1. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 4 - 1 CHAPTER 4 Ethics and Social Responsibility in Marketing

2. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 4 - 2 After reading this chapter you should be able to: Appreciate the nature and significance of ethics in marketing. Understand the differences between legal and ethical behaviour in marketing.

3. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University 4 - 3 After reading this chapter you should be able to: Identify factors that influence ethical and unethical marketing decisions. Distinguish among the different concepts of ethics and social responsibility.

4. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Nature and Significance of Marketing Ethics Ethics are the moral principles and values that govern the actions and decisions of an individual or group. They serve as guidelines on how to act rightly and justly when faced with moral dilemmas. But how do know what is right and wrong ethically? A good place to start is the difference between what is legally right and is right. The text on p.86 offers some good examples of ethical dilemmas in marketing. 4 - 4

5. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Current Perceptions of Ethical Behaviour Some companies now have an ethical code that all employees must abide by. Some companies don’t though and this is where ethical issues can arise between an organisation and its stakeholders. Some industries, such as the car industry or oil industry, are seen by many in society to be industries where ethics has been forgotten in the pursuit of markets and customers. However as ethics is of increased importance to consumers companies in all industries are making strong efforts to improve their level of perceived ethical business practices with stakeholders. 4 - 5

6. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Concept Check 1.What are ethics? 2.What are three possible reasons for the present state of ethical conduct in business? 1. Ethics are the moral principles and values that govern the actions and decisions of an individual or group and serve as guidelines on how to act rightly and justly when faced with moral dilemmas. 2. (1) Pressure on business people to make decisions in a society with diverse values; (2) Business decisions being judged by groups with different values and interests; and (3) Ethical business conduct may have declined. 4 - 6

7. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Societal Culture and Norms Culture refers to the set of values, ideas and attitudes that are learned and shared among the members of a group. Culture serves as a socialising force that determines what is considered to be morally right or wrong within a group. It is therefore a powerful force on companies and their ethical behaviour. Just because it is okay to market one product a certain way in one country does not make that correct to market it that way in another. In some countries piracy of movies, music and books is widespread, yet in others to commit this crime would result in years in jail. 4 - 7

8. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Business Culture and Industry Practices Business Culture consists of the effective rules of the game, the boundaries between competitive and unethical behaviour. Just as culture varies between country and country, business culture can vary tremendously between industry and industry. For this reason ethics in some industries is nearly unheard of but in others if a business were to conduct itself in an unethical way it would soon find itself out of business. 4 - 8

9. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Ethics of Exchange As you already know the exchange process underlies every transaction in marketing. However, in this exchange there is usually an unequal relationship between one party and the other. As a individual consumer you have little power over the companies you deal with. This can lead some companies to exploit this relationship. However the, Trade Practices Act and the ACCC which enforces it, do protect all consumers in all transactions. 4 - 9

10. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Ethics of Competition Business culture also influences ethics when dealing with competition from other businesses. The two most common forms of unethical behaviour in competition are: –Economic espionage and; –Bribery Economic espionage involves gathering information, usually illegally, on competitors. Bribery is of course paying someone money for them to do something for you they shouldn’t. An example might be paying a purchasing officer to buy your products over that of another company. 4 - 10

11. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Corporate Culture and Expectations A third influence on ethical practices is corporate culture. Corporate culture reflects the shared values, beliefs and purpose of employees that affect the individual and group behaviour. The corporate culture is best symbolised by how the staff dress, the working environment and how employees are compensated. Many companies also have a code of ethics for ensuring that their staff always do the right thing ethically. The ethical behaviour of top management and co- workers is critical in ensuring that all business practices remain ethical. 4 - 11

12. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Personal Moral Philosophy and Ethical Behaviour Ethical choices are ultimately based on the personal moral philosophy of the decision maker concerned. Moral philosophy is learned through the process of socialisation with friends and family and by formal education. Two prominent personal moral philosophies have direct bearing on market practice: –Moral idealism. This is a moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome. –Utilitarianism. This is a moral philosophy that focuses on the ‘the greatest good for the greatest number’. 4 - 12

13. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Concept Check 1.Give examples of three different types of unethical marketing behaviour. 2.What is meant by moral idealism? 1. Animal testing, marketing fast food to children and cold calling. 2. Moral idealism is a moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome. This philosophy can be traced back to the Greek philosopher Socrates who addressed the problem of ‘how we ought to live’. 4 - 13

14. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Understanding Social Responsibility in Marketing The societal marketing concept discussed in chapter 1 stresses marketing’s social responsibility by not only for consumer’s needs but also providing for society’s welfare. Social responsibility is the idea that organisations are part of a larger society and are accountable to that society for their actions. The three main concepts of social responsibility are: –Profit responsibility –Stakeholder responsibility –Societal responsibility 4 - 14

15. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Three Concepts of Social Responsibility 4 - 15

16. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Profit Responsibility Profit responsibility holds that companies have a simple duty— to maximise profits for their owners or shareholders. Nonetheless, there are concerns about profiteering. Profiteering occurs when a company makes excessive profits, usually by taking advantage of a shortage of supply to charge extremely high prices. Petrol companies in Australia are often accused of profiteering in holiday times. 4 - 16

17. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Stakeholder Responsibility Frequent criticism of the profit view has led to a broader concept of social responsibility. Stakeholder responsibility focuses on the obligations an organisation has to those who can affect achievement of its objectives. These constituencies include customers, employees, suppliers and distributors. Starbucks Coffee is one company that believes in stakeholder responsibility. 4 - 17

18. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Societal Responsibility An even broader concept of social responsibility has emerged in recent years. Societal responsibility refers to obligations that organisations have to (1) preserve the ecological environment and (2) serve the general public. Companies have responded to this concern through what is known as green marketing —marketing efforts to produce, promote and reclaim environmentally sensitive products. Socially responsible efforts on behalf of the general public are becoming more common. A formal practice is cause-related marketing, which occurs when the charitable contributions of a firm are tied directly to the customer revenues produced through the promotion of one of its products. 4 - 18

19. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University The Social Audit Converting socially responsible ideas into actions involves careful planning and monitoring of programs. Many companies develop, implement and evaluate their social responsibility efforts by means of a social audit, which is a systematic assessment of a firm’s objectives, strategies and performance in terms of social responsibility. A social audit consists of five steps: 1.Recognition of a firm’s social expectations and the rationale for engaging in social responsibility endeavours. 2.Identification of social responsibility causes or programs consistent with the company’s mission. 3.Determination of organisational objectives and priorities for programs and activities it will undertake. 4.Specification of the type and amount of resources necessary to achieve social responsibility objectives. 5.Evaluation of social responsibility programs and activities undertaken and assessment of future involvement. 4 - 19

20. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Turning the Table: Consumer Ethics and Social Responsibility Consumers also have an obligation to act ethically and responsibly in the exchange process and in the use of products. Unfortunately, consumer behaviour is somewhat inconsistent. Unethical practices of consumers are a serious concern to marketers. These practices include filing warranty claims after the claim period, making fraudulent returns of merchandise, providing inaccurate information on credit applications, tampering with electricity and gas meters, recording copyrighted music and DVDs, and submitting fraudulent insurance claims. 4 - 20

21. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Ronald McDonald House for Children Should marketing and social responsibility programs be integrated? 4 - 21

22. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Concept Check 1.Marketing efforts to produce, promote and reclaim environmentally sensitive products are called __________________. 2.What is a social audit? 1. Green Marketing 2. A social audit is a systematic assessment of a firm’s objectives, strategies, and performance in terms of social responsibility. 4 - 22

23. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: The Core by Kerin et al Slides prepared by Andrew Hughes, Australian National University Finish Questions? 4 - 23