ETHICS IN

MARKETING
 Learning Objectives

• After studying this module, you should be able to:

– Explain the role of ethics in marketing
– Use ethical standards to solve problems
– Apply knowledge to marketing case studies
– Understand marketing’s multiple responsibilities, and
identify the major social and ethical challenges of
marketing
– Describe the principles of socially responsible marketing
– Identify government and public agencies that regulate
marketing activities and organizations
– Define laws impacting marketing activities and
organizations
 Marketing ethics
• Marketing ethics addresses
principles and standards that define
acceptable conduct in the market
place. Marketing usually occurs in
the context of an organization, and
unethical activities usually develop
from the pressure to meet
performance objectives.
• Some obvious ethical issues in
marketing involves clear cut
attempts to deceive or take
advantage of a situation
 Marketing Ethics & Consumer Rights
• The law and regulations are
generally designed to protect the
consumers from unethical practices
by businesses
• These laws and regulations
recognize that consumers have
certain basic rights in the market
place
• Each marketer must relay on his/her
own value system to determine
what is and is not ethical
THE POLITICAL-LEGAL ENVIRONMENT
• Political-legal environment Component of the
marketing environment consisting of laws and their
interpretations that require firms to operate under
competitive conditions and to protect consumer rights.

GOVERNMENT REGULATION
• Antimonopoly period of the late 19th and early 20th
centuries.
• Protecting competitors during the Great Depression.
• Consumer protection in past 40 years.
• Industry deregulation began in the 1970s and
continues today.
• Newest regulatory frontier is cyberspace.
GOVERNMENT REGULATORY AGENCIES
• Federal Trade Commission has broadest regulatory
powers over marketing.
• Others include Consumer Product Safety
Commission, the Federal Power Commission, the EPA,
and FDA.
OTHER REGULATORY FORCES
• Consumer interest organizations.
• Self-regulatory groups.
CONTROLLING THE POLITICAL-LEGAL
ENVIRONMENT
• Complying with laws and regulations serves
customers and avoids legal problems.
• Influencing the outcome of legislation through
lobbying or boycotts.
ETHICAL ISSUES IN MARKETING

• Marketing ethics Marketers’ standards of

conduct and moral values.
• Many companies create ethics programs to train
employees to act ethically.
• Employees’ personal values sometimes conflict
with employers’ ethical standards.
ETHICS IN MARKETING RESEARCH
• Invalid or unreliable research studies
• Invasion of consumer privacy, not respecting
confidentiality
• Disguising sales as research
• Failure to secure voluntary and informed
participation
• Competitive intelligence gathering
• Consumers are concerned about privacy, and
Internet has increased privacy concerns
• FTC provides
consumer information about privacy online
• The U.S. government also maintains a
Do Not Call registry to prevent unwanted
telemarketing.
ETHICS IN PRODUCT/PACKAGE STRATEGY
• Example: Package strategy.
• Larger packages are more noticeable on the shelf.
• Oddly sized packages make price comparison
difficult
• Actual versus apparent size
• Example: Product strategy.
• Misleading or inadequate information
• Excessive or environmentally-unfriendly packaging
• Product testing: on animals or insufficient testing to
reveal safety concerns
• Marketing socially controversial products
• Marketing unsafe products
ETHICS IN DISTRIBUTION
• What is the appropriate degree of control over the
distribution channel?
• Should a company distribute its products in marginally
profitable outlets that have no alternative source of supply?
ETHICS IN PROMOTION
• Truth in advertising is the bedrock of ethics in promotion.
• Marketing to children has come under increased scrutiny.
• Marketing beer to college students, including through
providing promotional items such as shirts and hats, raises ethical
questions.
ETHICS IN PRICING
• Most regulated aspect of a firm’s marketing activities.
 FOUR AREAS OF PRICING ARE CONSIDERED
UNETHICAL AND ILLEGAL:

• Deceptive Pricing: Where a salesperson tries to

influence lure customers into a store. Thereafter,
a salesperson tries to influence to buy a higher-
priced item.
• Unfair Pricing: When competitors are driven out
by low prices the company raises price back to
their former level.
 FOUR AREAS OF PRICING ARE CONSIDERED
UNETHICAL AND ILLEGAL:

• Price Discrimination: It can be unethical if

similar buyers are charged different prices for the
same based on their ability to pay.
• Price fixing: It is an agreement among firms in
an industry to set up prices at certain levels. Two
types of price fixing:
1. Horizontal price fixing
2. vertical price fixing
SOCIAL RESPONSIBILITY IN MARKETING
• Social responsibility
Marketing philosophies,
policies, procedures, and
actions that have the
enhancement of society’s
welfare as a primary
objective.
MARKETING’S RESPONSIBILITIES
• Marketing decisions must involve consideration of
general well-being and even potential global effects.
• Some organization help promote social causes or
practice socially responsible investing.
MARKETING AND ECOLOGY
• Ecology is the study of the relationship between
natural things and their environment.
• Protection of the environment influences all areas
of marketing decision making.
• Marketing system produces billions of tons of
packaging materials annually.
• Green marketing Production, promotion, and
reclamation of environmentally sensitive products.
 Marketing Ethics & Consumer Rights

• AMA has established a codes of ethics to provide

guidelines for ethical conduct. It says, in part, that,
“Marketers shall uphold and advance the
integrity, honor and dignity of the marketing
profession, by being honest in serving
consumers, clients, employees, suppliers,
distributors, and the public.”
 ETHICAL VALUES

• Honesty: to be truthful and forthright in our

dealings with customers and stakeholders.
• Responsibility: to accept the consequences
of our marketing decisions and strategies.
• Fairness: to try to balance justly the needs of
the buyer with the interests of the seller.
• Respect: to acknowledge the basic human
dignity of all stakeholders.
CONTD…….

Openness: to create transparency in our

marketing operations.

Citizenship: to fulfill the economic, legal

and societal responsibilities that serve
stakeholders in a strategic manner.
 NATURE of MARKETING ETHICS

• Ethics –doing the“right” thing

Ethical vs Legal
Personal & not punishable - Societal and Punishable

 Laws
 UNDERSTANDING ETHICAL BEHAVIOR

1st Influence - Societal Culture and Norms

 Culture dictates what is right and wrong,

so “right” changes from culture to culture.
 2nd Influence - Business Culture & Industry
Practices - B to C
• Early 1900s: Caveat Emptor
– A Latin phrase meaning “let the buyer beware” - what
you see is what you get,… not what you expected, too bad
– Belief that competition in the marketplace corrects abuses

• 1962, Kennedy’s Consumer Bill of Rights

Consumer Bill of Rights (1962)

The
The Consumer
Consumer BillBill of
of Rights
Rights (1962)
(1962)
is
is aa law
law that
that codified
codified (standardized
(standardized what
what
was
was not not previously
previously written
written down)
down) the
the
ethics
ethics of of exchange
exchange between
between buyers
buyers and
and
sellers.
sellers. ItIt includes
includes the
the buyers
buyers rights:
rights:
(1)
(1) toto safety
safety
(2)
(2) toto be
be informed
informed
(3)
(3) toto choose,
choose, and
and
(4)
(4) toto be
be heard.
heard.
TODAY: Seller’s Versus Consumers’ Rights

Sellers’ rights: Consumers’ rights:

– To introduce products – To choose
of different styles and – To be informed
sizes, provided they – To safety
are not hazardous – To be heard
– To set its own prices,
– To redress
provided no
discrimination occurs
– To consumer education
– To spend to promote – To participate in
the product marketplace decision
– To use any product making
– To have access to basic
message, provided it is
not misleading services
– To use buying – To a sustainable
incentives environment
Business Culture & Industry Practices - B to B

 Ethics of Competition
• Economic Espionage – stealing trade secrets
• Includes trespassing, wiretapping, dumpster diving
• Bribes -payment before service
• Kickbacks-payment after service

Both are illegal in U.S.,

…but very common in developing nations
 3rd Influence- Corporate Culture &
Expectations

 Corporate Culture – shown in dress codes,

work space, compensation
 Code of Ethics
 What’s in it?
 What if its breached?

 Whistle-blowers
 Personal Moral Philosophy and
Ethical Behavior

 Moral Idealism
 There is a right thing to do,
…no matter what the cost
 Favored by religious &consumer groups

 Utilitarianism
 The right thing to do is what hurts the fewest
 Favored by business executives and the military
 Concept of Social Responsibility

 Profit Responsibility-
 company’s duty is to maximize profits
 Profiteering- shrink supply to raise price & profit

 Stakeholder Responsibility-
 company’s duty is to protect the interests of owners
 people who gain from it
 Societal Responsibility –
 company’s duty is to preserve environment
 protect users of their products
 while reaping profit

• Green Marketing
 Concept Check

2. What are three possible reasons for

the present state of ethical conduct in
the United States?
A: (1) Pressure on businesspeople to make
decisions in a society with diverse value
systems. (2) Business decisions being judged
publicly by groups with different values and
interests. (3) Ethical business conduct may
have declined.
 Concept Check

1. What main rights are included in the

Consumer Bill of Rights?
A: The rights to safety, to be informed,
to choose, and to be heard.
 Concept Check

2. What is meant by moral idealism?

A: Moral idealism is a personal moral
philosophy that considers certain
individual rights or duties as
universal, regardless of the outcome.
 Concept Check

1. What is meant by social

responsibility?
A: Social responsibility means that
organizations are a part of a larger
society and are accountable to that
society for their actions.
 Concept Check

2. Marketing efforts to produce,

promote, and reclaim
environmentally sensitive products
green marketing
are called _____________.
 Ethics

Ethics
Ethics are
are the
the moral
moral principles
principles and
and values
values
that
that govern
govern the
the actions
actions and
and decisions
decisions of
of
an
an individual
individual oror group.
group.
 Laws

Laws
Laws are
are society’s
society’s values
values and
and standards
standards
that
that are
are enforceable
enforceable in
in the
the courts.
courts.
 Code of Ethics

A
A code
code of
of ethics
ethics is
is aa formal
formal statement
statement of
of
ethical
ethical principles
principles and
and rules
rules of
of conduct.
conduct.
 Whistle-blowers

Whistle-blowers
Whistle-blowers areare employees
employees who
who
report
report unethical
unethical or
or illegal
illegal actions
actions of
of their
their
employers.
employers.
 Moral Idealism

Moral
Moral idealism
idealism is is aa personal
personal moral
moral
philosophy
philosophy that
that considers
considers certain
certain
individual
individual rights
rights or
or duties
duties as
as universal,
universal,
regardless
regardless of
of the
the outcome.
outcome.
 Utilitarianism

Utilitarianism
Utilitarianism isis aa personal
personal moral
moral
philosophy
philosophy that
that focuses
focuses onon “the
“the greatest
greatest
good
good for
for the
the greatest
greatest number,”
number,” byby
assessing
assessing the
the costs
costs and
and benefits
benefits of
of the
the
consequences
consequences of of ethical
ethical behavior.
behavior.
 Social Responsibility

Social
Social responsibility
responsibility means
means thatthat
organizations
organizations are
are aa part
part of
of aa larger
larger society
society
and
and are
are accountable
accountable toto that
that society
society for
for
their
their actions.
actions.
 Green Marketing

Green
Green marketing
marketing consists
consists of
of marketing
marketing
efforts
efforts to
to produce,
produce, promote,
promote, and
and reclaim
reclaim
environmentally
environmentally sensitive
sensitive products.
products.
 Some Morally Difficult Situations in Marketing

• You are considering hiring a

product manager who just left a
competitor’s company. She would
be more than happy to tell you all
the competitor’s plans for the
coming year. What do you do?
 Some Morally Difficult Situations in Marketing

• You have a chance to win a big

account that will mean a lot to you
and your company. The purchasing
agent hints that a “gift” would
influence the decision. Your
assistant recommends sending a fine
color television set to the buyer’s
home. What do you do?
 Some Morally Difficult Situations in Marketing

• You are interviewing a capable

woman applicant for a job as a
salesperson. She is better qualified
than the men just interviewed.
Nevertheless, you know that some
of your important customers prefer
dealing with men, and you will lose
some sales if you hire her. What
do you do?
 Some Morally Difficult Situations in Marketing

• You are a sales manager in an

encyclopedia company. Your
competitor’s salespeople are getting
into homes by pretending to take a
research survey. After they finish
the survey, they switch to their
sales pitch. This technique seems
to be very effective. What do you
do?