McGraw-Hill/Irwin Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. Marketing Dhruv Grewal Michael Levy Chapter 3 Marketing Ethics

3-2 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Johnson & Johnson Credo Customers first Employees second Stockholders last

3-3 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Firm Goals Greed and short term profit seeking lead to serious long term consequences Creating value over the long run leads to long term success

3-4 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Scope of Marketing Ethics Business ethics Marketing ethics

3-5 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Attitudes About the Ethical Standards of Various Professions Discussion question Why do you feel marketers rank so low on this scale? What can marketers do to improve their ranking?

3-6 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Creating an Ethical Climate in the Workplace Values – Establish – Share – Understand Rules – Management commitment – Employee dedication Controls – Reward – Punishment

3-7 Test Your Knowledge Creating a strong ethical climate within a firm includes having a set of __________ that guide decision making and behavior. A)employee opinions B)values C)religious decrees D)morals

3-8 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3.2: American Marketing Association Code of EthicsAmerican 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

3-9 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Influence of Personal Ethics Values Genetics Religion Upbringing

3-10 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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? Decisions often have conflicting outcomes, where both options have positive and negative consequences

3-11 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Competing Outcomes Dangerous flaw in new model Delay production Continue production Delayed revenue Possible layoffs Loss of bonuses Potential injury to consumers Loss of revenue

3-12 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Aligning Goals Individual short term goals not in line with firm long term goals. Reward and incentive structures ensure that goals are aligned.

3-13 Test Your Knowledge To align personal and corporate goals, firms need to have a strong ethical climate, explicit rules for governing a firm’s transactions including a code of ethics, and a system for________________. A)rewarding and punishing behavior B)covering up questionable activities C)assuring the long term goals of the firm are met D)protecting stockholder interests

3-14 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Link Between Ethics and Corporate Social Responsibility Corporate Social Responsibility Employees should act in an ethically responsible manner Firms should implement programs that are socially responsible

3-15 Adding Value 3.1: Coca Cola Fights HIV/AIDS in Africa Coca Cola Africa Foundation

3-16 Corporate Social Responsibility in Practice How does a firm link the economic and social functions of the business to create value for all stakeholders?

3-17 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Case in Point: Whole Foods MarketWhole Foods Market Challenge Answer Results To find success in customer satisfaction and wellness, employee excellence and happiness, enhanced shareholder value, community support, and environmental improvement. Support organic farming, invest in the firm’s “team members” and donate at least 5% of net profits to non-profits. Sales in excess of $1.8 Billion and being listed on Fortune’s Best Companies to Work For, establishment of two successful foundations.

3-18 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A Framework for Ethical Decision Making

3-19 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step One: Identify Issues Marketing research firm issues Data collection methods Using results to mislead or even harm the public Hiding the real purpose of the study

3-20 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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 1 2

3-21 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Stakeholder Analysis Matrix for a Marketing Research Firm Discussion question How are stakeholders interrelated? How do the responsibilities of one overlap the other?

3-22 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step Three: Brainstorm Alternatives Halt the market research project Make responses anonymous Instituting training on the AMA Code of Ethics for all researchers

3-23 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Step Four: Choose a Course of Action Weigh the alternatives Take a course of action

3-24 Test Your Knowledge Which step in the ethical decision making framework involves collecting legal information? A)Identify issues B)Gather information and identify stakeholders C)Brainstorm alternatives D)Choose a course of action

3-25 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Ethical Decision-Making Evaluation Questionnaire

3-26 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Integrating Ethics Into Marketing Strategy

3-27 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.

3-28 Newman’s Own

3-29 Test Your Knowledge During planning, ethical mission statements can take on another role as a means to guide a firm’s __________. A)profit and loss B)marketing strategy C)performance evaluation D)SWOT analysis

3-30 Putting an Ethical Mission Into Practice How does a firm live up to the ethical goals of its mission statement?

3-31 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Case in Point: Ben and Jerry’s 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.

3-32 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Implementation Phase Should the firm be targeting this market with this product? Should the firm be relocating production to another country? Should the firm be selling its product in this market in this manner?

3-33 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Entrepreneurial Marketing 3.1: Fetzer VineyardsFetzer Vineyards “We Make Our Wines Responsibly Please Drink Them Responsibly.” Environmentally conscious Socially conscious Committed to the development of both their business and their people

3-34 Control Phase © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Check successful implementation React to change

3-35 Adding Value 3.2: Tragedy Hits Six Flags Discussion question What were the keys to Six Flags handling of this tragedy?

3-36 Exhibit 3.8: The Six Tests of Ethical Action © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1.The Publicity Test 2.The Moral Mentor Test 3.The Admired Observer Test 4.The Transparency Test 5.The Person in the Mirror Test 6.The Golden Rule Test

3-37 Test Your Knowledge Which test of ethical action asks what the person you most admire would do in that situation? A)The Publicity Test B)The Admired Observer Test C)The Moral Mentor Test D)The Golden Rule Test

3-38 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Understanding Ethics Using Scenarios Scenario 1: Who Is on the Line? Scenario 2: West Virginia T-Shirts Scenario 3: Giving Credit Where Credit Isn’t Due Scenario 4: The Jeweler’s Tarnished Image Scenario 5: No Wonder It’s So Good Scenario 6: Bright Baby’s Bright Idea

3-39 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Ethical Dilemma 3.1: A Questionable Promotion What alternatives did Steve come up with? How did Steve evaluate these alternatives? Which alternative did Steve select, and why?

3-40 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? Back to list of scenarios Scenario 1: Who Is on the Line?

3-41 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? Scenario 2: West Virginia T-Shirts Back to list of scenarios

3-42 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? Back to list of scenarios Scenario 3: Giving Credit Where Credit Isn’t Due

3-43 Scenario 4: 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? Back to list of scenarios

3-44 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? Scenario 5: No Wonder It’s So Good Back to list of scenarios

3-45 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? Back to list of scenarios Scenario 6: Bright Baby’s Bright Idea

3-46 Business ethics: Refers to a branch of ethical study that examines ethical rules and principles within a commercial context, the various moral or ethical problems that might arise in a business setting, and any special duties or obligations that apply to persons engaged in commerce. Corporate social responsibility: 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. Marketing ethics: Examines those ethical problems that are specific to the domain of marketing. Chapter 3 Glossary