Chapter 2 Managing Ethics in a Sales Environment PowerPoint presentation prepared by Dr. Rajiv Mehta New Jersey Institute of Technology

Chapter 2

Managing Ethics in a Sales Environment

PowerPoint presentation prepared byDr. Rajiv Mehta

New Jersey Institute of Technology

Copyright © Houghton Mifflin Harcourt Publishing Company. All rights reserved. 2 | 2

Chapter Outline

• What Is Business Ethics?• Salespeople Are Boundary Spanners• Applying Professional Sales Codes of Ethics• Ethical Philosophies and Moral Judgments• Creating an Ethical Work Climate• Managing the Ethical Climate• Legal Considerations in the Sales Environment• Practicing Good Ethics Among the Sales Force


Learning Objectives

After reading this chapter, you should be able to do the following:1. Define ethics and defend its importance to sales and

sales management.2. Show how salespeople are boundary spanners.3. Apply a code of ethics to sales and sales management

situations.4. Apply the criteria for making moral judgments.5. Create and manage an ethical climate.6. Observe legal regulations that affect the sales

environment.7. Model good ethical behavior among the sales force.


Business Ethics, Sales,and Sales Management

• Ethics describes the moral content of behavior.

• Business ethics is the study of how businesspeople behave when facing a situation with moral consequences.

• Sales management ethics is the specific component of business ethics that deals with ethically managing the sales function.

Source: S. Pearce/PhotoLink


Balancing Between Individual, Professional, and Organizational Values

PressuresPressures

Individual ethics• personal integrity• moral values• social influences

Organizational ethics• profit• growth• survival

Professional ethics• professional standards• group goals• prestige


Customer Vulnerability

1.

Vulnerability

1.

Vulnerability

3.

Powerlessness

3.

Powerlessness

2.

Ignorance

2.

Ignorance

Consumer-directedapproaches

Consumer-directedapproaches

lack of experience or the ability to conduct a transaction or negotiate terms of a fair deal

lack of experience or the ability to conduct a transaction or negotiate terms of a fair deal

lack of some vital knowledge, often product knowledge, needed to participate in a fair exchange

lack of some vital knowledge, often product knowledge, needed to participate in a fair exchange

lack of either competition within a marketplace or sufficient assets with which to be persuasive

lack of either competition within a marketplace or sufficient assets with which to be persuasive


Types of Codes of Ethics

3.Business

association codes

3.Business

association codes

2.Professional

codes

2.Professional

codes

1. Company codes

1. Company codes

4.Advisory group

codes

4.Advisory group

codes

Types of codes of ethics


ethical boundaries for people engaged in the same line of business; e.g., Direct Selling Association of America

ethical boundaries for people engaged in the same line of business; e.g., Direct Selling Association of America

suggested by government agencies or other special interest groups

suggested by government agencies or other special interest groups

ethical boundaries for employees ethical boundaries for employees

ethical boundaries for occupational groups such advertisers, sales representatives, doctors, lawyers, and accountants

ethical boundaries for occupational groups such advertisers, sales representatives, doctors, lawyers, and accountants


Moral Philosophy

1.

Idealism

1.

Idealism

3.

Teleology

3.

Teleology

2.

Relativism

2.

Relativism

Bases ofmoral philosophy

Bases ofmoral philosophy

Relativism is a process by which individuals reach moral decisions based more on the actions they perceive to be acceptable given a particular situation.

Relativism is a process by which individuals reach moral decisions based more on the actions they perceive to be acceptable given a particular situation.

Ideals are a set of principles by which individuals determine morality.

A moral absolute represents a rule that should always be applied with no exceptions or excuses.

Ideals are a set of principles by which individuals determine morality.

A moral absolute represents a rule that should always be applied with no exceptions or excuses.

Teleology defines morality based on the consequences of the behavior that allows some indiscretion based on the argument that the “good” that results is more important than the harm caused.

Teleology defines morality based on the consequences of the behavior that allows some indiscretion based on the argument that the “good” that results is more important than the harm caused.

Moral philosophy deals with the systematic ways that individuals recognize and resolve decisions having moral content.


Moral Judgments

1.

Moral equity

1.

Moral equity

3.

Contractualism

3.

Contractualism

2.

Acceptability

2.

Acceptability

Bases ofmoral judgments

Bases ofmoral judgments

how culturally or socially acceptable we perceive an action to be

how culturally or socially acceptable we perceive an action to be

the inherent fairness or justice in a situation

the inherent fairness or justice in a situation

the extent to which an act is consistent with stated or implied contracts and or laws

the extent to which an act is consistent with stated or implied contracts and or laws

A moral judgment is a person’s evaluation of the situation from an ethical perspective.


Unethical Sales Practices:Prohibited Actions

• bribes, gifts, kickbacks• conflicts of interest• illegal political payments• violation of laws in general• use of insider information• violations of secrecy

agreements

• falsification of sales accounts• moonlighting• violation of antitrust laws• fraud and deception• illegal payments abroad• justifying the means by the

intended end


Ethical Concerns in Selling and Sales Management

5.

Customer

relationships

5.

Customer

relationships

4.

Treatment of

coworkers

4.

Treatment of

coworkers

3.

Treatment of

competitors

3.

Treatment of

competitors

2.

Salespeople’s ethics

& their company

2.

Salespeople’s ethics

& their company

1.

Employer ethics with

their salespeople

1.

Employer ethics with

their salespeople

EthicalconcernsEthical

concerns


Employer Ethics with Their Salespeople

• Compensation– prompt, accurate payment of

salary, commissions, and bonuses as well as timely reimbursement of selling expenses

• Sales territories– fair assignment of sales territories

• Sales quotas– setting realistic achievable sales

quotas

• Hiring, promoting, and firing– sexism, racism, and ageism must

not influence managerial decisions

Source: Digital Vision


Ethical Violations

• misusing company assets• expense account padding• unauthorized use of company

funds• personal use of company time• fabrication of sales records• manipulation of customer

orders• cheating in sales contests• circumventing company policy



Treatment of coworkersa. sexual harassmentb. stealing customers from

colleaguesc. undermining coworkers

Treatment of competitorsa. disparaging competitors

and their products or services

b. tampering with competitor's products

c. competitive snooping

Ethical Violations AgainstCoworkers and Competitors



Ethical IssuesRegarding Treatment of Customers

• special gifts • entertainment • over-promising • over-selling• misrepresenting, covering

up the facts, or distorting the truth

• manipulating order forms • disclosing confidential

information • showing favoritism• conflicts of interest



Ethical Issues: Marketing Mix

1. Product quality and service• poor product quality• unsafe products• unreasonable return

policies• poor after-sales service

2. Pricing• inflated list prices• not honoring pricing

incentives• adding hidden costs


Ethical Issues: Marketing Mix

3. Distribution• using resellers that are

aggressive, dishonorable, “fly-by-night” operators

• using “bait and switch” strategies

4. Promotion• deceptive advertising• misleading product

warranties• phony promotional contests• dishonest fundraising

activities


Creating an Ethical Work Climate

3.Peer behavior

3.Peer behavior

2.Trust and

responsibility

2.Trust and

responsibility

1. Policies and

rules

1. Policies and

rules

4.Bottom-line

sales emphasis

4.Bottom-line

sales emphasis



the extent to which employees view coworkers as having high moral standards

the extent to which employees view coworkers as having high moral standards

pressure employees feel to prioritize increased sales, profits, margins, or other financial returns over all other concerns

pressure employees feel to prioritize increased sales, profits, margins, or other financial returns over all other concerns

standard business norms and regulations as defined by senior management

standard business norms and regulations as defined by senior management

how far people are trusted to behave in a responsible way and are held personally responsible for their actions

how far people are trusted to behave in a responsible way and are held personally responsible for their actions


Managing the Ethical Climate

• Sales managers should be sure of the following:– that salespersons are

aware of rules and policies

– that salespersons are rewarded and reprimanded with no favoritism or bias

– that an ethical climate is promoted at all levels of the sales organization Source: Digital Vision


Legal Considerations in theSales Environment: Federal RegulationProtecting Companies from Each Other

• Laws that ensure that a competitive marketplace exists include the following:– Robinson-Patman Act– Sherman Antitrust Act– Clayton Act

Source: Hisham Ibrahim


Federal Regulation Protecting Companies from Each Other

1. Price

discrimination

1. Price

discrimination

3.

Price fixing

3.

Price fixing

2.

Collusion

2.

Collusion

Laws protect firmsagainst

Laws protect firmsagainst

Collusion occurs when competitors conspire to set prices, agree to divide territories on a noncompetitive basis, or join together to act to the detriment of another competitor.

Collusion occurs when competitors conspire to set prices, agree to divide territories on a noncompetitive basis, or join together to act to the detriment of another competitor.

Price discrimination consists of favoring different customers on price or terms of sale when the discrimination has a harmful effect on competition. Price discrimination is allowed under two conditions:(a) The price differential is given in good faith to meet a price offered by a competitor.(b) The price differential is based upon cost savings stemming from quantities in which products are sold or delivered.

Price discrimination consists of favoring different customers on price or terms of sale when the discrimination has a harmful effect on competition. Price discrimination is allowed under two conditions:(a) The price differential is given in good faith to meet a price offered by a competitor.(b) The price differential is based upon cost savings stemming from quantities in which products are sold or delivered.

Competitors who conspire to set or maintain uniform prices and profit margins are fixing prices.

Competitors who conspire to set or maintain uniform prices and profit margins are fixing prices.



7.Reciprocity

7.Reciprocity

6.Restraint of

trade

6.Restraint of

trade

5. Exclusive dealing

5. Exclusive dealing

4.Tie-in sales

4.Tie-in sales

Laws protect firms against


Reciprocity consists of selecting only suppliers who will also purchase from the buyer—“Buy from me and I’ll buy from you.”

Reciprocity consists of selecting only suppliers who will also purchase from the buyer—“Buy from me and I’ll buy from you.”

Tie-in sales occur when purchasers are forced to buy an unwanted item or items in return for being allowed to purchase a product in heavy demand.

Tie-in sales occur when purchasers are forced to buy an unwanted item or items in return for being allowed to purchase a product in heavy demand.

Exclusive dealing consists of agreements in which a manufacturer or wholesaler grants one dealer exclusive rights to sell a product in a certain trading area or insists that the dealer not carry competing lines.

Exclusive dealing consists of agreements in which a manufacturer or wholesaler grants one dealer exclusive rights to sell a product in a certain trading area or insists that the dealer not carry competing lines.

Competitors colluding to divide a market into noncompetitive territories or to restrict competition in a market are in restraint of trade.

Competitors colluding to divide a market into noncompetitive territories or to restrict competition in a market are in restraint of trade.



11.False product descriptions

11.False product descriptions

10.False business

descriptions

10.False business

descriptions

9. Inaccurate orders/

terms of sale

9. Inaccurate orders/

terms of sale

8.Unordered goods

8.Unordered goods



Salespeople must not misrepresent the way a product is produced (e.g., claim that mass-produced products are custom-made.)

Salespeople must not misrepresent the way a product is produced (e.g., claim that mass-produced products are custom-made.)

Unordered goods are goods that are not ordered but shipped along with an existing order in hopes that the buyer will pay for them.

Unordered goods are goods that are not ordered but shipped along with an existing order in hopes that the buyer will pay for them.

Companies may not misrepresent delivery dates, fail to actually fill an order, or not fill an order in a reasonable time.

Terms of sale include warranties and guarantees, the ability of the buyer to cancel a contract or obtain a refund.

Companies may not misrepresent delivery dates, fail to actually fill an order, or not fill an order in a reasonable time.

Terms of sale include warranties and guarantees, the ability of the buyer to cancel a contract or obtain a refund.

Salespeople must never misrepresent the company’s financial strength, length of time in business, or reputation, nor may they misrepresent facts concerning its plant, equipment, or facilities.

Salespeople must never misrepresent the company’s financial strength, length of time in business, or reputation, nor may they misrepresent facts concerning its plant, equipment, or facilities.



– Business slander

– Business libel

– Product disparagement

– Unfair competition

– Business slander

– Business libel

– Product disparagement

– Unfair competition

Placing undue pressure, intimidation, or fear on the buyer into a sale is illegal.

Placing undue pressure, intimidation, or fear on the buyer into a sale is illegal.

13. Business Defamation

Laws protectagainst

12.Customercoercion


Legal Considerations in theSales Environment: Federal RegulationProtecting Consumers from Companies

• U.S. legislation protecting consumers and society from unfair business practices includes the following:– Fair Packaging and

Labeling Act– Consumer Goods

Pricing Act– Nutrition Label and

Education ActSource: David Buffington


State and Local Regulation

• State and local laws that regulate selling activities include the following:1. Uniform Commercial Code, which regulates the

performance of goods, sellers’ warranties, and the maximum allowable rates of interest, misrepresentations, and promises not kept

2. Green River Ordinances, which requires nonresidents to obtain a license from city authorities to sell goods or services direct to consumers in that vicinity

3. Cooling-Off Rules, which requires door-to-door salespeople to give written notice to customers placing orders of $25 or more that they can cancel their purchase within three days

Source: Hisham Ibrahim


Ethics and Regulationin International Sales

• In international negotiations, salespeople must not confuse varying ethical standards with the U.S. and foreign laws governing their activities.

• In planning to sell products or services to a foreign country, sales representatives should contact the commercial attaché at the U.S. embassy for information on legal requirements in conducting business there.

Source: Jack Star/PhotoLink

Source: Jack Star/PhotoLink


Practicing Good Ethics Among the Sales Force: Maintaining a Positive Ethical Climate

• Understanding ethics– Salespeople reach ethical maturity

when they place the moral treatment of others ahead of short-term personal gain.

• Measuring the ethical climate– Monitor the ethical climate with

surveys.

• Leading by example– A positive, healthy, and moral

ethical work climate begins at the top with sales management.

• Sales manager ethics checklist

Source: Triangle Images


Sales Manager Ethics Checklist

• Will the action I take diminish the value of the product we are selling?

• Will the action I take result in inequitable or disrespectful treatment of a salesperson?

• Will this action place a greater emphasis on sales or profits than on the ethical treatment of the customer?

• Will my action, either intentionally or unintentionally, motivate a salesperson to treat someone unethically?

• Would I be comfortable telling my children about the way I acted in this situation? Source: © Jack Hollingsworth/Corbis


Ten Ethical Commandments for Sales Managers and Salespeople

• For an interesting article on the ten commandments of sales ethics, see– http://www.davekahle.com/chap16.htm

• Peruse the Direct Selling Association’s code of ethics at– http://www.dsa.org/ethics/code/


Ethical Situation: What Would You Do?

Discussion Question:It’s Friday night and your family car has just broken down. You promised your wife that you would take her to her high school reunion about 200 miles away this weekend. The company car assigned to you as a sales manager is parked in the company parking lot, so you’re considering using it for the high school reunion trip. No one at work will know that you used the company car for pleasure since you often pick the car up early on Monday mornings in case you have to accompany any of your salespeople to make sales calls.


Ethical Situation: What Would You Do?

Discussion Question:Your salesperson just signed a contract with a hard bargaining customer who has never bought from your company before. You, as a sales manager, are pleased to have finally sold this potentially large account after trying for two years. But, the sales agreement price leaves your company with virtually no profit on the deal because a major part of the contract requires your company to provide a high level of expensive monthly customer service. You’re wondering whether you should recommend to the company’s customer service people to just cut back on the quality and quantity of service provided this customer, so the deal will become profitable.

Documents

Chapter 2 Managing Ethics in a Sales Environment PowerPoint presentation prepared by Dr. Rajiv Mehta New Jersey Institute of Technology