MARKETING ETHICS Why do marketers have to worry about ethics? What does it take for a firm to be considered socially responsible? How should a firm make ethically responsible decision? How can ethics and social responsibility 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.

Mattel – Product Safety Crisis Lead paint from subcontracted manufacturer in China In August 2007 several toy manufacturer’s found lead paint in their toys. Mattel recalled 20 million products in 1 month. Ask students - was Mattel at fault for this? Many will think it’s Mattel’s responsibility to micromanage production other students will believe Mattel is not able to follow all their products through all their production stages.

Firm Goals Greed and short term profit seeking Serious long term consequences Creating value over the long run Long term success Profit is important to the success of the firm. But how the firm makes that profit can have a dramatic impact on the firm’s future.

The Scope of Marketing Ethics Business Ethics Marketing Ethics 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 the Ethical Standards of Various Professions Why do you feel marketers (advertising practitioners) rank so low on this scale? What can marketers do to improve their ranking? 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 the 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.

Citibank Addresses Identity Theft Why is this a good customer issue to address? Why are these ads effective? These ads on YouTube (always check YouTube links before class) are part of a campaign Citibank ran for identity theft. They are interesting ads as they show the victim with the voice of the thief talking about the products the thief plans to buy. They are effective because they speak directly to a consumer’s fear of credit card theft and the contrast between the character in the ad and their voice attracts attention. Citibank Commercial

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.

American Marketing Association 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 sub-area 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. Group activity: Have the students develop a Code of Ethics for their college or university. Ask students: What ethical behaviors should you include? Why are those chosen behaviors important? AMA Website

The Influence of Personal Ethics Genetics Family Religion Values In many cases, ethics is in the eye of the beholder. Ask students: 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. What happened?

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? Ask students: Why might a salesperson lie to a young couple about the condition of a new home? 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

Competing Outcomes Dangerous flaw in new model Delay production Delayed revenue Possible layoffs Loss of bonuses Continue production Potential injury to consumers Loss of revenue Ask students: Which option would you choose? How do you think various people make such choices?

The Link Between Ethics and Corporate Social Responsibility Firms should implement programs that are socially responsible Employees should act in an ethically responsible manner This web link is for the Build-A-Bear Workshop. The page is for their community involvement. Students are probably familiar with the product. Ask students if they were aware that this company was so active in the community. Have students determine which of these corporate giving plans appears to be the most effective? 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? Build-A-Bear Workshop

A Framework for Ethical Decision Making This concept is broken down in the next slides

Step One: Identify Issues Using results to mislead or even harm the public Marketing research firm issues 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 Two: Gather Information and 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.

Stakeholder Analysis Matrix for a Marketing Research Firm Ask students: How are stakeholders interrelated? How do the responsibilities of one overlap the other? The stakeholders are interrelated because an ethical violation may impact others. Falsifying results for a new pharmaceutical study will, for instance, impact the researchers, the pharmaceutical company, the legal system, the physicians, and most importantly the patients.

Step Three: Brainstorm Alternatives Halt the market research project? Make responses anonymous? Instituting training on the AMA Code of Ethics for all researchers The alternative solutions depend on the type of ethical issue and how the stakeholders are affected.

Step Four: 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.

Ethical Decision-Making Evaluation Questionnaire Group activity: Pose an ethical issue and have the class vote on how they would score each question.

Check Yourself According to the American marketing Association Code of Ethics, what are the six ethical values Identify the four stages in the ethical decision making framework Honesty, responsibility, fairness, respect, openness, citizenship Stages in framework: Stages 1: Identify Issues Stages 2: Gather Information and Identify Stakeholders Stages 3: Brainstorm Alternatives Stages 4: Choose a Course of Action

Integrating Ethics Into Marketing Strategy 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.

Planning Phase The mission or vision statement sets the overall ethical tone for planning. Firms often go beyond the mission or vision statement by including a values statement. 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.

Newman’s Own Donating over $200 million since 1982 The adding value 3.1 box features Newman’s Own Organics. This is a good opportunity to discuss the firm.

Implementation Stage Aqua Teen Hunger Force Secret Sparkle Body Spray LED display was mistaken as a bomb Secret Sparkle Body Spray Sold through retailer that targets 7-14 year olds although packaging claimed to keep out of reach of children Turner Broadcasting wanted to market to its core audience— teenagers who would know exactly what the lighted character represented—but it failed to consider the ramifications of blinking lights and LED displays near public transportation venues in a city that had been touched deeply by the events of 9/11. This promotion to young girls was inappropriate according to P&G’s own labeling and was terminated when the Children’s Advertising Review Unit of the Better Business Bureau stepped in and requested that P&G stop promoting the product to children.

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? 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.

Check successful implementation 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.

The Six Tests of Ethical Action The Publicity Test Would I want to see this in the media? The Moral Mentor Test Would the person I admire the most do this? The Admired Observer Test Would I want the person I admire the most to SEE me doing this? The Transparency Test Could I give a clear explanation for the action The Person in the Mirror Test Would I be able to look in the mirror and respect myself The Golden Rule Test Would I like to be on the receiving end of this action? Group activity: Divide students into groups, each of which takes one of these tests and then develops an example for the rest of the class.

Check Yourself Should a marketing manager insist on assessing the ethics of a situation she or he is facing? Identify one ethical issue you might face in each of the three phases of a marketing plan Yes Answers will vary

Understanding Ethics Using Scenarios Scenario 1: R.J. Reynolds: Promotions to Youth Scenario 2: Victoria’s Dirty Secret Scenario 3: Pregnant Teen TV Star Scenario 4: Who Is on the Line? Scenario 5: West Virginia T-Shirts Scenario 6: Giving Credit Where Credit Isn’t Due Scenario 7: The Jeweler’s Tarnished Image Scenario 8: No Wonder It’s So Good Scenario 9: Bright Baby’s Bright Idea Scenario 10: Money from Mailing Lists Scenario 11: The Blogging CEO Click on each scenario to bring up the picture and questions.

Scenario 1: R.J. Reynolds What are the ethical issues Mailings to young adults Candy flavored cigarettes Is it wrong? Why or why not? An alcohol company cannot promote excessive drinking but a tobacco company has no such regulation. Back to list of scenarios

Scenario 2: Victoria’s Dirty Secret What was Victoria’s Secret doing? Was it wrong? Unethical How could they fix this? This is very grey since the company was trying to honestly raise revenues. Students might have additional issues with this company as they promote body images that are hard for many women to maintain. Back to list of scenarios

Scenario 3: Pregnant Teen TV Star Should the show be cancelled? Should the pregnancy be written into the script? How should Nickelodeon handle this? Is there any way this could be helpful? This type of issue can be very emotional for students. Be sure to instruct students to keep their comments on this topic professional. Entertainment companies who decide to stand by their stars when this type of situation happens, may find themselves stuck between strong emotions on both sides. Back to list of scenarios

Scenario 4: Who Is on the Line? What are the ethical issues in this scenario? Why would a firm use this service? How do you think consumers will respond to firms who use this service? Would you advise purchasing this service? Some states ban such software and require businesses to display a real phone number. But the practice continues. Ask students: Why would firms want to participate in it? Back to list of scenarios

Scenario 5: West Virginia T-Shirts What are the ethical issues in this scenario? If you were the retailer how would you have responded? Does a history of previous inappropriate business practices impact your opinion of the retailer? The retailer clearly believes that its target market is not offended and has little regard for non-customers who might be. In the long term, this type of indifference may prove problematic, but in the short term, the firm’s attitude might even increase its sales. Back to list of scenarios

Scenario 6: Giving Credit Where Credit Isn’t Due Is this an inappropriate target market? Could you argue that the firm provides a valuable service to this market? Would you advise the cataloger to pursue this new strategy? 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. Back to list of scenarios

Scenario 7: The Jeweler’s Tarnished Image Is the manufacturer responsible for the acts of independent sales people? How do you feel the Billing’s should respond? When the owners learn about the deception, should they immediately stop using the distributors? Why or why not? Back to list of scenarios

Scenario 8: No Wonder It’s So Good Relax with Enjoy Cola Is the legal non disclosure of the alcohol content and ethical issue? Should the firm be required to disclose the alcohol content? What would you do if you were Mia? 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? Back to list of scenarios

Scenario 9: Bright Baby’s Bright 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? What would you have advised the CEO? Avoiding a large loss often creates the potential for ethically questionable actions. Would the scenario change if some infants had died from this product? Back to list of scenarios

Scenario 10: Money from Mailing Lists Should Mangold continue to use the Marketing Metrix mailing list? Should he tell his new customers how he got their names? Do customers need to give consent before companies collect information on their online behavior? Sports Nostalgia Emporium must weigh the short-term gain of increased sales versus the long-term negative impact of customers who may be upset once they discover that their online behavior is being tracked. Back to list of scenarios

Scenario 11: The Blogging CEO Should Burdick be allowed to praise his company anonymously? Should he be allowed to attack his competitors? How would you feel if you knew a blogger had personal interests in the topic? Burdick must weigh the short-term impact of his anonymous blogging against the long-term negative impact of customers who may be upset once they discover his relationship with ACME Bubblegum. Back to list of scenarios

Glossary 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. Return to slide