Ethics and Socially Responsible Marketing Chapter 18 Ethics and Socially Responsible Marketing Chapter 18 will focus on Ethics and Socially Responsible Marketing.

Chapter 18: Ethics and Socially Responsible Marketing LEARNING OBJECTIVES LO1 Identify why marketers should be concerned about ethics LO2 Distinguish between ethics and social responsibility LO3 Describe consumerism and explain how it fosters ethical and socially responsible business practices LO4 Identify the four steps in ethical decision making LO5 Outline how ethics and social responsibility can be integrated into a firm’s marketing strategy These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides.

Ethical trade-off: low costs vs. doing the right thing How do retailers strike the balance between keeping costs low & ensuring acceptable working conditions in developing countries? Loblaw led the garment industry to ensure worker safety Firms can demonstrate their commitment & be trusted to do the right thing Per chapter introduction: the case study focuses on how retailers often struggle to make the trade-off between keeping costs as low as possible & ensuring acceptable working conditions in developing third-world countries. Lower costs are often achieved at the price of labour safety & below-average labour costs. Bangladesh is the world’s second largest apparel exporter, next to China. When the Canadian government eliminated the 18% duty on clothing made there, we saw an influx in garments made in that country. Unfortunately the collapse of a large commercial building in that country where a garment factory was housed, saw many casualties & injuries, & brought to light the poor working conditions of these employees. The tragedy raised many questions about ethical implications of outsourcing manufacturing to developing countries with poor safety measures. The scrutiny also shifted to retailers, including Loblaw, makers of the Joe Fresh clothing line, which happened to be manufactured in that garment factory. Loblaw successfully led the Western garment industry to rally to improve conditions and safety for these workers. It is possible to demonstrate that out of a disastrous event, if handled in a responsible manner can strengthen the brand by demonstrating that it can be trusted to do the right thing. .

The scope of marketing ethics LO1 The scope of marketing ethics Business Ethics Marketing Ethics Business ethics: examines ethical rules & principles within a commercial context, the various moral or ethical problems that might arise in a business setting & any special duties or obligations that apply to persons engaged in commerce. Marketing ethics: ethical problems that are specific to the domain of marketing. This YouTube video is a Miller ad for responsible drinking (always check YouTube links before class). Ask students: how it compares to other ads they see for drinking. They might note that they use a lighter fear appeal. Ask them if they think Miller is doing their job to promote responsible drinking. Group activity: Ask students to brainstorm the ethical issues unique to marketing. They should start with the marketing mix by proceeding through each of the 4Ps. Each group should write one issue for each element on the board, then discuss what they have produced as a class. Miller Commercial

Attitudes about ethical standards of various professionals LO1 Attitudes about ethical standards of various professionals Discussion Question Why do you feel marketers rank so low on this scale? What can marketers do to improve their ranking? People in marketing interact directly with the public. Because they are so much in the public eye, it should not be surprising that marketing & sales professionals sometimes rank poorly in ratings of the most trusted professions. In a recent Gallup survey, most professions were rated much higher than marketing as shown in the slide. For marketers who depend on the long-term trust of their customers, this low ranking is very disappointing. Marketing is a very visible part of business. Often practices that are the result of other business functions will be attributed to marketing. Marketers need to stress the good things that they do and the value that they add to society. Also, by policing practitioners and sanctioning those who violate the various codes of ethics, etc. marketers can demonstrate that they are serious about ethical standards.

Creating an ethical climate in the workplace LO1 Creating an ethical climate in the workplace Values Establish Share Understand Rules Management commitment Employee dedication Controls Reward Punishment A strong ethical climate requires a commitment from the top down within the firm. Everyone within the firm must agree to a system of controls that rewards appropriate behavior and punishes inappropriate behavior. Ask students: about the ethical climate on their campus. Pick a topic such as honor code violations or pledging procedures of sororities and fraternities. Then ask them to evaluate the topic based on values, rules, and controls. A firm’s incentive system can encourage exactly the type of behavior the firm states that it wants to avoid. Incentives such as a bonus can be a double-edged sword, generating sales but also encouraging overly and aggressive and potentially unethical sales tactics.

Canadian marketing association’s code of ethics LO1 Canadian marketing association’s code of ethics Generally accepted code in marketing Flows from general norms of conduct to specific values Subareas within marketing have their own code of ethics to deal with specific issues Each subarea within marketing, such as marketing research, advertising, pricing, and so forth, has its own code of ethics that deals with the specific issues that arise when conducting business in those areas. Click on the slide heading to go to the CMA website. Group activity: Have the students develop a Code of Ethics for their college or university. Ask students: What ethical behaviours should you include? Why are those chosen behaviours important?

The influence of personal ethics: why people act unethically LO1 The influence of personal ethics: why people act unethically What makes people take actions that create so much harm? Are all the individuals who engage in questionable behavior just plain immoral or unethical? In many cases, ethics is in the eye of the beholder. Corporate scandals in recent years have many people asking the two simple questions as noted in the slide. To avoid these ethical consequences, the long-term goals of the firm must be aligned with the short-term goals of each individual within the firm. Ask students: Why might a salesperson lie to a young couple about the safety of a car seat for their infant.? This will bring out issues such as self-interest for the welfare of the salesperson and his/her family. Remind students there are no definitive answers to these questions. Ethics is a difficult topic, and many people struggle to find answers to questions such as these. Decisions often have conflicting outcomes, where both options have positive and negative consequences

Corporate social responsibility (CSR) LO2 Corporate social responsibility (CSR) Voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. - For a company to act in a socially responsible manner, the employees within the company must also maintain high ethical standards and recognize how their individual decisions lead to the collective actions of the firm. Firms with strong ethical climates tend to be more socially responsible. Today, companies are undertaking a wide range of corporate social responsibility initiatives, such as establishing corporate charitable foundations, supporting and associating with existing nonprofit groups, supporting minority activities, and following responsible marketing, sales, and production practices.

The Link Between Ethics and CSR LO2 The Link Between Ethics and CSR Firms should implement programs that are socially responsible Explain to students that companies are involved in a host of activities. Ask students: Why might some social commentators suggest that CSR is unnecessary? Students will realize that some say the main objective of a company should be to make money. But an understanding of CSR moves many beyond a shareholder perspective to recognize that they must appeal to a vast variety of stakeholders including countries, suppliers, the environment, employees and customers. Ask students: Can a firm be socially responsible and not ethical, or ethical and not socially responsible? A firm can give money to charity (socially responsible), but be unethical (engage in deceptive advertising). Ask students: Can you think of a firm that may be either ethical or socially responsible, but not both? Group activity: Students should create a list of firms reputed to be socially responsible. In what ways do these firms demonstrate their commitment? Do the students consider these factors when purchasing goods? Employees should act in an ethically responsible manner

Ethics vs. social responsibility LO2 Ethics vs. social responsibility It is important to distinguish between ethical business practices and corporate social responsibility programs. The slide helps to explain this concept further.

Case in point: tim hortons LO2 Case in point: tim hortons Challenge Answer Results To honour Tim Horton's love for children and his desire to help those less fortunate Tim Hortons storeowners hold an annual Camp Day, donating coffee sales and collecting public donations. Corporate Social Responsibility in Practice Click on link in slide title to go to Tim Hortons’ website and show students the Community and Goodwill programs such as the Tim Horton Children Foundation and/or Tim Horton Camp Experience. Raised over $7.2 million, enabling 11,000 kids from economically disadvantaged homes to go to camp.

Consumerism, ethics & socially responsible practices LO3 Consumerism, ethics & socially responsible practices CONSUMERISM: A social movement aimed at protecting consumers from business practices that infringe upon their rights. Employees Customers Marketplace Society Companies that do not pay sufficient attention to ethical conduct & strong corporate responsibility are often targeted by consumer groups & other advocacy groups, which generate negative publicity & sometimes even boycott their products. Consumerism is a social movement aimed at protecting consumers from business practices that infringe upon their rights. When companies embrace corporate social responsibility (CSR) they appeal not only to their shareholders but also to their key stakeholders, including their own employees, consumers, the marketplace, & society at large. Each stakeholder group, as noted in the slide, has a key role to play.

Entrepreneurial marketing 18.1: money does grow on trees LO3 Entrepreneurial marketing 18.1: money does grow on trees Social responsibility & environmental concern is a key driver of Ten Tree Apparel Every item sold = 10 trees planted Clothing produced in responsible way Ten Tree’s products are tagged with the message ‘ten trees are planted for every item purchased”. This attracts an audience of socially and/or environmentally enlightened consumers. Ten Tree has planted in over 14 countries. After appearing on Dragons’ Den & securing funding, they are now distributing in over 300 retailers across Canada & looking to expand into the US. The company focuses on contributing to the financial, social & environmental bottom line.

A framework for ethical decision making LO4 A framework for ethical decision making This chart can be used on its own to introduce the framework. Additional slides follow which can be used to provide more detail as desired. We cannot expect every member of a firm to always act ethically. However, a framework for ethical decision making can help move people to work toward common ethical goals. The slide shows a simple framework for ethical decision making. The next set of slides will overview each of the steps.

Step 1: identify issues Marketing research firm issues LO4 Using results to mislead or even harm the public Data collection methods Hiding the real purpose of the study - In a marketing research firm, ethical issues might include: data collection methods—not informing respondents that they are being observed hiding the true purpose of a study from respondents—telling them they are an independent research company, but actually doing research for a particular politician. using results to mislead or even harm the public—results of a pharmaceutical study. - Ask students – why would a company do this?

Step 2: gather information & identify stakeholders LO4 Step 2: gather information & identify stakeholders Identify all ethical issues and relevant legal information Identify all relevant stakeholders and get their input on any identified ethical issues Ask students: What are the ramifications of publishing misleading research findings for a new pharmaceutical product. Answer: there could be real harm to users. Then ask: Why might this happen? Answer: The pharmaceutical industry wants the product to come to market to meet sales goals. They might be paying the researchers to do the project.

Step 3: brainstorm & evaluate alternatives LO4 Step 3: brainstorm & evaluate alternatives Halt the market research project? Make responses anonymous? Instituting training on the CMA Code of Ethics for all researchers After the firm has identified the stakeholders & their issues & gathered the available data, all parties relevant to the decision should come together to brainstorm any alternative courses of action. The alternative solutions depend on the type of ethical issue and how the stakeholders are affected.

Step 4: choose a course of action LO4 Step 4: choose a course of action Weigh the alternatives Take a course of action Alternatives are then evaluated and a course of action is chosen. The chosen course represents the best solution for the stakeholders using ethical best practices. The next slide shows that in order to choose the appropriate course of action, marketing managers will evaluate each alternative by using a process as shown.

Ethical decision-making metric LO4 Ethical decision-making metric As noted in the slide, alternatives are evaluated by using a process as noted in the slide, which is a sample ethical decision-making metric. Using this exhibit, you can gauge your own ethical response.

Case in point: ben and jerry’s LO4 Case in point: ben and jerry’s Challenge Answer Results To promote business practices that respect the earth and the environment. Ethical sourcing of production and suppliers. The company only uses milk that does not contain growth hormones, and now has transitioned to “certified humane” cage free eggs, also using fair trade certified ingredients such as coffee and vanilla. Ben & Jerry’s has taken its commitment to the environment into consideration in its sourcing decisions. The company examines every aspect of its products and seeks opportunities to improve the environment.

LO4 Group Activity: Have the students discuss how the specific priorities of Ben and Jerry’s relate to their target market. How do these priorities create value for the firm and its customers?

Integrating ethics into marketing strategy LO5 Integrating ethics into marketing strategy Planning Phase Implementation Phase Control Phase Remind students that as marketers, they must ask questions specific to each stage and examine those questions carefully before moving on to the next stage. Ethical decision making is not a simple process, though it can get easier as decision makers within the firm become accustomed to thinking about the ethical implications of their actions from a strategic perspective. Ethical decision making can be integrated into the strategic marketing planning process. Let’s now review each stage in detail.

LO5 Planning phase The mission or vision statement sets the overall ethical tone for planning. Mission statements can be used as a means to guide a firm’s SWOT analysis. By incorporating ethics into the firm’s mission statement, the firm sets a standard for its subsequent ethical decision making. The mission statement signals the firm’s strategic priorities.

Implementation phase Should the firm be relocating production to another country? Should the firm be targeting this market with this product? Should the firm be selling its product in this market in this manner? In this phase, firms are identifying potential markets & ways to deliver the 4 P’s to them, firms must consider several ethical issues, such as choice of target market how to pursue this market. Group activity: For each question related to the implementation phase, see if students can think of examples for each of the questions. Many students will use examples such as tobacco, alcohol or other controversial product companies. Point out that other products also encounter the same issues, even if the products themselves seem less controversial. Once the strategy is implemented, controls must be in place to be certain that the firm has actually done what it has set out to do.

Check successful implementation LO5 Control phase Check successful implementation React to change Any plan requires constant evaluation and revision, and this truism applies particularly to the evaluation of ethical issues. Ethics remains a crucial component of the strategic marketing planning process & should be incorporated into all firm’s decision making.

Ethical dilemma 18.1: check-ins & facebook photos can be dangerous LO5 Ethical dilemma 18.1: check-ins & facebook photos can be dangerous The rise of social media gives criminals & unethical marketers an easy way to take advantage of consumers. Consumers are becoming more aware & avoid obvious releases of personal information. Ethical marketers need to find a way to collect personal information that consumers make available through social media & not violate their locational privacy. As students: how often do they post statuses that indicate where they are, or check-in via Facebook? Are they concerned about revealing their locations & having their homes robbed? How should retailers treat this sensitive type of information?

LO5 Understanding ethics by using scenarios: scenario 1 – retailers lack ethical guidelines Should retail staff ‘mislead’ customers into thinking they look great in the most expensive outfits & accessories when they really don’t? Should they say & do anything to close the sale? Or do consumers just want to feel good? As noted in the scenario, should retail staff simply embellish the truth about how a customer looks in order to close the sale? Or should they be honest & truly try to recommend something that really does look good? Should staff make the customer feel good at all costs? Is this what consumers want? Or do they want the truth? What do you think?

Scenario 2: giving credit where credit isn’t due LO5 Scenario 2: giving credit where credit isn’t due Should high-risk consumers be given credit accounts or easy access to credit with high interest rates, knowing that they cannot afford to pay? Lower-income consumers often are denied credit, and when they get credit then pay it off, they build their credit. Rent-to-own and check cashing firms use this argument to justify their exorbitant fees and interest rates. Opponents argue that encouraging non–credit-worthy consumers to take credit cards harms them by making them responsible for debts they likely cannot pay off. Should this type of enticement be allowed or should we believe that consumers know the risk & should accept responsibility for them? What do you think?

Scenario 3: the jeweller’s tarnished image LO5 Scenario 3: the jeweller’s tarnished image Outright lies are sometimes used to prey upon people’s feelings of sympathy. This entices consumers to buy more or to donate to causes In this case, the distributor lied to customers to entice them to purchase more & preyed upon their sense of compassion. When the owners learn about the deception, should they immediately stop using the distributors? Why or why not?

Scenario 4: no wonder it’s so good LO5 Scenario 4: no wonder it’s so good Company does not disclose the ingredient of alcohol Government does not require unless alcohol is > 1% content Impact to consumers who are sensitive/allergic to alcohol Relax with Enjoy Many people believe that legal actions de facto must be ethical, but are they really? If the chance of harm is very low, should the firm disclose the presence of the alcohol to avoid any potential issues? What about people who should not be consuming alcohol such as pregnant women, recovering alcoholics and children? Should full disclosure be made?

Scenario 5: bright baby’s right idea LO5 Scenario 5: bright baby’s right idea Is the potential for injury enough to merit removal of the product from the market? Do you feel it is ethical to move the product to a less regulated market? Avoiding a large loss often creates the potential for ethically questionable actions. Would the scenario change if some infants had died from this product?