Marketing Ethics [PDF]

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Table of Contents CHAPTER 1............................................................................................................... 5 What is Marketing Ethics?.............................................................................................. 5 Advantages and disadvantages:........................................................................................ 5 Areas with which Marketing ethics deals:............................................................................5 What is Ethical Marketing?............................................................................................. 6 Need of Marketing Ethics............................................................................................... 6 Life without Ethics........................................................................................................ 6 “Your say on Ethics”:..................................................................................................... 7 CHAPTER 2.................................................................................................................. 8 Framework for Marketing Issues....................................................................................... 8 Issues in Ethical Marketing............................................................................................. 8 1-Market research...................................................................................................... 8 Ethical danger points in market research include:..................................................................8 Invasion of privacy:................................................................................................... 8 Stereotyping:............................................................................................................ 9 2-Market Audience........................................................................................................ 9 The Ethical danger points out of the Market audience mail include:........................................9 3-Pricing Ethics.......................................................................................................... 10 List of unethical pricing practices.................................................................................10 1.

Bid rigging:.................................................................................................. 10

2.

Dumping (pricing policy):............................................................................. 10

3.

Predatory pricing:........................................................................................ 10

4.

Price discrimination:.................................................................................... 10

5.

Price gouging:.............................................................................................. 10

6.

Price fixing:.................................................................................................. 11

7.

Price skimming:........................................................................................... 11

8.

Price war...................................................................................................... 11

9.

Supra competitive pricing:...........................................................................11

10.

Variable pricing:........................................................................................ 11

4-Ethics in advertising and promotion..............................................................................12 1

1.

Issues over truth and honesty:.....................................................................12

2.

Issues with violence, sex and profanity:.......................................................12

3.

Taste and controversy.................................................................................. 12

4.

Negative advertising techniques:................................................................12

CONTROVERSIES IN MARKETING............................................................................. 12 1-Delivery channels................................................................................................. 13 2-Deceptive marketing.............................................................................................. 13 3-Using Ethics as a Marketing Tactic............................................................................ 13 CHAPTER 3............................................................................................................. 15 CODE OF ETHICS IN MARKETING............................................................................. 15 Some of the basic issues related to code of ethics are:...........................................................15 

Business Relationships................................................................................. 15

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Offering Gifts to Clients................................................................................ 15

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Receiving Gifts From Clients.........................................................................15

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Business Communication.............................................................................15

Marketers Choice:....................................................................................................... 15 Canadian Marketing Association’s Code of Ethics...............................................................16 

Accuracy of Representation of Products.......................................................16

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Support of Claims Made About Products......................................................16

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Acceptability for Using the Word “Free”.......................................................16

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Guidelines for Advertising Which Compares One Product to Another..........16

ETHICAL NORMS..................................................................................................... 16 Do no harm............................................................................................................ 16 Foster trust in the marketing system.............................................................................. 16 Embrace ethical values.............................................................................................. 16 ETHICAL VALUES.................................................................................................... 16 Honesty................................................................................................................ 16 Responsibility–....................................................................................................... 17 Fairness –.............................................................................................................. 17 Respect –.............................................................................................................. 17 Transparency–........................................................................................................ 18 Citizenship............................................................................................................ 18 AS PER AMERICAN MARKETING ASSOCIATION Code of Ethics :....................................18 Responsibilities of the Marketer.................................................................................. 18 2

Rights and Duties of Parties in the Marketing Exchange Process:.........................................19 In the area of product development and management:........................................................20 In the area of promotions:.......................................................................................... 20 In the area of distribution:.......................................................................................... 20 In the area of pricing:................................................................................................ 20 In the area of marketing research................................................................................. 20 Organizational Relationships:..................................................................................... 20 CHAPTER 4................................................................................................................ 22 POWER OF SUING:................................................................................................. 22 ETHICAL DILEMMAS:.............................................................................................. 22 Invasion of Privacy.................................................................................................. 22 Spamming............................................................................................................. 23 Public Bashing :...................................................................................................... 23 Dishonesty and Distortions......................................................................................... 23 Distorted Endorsements and Improper Anonymity............................................................24 Misuse of Free Expertise and Contests..........................................................................24 Opportunism.......................................................................................................... 24 CHAPTER 5................................................................................................................ 25 DMA Principles....................................................................................................... 25 The Terms of the Offer........................................................................................ 25 Advance Consent/Negative Option Marketing....................................................25 Marketing to Children............................................................................................... 25 Special Offers and Claims.......................................................................................... 26 Sweepstakes........................................................................................................... 26 Fulfillment............................................................................................................. 26 Collection, Use, and Maintenance of Marketing Data........................................................26 Digital Marketing.................................................................................................... 27 Telephone Marketing to Landline & Wireless Devices.......................................................27 Mobile Marketing.................................................................................................... 27 Fundraising......................................................................................................... 27 Laws, Codes, and............................................................................................... 27 CHAPTER 6................................................................................................................ 28 State of the Field and Future Directions............................................................................ 28 Insights.................................................................................................................. 29 3

CHAPTER 7................................................................................................................ 30 Conclusion................................................................................................................ 30 ETHICS IN MARKETING MINI-CASE STUDIES................................................................31 Case Study 1............................................................................................................. 31 Incredible Shrinking Potato Chip Package.........................................................................31 Case Study 2............................................................................................................. 32 Falsification of Data.................................................................................................... 32 Case Study 3............................................................................................................. 33 Washing Dirty Laundry................................................................................................ 33 Case Study 4............................................................................................................. 35 Lottery Mania............................................................................................................ 35 Case study 5.............................................................................................................. 36 Bibliography................................................................................................................ 38

CHAPTER 1 What is Marketing Ethics? Marketing ethics is less of a marketing strategy and more of a philosophy that informs all marketing efforts. It seeks to promote honesty, fairness, and responsibility in all advertising. Ethics is a difficult subject because everyone has subjective judgments about what is

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“right” and what is “wrong.” For this reason, ethical marketing is not a hard and fast list of rules, but a general set of guidelines to assist companies as they evaluate new marketing strategies.

Advantages and disadvantages: There are distinct advantages and disadvantages to ethical marketing. Unethical advertising is often just as effective as it is unethical. And since unethical behavior is not necessarily against the law, there are many companies who use unethical advertising to gain a competitive advantage. For companies looking to improve the image of a brand and develop long-term relationships with customers, unethical behavior can quickly lead to failure. Customers do not want to feel manipulated by the brands they like. Companies can use ethical marketing as a way to develop a sense of trust among their customers. If a product lives up to the claims made in its advertising, it reflects positively on the entire company. It can make the consumer feel like the company is invested in the quality of the products and the value they provide customers. It is impossible to claim that any company is completely ethical or unethical. Ethics resides in a gray area with many fine lines and shifting boundaries. Many companies behave ethically in one aspect of their advertising and unethically in another.

Areas with which Marketing ethics deals: 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.

What is Ethical Marketing? Ethical marketing refers to the application of marketing ethics into the marketing process  Marketing ethics has the potential to benefit society as a whole, both in the short- and long-term  Study of Ethical marketing should be included in applied ethics and involves examination of whether or not an honest and factual representation 5

 Marketing ethics has influenced companies and their response is to market their products in a more socially responsible way.  The increasing trend of fair trade is an example of the impact of ethical marketing.  The philosophy of marketing is not lost with this newfound ethical slant, but rather hopes to win customer loyalty.  Ethical marketing should not be confused with government regulations brought into force to improve consumer welfare.

Need of Marketing Ethics There are times when the right and wrong decisions are obvious, but what about the times where the outcome is less clear? Situations where, if nobody knew we made the wrong decision, we would be benefited financially, emotionally, or otherwise. Ethics help us navigate the gray area between absolute rights and morally wrong. They provide the structure that helps us make a decision we can be proud of.

Life without Ethics Without ethics, society would be reduced to the type of animal behaviour that is seen in nature. Hunt, kill, feed, fornicate. When mankind started to think about the outcome of their action, or inaction, ethics were born. Mankind demonstrates its difference from the rest of the animal kingdom by being imaginative enough to follow a concept through the various possible outcomes, and then deciding on the action that best suits the personal beliefs of the person in question.

“Your say on Ethics”: There are many schools of thought to help us make our ethical choices. “Epicurus believed if everyone is honest, prudent, and employs justice when dealing with others, they would be free from retribution from society”. Basically, if everyone is good, everything will be good .Immanuel Kant had a different idea about ethics. Kant saw everything as black or white and mankind has a “duty without exception.” This view affords no wiggle room on any decision. If the outcome is bad in any way, then 6

it is ethically wrong. W.D. Ross provided a more lenient view of Kant’s philosophy. By providing “self-evident duties” Ross helps us navigate the gray areas of the map by providing guidelines for us to follow. Ross starts with “First – do no harm” but then juxtaposes this with the second rule of “Make amends if you do harm.” By allowing for violations of the first rule, Ross allows mankind to make the decisions that suit their personal beliefs. So in short, we can give many reasons but will notify some which are as follows: •

When an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services.

•

To create Values or trust with key stakeholders

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To build good image about the organization in the minds of customer, employees, shareholders and the society.

CHAPTER 2 Framework for Marketing Issues 

Value-oriented framework, analyzing ethical problems on the basis of the values which they infringe (e.g. honesty, autonomy, privacy, transparency). An example of such an approach is the AMA Statement of Ethics.

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Stakeholder-oriented framework, analyzing ethical problems on the basis of which they affect (e.g. consumers, competitors, society as a whole).

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Process-oriented framework, analyzing ethical problems in terms of the categories used by marketing specialists (e.g. research, price, promotion, placement). None of these frameworks allows, by itself, a convenient and complete

categorization of the great variety of issues in marketing ethics

Issues in Ethical Marketing 1-Market research Market research is the collection and analysis of information about consumers, competitors and the effectiveness of marketing programs. With market research, businesses can make decisions based on how the responses of the market, leading to a better understanding of how the business has to adapt to the changing market. It is used to establish which portion of the population will or does purchase a product, based on age, gender, location, income level, and many other variables. This research allows companies to learn more about past, current, and potential customers, including their specific likes and dislikes.

Ethical danger points in market research include: Invasion of privacy: One of the most serious ethical considerations involved in market research is invasion of privacy. Companies have an unprecedented ability to collect, store and match information relating to customers that can infringe on a person's right to privacy. In many instances, the customer does not know or understand the extent of the company's infiltration into his life. The company uses this information to reach the customer with targeted advertising, but the process of targeting can have a chilling effect on personal freedom. Stereotyping: In social psychology, a stereotype is a thought that can be adopted about specific types of individuals or certain ways of doing things. Marketing campaigns often cast particular groups in stereotypical roles, such as washing powder advertisements that show women as 8

housewives preoccupied with their laundry, or do-it-yourself marketing that seldom portray anyone other than men as being “handy.” In addition, the stereotypical impression created by much commercial marketing is that having an abundance of possessions will lead to fulfillment and happiness, but the opposing message is that the consumer will not be part of the happy group if he does not purchase the product.

2-Market Audience The Ethical danger points out of the Market audience mail include: 1-Excluding potential customers from the market: selective marketing is used to discourage demand from undesirable market sectors or disenfranchise them altogether. 2-Targeting the vulnerable (e.g. children, the elderly).

For example: Unethical market exclusion or selective marketing are past industry attitudes to the gay, ethnic minority and obese ("plus-size") markets. Contrary to the popular myth that ethics and profits do not mix, the tapping of these markets has proved highly profitable. For example, 20% of US clothing sales are now plus-size. Another example is the selective marketing of health care, so that unprofitable sectors (i.e. the elderly) will not attempt to take benefits to which they are entitled.

In the case of children, the main products are unhealthy food, fashion ware and entertainment goods. Children are a lucrative market as children below twelve years of age but are not capable of resisting or understanding marketing tactics at younger ages (children don't understand persuasive intent until they are eight or nine years old. At older ages competitive feelings towards other children are stronger than financial sense.

3-Pricing Ethics

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List of unethical pricing practices. 1. Bid rigging: Bid rigging is a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid. This form of collusion is illegal in most countries. It is a form of price fixing and market allocation, often practiced where contracts are determined by a call for bids, for example in the case of government construction contracts. 2. Dumping (pricing policy): In economics, "dumping" is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production. 3. Predatory pricing: Predatory pricing (also undercutting) is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. 4. Price discrimination: Price discrimination or price differentiation is a pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets or territories 5. Price gouging: Price gouging is a pejorative term referring to a situation in which a seller prices goods or commodities at a level much higher than is considered reasonable or fair. This rapid increase in prices occurs after a demand or supply shock: examples include price increases after hurricanes or other natural disasters. In precise, legal usage, it is the name of a crime that applies in some of the United States during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market, or to windfall profits. In the Soviet Union, it was simply included under the single definition of speculation. 6. Price fixing: Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. The intent of price fixing may be to push the price of a product as high as possible, generally leading to profits for all sellers but may also have the goal to fix, peg, discount, 10

or stabilize prices. The defining characteristic of price fixing is any agreement regarding price, whether expressed or implied. 7. Price skimming: Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.It is a temporal version of price discrimination/yield management. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price. 8. Price war:Price war is commercial competition characterized by the repeated cutting of prices below those of competitors.One competitor will lower its price, then others will lower their prices to match. If one of them reduces their price again, a new round of reductions starts. In the short term, price wars are good for buyers, who can take advantage of lower prices. Often they are not good for the companies involved because the lower prices reduce profit margins and can threaten their survival. 9. Supra competitive pricing: Supra competitive pricing is pricing above what can be sustained in a competitive market. This may be indicative of a business that has a unique legal or competitive advantage or of anti-competitive behavior that has driven competition from the market. 10. Variable pricing: Variable pricing is a pricing strategy for products. Traditional examples include auctions, stock markets, foreign exchange markets, bargaining and discounts.

4-Ethics in advertising and promotion 1. Issues over truth and honesty: In the 1940s and 1950s, tobacco used to be advertised as promoting health. Today an advertiser who fails to tell the truth offends against morality in addition to the law. However the law permits puffery (a legal term). The difference between mere puffery and fraud is a slippery slope. The problem is the slippery slope by which variations on puffery can descend fairly quickly to lies 2. Issues with violence, sex and profanity: Sexual innuendo is a mainstay of advertising content, and yet is also regarded as a form of sexual

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harassment. Violence is an issue especially for children's advertising and advertising likely to be seen by children 3. Taste and controversy: The advertising of certain products may strongly offend some people while being of interest to others. Examples include: feminine hygiene products as well as hemorrhoid and constipation medication. The advertising of condoms has become acceptable in the interests of AIDSprevention, but are nevertheless seen by some as promoting promiscuity 4. Negative advertising techniques: In negative advertising, the advertiser highlights the disadvantages of competitor products rather than the advantages of their own. The methods are most familiar from the political sphere

CONTROVERSIES IN MARKETING The advertising of certain products may strongly offend some people while being of interest to others. Examples include: feminine hygiene products as well as hemorrhoid and constipation medication. The advertising of condoms has become acceptable in the interests of AIDS-prevention, but are nevertheless seen by some as promoting promiscuity.

1-Delivery channels Direct marketing is the most controversial of advertising channels, particularly when approaches are unsolicited. Common examples are: TV commercials and direct mail. Electronic spam and telemarketing push the borders of ethics and legality more strongly. 2-Deceptive marketing Deceptive marketing is not specific to one target market, and can sometimes go unnoticed by the public. There are several ways in which deceptive marketing can be presented to consumers; one of these methods is accomplished through the use of humor. Humor provides an escape or relief from some kind of human constraint, and some advertisers intend to take advantage of this by deceptively advertising a product that can potentially alleviate that constraint through humor. 12

3-Using Ethics as a Marketing Tactic Major corporations fear the damage to their image associated with press revelations of unethical practices. Marketers have been quick to perceive the market's preference for ethical companies, often moving faster to take advantage of this shift in consumer taste. This results in the propagation of ethics itself as a selling point or a component of a corporate image. A list of known unethical or controversial marketing strategies: 1. 2. 3. 4. 5. 6. 7.

Anti-competitive practices Bait and switch Planned obsolescence Pyramid scheme Vendor lock-in / Vendor lock-out Viral marketing / guerilla marketing Subliminal advertising

Controversial marketing strategies associated with the internet: 1. Embrace, extend and extinguish 2. Search engine optimization 3. Spamdexing.

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CHAPTER 3 CODE OF ETHICS IN MARKETING The call for marketers to become more responsible for their actions has led to the development of a code of ethics by many companies and professional organizations. A company code of ethics includes extensive coverage of how business is conducted by members of an organization.

Some of the basic issues related to code of ethics are: 14

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Business Relationships-must never take unfair advantage of others through manipulation, concealment, abuse of privileged information, misrepresentation of

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material facts or any other unfair dealing practice. Offering Gifts to Clients -may not furnish or offer to furnish any gift that is of

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more than token value or that goes beyond the common courtesies. Receiving Gifts From Clients -must never request or ask for gifts,

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entertainment or any other business courtesies. Business Communication -should take care to avoid exaggeration, colorful language, guesswork, legal conclusions and derogatory remarks or characterizations of people and other companies.

Marketers Choice: Marketers often join professional organizations for the purpose of associating with others who share similar interests. These organizations include industry associations, whose membership is mostly limited to those who work within a particular industry, and professional services associations, whose membership consists of those who share similar job responsibilities. Marketers joining these organizations often find that a code of ethics has been developed that is intended to be followed by all organization members. For example, the Canadian Marketing Association lays out rules for its membership, which includes marketers from many forprofits and not-for-profit organizations, in its Code of Ethics and Standards and Practices.

Canadian Marketing Association’s Code of Ethics The Code discusses such issues as: 

Accuracy of Representation of Products -must accurately and fairly

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describe the product or service offered. Support of Claims Made About Products -must be able to substantiate the

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basis for any performance claim or comparison. Acceptability for Using the Word “Free” -Products or services offered

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without cost or obligation. Guidelines for Advertising Which Compares One Product to Another -must be factual, verifiable and not misleading 15

ETHICAL NORMS Marketers must: Do no harm. This means consciously avoiding harmful actions or omissions by embodying high ethical standards and adhering to all applicable laws and regulations in the choices we make. Foster trust in the marketing system. This means striving for good faith and fair dealing so as to contribute toward the efficacy of the exchange process as well as avoiding deception in product design, pricing, communication, and delivery of distribution. Embrace ethical values. This means building relationships and enhancing consumer confidence in the integrity of marketing by affirming these core values: honesty, responsibility, fairness, respect, transparency and citizenship.

ETHICAL VALUES Honesty – to be forthright in dealings with customers and stakeholders. Thus, a marketer should:    

Strive to be truthful in all situations and at all times. Offer products of value that do what we claim in our communications. Stand behind our products if they fail to deliver their claimed benefits. Honor our explicit and implicit commitments and promises.

Responsibility– to accept the consequences of our marketing decisions and strategies. Thus, a marketer should:   

Strive to serve the needs of customers. Avoid using coercion with all stakeholders. Acknowledge the social obligations to stakeholders that come with increased marketing

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and economic power. Recognize our special commitments to vulnerable market segments such as children, seniors, the economically impoverished, market illiterates and others who may be

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substantially disadvantaged. Consider environmental stewardship in our decision-making.

Fairness – to balance justly the needs of the buyer with the interests of the seller. Thus, a marketer should:

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Represent products in a clear way in selling, advertising and other forms of communication; this includes the avoidance of false, misleading and deceptive

 

promotion. Reject manipulations and sales tactics that harm customer trust. Refuse to engage in price fixing, predatory pricing, price gouging or “bait-and-switch”

 

tactics. Avoid knowing participation in conflicts of interest. Seek to protect the private information of customers, employees and partners.

Respect – to acknowledge the basic human dignity of all stakeholders. Thus, a marketer should: 

Value individual differences and avoid stereotyping customers or depicting demographic

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groups (e.g., gender, race, sexual orientation) in a negative or dehumanizing way. Listen to the needs of customers and make all reasonable efforts to monitor and improve

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their satisfaction on an ongoing basis. Make every effort to understand and respectfully treat buyers, suppliers, intermediaries

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and distributors from all cultures. Acknowledge the contributions of others, such as consultants, employees and coworkers,

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to marketing endeavors. Treat everyone, including our competitors, as we would wish to be treated.

Transparency– to create a spirit of openness in marketing operations. Thus, a marketer should:   

Strive to communicate clearly with all constituencies. Accept constructive criticism from customers and other stakeholders. Explain and take appropriate action regarding significant product or service risks, component substitutions or other foreseeable eventualities that could affect customers or

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their perception of the purchase decision. Disclose list prices and terms of financing as well as available price deals and adjustments.

Citizenship – to fulfill the economic, legal, philanthropic and societal responsibilities that serve stakeholders. Thus, a marketer should:   

Strive to protect the ecological environment in the execution of marketing campaigns. Give back to the community through volunteerism and charitable donations. Contribute to the overall betterment of marketing and its reputation. 17

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Urge supply chain members to ensure that trade is fair for all participants, including producers in developing countries.

AS PER AMERICAN MARKETING ASSOCIATION Code of Ethics : Members of the American Marketing Association are committed to ethical professional conduct. They have joined together in subscribing to this Code of Ethics embracing the following topics: Responsibilities of the Marketer Marketers must accept responsibility for the consequences of their activities and make every effort to ensure that their decisions, recommendations and actions function to identify, serve and satisfy all relevant publics: customers, organizations and society. Marketers' Professional Conduct must be guided by:     

The basic rule of professional ethics: not knowingly to do harm; The adherence to all applicable laws and regulations; The accurate representation of their education, training and experience; The active support, practice and promotion of this Code of Ethics. Honesty and Fairness

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

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public; Not knowingly participating in conflict of interest without prior notice to all parties

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involved; and Establishing equitable fee schedules including the payment or receipt of usual, customary and/or legal compensation for marketing exchanges.

Rights and Duties of Parties in the Marketing Exchange Process: Participants in the marketing exchange process should be able to expect that:  

Products and services offered are safe and fit for their intended uses; Communications about offered products and services are not deceptive;

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All parties intend to discharge their obligations, financial and otherwise, in good faith;

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and Appropriate internal methods exist for equitable adjustment and/or redress of grievances concerning purchases.

It is understood that the above would include, but is not limited to, the following responsibilities of the marketer:

In the area of product development and management:  Disclosure of all substantial risks associated with product or service usage;  Identification of any product component substitution that might materially change the 

product or impact on the buyer's purchase decision; Identification of extra cost-added features.

In the area of promotions:  Avoidance of false and misleading advertising;  Rejection of high-pressure manipulations, or misleading sales tactics;  Avoidance of sales promotions that use deception or manipulation. In the area of distribution:  Not manipulating the availability of a product for the purpose of exploitation;  Not using coercion in the marketing channel;  Not exerting undue influence over the reseller's choice to handle a product. In the area of pricing:  Not engaging in price fixing;  Not practicing predatory pricing;  Disclosing the full price associated with any purchase. In the area of marketing research:  

Prohibiting selling or fundraising under the guise of conducting research; Maintaining research integrity by avoiding misrepresentation and omission of pertinent research data; 19



Treating outside clients and suppliers fairly.

Organizational Relationships: Marketers should be aware of how their behavior may influence or impact the behavior of others in organizational relationships. They should not demand, encourage or apply coercion to obtain unethical behavior in their relationships with others, such as employees, suppliers, or customers. 

Apply confidentiality and anonymity in professional relationships with regard to

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privileged information; Meet their obligations and responsibilities in contracts and mutual agreements in a timely

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manner; Avoid taking the work of others, in whole, or in part, and representing this work as their own or directly benefiting from it without compensation or consent of the originator or

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owner; and Avoid manipulation to take advantage of situations to maximize personal welfare in a way that unfairly deprives or damages the organization of others.

Thus, these are some basic obligations that every marketer should take into consideration to maintain an ethical code of business and marketing, that will only help it to take the business or the organization to the most successful edge.

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CHAPTER 4 POWER OF SUING: With the rise of content marketing, brand marketers and advertisers have found a gold mine of opportunities for reaching and engaging their audiences. What’s more, consumers enjoy the power to invite their potential suitors. But with this newly discovered consumer freedom to select what they read and who they befriend comes some new ethical challenges. No longer is the information vetted through high journalistic standards. Internet users now have to adopt their own filters for information. In addition, temptations still exist for advertisers to fake their endorsements and literally purchase favorable comment.

ETHICAL DILEMMAS: A growing list of ethical dilemmas continues with violations of misrepresentation, privacy, cyber bullying and general “creepiness.” With the arrival of broad reaching and relatively unrestricted social channel communications comes the price of consumer vulnerable to new scams and deception. This is why ethics in social media is now receiving a great deal of attention. At the heart of consumer protectionism in this arena is a concern for trustworthy advice and protection of privacy as it relates to the protection of an individual’s own credibility. The following are several common ethical dilemmas faced when sales personnel and marketers engage in social media: Invasion of Privacy Actions that unknowingly infringe on the privacy of social networking participants should be considered unethical if it potentially harms an individual’s personal and professional credibility. This would include any non-permissive approaches taken by a marketer

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to disclose profile information as well as the sharing of sensitive personal information through channels that could exploit or otherwise harm the individual’s standing.

QUESTIONABLE AREAS

A questionable area to consider when evaluating social media ethics is the role of behavioral targeting. Consider the ways advertisers track where you shop and browse from “click-through” behaviors used in retargeting campaigns. An assumption here is that ad viewers will appreciate the the improvement in message relevance. A similar question should be raised in the use of Custom Audience features that permit marketers to pass on their email lists to Facebook, who then matches these lists with their own user log-in IDs for further targeting. Spamming Over-promoting unsolicited messages is often viewed as unethical given the manner in which messages are broadcasted. Users are often deceived through a trail of spamming Twitter and Facebook links. The unwanted messages often clutter up opportunities for more useful information. Public Bashing : Publicly disparaging others (e.g., your competition) in your social media dialogs is typically considered unethical. Such negative sentiment can quickly go viral without permitting fair rebuttals. These defenseless attacks will not only damage your reputation, they run the risk of libelous lawsuits if not properly founded.

Dishonesty and Distortions At the core of social media intentions is transparent communication. Dishonest claims or untruthful derogatory comments can jeopardize the long-term reputation of your company with an uncontrollable number of message recipients.

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This issue has become especially contentious with the trend towards native ads. Although the FCC is likely to step into the arena, brand publishers have essentially been given a green light on disguising their ad content as publishing content.

Distorted Endorsements and Improper Anonymity A similar ethical violation involves the misrepresentation of your credential, affiliations and expertise. Many once reputable companies have been severely damaged with fake stories of consumers using their products. i.e., What may appear to be an anonymous testimony is instead backed by a voice with a vested interest in the sponsor. Any practice of hiring folks to comment favorable or fabricate a story about your company’s offerings should be considered unethical. In a similar vein, overly aggressive employees have been found guilty of exaggerating competitive shortcomings. This activity is especially harmful if it catches the parent company off guard. Misuse of Free Expertise and Contests With the growing use of Face book contests and crowd sourcing for soliciting design ideas, contest participants run the risk of divulging their secrets with no reward. Oftentimes, design ideas are rewarded to the most profitable partners of the social network sponsor leaving many with unrewarded work. This abuse is especially unethical if the sponsor knowingly gathers superior design ideas from contestants they have no intention of compensating. Opportunism In the spirit of providing social networking communities with contributions to their cause or business challenges, social media marketers are discouraged from providing content that subliminally heads readers down a self-serving path. Whether these actions are unethical or just plain “unprofessional” depends on the situation and degree of deception. So which of these deadly sins concern businesses the most?

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CHAPTER 5 DMA Principles DMA Principles are the underlying framework for the Guidelines for Ethical Business Practices detailed herein, and for Guidelines that will be drafted in the future. These Principles apply to DMA members’ relationships with current and prospective customers, donors, and members, and are the grounding for all DMA members, which includes those who market directly not only to consumers, but also to businesses, government agencies, and “SOHO” (small-office/home-office) entities. The Principles provide a general statement to the public of the expectations they can have when dealing with DMA members.

The Terms of the Offer Honesty and Clarity of Offer - Article #1 Accuracy and Consistency - Article #2 Clarity of Representations - Article #3 Actual Conditions - Article #4 Disparagement - Article #5 Decency - Article #6 Photographs and Artwork - Article #7 Disclosure of Sponsor and Intent - Article #8 Accessibility - Article #9 Solicitation in the Guise of an Invoice or Governmental Notification - Article #10 Postage, Shipping, or Handling - Article #11

Advance Consent/Negative Option Marketing - Article #12

Marketing to Children Marketing to Children - Article #13 24

Parental Responsibility and Choice - Article #14 Collection and Use of Information from or about Children - Article #15 Marketing Online to Children Under 13 Years of Age - Article #16

Special Offers and Claims Use of the Word "Free" and Other Similar Representations - Article #17 Price Comparisons - Article #18 Guarantees - Article #19 Use of Test or Survey Data - Article #20 Testimonials and Endorsements - Article #21

Sweepstakes Use of the Term "Sweepstakes" - Article #22 No Purchase Option - Article #23 Chances of Winning - Article #24 Prizes - Article #25 Premiums - Article #26 Disclosure of Rules - Article #27

Fulfillment Unordered Merchandise or Service - Article #28 Product Availability and Shipment - Article #29 Dry Testing - Article #30

Collection, Use, and Maintenance of Marketing Data Consumer Choice & the Collection, Use, and Transfer of Personally Identifiable Data - Article #31 Personal Data - Article #32 Health Information Privacy and Protection - Article #33 Promotion of Marketing Lists - Article #34 Marketing List Usage - Article #35 25

Responsibilities of Database Compilers – Article #36 Data Security - Article #37

Digital Marketing Online Information & OBA - Article#38 Mobile Service Commercial Message Solicitations Delivered to a Wireless Device -Article #39 Commercial Solicitations Online - Article #40 Email Authentication – Article #41 Use of Software or Other Similar Technology Installed on a Computer or Similar Device – Article #42 Social Media & Online Referral Marketing - Article #43 Email Appending to Consumer Records - Article #44 Telephone Marketing to Landline & Wireless Devices Reasonable Hours - Article #45 Taping of Conversations - Article #46 Restricted Contacts - Article #47 Caller-ID/Automatic Number Identification Requirements – Article #48 Use of Automated Dialing Equipment/Robocalls – Article #49 Use of Prerecorded Voice & Text Messaging - Article #50 Use of Telephone Facsimile Machines - Article #51 Promotions for Response by Toll-Free and Pay-Per-Call Numbers - Article #52 Disclosure and Tactics - Article #53

Mobile Marketing Obtaining Consent to Contact a Mobile Device – Article #54 Providing Notice about Mobile Marketing Practices – Article #55 Mobile Opt-Out Requests – Article #56 Sponsorship or Affiliate Marketing – Article #57 Location-Based Mobile Marketing – Article #58 Mobile Subscription & Premium Rate Services – Article #59

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Fundraising - Article #60 Laws, Codes, and Regulations - Article #61

CHAPTER 6

State of the Field and Future Directions The latest description of marketing ethics and their discussions of empirical tests of the theory provides an excellent framework for understanding the “why” questions about marketing ethics. The model shows why peoples’ ethical judgments differ in an organizational context. This theory, provide directions for future empirical descriptive research in marketing ethics. While many researchers and managers believe that personal ethics determines organizational ethics, these frameworks and empirical research question this assumption. The role of corporate culture along with internal control of opportunity to engage in misconduct remains a key determinant of marketing ethics. The development of stakeholder theory and the importance of stakeholder orientation provide a new direction for integrating ethics into marketing decisions. This perspective focuses on understanding and responding to important stakeholder groups that hold marketing accountable for its actions. This approach assumes that stakeholders are knowledgeable on key ethics issues and that the organization can respond in a manner that maintains marketing relationships. Stakeholder orientation has the potential to redefine the strategic concept of market orientation by including the interests of all stakeholders in marketing 27

decisions. Marketing can be viewed more as a network of relationships providing skills and knowledge to all stakeholders .From this perspective marketing ethics would be an important part of the strategic planning process. The role of normative theory and cognitive moral development continues to be a part of the pluralistic approach used to discover and evaluate marketing ethics. Both descriptive and normative researchers agree that marketers do develop guidelines and rules for ethical conduct based on accepted norms and moral philosophies. Integrative Social Contract Theory (ISCT) based on norms as the foundation of rules within communities, provides a direction for future research. Stakeholder theory can be linked with ISCT to examine multiple conflicting norms and discovery of norms that should have priority in marketing decisions.

Insights For most organizations, trade associations define minimum acceptable ethical behavior and the regulatory system provides the foundation for acceptable conduct in society. While acceptable ethical behavior is derived from the professional, cultural, industry, and organizational environments, individual behavior may differ based on ethical judgments .Marketing ethics remains a complex area to understand and offers the opportunity for research on many different dimensions that have been discussed in this section. Marketing will be under pressure from organizational efforts to institutionalize formal ethics programs in order to satisfy stakeholder demands. Both normative and descriptive understanding will be required to improve marketing ethics. There are many opportunities to contribute to the advancement of knowledge in this important area of marketing.

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CHAPTER 7 Conclusion Much progress has been made in advancing theory and research in marketing ethics. In addition, the practice of marketing has been elevated to higher levels of ethics from professional codes of conduct provided by the American Marketing Association, Direct Selling Association, Direct Marketing Association, Marketing Research Association, American Federation of Advertising and the National Advertising Division of the Council of Better Business Bureaus. In addition, most corporations have developed comprehensive codes of conduct that address specific ethical risk areas in marketing practice. Recent regulatory changes that require boards of directors to be responsible for oversight on all ethics issues within an organization elevate the importance of marketing ethics. It is clear that marketing ethics is part of organizational responsibility and individuals cannot make independent decisions about appropriate conduct. There is recognition through 29

academic research and regulatory initiatives that corporate culture plays a key role in improving marketing ethics. But certain questions needs to be answered which are 1-What is the interrelationship between contract law and ethics in building and sustaining marketing exchanges? 2- Does the contingency framework for understanding ethics in a marketing organization assist in designing an effective program to maintain and improve ethics in marketing?

ETHICS IN MARKETING MINI-CASE STUDIES

Case Study 1 Incredible Shrinking Potato Chip Package Topic: Cost vs. price vs. value issues Characters: Julie, Brand Manager for potato chips at a regional salty snacks manufacturer Dave, Marketing Director for the regional salty snacks manufacturer Julie has been concerned about the profitability of the various items in her line of potato chips. According to her potato suppliers, the recent drought caused a 35 percent reduction in the potato crop compared to one year ago, resulting in a 25 percent hike in potato prices to large buyers like Julie’s company. Potatoes accounted for almost all of the content of her chips (which also consisted of vegetable oil, one of three different flavoring spices, and salt), plus there were packaging costs. To hold the line on margins, which 30

of late had been slim at only about 5 percent due to fierce competition from several other local and regional brands, Julie would need to raise potato chip prices about 15 percent. On her most popular 7.5 oz. size, which had a price spot of $1.59 on the package, this would require a price hike of $.24, bringing the price up to $1.83. Julie wondered what would be the appropriate strategy to deal with this unfortunate circumstance. She was very reluctant to raise the price to maintain the margin. First, she feared incurring the bad will of her loyal customers; it wouldn’t be perceived as fair by them. Moreover, she was worried about competitive responses; her other larger competitors might be willing to incur a loss in the short-run to keep their customer bases and to attract price-hiking rivals’ customers. Julie couldn’t afford such a strategy since she was evaluated solely on the basis of monthly net profits. Historical data in this industry revealed another possible competitive maneuver in the face of rising ingredient costs: hold the line on prices and package size while reducing the net weight of the package. Julie was concerned that this might be a deceptive practice. She recalled from a Consumer Behavior course she had taken in college a concept known as the “just noticeable difference.” This said that relatively small changes in a stimulus (such as a price hike or content shrinkage) go unnoticed by consumers. Julie felt intuitively that the price increase necessary to maintain margins would be noticed, given the price sensitivity of buyers for snack foods. However, the past industry data suggested that perhaps buyers might not notice the package size reduction needed to sustain profits, which in this case would be 1.1 ounces. Julie asked her boss, Dave, the Marketing Director, about the advisability of reducing the net weight of the potato chips. Dave said that this was a practice known variously as “downsizing” and “package shorting.” It was a very common practice among packaged goods manufacturers. For instance, he said, candy bar manufacturers are subject to constantly fluctuating ingredient prices, and because there are expected (“fair” or “reference”) prices for candy bars, package sizes are frequently adjusted without informing consumers. Jim said that was a nonissue since marketers have been above board in labeling products accurately as to weight, serving size, price, and quantity. Furthermore, the Food and Drug Administration had no laws against the practice. Dave recommended downsizing the potato chips, but he made it clear to Julie that the ultimate decision was up to her. Julie still had her doubts. After all, it would seem that consumers who are in the habit of buying a particular product size generally don’t scrutinize the net weight label on subsequent purchases. If this were true, it seemed to Julie that downsizing would be a deceptive practice. Author: Geoffrey P. Lantos, Associate Professor of Marketing, Stonehill College.

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Case Study 2 Falsification of Data Topic: Marketing Research (via research supplier company) Characters: Greg, Marketing research analyst Elizabeth, Project/Work coordinator Ms. Jordon and Mr. Collins, Co-owners and active managers Greg is in his second month of employment with XYZ Marketing Research. The firm is a large, wellknown, highly respected, very successful supplier of marketing research. Its clients include major companies in many different industries throughout the world. Routine procedure is for Ms. Jordon and Mr. Collins to secure business in the form of research projects. Each project ends with an analyst preparing a written report with marketing strategy recommendations based on his/her interpretation of the data. This report is given to Elizabeth who gives it to Ms. Jordon and Mr. Collins who then deliver the written report, complete with a verbal presentation, to the client. Projects are assigned to one of the 16 research analysts by Elizabeth, depending on the workloads of the different analysts. Given the volume of projects and the similarity of most projects, different analysts usually work on different parts of a project. For example, different analysts are used to plan the sample, construct the questionnaire, and interpret the data. Data collection and computer processing of data are conducted by separate companies contracted with the XYZ Marketing Research company. Greg’s responsibilities are to interpret the data and write a report with marketing strategy recommendations. He has completed about 20 such projects, for which the co-owners have praised his work. On Wednesday afternoon he completed this project. Following regular procedures, he gave the completed report to Elizabeth to give to Ms. Jordon and Mr. Collins. Thursday morning when Greg arrived at work, he found the original computer data printouts by his door with numerous numbers in the tables changed with red ink There was also a note to see Elizabeth. Elizabeth explained that Mr. Collins thought the findings would have been different and that the client would probably not agree with the actual findings and related recommendations. He has therefore taken “research license” and changed a few numbers in the computer data printouts. Now he wants you (Greg) to rewrite your report accordingly. Elizabeth explained that since clients are provided with a copy of these summary printout sheets, she has called the outside computer firm to send new printouts with the revised numbers. 32

Case Study 3 Washing Dirty Laundry Topic: Advertising (Unethical Tactics) Characters: Bruce Seth, project manager at a consumer products company Priscilla Wheeling, Bruce's boss Bruce Seth, a project manager at a consumer products company, was wondering how he should proceed with his recommendation for the Endirt commercials. Endirt had been doing well in the market, but not a week went by without a customer (or former customer) writing to complain about the commercial. There were variations of the commercial, but the central theme was “Dirt on your shirt.” It typically featured a woman saying, “Dirt on your shirt! Dirt on your shirt!” in a taunting voice to a man whose shirt was soiled. The man looked at another lady (presumably his wife), who was very embarrassed at the entire situation. Later shots showed her washing the shirt after rubbing Endirt into it, and the other woman (or women) saying, “No more dirt on your shirt!” The complaining letters, almost exclusively from women, expressed objections to the commercial because it was demeaning to women and otherwise offensive as well. On the one hand, the brand was doing well; it was the brand leader in a growing market, though a much larger competing company was quite capable of beating Endirt with its brand. On the other hand, were the rights of the women being infringed? All the letters seemed to imply that. Bruce was a believer in the profit motive, but not at the cost of condoning unethical behavior. He had been asked to make a recommendation for the commercial for the next TV season. After reviewing the sales data and reading the letters of complaint, Bruce was contemplating his next move. Marketing research managers and project managers worked along with brand managers on specific brand research issues. Bruce reported to Priscilla Wheeling, a marketing research manager, and would provide recommendations to her and to the brand manager responsible for Endirt. Priscilla was a capable, promising executive with excellent graduate degrees. She was supporting her husband through his Ph.D. in history. She did not like the Endirt commercial and made no secret of it. She proclaimed that she would never buy the brand because the message was offensive and because of the role of the woman in the commercial. Bruce was pursuing a graduate degree while working and putting his wife through college; he certainly needed the job and the income. He was a recent recruit still in his probationary period. Bruce had reviewed all the letters, practically all of which were from women and strongly negative. Many of them said, as Priscilla did, that they would not buy the brand because of the offensive commercial and 33

because it was demeaning to women. Secondary data showed that the primary decision makers and purchasers of the product were women. Part of the reason for Endirt’s success was believed to be the advertising message, which not only had a high level of recall but a high level of association with the brand. Bruce wondered if, in spite of its apparent success, it was ethical to continue with the advertising message if it infringed on the rights of women, the major buyers of the brand. Author: Beheruz N. Sethna, Ph.D., Gulf States Utilizes Professor of Business, Dean,

College of Business, Lamar University

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Case Study 4 Lottery Mania Topic: Marketing Management (Event Marketing) Characters: Jane, Recently appointed Director of Event Marketing for the Anystate Lottery Jim, Marketing Director for the Anystate Lottery Sal, Commissioner of the Anystate Lottery Jane was recently hired out of college as the Director of Event Marketing for the Anystate Lottery. Although Jane’s father was a compulsive gambler and she received several betterpaying job offers, she decided to take the lottery job because she is a strong supporter of education and 50 percent of lottery sales go to supporting public education. Her family was against her accepting the job. The Anystate Lottery started five years ago after it was approved by 80 percent of the electorate. Two years ago, sales began to decline. This has led Jim, Marketing Director for the Anystate Lottery, to consider segmenting the population of Anystate into frequent, occasional, and nonparticipating players. Jim decided to target frequent players for the new lottery game, “Lottery Mania.” The probability of winning Lottery Mania was estimated to be one in 24 million. Frequent players of the lottery spend, on the average, $20 per week. Members of various minority groups constitute a large proportion of frequent players. Research conducted by the Anystate Lottery found that many minority frequent players use part of their limited grocery money to play lottery games. In some cases, people have gone hungry in order to play the lottery in hopes of winning the big prize. As Commissioner of the lottery, Sal is concerned about any negative publicity that may surround the operation of the lottery. However, he has directed Jim to increase sales of lottery tickets by 10 percent during the new game of Lottery Mania. Jim called Jane and ordered her to develop several promotional events to be targeted toward minority lottery players. These events will be used to launch Lottery Mania scheduled to start four weeks from now. Event marketing has been used very successfully for targeting minority consumers for a variety of products.

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Jane is upset about the task of specifically targeting minority segments over all other segments in the population of Anystate. Jane is a member of a minority group. Jane knows that additional money for education will help all students in Anystate, especially minority students. Yet she can’t help but think about all the families that will play the lottery even though they can’t afford it. Author: Craig A. Kelley, Professor of Marketing, California State University, Sacramento.

Case study 5 Adapted by Damian Grace from Manuel Velasquez, Business Ethics, 3rd. edn., Prentice Hall, 1992, 302-3. AUSTRALIAN GRADUATE SCHOOL OF MANAGEMENT Business Ethics Marketing Ethics Case Study In 1978, the US Food and Drug Administration (FDA) warned manufacturers of hair dyes that it was considering a requirement for them to place this label on products containing 4-MMPD (4Methoxy-M-phenylenediamine sulfate): Warning: Contains an ingredient that can penetrate your skin and has been determined to cause cancer in laboratory animals. Companies likely to be affected included Clairol, Revlon, Alberto-Culver, and Helene Curtis. The alert on 4-MMPD had gone out in 1975, when it was found that the chemical caused mutations in bacterial genes. This was taken as a sign of carcinogenic potential in humans. Subsequently this view received more support when 4-MMPD was found to produce cancers in animals. Because of powers under its Act of 1938, the FDA was unable to do more than require a label to be fixed to the dye. This was not an appealing prospect for dye manufacturers, who strenuously defended their products against the imposition of the warning label. They asserted that animal tests were not transferable because that would be “the equivalent of a woman drinking more than 25 bottles of hair dye a day, every day of her life”. Despite legal defences, the cosmetic industry lost the fight and the labels were required. Most manufacturers had already removed 4MMPD from their products by the time the court found for the FDA, thereby avoiding the offending warning label. Revlon,

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however, removed 4-MMPD and replaced it with 4-EMPD. When the FDA tested this chemical, it found that it too caused bacterial mutations. Revlon countered that the National Cancer Institute had tested 4-EMPD and had not found it a cancer-inducing agent. The NCI then denied that it had ever tested the chemical and Revlon was forced to correct its story: its own scientists had done the tests, but like the FDA the Revlon researchers had found bacterial mutations. Nevertheless, the FDA was not able to require a warning label to be placed on dyes with 4-MMPD until animal tests had been conducted, a process which takes three to four years. Warning labels cannot be affixed to containers until a further one to two years after this. Meanwhile, no manufacturers using 4-MMPD withdrew old stock from the market when labels were imposed. These products continued to be sold for several years without the warnings.© Damian Grace

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Bibliography

Bartels, R. 1967. “A Model for Ethics in Marketing,” Journal of Marketing, Vol. 31. Farmer, R.N. 1987. “Would You Want Your Granddaughter to Marry a Taiwanese Marketing Man?” Journal of Marketing, Vol. 51. Dunfee, T.W., N.C. Smith, and W.T. Ross Jr. 1999. “Social Contracts and Marketing Ethics,” Journal of Marketing, 63 (3). Ferrell, O.C. and L. Ferrell. 2005. “Ethics and Marketing Education.” Marketing Education Review, forthcoming. American Marketing Association. “What Are The Definitions of Marketing and Marketing Research?,” available at http://www.marketingpower.com/content4620.php. Bellizzi, J.A. and R.W. Hasty. 2003. “Supervising Unethical Sales Force Behavior: How Strong Is the Tendency to Treat Top Sales Performers Leniently?” Journal of Business Ethics, Vol. 43, 337-351.

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