Chapter Three Marketing Ethics, Regulations, and Social Responsibility

Chapter Objectives Identify ethical issues in marketing. Discuss legislation and regulatory agencies that impact marketing. Discuss the social responsibility of business firms.

Marketing Shapes Inappropriate Cultural Values Companies aggressively market their products, even if they are harmful to individuals and/or society. Does marketing of products shape values or does marketing respond to current values? Ethical Issues in Marketing

This ad promises little girls and their parents that their girl will end up as attractive as Britney Spears if they drink milk. Source: Courtesy of Bozell Worldwide, Inc. as agent for the National Fluid Milk Processor Promotion Board. $12 billion a year is spent on marketing products to children ages 4 to 12. Are children a fair target? –They have not reached maturity. –They don’t have adult reasoning. –It is difficult for them to differentiate between fact and fiction. –They can be easily manipulated.

Is this advertisement merely responding to sexual attitudes in society? Source: Courtesy of Guess and Creative Director Paul Marciano. Does sexual appeal sell products? Is sex in advertising overdone? Is marketing promoting inappropriate sexual behavior? Is marketing responding to sexual attitudes in society? Should sex in advertising be regulated? If so, how? If not, why not?

Does Marketing Overemphasize Materialism and Cause People to Buy More Than They Can Afford Do consumers overspend? Does easy credit contribute to overspending? Is marketing responding to desires of consumers or promoting overspending? Does marketing capitalize on human weakness or does it respond to human desires? Does marketing create materialistic desires or does marketing respond to materialistic desires? Is materialism good or bad?

Marketing Uses Deceptive and Misleading Techniques Can salespeople be trusted? Is it okay to use bribes and gifts in selling to business customers? If marketers do not use bribes at home can they do it when they take their products internationally? Bait and switch Deceptive Advertising* (FTC Guidelines; False Advertising)FTC GuidelinesFalse Advertising Blockbuster sued over late fees

Channel One Advertising Research results What are the ethical issues involved when marketing to youth?

Marketing Increases the Prices of Goods and Services Marketing creates intangible benefits. Marketing provides information. Companies cannot reduce marketing expenditures unless competitors do. Marketing contributes to GDP. Yes, but …. From

Marketing Violates Consumer Rights to Privacy Why do marketers want information about consumers? What information do marketers want? How should this information be gathered? How should this information be used?

Ethical/Unethical Decisions Ethically Questionable Issue -Personal background -Experience -Social influences -Job-related influences Individual Alternatives Decision Consequences Morals: Personal beliefs or standards used to guide an individual’s actions. Morals direct people as they make decisions. Ethics: Philosophical principles that serve as operational guidelines for both individuals and organizations concerning what is right and wrong.

Marketing Regulations Sherman Antitrust Act—1890 Federal Food and Drug Act—1906 Clayton Act—1914 Federal Trade Commission Act—1914 Robinson-Patman Act—1936 Wheeler-Lea Amendment—1938 Lanham Act—1946 Fair Packaging and Labeling Act—1966 Consumer Product Safety Act—1972 Hart-Scott-Rodino Act—1976 Children’s Television Act—1990 FreeTradeOpenCompetition

Federal Agencies Regulating Marketing Practice Food and Drug Administration (FDA) Federal Communications Commission (FCC) U.S. Postal Service (USPS) Consumer Product Safety Commission (CPSC) Federal Trade Commission (FTC) Deceptive and Misleading Communication Communication is deceptive or misleading if a substantial number of consumers are left with false impression or if the communication involves misrepresentation. The misrepresentation induces people to make a purchase. Note: Puffery is not considered deceptive or misleading. Complaint Procedure Complaint filed with FTC Investigation initially confidential Consent order Administrative complaint Cease and desist order Court of Appeals Corrective advertising Requires substantiation of claims Trade regulation rulings Procedures

Industry Regulations Better Business Bureau (BBB): –Keeps records and summaries of complaints filed against individual companies. –National Advertising Division (NAD) –National Advertising Review Board (NARB)

Social Responsibility 83% of Americans indicate that it is important for companies to support the needs of society through: –Environmentally safe products –Controlling emissions and wastes –Becoming involved in meeting societal needs, e.g., donations, community sponsoring, etc. Cause-Related Marketing Involves a long-term partnership Is integrated into the corporation’s marketing plan Both parties must benefit. Companies need to show a genuine effort. Green Marketing Development and promotion of products that are environmentally safe Demonstrates social responsibility Keys to successful green marketing –Develop a strong brand name and association with green products –Reduce costs of producing green products –Make green products attractive to the public Prius Prius-Japan