Ethics in Marketing (Encyclopedia of Business and Finance)
Ethics are a collection of principles of right conduct that shape the decisions people or organizations make. Practicing ethics in marketing means deliberately applying standards of fairness, or moral rights and wrongs, to marketing decision making, behavior, and practice in the organization.
In a market economy, a business may be expected to act in what it believes to be its own best interest. The purpose of marketing is to create a competitive advantage. An organization achieves an advantage when it does a better job than its competitors at satisfying the product and service requirements of its target markets. Those organizations that develop a competitive advantage are able to satisfy the needs of both customers and the organization.
As our economic system has become more successful at providing for needs and wants, there has been greater focus on organizations' adhering to ethical values rather than simply providing products. This focus has come about for two reasons. First, when an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services. When marketing practices depart from standards that society considers acceptable, the market process becomes less efficientometimes it is even interrupted. Not employing ethical marketing practices may lead to dissatisfied customers, bad publicity, a lack of trust, lost business, or, sometimes, legal action. Thus, most organizations are very sensitive to the needs and opinions of their
customers and look for ways to protect their long-term interests.
Second, ethical abuses frequently lead to pressure (social or government) for institutions to assume greater responsibility for their actions. Since abuses do occur, some people believe that questionable business practices abound. As a result, consumer interest groups, professional associations, and self-regulatory groups exert considerable influence on marketing. Calls for social responsibility have also subjected marketing practices to a wide range of federal and state regulations designed to either protect consumer rights or to stimulate trade.
The Federal Trade Commission (FTC) and other federal and state government agencies are charged both with enforcing the laws and creating policies to limit unfair marketing practices. Because regulation cannot be developed to cover every possible abuse, organizations and industry groups often develop codes of ethical conduct or rules for behavior to serve as a guide in decision making. The American Marketing Association, for example, has developed a code of ethics (which can be viewed on its Web site at www.ama.org). Self-regulation not only helps a firm avoid extensive government intervention; it also permits it to better respond to changes in market conditions. An organization's long-term success and profitability depends on this ability to respond.
Several areas of concern in marketing ethics are explored in the remainder of the article.
UNFAIR OR DECEPTIVE MARKETING PRACTICES
Marketing practices are deceptive if customers believe they will get more value from a product or service than they actually receive. Deception, which can take the form of a misrepresentation, omission, or misleading practice, can occur when working with any element of the marketing mix. Because consumers are exposed to great quantities of information about products and firms, they often become skeptical of marketing claims and selling messages and act to protect themselves from being deceived. Thus, when a product or service does not provide expected value, customers will often seek a different source.
Deceptive pricing practices cause customers to believe that the price they pay for some unit of value in a product or service is lower than it really is. The deception might take the form of making false price comparisons, providing misleading suggested selling prices, omitting important conditions of the sale, or making very low price offers available only when other items are purchased as well. Promotion practices are deceptive when the seller intentionally misstates how a product is constructed or performs, fails to disclose information regarding pyramid sales (a sales technique in which a person is recruited into a plan and then expects to make money by recruiting other people), or employs bait-and-switch selling techniques (a technique in which a business offers to sell a product or service, often at a lower price, in order to attract customers who are then encouraged to purchase a more expensive item). False or greatly exaggerated product or service claims are also deceptive. When packages are intentionally mislabeled as to contents, size, weight, or use information, that constitutes deceptive packaging. Selling hazardous or defective products without disclosing the dangers, failing to perform promised services, and not honoring warranty obligations are also considered deception.
OFFENSIVE MATERIALS AND OBJECTIONABLE MARKETING PRACTICES
Marketers control what they say to customers as well as and how and where they say it. When events, television or radio programming, or publications sponsored by a marketer, in addition to products or promotional materials, are perceived as offensive, they often create strong negative reactions. For example, some people find advertising for all products promoting sexual potency to be offensive. Others may be offended when a promotion employs stereotypical images or uses sex as an appeal. This is particularly true when a product is being marketed in other countries, where words and images may carry different meanings than they do in the host country.
When people feel that products or appeals are offensive, they may pressure vendors to stop carrying the product. Thus, all promotional messages must be carefully screened and tested, and communication media, programming, and editorial content selected to match the tastes and interests of targeted customers. Beyond the target audience, however, marketers should understand that there are others who are not customers who might receive their appeals and see their images and be offended.
Direct marketing is also undergoing closer examination. Objectionable practices range from minor irritants, such as the timing and frequency of sales letters or commercials, to those that are offensive or even illegal. Among examples of practices that may raise ethical questions are persistent and high-pressure selling, annoying telemarketing calls, and television commercials that are too long or run too frequently. Marketing appeals created to take advantage of young or inexperienced consumers or senior citizensincluding advertisements, sales appeals disguised as contests, junk mail (including electronic mail), and the use and exchange of mailing listsay also pose ethical questions. In addition to being subject to consumer-protection laws and regulations, the Direct Marketing Association provides a list of voluntary ethical guidelines for companies engaged in direct marketing (available at their Web site at www.the-dma.org).
ETHICAL PRODUCT AND DISTRIBUTION PRACTICES
Several product-related issues raise questions about ethics in marketing, most often concerning the quality of products and services provided. Among the most frequently voiced complaints are ones about products that are unsafe, that are of poor quality in construction or content, that do not contain what is promoted, or that go out of style or become obsolete before they actually need replacing. An organization that markets poor-quality or unsafe products is taking the chance that it will develop a reputation for poor products or service. In addition, it may be putting itself in jeopardy for product claims or legal action. Sometimes, however, frequent changes in product features or performance, such as those that often occur in the computer industry, make previous models of products obsolete. Such changes can be misinterpreted as planned obsolescence.
Ethical questions may also arise in the distribution process. Because sales performance is the most common way in which marketing representatives and sales personnel are evaluated, performance pressures exist that may lead to ethical dilemmas. For example, pressuring vendors to buy more than they need and pushing items that will result in higher commissions are temptations. Exerting influence to cause vendors to reduce display space for competitors' products, promising shipment when knowing delivery is not possible by the promised date, or paying vendors to carry a firm's product rather than one of its competitors are also unethical.
Research is another area in which ethical is sues may arise. Information gathered from research can be important to the successful marketing of products or services. Consumers, however, may view organizations' efforts to gather data from them as invading their privacy. They are resistant to give out personal information that might cause them to become a marketing target or to receive product or sales information. When data about products or consumers are exaggerated to make a selling point, or research questions are written to obtain a specific result, consumers are misled. Without self-imposed ethical standards in the research process, management will likely make decisions based on inaccurate information.
DOES MARKETING OVERFOCUS ON MATERIALISM?
Consumers develop an identity in the market place that is shaped both by who they are and by what they see themselves as becoming. There is evidence that the way consumers view themselves influences their purchasing behavior. This identity is often reflected in the brands or products they consume or the way in which they lead their lives.
The proliferation of information about products and services complicates decision making. Sometimes consumer desires to achieve or maintain a certain lifestyle or image results in their purchasing more than they need or can afford. Does marketing create these wants? Clearly, appeals exist that are designed to cause people to purchase more than they need or can afford. Unsolicited offers of credit cards with high limits or high interest rates, advertising appeals touting the psychological benefits of conspicuous con sumption, and promotions that seek to stimulate unrecognized needs are often cited as examples of these excesses.
SPECIAL ETHICAL ISSUES IN MARKETING TO CHILDREN
Children are an important marketing target for certain products. Because their knowledge about products, the media, and selling strategies is usually not as well developed as that of adults, children are likely to be more vulnerable to psychological appeals and strong images. Thus, ethical questions sometimes arise when they are exposed to questionable marketing tactics and messages. For example, studies linking relationships between tobacco and alcohol marketing with youth consumption resulted in increased public pressure directly leading to the regulation of marketing for those products.
The proliferation of direct marketing and use of the Internet to market to children also raises ethical issues. Sometimes a few unscrupulous marketers design sites so that children are able to bypass adult supervision or control; sometimes they present objectionable materials to underage consumers or pressure them to buy items or provide credit card numbers. When this happens, it is likely that social pressure and subsequent regulation will result. Likewise, programming for children and youth in the mass media has been under scrutiny for many years.
In the United States, marketing to children is closely controlled. Federal regulations place limits on the types of marketing that can be directed to children, and marketing activities are monitored by the Better Business Bureau, the Federal Trade Commission, consumer and parental groups, and the broadcast networks. These guidelines provide clear direction to marketers.
ETHICAL ISSUES IN MARKETING TO MINORITIES
The United States is a society of ever-increasing diversity. Markets are broken into segments in which people share some similar characteristics. Ethical issues arise when marketing tactics are designed specifically to exploit or manipulate a minority market segment. Offensive practices may take the form of negative or stereotypical representations of minorities, associating the consumption of harmful or questionable products with a particular minority segment, and demeaning portrayals of a race or group. Ethical questions may also arise when high-pressure selling is directed at a group, when higher prices are charged for products sold to minorities, or even when stores provide poorer service in neighborhoods with a high population of minority customers. Such practices will likely result in a bad public image and lost sales for the marketer.
Unlike the legal protections in place to protect children from harmful practices, there have been few efforts to protect minority customers. When targeting minorities, firms must evaluate whether the targeted population is susceptible to appeals because of their minority status. The firm must assess marketing efforts to determine whether ethical behavior would cause them to change their marketing practices.
ETHICAL ISSUES SURROUNDING THE PORTRAYAL OF WOMEN IN MARKETING EFFORTS
As society changes, so do the images of and roles assumed by people, regardless of race, sex, or occupation. Women have been portrayed in a variety of ways over the years. When marketers present those images as overly conventional, formulaic, or oversimplified, people may view them as stereotypical and offensive.
Examples of demeaning stereotypes include those in which women are presented as less intelligent, submissive to or obsessed with men, unable to assume leadership roles or make decisions, or skimpily dressed in order to appeal to the sexual interests of males. Harmful stereotypes include those portraying women as obsessed with their appearance or conforming to some ideal of size, weight, or beauty. When images are considered demeaning or harmful, they will work to the detriment of the organization. Advertisements, in particular, should be evaluated to be sure that the images projected are not offensive.
Because marketing decisions often require specialized knowledge, ethical issues are often more complicated than those faced in personal lifeand effective decision making requires consistency. Because each business situation is different, and not all decisions are simple, many organizations have embraced ethical codes of conduct and rules of professional ethics to guide managers and employees. However, sometimes self-regulation proves insufficient to protect the interest of customers, organizations, or society. At that point, pressures for regulation and enactment of legislation to protect the interests of all parties in the exchange process will likely occur.
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