Marketing Ethics and Social Responsibility

1. Marketing Ethics and Social Responsibility

2. Learning Objectives After studying this chapter, you should be able to: Identify the major social criticisms of marketing Define consumerism and environmentalism and explain how they affect marketing strategies Describe the principles of socially responsible marketing Explain the role of ethics in marketing

3. Chapter Outline Social Criticisms of Marketing Citizen and Public Actions to Regulate Marketing Business Actions Toward Socially Responsible Marketing

4. Social Criticisms of Marketing Marketing�s Impact on Individual Consumers High cost of distribution High advertising and promotion costs Excessive markups Deceptive practices

5. Social Criticisms of Marketing 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

6. Social Criticisms of Marketing 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

7. Social Criticisms of Marketing Complaint: Companies mark up products excessively Response: Most businesses try to deal fairly with consumers because they want to build relationships and repeat business

8. Social Criticisms of Marketing Marketing�s Impact on Individual Consumers Deceptive 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

9. Social Criticisms of Marketing Marketing�s Impact on Individual Consumers Deceptive Practices 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

10. Social Criticisms of Marketing Marketing�s Impact on Individual Consumers Deceptive Practices 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

11. Social Criticisms of Marketing 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.

12. Social Criticisms of Marketing 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.

13. Social Criticisms of Marketing 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.

14. Social Criticisms of Marketing 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.

15. Social Criticisms of Marketing 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.

16. Social Criticisms of Marketing Marketing�s Impact on Society as a Whole False Wants and Too Much Materialism

17. Social Criticisms of Marketing 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

18. Social Criticisms of Marketing 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.

19. Social Criticisms of Marketing Marketing�s Impact on Society as a Whole Cultural Pollution

20. Social Criticisms of Marketing 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

21. Social Criticisms of Marketing Marketing�s Impact on Other Businesses Acquisition of competitors Marketing practices Unfair competitive marketing practices

22. Social Criticisms of Marketing 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

23. 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

24. Citizen and Public Actions to Regulate Marketing Environmentalism is an organized movement of concerned citizens, businesses, and government agencies to protect and improve people�s living environment

25. Citizen and Public Actions to Regulate Marketing 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

26. Citizen and Public Actions to Regulate Marketing 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.

27. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability Pollution prevention Product stewardship Design for environment (DFE) New environmental technologies Sustainability vision

28. Citizen and Public Actions to Regulate Marketing Environmentalism

29. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability 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

30. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability 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

31. 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

32. Social Criticisms of Marketing

33. Business Actions Toward Socially Responsible Marketing Enlightened Marketing 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

34. Business Actions Toward Socially Responsible Marketing Enlightened Marketing 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

35. Business Actions Toward Socially Responsible Marketing Enlightened Marketing 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

36. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Societal marketing

37. Business Actions Toward Socially Responsible Marketing Enlightened Marketing 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

38. Business Actions Toward Socially Responsible Marketing Enlightened Marketing

39. Business Actions Toward Socially Responsible Marketing 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

40. Business Actions Toward Socially Responsible Marketing Marketing Ethics Philosophies 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

41. Business Actions Toward Socially Responsible Marketing Marketing Ethics

42. 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?

43. Review Questions  Identify the major social criticisms of marketing Define consumerism and environmentalism and explain how they affect marketing strategies Describe the principles of socially responsible marketing Explain the role of ethics in marketing

44. 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.