates desire in the mind of
the consumer, not always in
right direction.
❑ It is inherently deceptive.
❑ What kind of norms should be
observed in Advertising
❑ Truthfulness (at least not intentional
misleading)
❑ Avoidance of obscene or defensive
material
❑ Deliberate maligning of competitors
❑ Appreciation of the impact on young
and impressionable minds
 5
ETHICS IN MARKETING

4.1 Truthfulness in Advertising

⮚ Now a days, the purpose of advertising (Commercial) is not so much information
dissemination as persuading a prospective buyer into buying the product.
⮚ To persuade prospective buyers is to extol the virtues of the product, describe
what it can accomplish(often with some exaggeration), and position the product
in the minds of consumers by association with another experience or benefit.
⮚ The main Ethical issue is one of Truthfulness of the claims made, if any. For
example- fairness creams makes its user white in complexion…Health drinks that
claim to make a young boy tough and taller……this kind of claims are wrong and
untruthful message is conveyed deliberately.
 5
ETHICS IN MARKETING

⮚ If messages are outright false, companies go beyond the purview of Ethics, and
they are likely to be sued and held liable.
⮚ Such suits are common in western countries…and with increased activism and
some activity by consumer courts, such legal actions are becoming more common
in India as well.
⮚ But companies are also getting more clever
⮚ They resort to more subtle devices to stay (just) short of the legal line, with the
clear intention to mislead. For Example- many over-the counter (OTC) drugs,
toothpastes, mouthwashes, etc are recommended by a person wearing white
overalls, and perhaps with a stethoscope on his person, the clear intention being
to mislead the audience into thinking that this is a Doctor who is recommending
these products, so they must be effective.
 5
ETHICS IN MARKETING

⮚ Such intentional misleading will definitely go against Kant’s notion of Categorical

imperative (deception is not to be encouraged)….supporters of such advertisement
will say-”everybody knows the truth…
⮚ But from an Ethical perspective, this cannot be supported since it is not known who
or how many get deceived and in what manner.
⮚ There may be several examples, where buyers is prompted to buy a product on the
basis of claimed benefits of some product and found that it is not working….
⮚ Hair dyers, fairness cream, weight loss medicines, power tonics, …..they all claim
best results but never talk about their side effects and user do not find any tangible
results…..
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖You need to present a fair picture of

the product or service, and what it can
or cannot do.
❖Intentional misleading, however subtle
it may be, definitely goes against the
canons of ETHICS
 5
ETHICS IN MARKETING

4.2 Avoidance of Offensive and Indecent

Materials
⮚ It is very tricky to decide what is offensive and Indecent material
⮚ Something considered obscene 50 years back may be perfectly fine now. For
example- nudity is generally considered offensive, but may be acceptable now,
if tastefully done, in particular societies.
⮚ Remember, advertisement should not offend the sensibilities of the majority of
any society, whether they conform to the obscenity laws or not. (misuse of
God, Goddesses, great leaders etc )
⮚ Poking fun at a particular community, group could be offensive (like dark
complexion girls, sardarji etc).
 5
ETHICS IN MARKETING

⮚ Gender is a sensitive issue today. An Advertisement that portrays women in the

stereotypes of being submissive, sacrificing for families, less intelligent, or
incapable of taking decision are today definitely not likely pass the test of
conformance to ethical standards.
⮚ Legal standards are present but evidently a call needs to taken by Managers as to
the standards they set for themselves.
⮚ No doubt, Advertisements are essentially a creative effort and mean to attract
attention hence often different approaches are tried.
⮚ It is difficult to specify a rigid set of dos and don’ts, but Managers need to be
sensitive to how an audience reacts to an advertisement. (See box 4.5 on page 73
of your text book)
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖You should avoid offensive and

obscene materials, and those that
could cause distress to parts of the
audience.
❖Certain issues are becoming
important today, as, for example,
gender and racial issues.
 5
ETHICS IN MARKETING

4.3 Deliberate Maligning of Competitors

⮚ Deliberately maligning of competitors is usually illegal and unethical.
definitely
⮚ Surely, highlight the good qualities of your products/services, but don’t try to
claim superiority to other products unjustifiably. (recent example- Puro salt)
⮚ Usually companies try to be just on the right side of the legal line, knowing
very well that they are clearly on the wrong side of Ethical line.
⮚ The intention remains, however, not to convey any real information about the
product, or to convey, partial, distorted, or downright, untrue information,
and to mislead the consumer with regard to the competitors products, hiding
under the dictum “caveat emtor”
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖Avoid denigration or maligning of

competitors.
❖There are usually enough virtues in
your product, without denigrating
others
 5
ETHICS IN MARKETING

4.4 Awareness about Impact on Society

⮚ It is a fact that advertisements can impact minds in different ways, especially
young and impressionable minds.
⮚ Is it Ethical that when Alcohol advertisements are banned, surrogate
advertisements ostensibly promoting mineral water and soda (Often with the
same name as the alcoholic drinks) are resorted to, with little doubt about the
real product being advertised.
⮚ How Glorifying smoking as a social lubricant, can be held ethical, while it is a
big cause of cancer…although now they are displaying the harmfulness on
packets.
 5
ETHICS IN MARKETING

⮚ The Ethical issue here is the deliberate creation of a need or desire through subtle
manipulation of young minds.
⮚ Such persuasion need not be confined to children. We can discuss a very
interesting case that of advertising and promotion of infant milk food by various
manufacturers, especially Nestle’ (See box no.4.6 on page 77 of your text book).
This case has become one of the most famous case regarding ethics in
advertising and promotion.
⮚ There can be many arguments in favor of advertising and their ways…it is
complex issue and difficult to prescribe unambiguously what is ethical in such
matters.
⮚ But one thing is sure, that the nature and extent of persuasion employed by the
company is an ethical issue.
 5
ETHICS IN MARKETING

W
ha
yo t s
u, ho
E a u
M thi s a ld
an ca n
DO age l
?? r,
 5
ETHICS IN MARKETING

❖ You need to be sensitive about how your

advertising and promotion practices impact
society
❖ Promoting violence, sexual misconduct,
exploitation of the ignorance and vulnerability
of sections of society, need to be avoided
❖ If it becomes known that the advertisements
are producing undesirable effects, or are
objected by a sizeable sections of society, they
 5
ETHICS IN MARKETING

Key Takeaways
1. The old dictum ”caveat emtor” is not ethically acceptable. Companies need
to behave legally and ethically with consumers.
2. Companies have responsibility to make their customer aware about the
product and the product should come true on that.
3. Companies need to set price fairly and not take advantage of any
monopolistic situation.
4. The so called teaser rates should also be Ethical
5. Companies should ensure proper after sales services and deal ethically in
case of defective product.
6. Advertising should be done in an Ethical way. All ethics in Advertising should
be followed