Marketing Ethics and Social Responsibility in Strategic Planning 3 C H A P T E R

The Role of Ethics and Social Responsibility in Marketing Strategy Grown in importance recently Due to firms having problems including corporate scandals and misconducts Have become necessities due to: Stakeholder demands Changes in law May improve marketing performance and profits Are important to development of marketing strategy

Discussion Question Why is marketing ethics a strategic consideration in organizational decisions? Who is most important in managing marketing ethics: the individual or the firm’s leadership? Explain your answer.

Dimensions of Social Responsibility A broad concept that relates to an organization’s obligation to maximize its positive impacts on society while minimizing its negative impacts Includes: Economic responsibility of making a profit Legal responsibility of obeying laws and regulations Ethical responsibility to uphold principles and standards Philanthropic responsibility to increase the firm’s positive impact on society

The Pyramid of Corporate Social Responsibility Exhibit 3.1

Marketing Strategy in Action R.J. Reynolds has been accused by critics of using its “Joe Camel” cartoon character, to target children for cigarette consumption. How has society acted to protect children from advertising such as this? What obligations do companies have to protect children?

Marketing Ethics and Strategy Principles and standards that define acceptable marketing conduct as determined by the public, government regulators, private interest groups, competitors, and the firm itself The most basic of these standards is the codified laws and regulations Involves complex and detailed decisions in gray areas Deals with experiences and decisions made at work Can lead to violations of public trust Comes into play anytime individuals feel manipulated or cheated A firm’s reputation is one of its greatest assets.

Marketing Ethics and Strategy Potential Ethical Issues in Marketing Overall Issues Misrepresenting the firm’s capabilities Manipulation or misuse of data or info Invasion of privacy Anticompetitive activities Product Issues Pricing Issues Distribution Issues Promotion Issues See Exhibit 3.2 in Text

Marketing Ethics and Strategy Public Sentiment Toward Business Regulation Exhibit 3.3

Marketing Ethics and Strategy The Challenges of Being Ethical and Socially Responsible Business decisions involve complex and detailed discussions in which correctness may not be so clear cut. Internet privacy, protecting trademarks and brand names A person's experiences and decisions at home, in school, and in the community may be quite different from the experiences and the decisions (he or she has to make) at work. Ethical conflict may emerge from an inconsistency between personal values and the values held by members of the work group Ethical issues can develop into legal problems

Types of Misconduct Observed in Organizations Exhibit 3.4

Discussion Question Why have we seen more evidence of widespread ethical marketing dilemmas within firms today? Is it necessary to gain the cooperation of marketing managers to overstate revenue and earnings in a corporation?

Deceptive Practices in Marketing Deceptive Communications and Promotion Fraud or any false communication Exaggerated claims or statements Ambiguous statements Product labeling issues Selling abuses Regulating Deceptive Marketing Practices Typically regulated by: The firms themselves Industry and trade associations including Better Business Bureau

Organizational Determinants of Marketing Ethics & Social Responsibility Ethical Decision Making Determined by an individual’s background and business colleagues Affected by personal values, opportunity for unethical behavior, and exposure to others Intricately tied to the firm’s culture and ethical climate Corporate or organizational culture May be conveyed formally in employee handbooks, codes of conduct, memos, and ceremonies. Expressed informally through dress codes, extracurricular activities, and anecdotes

Organizational Determinants of Marketing Ethics & Social Responsibility Ethical Climate Part of a corporate culture that relates to an organization’s expectations about appropriate conduct The character component of an organization Sets the tone for ethical decisions Determines whether or not an individual perceives an issue to be an ethical issue Can only be improved by planning and structure The majority of firms that experience ethical or legal problems usually have stated ethics codes and programs. However, these codes, values, and standards may not be integrated into daily decision making Likely to occur when modeled by a strong leader

Organizational Determinants of Marketing Ethics & Social Responsibility Codes of Conduct (Codes of Ethics) Formal statement that describes what an organization expects of its employees Core values or principles that should be contained in a code of ethics include trustworthiness, respect, responsibility, fairness, caring, and citizenship. Must reflect management’s desire for compliance with values, rules, and policies Will not resolve every ethical issue in daily operations, but help deal with ethical dilemmas by prescribing or limiting specific activities. Not an effective means of controlling ethical behavior unless integrated into daily decision making Not effective unless the code has support of top management

Organizational Determinants of Marketing Ethics & Social Responsibility Key Considerations in Developing and Implementing a Code of Ethical Conduct Exhibit 3.5

Organizational Determinants of Marketing Ethics & Social Responsibility Texas Instruments’ “Ethics Quick Test” Is the action legal? Does it comply with our values? If you do it, will you feel bad? How will it look in the newspaper? If you know it’s wrong, don’t do it! If you’re not sure, ask. Keep asking until you get an answer.

Organizational Determinants of Marketing Ethics & Social Responsibility Marketing Ethics and Leadership Ethical cultures emerge from strong leadership. Leader as a model of acceptable behavior. Having a strong ethical climate depends on top mangers who consistently model the firm’s policies and standards. Great leaders: Create a common goal or vision for the company Obtain "buy in" or support from significant partners Motive others to be ethical Use the resources that are available to them Enjoy their jobs and approach them with an almost contagious tenacity, passion, and commitment.

Stakeholders, Market Orientation, and Marketing Performance The increasing evidence of a link between social responsibility, stakeholders, and marketing performance. Employees working in an ethical climate will make an extra effort to better understand the demands and concerns of customers. Employee commitment to the firm, customer loyalty, and profitability have also been linked to increased social responsibility. Employees who work in an ethical climate are more committed to the achievement of high quality standards. Become more willing to personally support the quality initiatives of the firm. An ethical climate is also conducive to a strong market orientation

Stakeholders, Market Orientation, and Marketing Performance The development of an organizational culture that effectively and efficiently promotes the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance of the firm. Strongly tied to ethics and social responsibility Means fostering a sense of cooperation and information exchange

Stakeholder Orientation The degree to which a firm understands and addresses stakeholder demands Strongly tied to ethics and social responsibility Comprised of three activities: Generation of stakeholder groups data and assessment of firm effects on these groups Distribution of this information throughout the firm Responsiveness as a whole to this intelligence Research indicates a strong association between social responsibility and customer loyalty

Incorporating Ethics & Social Responsibility to Marketing Performance Strong ethics causes employees to be: Motivated to serve customers Committed to the firm Committed to high quality standards Satisfied with their job Can lead to trust among firm’s stakeholders Is so important that it can have major negative impacts on firms that don’t uphold ethical standards

The Connection Between Ethics and Strategic Planning Typically done through ethical compliance programs or integrity initiatives Vested in the marketing plan Based on an understanding of: Risks associated with misconduct Ethical and social consequences of strategy Values of organizational members and stakeholders Manifested through actions … not just words

Discussion Question What is the relationship between marketing ethics and organizational performance? What are the elements of a strong ethical compliance program to support responsible marketing and a successful marketing strategy?