1. Business Marketing Ethics September 13, 2011 Dawne Martin, Ph.D.

2. Learning Objectives & Assignments To review issues in marketing ethics To understand the legal constraints on marketing behavior To investigate the issues associated with diversity To apply the AMA code of ethics to complex situations For Thursday, September 15 Quiz – Chapters 1 – 2 – 10 points Chapter 3

3. Ethics & Marketing Ethics deal with personal moral principles and values Laws are society’s values and standards that are enforceable in courts There are numerous situations where judgment plays a large role in defining ethical and legal boundaries Actions that are technically legal could be viewed as unethical Actions are considered to be ethical may not be seen as legal

5. Perceptions of Ethical Behavior 58 of US adults rate ethical standards of business executives as “fair” or “poor” 90% think white-collar crime is “very common” or “somewhat common” 76% say the lack of ethics in business contributes to tumbling societal moral standards 41% of 1,694 corporate employees in a recent survey were aware of ethical problems in their company

6. Marketing Ethics Marketing Ethics: Moral judgments, standards and rules of conduct relating to marketing decisions. Factors influencing ethical decision-making: Individual factors - attitudes and values. Opportunity presenting itself - likelihood of punishment, no professional codes of ethics, no corporate policies to discourage unethical decision making. Values, attitudes, and behaviors of others - peers, supervisors, top management.

7. Three Views of Ethical Responsibility Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free- market system, not with managers or organizations.Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free- market system, not with managers or organizations. Hand of government: Hand of government: Corporation has no moral responsibility beyond legal obedience. Regulatory hand of law and political process turn these objectives into common good. Hand of management: Hand of management: Encourages corporations to exercise independent, non-economic judgment over matters of morals and ethics that face them.

8. Sources of Ethical Standards Markkual Center for Applied Ethics, http://www.scu.edu.ethics/practising/decision/frameworks.html Utilitarian Approach – produces the greatest good and least harm for all affected Rights Approach – protects and respects moral rights of those affected Fairness or Justice Approach – all equals should be treated equally, or on a standard that is defensible.

9. Common Good Approach -- Respect and compassion for all others – specifically the vulnerable Virtue Approach – Actions consistent with our virtues – Is this consistent with my acting my best.

11. Respect, Honor, Integrity Recent job ad with clear ethical expectations: Salary: $115,000 base (neg.), plus 20-30% incentive bonus, car, and executive benefits. Personal characteristics: Must be a person of high integrity and impeccable character, whom people will trust and respect; have emotional maturity; be growing as a person, with a sense of purpose; bring credibility by demeanor, professional knowledge, and approach.

12. Characteristics of Successful Relationships Mutual Trust Communication Shared Goals Commitment to Mutual Gain Organizational Support

13. Trust Belief that party will fulfill its obligations in the relationship and not act to detriment of partner Aspects of Trust Honesty & Integrity Dependability Capability & Expertise Concern for Other

14. Two-Sides of Business Ethics Buyers and Buying Center Members Collusive bidding Restrictive conditions for bid specifications Over-estimating purchases for quantity discounts Excessive quantity on “sample” orders Obscure contract clauses in small type Accepting bribes or gifts Sellers Overselling Promising more than can be delivered Lying or making exaggerated claims Failing to keep customers confidences of divulging information to competitors Offering inappropriate or illegal entertainment

15. Ethical Dilemmas Read the AMA Code of Ethics For each ethical dilemma address the following: Is this situation covered by the AMA code of Ethics? What are the short-term consequences of your decision? Will anyone be hurt by your decision? How will your decision affect the trust of the customer or your employer? What are the long term consequences of your decisions?

16. Ethical Issues in Marketing Research Society’s rights The right to be informed of research results that may impact society as a whole The right to expect objective research results Clients’ rights The right to confidentiality The right to expect quality research Researcher’s Rights The right for protection against improper solicitation of proposals The right to accurate presentation of findings The right to confidentiality of proprietary information on techniques

17. Ethics and Pricing Setting an unfair price Altering product quality without changing price Practicing price discrimination with smaller accounts Price fixing Typical Examples of Antitrust Violations Bid Rigging Price Fixing Tying Market Allocations Using a Competitor’s Quote to Re-quote or Re-bid Reciprocity

18. Ethics and Advertising Strategy Comparative advertising If comparisons are made, then they must be accurate. Not implying that if a product is superior to competition in one characteristic, then it is superior overall. Better to point out competitive differences, leaving business customer to judge superiority of product. Truth in Advertising It is immoral to: Lie, mislead, or deceive in advertising. Fail to indicate dangers that are not normally expected. It is not immoral to: Use a metaphor or other figure of speech if these will be understood as figurative language. Persuade as well as to inform

19. Ethics in Sales Management Dealing with Customers Bribes Gifts Entertainment Reciprocity Dealing with Employers Moonlighting Changing jobs Expense Accounts Contests

20. Three Concepts of Social Responsibility Profit Responsibility: Companies have a duty to maximize profits for their owners and stockholders Stakeholder Responsibility: Focuses on obligations an organization has to those who can affect achievement of its objectives Customers Employees Suppliers Distributors

21. Social Responsibility Societal Responsibility Preservation of the ecological environment and general public Education Diversity Economically disadvantaged Labor conditions, child labor Responses Green marketing: Produce, promote and reclaim environmentally sensitive products ISO 4000 – international standards for environmental quality and green marketing standards Cause-related marketing – charitable contributions tied to customer revenues

23. McDonnell Corporation Competitive Research for Multi-million dollar contracts. Potential research techniques – which are unethical? Why? Check competitors annual and 10K reports, SEC filings, etc. Ask competitor for information with full identification. Buy competitor’s products, take them apart and price components. Hire head-hunting firm to interview key managers from competitor firm. Hire management consultant to interview competitor under the guise of doing an industry survey and guarantee of confidentiality. Ask salespeople to ask customers about competitors. Get a customer to request a phony bid from competitor. Buy competitor’s garbage. Infiltrate a competitor’s business operations (cleaning crews, new hires) Hack through competitor’s extranet.