CHAPTER FIVE

• Business Ethics in Marketing

• In today’s corporate world ethical marketing is
playing a larger role in marketing strategy.
• In response to this consumer demand
organizations have increased their focus on
ethical marketing.
• When companies are reviewing marketing
strategies they need to consider whether the
marketing decisions that they are making are
ethical and reflect consumer and market
expectations.
 Cont.…
Ethical marketing is about whether a firm’s
marketing decision is morally right or wrong.
The morality of the marketing decision can
encompass any part of marketing decision such as
advertising, pricing of their product or service,
sourcing of their raw materials.
Marketing ethics addresses principles and standards
that define acceptable conduct in the market place.
Marketing ethics also refers to the marketers’
standards of conduct and moral values.
 Cont.…

• Many companies create ethics programs to

train employees to act ethically.
• Why?
 The Major Ethical Issues in Marketing Decisions

 Ethical issues in marketing arise from the conflicts

and lack of agreement on particular issues.
 Parties involved in marketing transactions have a
set of expectations about how the business
relationships will take shape and how various
transactions need to be conducted.
 1. Emerging Ethical Problems in Market Research
• The way a company conducts its market research
these days can have serious ethical consequences,
affecting the lives of consumers in ways that have
yet to be fully understood.
• Some of the ethical issues in marketing research
include:
– Invalid or unreliable research studies
– Invasion of consumer privacy, not respecting
confidentiality
– Failure to secure voluntary and informed participation
– Competitive intelligence gathering
 2. Grouping the Market Audience
 Unethical practices in marketing can result in
grouping the audience into various segments.
 Selective marketing May be used to discourage the
demand arising from these so-called undesirable
market segments.
Examples of unethical market exclusion may include
the industry attitudes towards the gay, ethnic
minority, and plus-size groups.
 3. Ethics in Advertising and Promotion

 The most commonplace ethical concern in promotion is

deception.
 The American Federal Trade Commission (FTC) defines
deception as “a misrepresentation, omission, or practice
that is likely to mislead the consumer acting reasonably
in the circumstances, to the consumer’s harm”.
 Deception is commonplace in advertising.
 For example, overstating a product’s feature or
performance is contrary to the ethics.
 Deception in advertising can be either an exaggeration
of products’ attributes or a unrealistic statement about
products’ performance
 4. Ethics in Delivery or distribution Channels
• Ethical concerns are sometimes linked with the
segmenting, targeting and positioning process.
• Efforts to target consumer populations can be
subject to unethical attitudes particularly vulnerable
consumer populations, such as children, the
poorest minorities, and the uneducated.
• Direct marketing is one of the most controversial
methods of advertising channels, especially when
the approaches included are unsolicited.
• Some common examples include TV and Telephonic
commercials and the direct mail.
 5. Pricing Ethics

 Marketers should be allowed to charge any price they want

provided there is no price discrimination among
consumers and that prices are all inclusive.
 However, too high prices are not ethical, when they do not
reflect the existing cost structure but are a means to take
advantage of consumers.
 This is especially true in the case of monopolies,
oligopolies.
 Besides, advertised prices should always be realistic prices
that consumers will find in stores.
 There are various forms of unethical business practices
related to pricing the products and services.
 Cont..
• There are the major areas of pricing considered
unethical and illegal:
Deceptive Pricing: Where a salesperson tries to
influence lure customers into a store. hereafter, a
salesperson tries to influence to buy a higher-
priced item.
Unfair Pricing: When competitors are driven out by
low prices the company raises price back to their
former level.
Price Discrimination: It can be unethical if similar
buyers are charged different prices for the same
based on their ability to pay.
 Cont.…
Price fixing: It is an agreement among firms in an
industry to set up prices at certain levels. Two
types of price fixing:
Bid rigging is a type of fraud in which a
commercial contract is promised to one party,
however, for the sake of appearance several
other parties also present a bid.
Predatory pricing is the practice of sale of a
product or service at a negligible price, intending
to throw competitors out of the market, or to
create barriers to entry.
 6. Ethics in product/package strategy
 Marketers are supposed to identify and satisfy needs of
consumers. Products/services Ethical concerns include:
 Ethical concerns can arise in the development of
products/services.
 Ethical concerns can also appear in the performance of
products/services.
 More questionable is the case of harmful products due to poor
design or lack of quality.
 Packaging can also be a source of ethical concerns. For Example:
• Exaggerating packaging (for example through design) or
misleading labels by giving unclear/incomprehensible information.
• Misleading or inadequate information
• Excessive or environmentally-unfriendly packaging
 Marketing Ethics and Consumer Rights (Protection)
Another core aspect of market ethics is the
evaluation made with regard to the place market
structures provide for the interest of consumers
or clients.
Although the actors in the market include both
the business and the consumer, taking in to
account the weak bargaining force of the
consumer constitute the issue of consumer
protection from market failure becomes
essential.
 Cont.…
• Among the various aspects of regulation,
consumer protection is at the forefront of moral
discourse. Businesses are regulated as to
whether they way they function in the market
affect the well beings of consumers or not.
 Cont…
• Generally four approaches exist:
Market approach
Contractual approach,
Due care approach and
Social cost approach.