Marketing Ethics and Social Responsibility 20. 20 - 2 Learning Objectives After studying this chapter, you should be able to: 1. Identify the major social

Marketing Ethics and

Social Responsibility2020

20 - 2

Learning Objectives

After studying this chapter, you should be able to:

1. Identify the major social criticisms of marketing

2. Define consumerism and environmentalism and explain how they affect marketing strategies

3. Describe the principles of socially responsible marketing

4. Explain the role of ethics in marketing

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Chapter Outline

1. Social Criticisms of Marketing

2. Citizen and Public Actions to Regulate Marketing

3. Business Actions Toward Socially Responsible Marketing

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Social Criticisms of Marketing

Marketing’s Impact on Individual Consumers

• High cost of distribution• High advertising and promotion costs• Excessive markups• Deceptive practices

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Complaint: Intermediaries mark up

prices beyond their value due to inefficiencies and unnecessary or duplicative services

Response: Markups reflect the cost

of the services that consumers expect

• Convenience• Larger stores and

assortments• More service• Return privileges

Marketing’s Impact on Individual Consumers

High Cost of Distribution

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Complaint: Prices are inflated to

absorb advertising and sales promotion costs, and packaging only adds to the psychological not functional value of the product

Response: Advertising does add to

product cost but also to product value by informing potential customers of the availability and merits of the product

Marketing’s Impact on Individual ConsumersHigh Advertising and Promotion Costs

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Complaint: Companies mark up

products excessively

Response: Most businesses try to

deal fairly with consumers because they want to build relationships and repeat business

Marketing’s Impact on Individual ConsumersExcessive Markups

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Marketing’s Impact on Individual ConsumersDeceptive Practices

Complaint: Companies use deceptive practices that lead customers to believe they will get more value than they actually do. These practices fall into three categories:

• Deceptive pricing• Deceptive promotion• Deceptive packaging

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Deceptive pricing includes practices such as falsely advertising “factory” or “wholesale” prices or a large price reduction from a phony high retail list price

Deceptive promotion includes practices such as misrepresenting the product’s features or performance or luring the customer to the store for a bargain that is out of stock

Deceptive packaging includes exaggerating packaging contents through subtle design, using misleading labeling, or describing size in misleading terms

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Legislation to protect consumers from deceptive practices• Wheeler-Lea Act—gives the Federal Trade Commission

(FTC) power to regulate “unfair or deceptive acts or practices”

Is it deception, alluring, or puffery that is just an exaggeration for effect?

• Products that are harmful• Products that provide little benefit• Products that are not made well

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Complaint: Salespeople use high-

pressure selling that persuade people to buy goods they had no intention of buying

Response:Most selling involves

building long-term relationships and valued customers. High-pressure or deceptive selling can damage these relationships.


High-pressure selling

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Complaint: Products have poor

quality, provide little benefit, and can be harmful

Response: Today’s marketers know

that customer-driven quality results in customer value and satisfaction that create profitable customer relationships. There is no value in marketing shoddy, harmful, or unsafe products.


Shoddy, Harmful, or Unsafe Products

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Complaint: Producers follow a program

of planned obsolescence, causing their products to become obsolete before they actually need replacement. Producers also continually change consumers’ concepts of acceptable styles to encourage more and earlier buying.

Response: Planned obsolescence is really

the result of competitive market forces leading to ever-improving goods and services. Marketers know that customers like style changes and want the latest innovations even if older models still work.


Planned Obsolescence

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Complaint:

American marketers serve disadvantaged customers poorly. Some retail companies “redline” poor neighborhoods and avoid placing stores there.

Response: Some marketers profitably

target these customers and the FTC has taken action against marketers that do advertise false values, wrongfully deny service, or charge disadvantaged customers too much.


Poor Service to Disadvantaged Consumers

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Complaint: The marketing system urges

too much interest in material possessions. People are judged by what they own rather than who they are, creating false wants that benefit industry more than they benefit consumers.

Response: People do have strong

defenses against advertising and other marketing tools. Marketers are most effective when they appeal to existing wants rather than creating new ones. The high failure rate of new products shows that companies cannot control demand.

Marketing’s Impact on Society as a WholeFalse Wants and Too Much Materialism

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Marketing’s Impact on Society as a WholeFalse Wants and Too Much Materialism

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Complaint: Businesses oversell

private goods at the expense of public goods and require more public goods to support them

Response: There needs to be a

balance between private and public goods

• Producers should bear full social costs of their operations

• Consumers should pay the social costs of their purchases

Marketing’s Impact on Society as a WholeToo Few Social Goods

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Complaint: Marketing and advertising

create cultural pollution

Response: Marketing and advertising are

planned to reach only a target audience, and advertising makes radio and television free to users and helps to keep down the costs of newspapers and magazines. Today’s consumers have alternatives to avoid marketing and advertising from technology.

Marketing’s Impact on Society as a WholeCultural Pollution

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Marketing’s Impact on Society as a WholeCultural Pollution

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Complaint: Businesses wield too much

political power over mass media, limiting media to report independently and objectively

Response: American industries do

promote their own interests, and regulators are seeking to balance the interests of big business against the public

• Microsoft• Tobacco

Marketing’s Impact on Society as a WholeToo Much Political Power

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Marketing’s Impact on Other Businesses

• Acquisition of competitors• Marketing practices• Unfair competitive marketing practices

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Marketing’s Impact on Other Businesses

Acquisition of competitors can sometimes be good for society when the acquiring company gains economies of scale that lead to lower prices

Marketing practices can also bar new competitors from entering an industry and can create use patents, heavy promotional spending to drive out existing competitors

Unfair competitive marketing practices such as pricing below cost, threatening to cut off business with suppliers, or discouraging the buying of a competitor’s product can hurt or destroy other firms

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Citizen and Public Actions to Regulate Marketing

Consumerism is the organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers

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Environmentalism is an organized movement of concerned citizens, businesses, and government agencies to protect and improve people’s living environment

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Consumerism

Traditional sellers’ rights include:• The right to introduce any product in any size and

style, provided it is not hazardous to personal health or safety; or if it is, to include proper warning and controls

• The right to charge any price for the product, provided no discrimination exists among similar kinds or buyers

• The right to spend any amount to promote the product, provided it is not defined as unfair competition

• The right to use any product message, provided it is not misleading or dishonest in content or execution

• The right to use any buying incentive programs, provided they are not unfair or misleading

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Environmentalism

People and organizations should operate with more care for the environment

The marketing system’s goal should not be to maximize consumption, consumer choice, or satisfaction, but rather to maximize life quality. Environmental costs should be included in both producer and consumer decision making.

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EnvironmentalismEnvironmental Sustainability

• Pollution prevention• Product stewardship• Design for environment (DFE)• New environmental technologies• Sustainability vision

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Environmentalism

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Pollution prevention involves not just cleaning up waste but also eliminating or minimizing waste before it is created

Product stewardship involves minimizing the pollution from production and all environmental impact throughout the full product life cycle

Design for environment (DFE) involves thinking ahead to design products that are easier to recover, reuse, or recycle

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New environmental technologies involve looking ahead and planning new technologies for competitive advantage

Sustainability vision is a guide to the future that shows the company that the company’s products, process, and policies must evolve and what is needed to get there

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Business Actions Toward Socially Responsible Marketing

Enlightened Marketing

Enlightened marketing refers to a company’s marketing effort supporting the best long-run performance of the marketing system and consists of five principles:

• Consumer-oriented marketing• Customer-value marketing• Innovative marketing• Sense-of-mission marketing• Societal marketing

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Social Criticisms of MarketingEnlightened Marketing

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Consumer-oriented marketing means that a company should view and organize its marketing activities from the consumer’s perspective

Customer-value marketing means that the company should put most of its resources into customer-value-building marketing investments: long-term customer loyalty and relationships by continually improving the value consumers receive from the firm’s market offerings

Innovative marketing requires the company to continually seek real product and marketing improvements

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Sense-of-mission marketing means the company should define its mission in broad social terms rather than narrow product terms

Societal marketing means the company makes marketing decisions by considering consumers’ wants and interests, the company’s requirements, and society’s long-run interests

• Views societal problems as opportunities• Designs pleasing and beneficial products

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Deficient products have neither immediate appeal nor long-term benefits

• Bad tasting and ineffective medicine

Pleasing products have high immediate satisfaction but may hurt consumers in the long run

• Cigarettes and junk food

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Enlightened MarketingSocietal marketing

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Salutary products have low appeal but may benefit consumers in the long run

• Seat belts and air bags

Desirable products give both immediate satisfaction and high long-term benefits

• Tasty and nutritious breakfast food

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Marketing Ethics

Corporate marketing ethics are broad guidelines that everyone in the organization must follow that cover distributor relations, advertising standards, customer service, pricing, product development, and general ethical standards

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Marketing EthicsPhilosophies

Issues are decided by the free market and legal system

Responsibility is not on the system but in the hands of the individual company and managers

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Marketing Ethics

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Discussion Question

In the chapter opening case Jeff Swartz is attempting to balance what he understands to be the complementary needs of social awareness and profit.

What do you think? Is one more important than the other?

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Review Questions

1. Identify the major social criticisms of marketing

2. Define consumerism and environmentalism and explain how they affect marketing strategies

3. Describe the principles of socially responsible marketing

4. Explain the role of ethics in marketing

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PowerPoint created by:

Ronald Heimler

• Dowling College, MBA• Georgetown University, BS Business

Administration• Adjunct Professor, LIM College, NY• Adjunct Professor, Long Island

University, NY• Lecturer, California Polytechnic State

University, Pomona, CA• President, Walter Heimler, Inc.

Documents

Marketing Ethics and Social Responsibility 20. 20 - 2 Learning Objectives After studying this chapter, you should be able to: 1. Identify the major social