Week 2 - Marketing Ethics PDF

SOCIALLY RESPONSIBLE MARKETING LOCATING ETHICS IN MARKETING Marketing Principles Helene Cherrier  Firm Goals Greed and short Serious long term term profit seeking consequences Creating value Lo...

SOCIALLY RESPONSIBLE MARKETING LOCATING ETHICS IN MARKETING Marketing Principles Helene Cherrier  Firm Goals Greed and short Serious long term term profit seeking consequences Creating value Long term success over the long run  It is ok to focus on profits. You don’t need to work for the welfare of the society. HOWEVER, YOU CANNOT DAMAGE OTHERS/SOCIETY/WORLD FOR YOUR PROFIT!  Main Ethical Dilemma Interest of the Needs of the shareholders society Transparency and clear definition of business terms The Scope of Marketing Ethics Examines ethical rules and principles in a commercial Business Ethics setting. Includes exploration of moral/ethical dilemmas that might arise in a business. Refers to the ethical issues Marketing Ethics specifically in the domain of marketing. 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  Criticisms of Marketing on consumers can be classified in terms of: – High Prices – Deceptive pricing / promotion / packaging – High-pressure selling – Shoddy, harmful, or unsafe products – Planned Obsolescence – Poor service for the disadvantaged – Socially irresponsible targeting  High Prices Three factors are cited as leading to high prices: – High costs of distribution – High advertising and promotion costs Heavily promoted brands cost much more than private – Excessive markups labels virtually identical non- branded or store-branded product Vertical price fixing occurs when parties at different levels of the same marketing channel collude to control the prices passed on to consumers. Ex: ‘Price-fix perfume giants fined € 40m’ Luxury perfume giants including L'Oréal, Dior, Guerlain, Chanel Fines: and shops such as Sephora and Marionnaud have been fined a total of €40 million for running a price-fixing ring. Marionnaud - €12,800,000 Sephora - €8,300,000 L’Oréal - €4,100,000 The appeal court in Paris upheld the 2006 decision of the Nocibé - €3,150,000 Chanel - €2,636,000 competition watchdog Conseil de la Concurrence (now called the Christian Dior - €2,200,000 Autorité de la Concurrence) to fine them for conspiring to "end Yves Saint Laurent €1,800,000 Guerlain - €1,700,000 any competition between retail outlets for their products". Beauté Prestige International (Jean-Paul Gautier, Issey Miake) - €476,000 Elco (Clinique et Estée Lauder) - €1,240,000 Each luxury company had set recommended selling prices prix LVMH (Parfums Givenchy et Kenzo Parfums) - public indicatif but also set a maximim discount that could be €769,000 + Kenzo - €350,000 Clarance/Clarins (ex Thierry Mugler parfums) - offered - forcing customers to pay more by ending effective €490,000 competition. The companies also set up "price police" to enforce Comptoir Nouveau de la parfumerie – Hermès the cartel which would threaten distributors with commercial Parfums - €310,000 Shiseido Europe - €200,000 reprisals if they refused to agree the prices. Fines ranged from €12.8m for Marionnaud to €200,000 for Shiseido. From www.connexionfrance.com/Archive/Price-fix-perfume-giants-fined-40m  Deceptive Practices Deceptive pricing - Falsely advertising factory or wholesale prices or large reductions from a phony high retail list price Deceptive promotion - Misrepresenting a product’s features or performance, or luring consumers to store for out-of-stock item Deceptive packaging - Exaggerating package contents, using misleading labeling, etc.  Misrepresentation of a product performance Coco-Cola’s vitaminwater is marketed as a super-healthy alternative to regular H2O, but critics say the claims don’t hold water. The National Consumers League (NCL) and other consumer groups recently filed complaints with the FTC and lawsuits alleging that the brand made “dangerously misleading” claims. Claims included: Print ad that suggested that vitaminwater served as a viable substitute for a seasonal flu shot A television ad that implied that vitaminwater boosts the immune system and helps fend off garden-variety sickness Language on the label reading, “vitamins + water = all you need.” DECEPTIVE PROMOTION  High-Pressure Selling Tactics Salespeople are often accused of using high- pressure selling tactics: – In persuading people to buy goods they had no intention of buying – Because prizes are often given to top sellers Marketers have little to gain from high- pressure tactics – Such actions damage relationships with the firm’s customers  Shoddy or Unsafe Products Products are not made well or services are not performed well Products are unsafe due to manufacturer indifference, increased product complexity, and poor quality control Products deliver little benefit or are even harmful  Planned Obsolescence Causing products to become obsolete before they actually need to be replaced Using materials and components that will break, wear, rust, or rot sooner than they should Holding back functional features, and introducing them later to make older models obsolete Perceived obsolescence - continually changing consumer concepts of acceptable styles to encourage more and earlier buying 16 - 16  Planned Obsolescence (Cont.) Clothing, consumer electronics, computer industries are frequently charged with perceived obsolescence. Marketers respond that consumers like style changes; they get tired of the old goods and want a new look in fashion or they want the latest high-tech innovations, even if older models still work  Underserved Consumers Lack of supermarkets in low income areas, have left many disadvantaged consumers with little or no access to healthy, affordable fresh foods 16 - 18 Poor Service to Disadvantaged Consumers They are forced to shop in small stores where they pay more for inferior goods National chain retailers practice redlining and refuse to open businesses in poor neighborhoods  Socially irresponsible targeting The pharmaceutical and food industry are industries that have to take extra care when marketing due to possible health issues with consumers. An example of a target market that many believe has been abused and irresponsible would be children’s snacks and cereals that are high in sugar and preservatives known for unhealthy lifestyles being marketed to children in between kids programming.  Marketing’s impact on society as a whole has been criticized in terms of: Materialism Too few social goods Cultural Pollution Too much political power Impact on other businesses https://www.yout ube.com/watch?v =zEN4hcZutO0  Marketing’s Impact on Society as a Whole False Wants and Too Much Materialism Complaint: Response: The marketing system urges too People do have strong defenses much interest in material against advertising an other possessions. People are marketing tools. Marketers are judged by what they own most effective when they rather than who they are, appeal to existing wants rather creating false wants that than creating new ones. The benefit industry more than high failure rate of new they benefit consumers. products shows that companies cannot control demand. 20-15  ‘The True Cost’ of Fast Fashion https://www.youtube.com/watch?v=OaGp5_Sfbss  Marketing’s Impact on Society as a Whole Too Few Social Goods A good or service that benefits the largest number of people in the largest possible way. Some classic examples of social goods are clean air, clean water and literacy Complaint: Response: Businesses oversell private goods There needs to be a balance at the expense of public between private and public goods and require more goods public goods to support them Producers should bear full social costs of their operations Consumers should pay the social costs of their purchases 20-16  Marketing’s Impact on Society as a Whole Cultural Pollution Complaint: Response: Marketing and advertising are planned Marketing and advertising to reach only a target audience, and creates cultural pollution advertising makes radio and television free to users and helps to keep the cost of newspapers and magazines down. Today’s consumers have alternatives to avoid marketing and advertising from technology. 20-17  Cherrier Hélène (2012). “Using Projective Techniques to Consider the Societal Dimension of Healthy Practices: An Exploratory Study,” Health Marketing Quarterly, Vol 29, Issue 1, p. 82-95. INSENSITIVE & DISCRIMINATORY COMMUNICATION Gurrieri, Lauren, Jan Grave-Govan and Hélène Cherrier (2016). “Controversial advertising: Transgressing the taboo of gender-based violence,” European Journal of Marketing, 50 (7/8),1448 – 1469. 30  Marketing’s Impact on Society as a Whole Too Much Political Power Complaint: Response: Businesses wield too much Industries do promote their political power over own interests, and mass media, limiting regulators are seeking to media to report balance the interests of independently and big businesses against the objectively public Microsoft Tobacco 20-18  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 setting prices below cost, threatening to cut off business with suppliers, or discouraging the buying of a competitor’s product can hurt or destroy other firms 20-20  THE OTHER SIDE OF THE COIN: CONSUMERS Reasons for lack of ethical concerns in purchase decisions (Belk, Devinney & Eckhardt, 2005): – Unawareness/insensitivity: “it is the way of the world”; “out of sight, out of mind” – Social norms (focus on price and brand): “everyone does that” – Perceived responsibility of higher authorities: “it’s the government’s job to…” Consumers are not always willing to pay more for offerings from socially responsible businesses. Ethical practices do not guarantee higher sales! Reference: Belk, R., Devinney, T., & Eckhardt, G. M. (2005). Consumer Ethics Across Cultures. Consumption, Markets and Culture, 8 (3), 275-289. Consumer power…  Dove: Facebook misfire (2017) The champion of ‘real beauty’ has come under fire recently for what some consumers have dubbed “whitewashing”. In a Facebook ad for Dove body wash, the brand chose to portray a black woman removing her top and metamorphosizing into a white woman after using the product. This sparked outrage among the brand’s social media followers, who slammed the business with hashtags like #DoneWithDove and called for a boycott of its products.  Protein World: ‘Are you beach body ready?’ (2015) The public took to social media to proclaim their disdain for the ad and accused it of promoting an unhealthy body image. The UK's Advertising Standards Authority received 378 complaints regarding the campaign, a petition to have the ads removed was launched and there was even a small demonstration held against it in Hyde Park.  Role of marketers for ethical business practices: AMA’s Code of Conduct “ As marketers, we recognize that we not only serve our organizations but also act as stewards of society in creating, facilitating and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stakeholders (e.g., customers, employees, investors, peers, channel members, regulators and the host community).” AMA’s Ethical Values AMA’s Ethical Norms 1. Honesty 1. Do no harm 2. Responsibility 2. Foster trust in the marketing 3. Fairness system 4. Respect 5. Transparency 3. Embrace ethical values 6. Citizenship  Creating an Ethical Climate in the Workplace Values Establish Share Understand Rules Management commitment Employee dedication Controls Reward Rules and controls help balancing the Punishment effect of personal values and ethics with those of the company. The Influence of Personal Ethics Think about a time you believed an ethical violation had occurred but a friend of family member did not think it was an ethical issue Corbis/Jupiter images  Conscious Marketing Principles – Recognition of marketing’s greater purpose – Consideration of stakeholders and their interdependence. – The presence of conscious leadership, creating a corporate culture. – The understanding that decisions are ethically based.  CSR Corporate social responsibility: describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. Corporate social responsibility describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. These responsibilities are not mandated by https://www.youtube.com/watch?v=V6m-VJy8Toc any law or regulation but instead are associated with the demands, expectations, requirements, and desires of various stakeholders.  Corporate Social Responsibility Employees Current Their families customers Potential customers Employees Customers Shareholders Stakeholders Marketplace Society Partners Community Competitors Environment  Top 20 Admired Companies and Illustrative CSR Programs Rank Company Illustration of CSR Program 1 Apple Actively working to reduce carbon footprint: http://www.apple.com/environment/ 2 Google Google.org funds for pro-profit entrepreneurship in Africa, Google China Social Innovation Cup for College Students 3 Berkshire Hathaway Donates billions of dollars to the Bill and Melinda Gates Foundation 4 Southwest Airlines Employees donate volunteer hours to Ronald McDonald Houses throughout the U.S. 5 Procter & Gamble Live, Learn, and Thrive improves the lives of children worldwide. 6 Coca-Cola Spent $102 million through The Coca-Cola Campaign focusing on water stewardship, healthy and active lifestyles, community recycling, and education 7 Amazon.com Developed nonprofit Simple Pay Donation system to help nonprofits raise money easily 8 FedEx Delivered 440 tons of relief supplies at no charge to Hurricane Katrina victims 9 Microsoft Developed a system with the American Red Cross for vital information on people’s welfare in a disaster’s aftermath 10 McDonald’s 99% of fish come from MSC-fisheries, transitioning to sustainable food and packaging sources, Ronald McDonald House charities 11 Walmart Stores Green strategy to reduce packaging and use energy efficient lighting 12 IBM KidSmart Early Learning, Smarter Cities Challenge, MentorPlace, TryScience programs 13 General Electric Ecomagination campaign, GE Volunteers Foundation 14 Walt Disney Disney’s Planet Challenge, worldwide animal and conservation fund 15 3M Pollution Prevention Pays (3Ps) program focuses on conserving resources 16 Starbucks Develops ecologically friendly growing practices, LEED certified stores 17 Johnson & Johnson Funds nonprofits that fight AIDS/HIV around the world 18 Singapore Airlines Provided air travel for Australian social workers to Dhaka in Bangladesh for a project to prevent hearing loss in textile workers at no charge 19 BMW Light Up Hope and BMW Children’s Safety programs 20 American Express Partners with National Trust for Historic Preservation through the WMF to preserve sites in the U.S. and worldwide. Source: From Fortune Magazine, March 19, 2012, “World’s Most Admired Companies.” Copyright © 2012 Time Inc. Used under license.  How Conscious Marketing Differs from Corporate Social Responsibility CORPORATE SOCIAL RESPONSIBILITY CONSCIOUS MARKETING Independent of corporate purpose or Incorporates higher purpose and a caring culture culture Takes a holistic, ecosystem view of Reflects a mechanistic view of business business as a complex adaptive system Social responsibility is at the core of the Often grafted on to traditional business business through the higher purpose and model, usually as a separate department viewing the community and the or part of PR environment as stakeholders Sees limited overlap between the business Recognizes that business is a subset of and society, and between business and society, and that society is a subset of the the planet planet  Ethics & Corporate Social Responsibility Socially Responsible Socially Irresponsible Ethical firm not involved Ethical Both ethical and socially with the larger responsible community Unethical Questionable firm Neither ethical nor practices, yet donates a socially responsible lot to the community  A Framework for Ethical Decision Making Step 1 Step 2 Step 3 Step 4 Identify Gather Brainstorm Choose a Issues information and course of and identify evaluate action stakeholders alternatives What are the What info do I need What are the What is the ethical to better understand potential solutions? most suitable dilemmas in the situation? Who What are the ethical action in this this context? are the relevant pros & cons of each situation? parties affected? solution?  Evaluating your alternatives: Exhibit 4.4 - Ethical Decision-making Metric  Integrating Ethics into Marketing Strategy Include in company Planning Phase mission/vision Implementation Revise STP & 4P Phase strategies Check the Control Phase implementation for ethical misconducts & take corrective action THANK YOU!