• I. 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.
    A. Ethical/Legal Framework in Marketing
    1. Ethics deal with personal moral principles and values.
    2. Laws are society's values and standards that are enforceable in the courts.
    3. There are numerous situations where judgment plays a large role in defining ethical and legal boundaries.
    4. Actions that are technically legal could be viewed as unethical
    5. Actions considered to be ethical may not be seen as legal.
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    B. Current Perceptions of Ethical Behavior
    There has been a public outcry about the unethical practices of businesspeople.
    Public opinion polls show
    • 58% of U.S. 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 businesspeople contributes to tumbling societal moral standards.
    • 41% of 1,694 corporate employees in a recent survey stated that they were aware of ethical problems in their companies.
    There are at least four possible reasons the state of perceived business ethical conduct is at its present level:
    1. Increased pressure on businesspeople to make decisions in a society characterized by diverse value systems.
    2. Growing tendency for business decisions to be judged publicly by groups with different values and interests.
    3. The public's expectations of business ethical behavior has increased.
    4. Ethical business conduct may have declined.
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  • II. UNDERSTANDING ETHICAL MARKETING BEHAVIOR
    The relationship among factors that influence ethical behavior can be shown in a framework in which
    1. societal culture and norms, affect
    2. business culture and industry practices, affect
    3. corporate culture and expectations–all of which affect and are affected by
    4. personal moral philosophy and ethical behavior.
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    A. Societal Culture and Norms
    • Culture refers to the set of values, ideas, and attitudes of a homogeneous group of people that are transmitted from one generation to the next.
    • Culture also serves as a socializing force that dictates what is morally right and just.
    • This means that moral standards are relative to particular societies, often reflecting the laws and regulations that affect social and economic behavior, including marketing practices.
    • It is common to observe different ethical views in different countries.
    • Societal values affect business practices regarding the use of another’s ideas, copyright, trademark, or patent.
    • These are viewed as intellectual property, and unauthorized use is deemed unethical and illegal in the U.S.
    • This is not the case everywhere.
      • Unauthorized use of copyrighted software and other intellectual property in global markets costs the U.S. economy $250 billion annually in lost revenue.
    B. Business Culture and Industry Practices
    Business cultures
    • Comprise the
      • The effective rules of the game
      • The boundaries between competitive and unethical behavior
      • The codes of conduct in business dealings.
    • Affects ethical conduct
      • In the exchange relationship between sellers and buyers
      • In the competitive behavior among sellers.
    1. Ethics of Exchange
    • Ethical exchanges between buyer and seller should result in both parties being better off after a transaction.
    • Before the 1960s, the legal concept of caveat emptor–let the buyer beware–was pervasive in the American business culture.
    Kennedy's Consumer Bill of Rights (1962):
    1. Right to safety.
    2. Right to be informed.
    3. Right to choose.
    4. Right to be heard.
    2. Ethics of Competition
    most common unethical competitive behavior
    1. Economic espionage - the clandestine collection of trade secrets or proprietary information about a company’s competitors.
    2. Bribery - often disguised as gifts, consulting fees, and favors. This practice is more common in business-to-business and government marketing than in consumer marketing.
    The Economic Espionage Act and the Foreign Corrupt Practices Act address these practices in the United States.
    C. Corporate Culture and Expectations
    • Corporate culture
      • reflects the shared values, beliefs, and purposes of employees that affect individual and group behavior
    • Corporate ethical culture manifests itself in
      • codes of ethics and the
      • ethical actions of top management and co-workers.
    1. Codes of Ethics
    • A formal statement of ethical principles and rules of conduct.
    • 80% (est) of U.S. companies have an ethics code
    • One of every five large companies have corporate ethics officers.
    • Lack of specificity is one of the major reasons for the violation of ethics codes.
    • The American Marketing Association has provided a detailed code of ethics.
    2. Ethical Behavior of Top Management and Co-Workers
    • A second reason for violating ethics codes rests in the perceived behavior of top management and co-workers.
    • Observing their behavior and gauging responses to unethical behavior may influence individual actions more than a written code of ethics.
    • Ethical dilemmas often bring personal and professional conflict.
      • For this reason, 35 states have laws protecting whistleblowers, employees who report unethical or illegal actions of their employers.
    D. Personal Moral Philosophy and Ethical Behavior
    • Ultimately, ethical choices are based on the personal moral philosophy of the decision maker.
    Two personal moral philosophies have direct bearing on marketing practice:
    1. Moral Idealism.
      • A personal moral philosophy that considers certain individual rights or duties as universal, regardless of the outcome.
      • This philosophy exists in the Consumer Bill of Rights and is favored by moral philosophers and consumer interest groups.
    2. Utilitarianism.
      • A personal moral philosophy that focuses on "the greatest good for the greatest number" by assessing the costs and benefits of the consequences of ethical behavior.
      • This philosophy underlies the economic tenets of capitalism.
  • III. UNDERSTANDING SOCIAL RESPONSIBILITY IN MARKETING
    • Social responsibility means that
      • Organizations are part of a larger society
      • Are accountable to that society for their actions.
    A. Concepts of Social Responsibility
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    1. Profit Responsibility
    • Companies have a duty to maximize profits for their owners or stockholders.
    2. Stakeholder Responsibility
    • Focuses on the obligations an organization has to those who can affect achievement of its objectives.
    • These constituencies include
      • customers,
      • employees,
      • suppliers
      • distributors.
    3. Societal Responsibility
    • Societal responsibility refers to obligations that organizations have to the
      1. preservation of the ecological environment and
      2. general public.
    Companies have responded to this concern with two marketing practices that reflect socially responsible behavior
    1. Green marketing
      1. Marketing efforts to produce, promote, and reclaim environmentally sensitive products.
      2. ISO 14000 consists of worldwide standards for environmental quality and green marketing practices. These standards are embraced by 84 countries.
    2. Cause-related marketing
      • Charitable contributions of a firm are tied directly to the customer revenues produced through the promotion of one of its products.
    B. Social Audit: Doing Well by Doing Good
    • A social audit is
      • Systematic assessment regarding the social responsibility of a firm's
        • objectives,
        • strategies, and
        • performance .
    Five steps of a social audit
    1. Recognition of a firm's social expectations and the rationale for engaging in social responsibility endeavors.
    2. Identification of social responsibility causes or programs consistent with the company's mission.
    3. Determination of organizational 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.
    Sustainable development
    • conducting business in a way that protects the natural environment while making economic progress.
    • Green marketing is an example of one such ecologically responsible initiative.
    Focus of Other Initiatives
    • Working conditions
    • Quality-of-life issues at offshore manufacturing sites that produce goods for U.S. companies.
    C. Turning the Table: Consumer Ethics and Social Responsibility
    • Consumers also have an obligation To act ethically and responsibly
      • In the exchange process
      • In the use and disposition of products.
    In the exchange process
    • Unethical practices of consumers
      • filing warranty claims after the claim period
      • misredeeming coupons
      • making fraudulent returns of merchandise
      • providing inaccurate information on credit applications
      • many other kinds of fraud.
    In the use and disposition of products.
    • Research shows that consumers
      • May be unwilling to sacrifice convenience and pay potentially higher prices to protect the environment
      • Lack the knowledge to make informed decisions dealing with the purchase, use, and disposition of products.