REPORT ON ETHICAL MARKETING ABSTRACT
This report begins by examining several potentially ethical recent marketing practices. Since most marketing managers face ethical dilemmas during their careers, it is essential to study the moral consequences of these decisions. A typology of ways that managers might confront ethical issues is proposed. The significant organizational, personal and societal costs emanating from unethical behavior are also discussed. Both relatively simple frameworks and more comprehensive models for evaluating ethical decisions in marketing are summarized. Finally, the fact that organizational commitment to fostering ethical marketing decisions can be accomplished by top management leadership, codes of ethics, ethics seminars/programs and ethical audits is examined.
Introduction to Report on Ethical Marketing
Ethical Marketing refers to the application of marketing ethics into the marketing process. Briefly, marketing ethics refers to the philosophical examination, from a moral standpoint, of particular marketing issues that are matters of moral judgment. Ethical marketing generally results in a more socially responsible and culturally sensitive business community. The establishment of marketing ethics has the potential to benefit society as a whole, both in the short- and long-term. Ethical marketing should be part of business ethics in the sense that marketing forms a significant part of any business model. Study of Ethical marketing should be included in applied ethics and involves examination of whether or not an honest and factual representation of a product or service has been delivered in a framework of cultural and social values.
It promotes qualitative benefits to its customers, which other similar companies, products or services fail to recognize. The concern with ethical issues, such as child labor, working conditions, relationships with third world countries and environmental problems, has changed the attitude of the Western World towards a more socially responsible way of thinking. This 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 idea of fair trade is that consumers pay a guaranteed commodity price to a small group of producers. The producers agree to pay fair labor prices and conserve the environment. This agreement sets the stage for a commerce that is ethically sound.
The philosophy of marketing is not lost with this newfound ethical slant, but rather hopes to win customer loyalty by reinforcing the positive values of the brand, creating a strong citizen brand. However, this new way of thinking does create new challenges for the marketer of the 21st century, in terms of invention and development of products to add long-term benefits without reducing the product’s desirable qualities.
What is Ethical Marketing
Ethical marketing is about whether a firms marketing decision is morally right or wrong. The morality of the marketing decision can encompass any part of marketing from advertising to the pricing of their product or service, to the sourcing of their raw materials.
In today’s corporate world ethical marketing is playing a larger role in marketing strategy. An increasing number of consumers are buying products/services because they feel that the products, services or organizations responsible for those are ethical. In response to this consumer demand organisations have increased their focus on ethical marketing. The UK Co-operative bank is good example of an organization that tries to follow a ethical principal, based on what the customers feel strong about.
When companies are reviewing marketing strategies they need to consider whether the marketing decisions that they are making are ethical and reflect consumer and market expectations.
An individual’s view of ethics and morality is influenced by a variety of things including their culture, background, experience, upbringing/family, peers, community, religion and country.
After a company has decided to implement ethical marketing they will need to make the following decisions:
- Define what is ethical.
- Which branch of ethics will they subscribe to.
- How will the ethical approach to marketing be implemented.
- In which areas of the firm’s operations should ethical marketing be implemented e.g. employees, suppliers, consumers/clients, production techniques, distribution or the whole value chain.
A number of questions a firm must ask itself include:
Should the firm employ children to their products?
- Do the firm’s suppliers use child labor?
- Does the firm know? Today, child labor is a very big issue, does your firm want to associate itself with this?
- Does the firm exaggerate the benefits of its products on its packaging?
- Are claims overstated? Many firms do make bold claims. The company needs to make sure these claims are fully supported.
- Does the firm conduct in high pressurized selling techniques or focus on customer groups that are vulnerable e.g. pensioners? With markets very competitive obtaining customer loyalty is becoming very difficult. High pressurized selling techniques could result in the firms loosing reputation within its market.
- Does the firm squeeze even more margins out of their supplier to the extent that it impacts on the suppliers’ profit margin and may well have an impact on the quality of the products sold to you?
Basic concepts of Ethical Marketing
Ethics are a collection of principles of right conduct that shape the decisions people or organizations make. Practicing ethics in marketing means deliberately applying standards of fairness, or moral rights and wrongs, to marketing decision making, behavior, and practice in the organization.
In a market economy, a business may be expected to act in what it believes to be its own best interest. The purpose of marketing is to create a competitive advantage. An organization achieves an advantage when it does a better job than its competitors at satisfying the product and service requirements of its target markets. Those organizations that develop a competitive advantage are able to satisfy the needs of both customers and the organization.
As our economic system has become more successful at providing for needs and wants, there has been greater focus on organizations’ adhering to ethical values rather than simply providing products. This focus has come about for two reasons. First, when an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services. When marketing practices depart from standards that society considers acceptable, the market process becomes less efficient—sometimes it is even interrupted. Not employing ethical marketing practices may lead to dissatisfied customers, bad publicity, a lack of trust, lost business, or, sometimes, legal action. Thus, most organizations are very sensitive to the needs and opinions of their customers and look for ways to protect their long-term interests.
Second, ethical abuses frequently lead to pressure (social or government) for institutions to assume greater responsibility for their actions. Since abuses do occur, some people believe that questionable business practices abound. As a result, consumer interest groups, professional associations, and self-regulatory groups exert considerable influence on marketing. Calls for social responsibility have also subjected marketing practices to a wide range of federal and state regulations designed to either protect consumer rights or to stimulate trade.
The Federal Trade Commission (FTC) and other federal and state government agencies are charged both with enforcing the laws and creating policies to limit unfair marketing practices. Because regulation cannot be developed to cover every possible abuse, organizations and industry groups often develop codes of ethical conduct or rules for behavior to serve as a guide in decision making.
Societal Culture and Norms
- Culture refers to the set of values, ideas, and attitudes of a homogeneous group of people that are transmitted from one generation to the next.
- Culture also serves as a socializing force that dictates what is morally right and just.
- This means that moral standards are relative to particular societies, often reflecting the laws and regulations that affect social and economic behavior, including marketing practices.
- It is common to observe different ethical views in different countries.
- Societal values affect business practices regarding the use of another’s ideas, copyright, trademark, or patent.
- These are viewed as intellectual property, and unauthorized use is deemed unethical and illegal in the U.S.
- This is not the case everywhere.
- Unauthorized use of copyrighted software and other intellectual property in global markets costs the U.S. economy $250 billion annually in lost revenue.
Business Culture and Industry Practices
Business cultures –
- The effective rules of the game
- The boundaries between competitive and unethical behavior
- The codes of conduct in business dealings.
- Affects ethical conduct
- In the exchange relationship between sellers and buyers
- In the competitive behavior among sellers.
Corporate Culture and Expectations
Corporate culture reflects the shared values, beliefs, and purposes of employees that affect individual and group behavior Corporate ethical culture manifests itself in codes of ethics and the ethical actions of top management and co-workers.
10 principles of ethical contact by marketers that was drawn up by the Word of Mouth Marketing Association — designed especially for achieving successful ethical marketing strategies..
How to do it right
- Be truthful and never knowingly relay false information
2. Full disclosure — including employment and affiliations.
3. Respect all community guidelines [set by bloggers and community managers].
4. Never ask a blogger to lie.
5. Take extra care when dealing with bloggers that appeal to minors.
6. No manipulation of advertising or affiliate programs to impact blogger income.
7. Refrain from using automated systems for distributing messages.
8. Full disclosure of incentives and payments given.
9. Sending a product to a blogger does not guarantee coverage.
10. Request that bloggers reveal the source of products they review.
GO GREEN CONCEPT
COMPANIES PREFER TO GO GREEN IN ORDER TO PRACTICE ETHICAL MARKETING.
Companies Going Green Benefits
Even though in the past most companies were resistant to implementing technology which would reduce environmental pollution and save energy as it would mean changing the way things are done which have been built over several years. However, contrary to what people believe, there are several benefits of companies going green. One of the main reasons as to why are companies going green is that people are becoming far more conscious and are buying products only from producers who produce environment friendly products. Moreover, people have become conscious of recycling things and there are many who ask how does recycling affect environment. The simple answer to that is when a thing which is already used is used again, it reduces the cost of making a particular thing, thereby reducing the need of power.
The main reason for the initial resistance of companies to go green is that the whole process of change would be time consuming and expensive. This is partially true, but then if these environment friendly products are used, they would help save a lot of money in the long run. Let’s say that you have a business, and you employ 1,000 employees. Every day, you need to communicate with all the employees and if you do this on paper, imagine the amount of paper you would need every day. On the other hand, if you digitize this paperwork and send emails, you can not only save your costs of buying paper and at the same time saving valuable trees from being cut down, thereby saving the environment. Moreover using fluorescent light bulbs costs more when you buy them compared to standard light bulb, but when you compare the life of both the bulbs, the fluorescent light bulbs lasts much longer.
Major Companies Going Green
Some of the major companies which have implemented green strategies include Bank of America, General Electric, DuPont and Home Depot. There are many more, but these are worth mentioning as they have been most resistant to change. Today, Bank of America uses much less paper than it has traditionally used and the best part is that the customer base of the company has not reduced at all, rather it has increased. Moreover, they recycle paper internally and the best part is they offer employees a cash back offer to a certain limit if they buy hybrid vehicles. You may like to know more on hybrid cars and the environment.
On its part General Electric have started developing environmental friendly product, especially, solar panels and has successfully generated billions in revenue. The company was one of the worst polluters, but has today taken steps to clean up the areas in which their plants are located.
Environmentalists over the last several years criticized DuPont due to their ways of not caring for the environment. However, due to government regulations and people’s sustained pressure, the company has taken steps to drastically lower its emissions of polluting greenhouse gases. Moreover, it has appointed an eminent environmentalist as its advisor on its board and the best part is they have successfully reduced pollution by more than 50%.
Home depot is another company which has taken recent steps to implement green technology. They were the largest retailer of old-growth wood products in the world, but the people started objecting to what they were doing, cutting down trees to make their products.
Tips for Companies Going Green
The following are few ways in which companies can go green.
- See to it that all mechanical equipments are well maintained.
- Recycle or donate old equipment or computers.
- Buy energy-efficient printers, PCs, etc.
- Cleaning products which are Eco-friendly should only be bought as these are non-toxic and biodegradable.
- Instead of using general batteries, rechargeable batteries can be used.
- Amount of paper should be reduced by trying to go for online bill payment, online banking and emails.
- Wherever possible double-sided printing should be used.
- Recycle ink cartridges, aluminum, plastic and paper.
Ethical/Legal Framework in Marketing
- Ethics deal with personal moral principles and values.
- Laws are society’s values and standards that are enforceable in the courts.
- There are numerous situations where judgment plays a large role in defining ethical and legal boundaries.
- Actions that are technically legal could be viewed as unethical
- Actions considered to be ethical may not be seen as legal.
12 Tips for Ethical Marketing
- People beats planet. Between people and planet, consumers are more likely to pay more for perceived human benefits, such as Fair Trade or proceeds benefiting charity, than environmental benefits, such as organic or low carbon footprint. Community-based values are particularly compelling.
- Values are a must. “Consumers are looking for the ethos behind the brand…consumers want to know that a company isn’t just driven by money,” Arnold states. Gone are the days when profit as sole motivator could fly.
- Heartstrings win over logic. Consumers respond to emotional angles more than rational ones. Luckily, ethical and environmental aspects can be highly emotive, so make sure to position them that way.
- Honesty is king. Make an honest gesture about where you are – even if you’re still working to become green – people will appreciate your honesty. For God’s sake,don’t green-wash.
- Get creative with your packaging. Make your product’s packaging a selling point, or design a second life into the packaging so that consumers can continue to use the package for another purpose once they get it home. (While you’re at it, design a second life for your product.)
- People don’t trust ads. Use channels other than advertising to communicate with your audience.
- Action speaks louder than words. Spend money on making a great product rather than marketing it.
- Market the ease of the green or ethical aspects of your product. People are lazy.
- Beware of market research. Basing a marketing campaign on statistics is a dangerous trap, given that market research is often flawed. For example, people cannot be relied on to answer truthfully about how they would act in a situation.
- Balance ethical and traditional values. Products don’t sell on ethics alone. Arnold advises choosing the 1 or 2 key ethical values and blending them with the key traditional values (such as value and quality).
- Choose your words wisely – different words elicit different impressions from different people.
- Maintain coherent messaging across the company. If a company’s marketing campaigns send conflicting messages, no one wins.
Unethical Marketing Practices
Unethical marketing is wrong by definition but usually it isn’t a life or death matter. Subjective statements like “the most delicious” are suggestive enough to influence opinions but vague enough that it’s not directly a lie.
While a firm is entitled to persuade the potential customers that by buying its products they will get the best value for their money, the persuasion should be based on facts rather than deception, information rather than disinformation. In other words, the businesses should desist from indulging in deceptive marketing practices.
In Pakistan, deceptive marketing practices are prohibited by the Competition Ordinance, 2009. Section 10 of the Ordinance states: “No undertaking shall enter into deceptive marketing practices.” Such practices are defined in a comprehensive way to cover either of the following: a) false or misleading information, which may harm the business interest of another enterprise; b) false or misleading information to consumers, including information that lacks reasonable basis, relating to price, character, method, place of production, properties, suitability for use, or quality of goods; c) false or misleading comparison of goods in advertising; and d) fraudulent use of another business’s trademark, firm name, product labeling or packaging.
As clarified by the commission itself, Section 10 applies to goods as well as services. These provisions are calculated to ensuring that the consumer’s decision to buy a product is based on sufficient information as to its actual price and benefits. In this respect, the Office of Fair Trading has been established under the commission.
Legal remedies notwithstanding, deceptive marketing practices, particularly deceptive advertising, are a common phenomenon in Pakistan. Businesses resort to aggressive marketing in order to increase their sales and lure customers away from their competitors. All else being equal, the more aggressive the marketing in an industry, the greater the chances that the firms will resort to deceptive marketing that distorts, misrepresents, or conceals facts. Some examples are:
Faced with stiff price competition, cellular service providers have come up with various ‘inexpensive’ packages and are using aggressive advertising to sell the same. However, in several cases, the advertisements do not clearly inform the customers about the caveats attached with these packages. For instance, one cellular service provider claims to offer the world’s cheapest call. While the accuracy of the claim itself is questionable, it is not clear whether the call is the world’s cheapest in terms of being local, national, or international, from network to network or to all networks.
Every mobile company claims that it offers the lowest call or text rates. The claim prima facie is ridiculous, simply because not all service providers can have the lowest call or SMS rate.
Cellular service providers have also come up with ‘cheap’ minute per call rates. However, the advertisements either do not mention at all, or mention in small print, that the next minute starts after every 30 or 45 seconds. Moreover, hidden charges, such as call connecting charges and taxes are not clearly specified.
Some time back, the CCP had reprimanded two cellular companies for indulging in deceptive marketing. For instance, one company’s package lacked a reasonable basis as to both price and character of the offer. It was not clearly mentioned whether call rates were inclusive or exclusive of taxes. Moreover, the duration of the call was not specified.
Banks and other financial institutions while encouraging consumers to open savings accounts do not adequately disclose certain crucial facts, such as whether the promised interest is simple or compound, whether interest rate varies with payment period (monthly, six-monthly or annual) and whether there are any compulsory deductions from the promised payment.
In the past, the CCP had admonished a few banks for misleading advertisements about higher returns on deposits. According to the CCP, the banks did not specify the basis of the calculation of the expected rate of return. Nor were consequences of early withdrawal from the deposits mentioned. Moreover, important information was carried in small print. In response, banks gave the undertaking to the commission that in future their advertisements and promotional material would clearly specify the rate of profit or rate of return along with the relevant terms and conditions and disclaimers if any in a manner understood by an average consumer.
Marketing of products relating to beauty and health/fitness industries is in many cases based on false or misleading information. Potential customers are made to believe that the product being offered, and endorsed by some celebrity, can do wonders in reducing weight, accelerating growth or having a fair complexion.
Sometimes, a product is claimed to provide a cure for a number of health and beauty related problems. The manufacturers of one cream, for instance, claim that it has multiple uses or advantages ranging from fair complexion to healing of wounds and burns to even treatment of cancer. On which basis do they make such a bold claim remains a mystery. In many cases, consumers are not warned against the possible harmful effects of using a medicine.
Evening newspapers in order to swell the size of their readership resort to creating hype and sensationalism. For instance, a newspaper will carry the headline, “The stock market collapsed,” in very large fonts followed by a question mark in extremely small print. Such a misleading display is enough to lure a curious commuter at a traffic signal, where such newspapers are generally purchased, into buying a copy of the paper.
Very recently, the CCP has asked paint manufacturers to terminate the practice of putting coupons in their packs without sufficient disclosures as to the exact price of the tokens.
In several industries, the producers claim their brand to be No.1 without specifying on what basis they make such a claim.
Obviously, a brand is No.1 if it has the largest share in the market. But the word “market” is vague. For it can be a local, regional, national or international market. A brand can be No.1 regionally but not nationally.
Do the businesses owe any responsibility to society in general and their customers in particular? Or are they responsible only to their shareholders and concerned primarily with maximizing profits by any means?
There is a school which maintains that businesses’ responsibility is only to themselves and that corporate social responsibility is a meaningless term. If this view is accepted, then ‘deceptive’ marketing practices become legitimate though they main remain illegal depending upon the legal framework. However, such a view is not widely accepted because businesses being part of society owe responsibility to it. At least they owe responsibility to their customers — both potential and existing.
In the wake of the recent global financial turmoil, few economists now believe in a laissez faire economy, where the government keeps its hands off business activity. Instead, it is almost universally believed that the government has to play an important role in ensuring competition and fair business practices.