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Chapter Seventeen: Ethics and Socially Responsible Marketing Chapter Objectives Explain why marketers should be concerned about ethics Describe the characteristics of a socially responsible firm Explain how a firm could make ethically responsible decisions Discuss how ethics and social responsibility can be integrated into a firm’s marketing strategy Discuss how consumers foster ethical and socially responsible business practices Annotated Chapter Outline PowerPoint Slides Instructor’s Notes The chapter roadmap highlights the main areas of focus for this chapter. Opening Vignette: Kellogg’s As heart diseases increase in across the world, so is the call by health and consumer groups for more regulation to control the amount of harmful foods we consumer. Food manufacturers such as Kellogg’s have been singled out for publicity campaigns. Kellogg’s was accused of lining its pocket at the expense of consumers. It was called upon to reduce the amount of salt in its cereals. Instead of resisting, it tried to reduce the amount of salt in its products and called on other food manufacturers to do the same. It was successful since other manufacturers have committed to do the same. Ask students if they agree with this assertion that food manufacturers only respond when pressured even though it makes sense to provide more and better healthy alternatives? Topic One: The Scope of Marketing Ethics I. Understand Business Ethics A. Business ethics overall refers to a branch of ethical study that examines ethical rules and principles in a commercial context, various moral or ethical problems that might arise in a business setting, and any special duties or obligations that apply to persons engaged in commerce. B. Marketing ethics examines ethical problems specific to the domain of marketing. C. Marketers must recognize the ethical implications of all their actions. Group activity: Ask students to brainstorm the ethical issues unique to marketing. They should start with the marketing mix and proceed through each of the 4Ps. Each group should write one issue for each element on the board, and then discuss what they have produced as a class. II. Ethical Issues Associated with Marketing Decisions A. The public nature of marketing often leads to the charge that marketers are unethical or at least less ethical than people in other professions. Marketing is a very visible part of business. Often practices that are the result of other business functions will be attributed to marketing. Marketers need to stress the good things that they do and the value that they add to society. Also, by policing practitioners and sanctioning those who violate the various codes of ethics, etc. marketers can demonstrate that they are serious about ethical standards. Ask students: What actions can marketers take to improve their image? Do you consider the way marketers are characterized by people taking the survey to be fair? B. To create an ethical climate in the workplace: 1. Everyone within the firm must share the same understanding of values and how they translate into the business activities of the firm, as well as a consistent language to discuss them. 2. All levels of the firm must be committed to establishing and maintaining an ethical climate. A strong ethical climate requires a commitment from the top down within the firm. Everyone within the firm must agree to a system of controls that rewards appropriate behaviour and punishes inappropriate behaviour. Ask students about the ethical climate on their campus. Pick a topic such as honour code violations or pledging procedures of sororities and fraternities. Then ask them to evaluate the topic based on values, rules, and controls. A firm’s incentive system can encourage exactly the type of behaviour the firm states that it wants to avoid. Incentives such as a bonus can be a double-edged sword, generating sales but also encouraging overly and aggressive and potentially unethical sales tactics. 3. Many professions, including marketing, have their own code of ethics. This marketing code of ethics was developed by the Canadian Marketing Association. Each sub-area within marketing, such as marketing research, advertising, pricing, and so forth, has its own code of ethics that deals with the specific issues that arise when conducting business in those areas. Group activity: Have the students develop a Code of Ethics for their college or university. Ask students: What ethical behaviours should you include? Why are those chosen behaviours important? C. The Influence of Personal Ethics 1. Why do people act unethically? Each person is the product of his or her culture, upbringing, genes, and other influences. 2. Two key questions apply to understanding unethical behaviour: What makes people take actions that create harm? Are all people who engage in such behaviour immoral or unethical? In many cases, ethics is in the eye of the beholder. Ask students: Why might a salesperson lie to a young couple about the safety of a car seat for their infant? This will bring out issues such as self-interest for the welfare of the salesperson and his/her family. Remind students there are no definitive answers to these questions. Ethics is a difficult topic, and many people struggle to find answers to questions such as these. Answer A D. The Link between Ethics and Corporate Social Responsibility 1. Corporate social responsibility refers to the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stake-holders. It means doing things that benefit society, such as sponsoring a charity event. Such actions are typically beyond the scope of corporate ethical behaviour or the ethical behaviour of employees. 2. A firm can behave in a socially responsible manner, but perform unethical practices, and vice versa. Ask students: Can a firm be socially responsible and not ethical, or ethical and not socially responsible? A firm can give money to charity (socially responsible), but be unethical (engage in deceptive advertising). Ask students: Can you think of a firm that may be either ethical or socially responsible, but not both? Group activity: Students should create a list of firms reputed to be socially responsible. In what ways do these firms demonstrate their commitment? Do the students consider these factors when purchasing goods? A number of examples follow which can be selectively used based on the amount of time available for the lecture. Case–in-Point Series Corporate Social Responsibility in Practice Tim Horton’s Camp Day http://www.timhortons.com/en/goodwill/childrens_about.html IV. A Framework for Ethical Decision Making This chart can be used on its own to introduce the framework. Additional slides follow which can be used to provide more detail as desired. A. Step 1: Identify issues In a marketing research firm, ethical issues might include: * data collection methods—not informing respondents that they are being observed * hiding the true purpose of a study from respondents—telling them they are an independent research company, but actually doing research for a particular politician * using results to mislead or even harm the public—results of a pharmaceutical study. B. Step 2: Gather information and identify stakeholders 1. Gather key facts related to the ethical issue, including all relevant legal information. 2. Identify and discuss the issue with those persons and groups that have a stake in its resolution. Ask students: What are the ramifications of publishing misleading research findings for a new pharmaceutical product? Answer: there could be real harm to users. Then ask: Why might this happen? Answer: The pharmaceutical industry wants the product to come to market to meet sales goals. They might be paying the researchers to do the project. 3. A stakeholder analysis matrix defines each stakeholder’s responsibility to the others. The stakeholders are interrelated because an ethical violation may impact others. Falsifying results for a new pharmaceutical study will, for instance, impact the researchers, the pharmaceutical company, the legal system, the physicians, and most importantly the patients. C. Step 3: Brainstorm alternatives The relevant stakeholders come together to brainstorm alternative solutions. The alternative solutions depend on the type of ethical issue and how the stakeholders are affected. D. Step 4: Choose a course of action 1. Weigh the various alternatives and choose a course of action that generates the best ethical solution. 2. Rank the alternatives in order of preference. 3. With an ethical framework, decision makers can include all relevant ethical issues, evaluate alternatives, and choose the course of action that will help them avoid serious ethical lapses. Alternatives are then evaluated and a course of action is chosen. The chosen course represents the best solution for the stakeholders using ethical best practices. Ethical Dilemma 17.1 Traffic Light Labelling Obesity is fast becoming a pandemic in Canada and many other countries. Regulators such as Health Canada and the British Food Standard Agency (FSA) are trying to develop ways to help consumers make healthier food choices. Traffic Light Labelling is one such technique in use in the UK. Food companies have rejected the idea and fighting fiercely against it. Do you agree with the arguments of the FSA and would such a program work in Canada? Ask students: If consumers want to eat healthier, shouldn’t the food industry aim to be more customer focused and give them what they want? Is it unethical for companies to use misleading food labels? Topic Two: Integrating Ethics into Marketing Strategy The pertinent ethical questions vary at each stage of the strategic marketing planning process. Remind students that as marketers, they must ask questions specific to each stage and examine those questions carefully before moving on to the next phase. I. Planning Phase A. Include an ethical statement in the firm’s mission or vision statements. B. Ethical mission statements can guide SWOT analyses. By incorporating ethics into the firm’s mission statement, the firm sets a standard for its subsequent ethical decision making. The mission statement signals the firm’s strategic priorities. http://www.mec.ca/Main/home.jsp The video case for this chapter features Mountain Equipment Co-op. This is a good opportunity to show the video and discuss the firm. Case-in-Point Series How does a firm live up to the ethical goals of its mission statement? Ben & Jerry’s has taken its commitment to the environment into consideration in its sourcing decisions. The company examines every aspect of its products and seeks opportunities to improve the environment. Group Activity: Have the students discuss how the specific priorities of Ben and Jerry’s relate to their target market. How do these priorities create value for the firm and its customers? II. Implementation Phase A. Ensure the values stated by the firm are consistent with the values of the target market. B. Various choices lead to potential ethical issues, including 1. Target market. 2. Resource allocation. 3. Sourcing decisions. Group activity: For each question related to the implementation phase, have students use the textual examples as a basis for a discussion in which they identify other products or examples for which a firm faces potential ethical issues. Many students will use examples such as tobacco, alcohol or other controversial product companies. Point out that other products also encounter the same issues, even if the products themselves seem less controversial. Entrepreneurial Marketing 3.1: Fetzer Vineyards The winery’s mission statement—“We Make Our Wines Responsibly. Please Drink Them Responsibly”—goes beyond most companies’ and commits to environmental and social causes, as well as employees. This ambitious mission statement has allowed Fetzer to find opportunities that it otherwise might have missed. Putting an Ethical Mission Into Practice - How does a firm live up to the ethical goals of its mission statement? The Fetzer example offers students a positive example of a firm that uses its ethical orientation to achieve market success. The wine production process is consistent not only with the firm’s values but also with those of its target market. III. Control Phase. A. An implemented system must address any potential ethical issues. B. As new technologies emerge, so might new ethical issues. Any plan requires constant evaluation and revision, and this truism applies particularly to the evaluation of ethical issues. Internet Marketing 17.1: For the Heavyweight Championship of the World: Google versus China Google established a presence in China in 2005. In 2010, it accuses China of hacking into the accounts of certain human rights advocates. It began directing Chinese searchers to its search engine in Hong Kong, which was uncensored. Google saw the hacking as an attempt to muzzle free speech. The Chinese government claimed otherwise – it is a commercial not a political dispute and companies operating in China must obey Chinese laws. This example offers a good opportunity to discuss how different ethical standards can influence business practice and the blurring of the lines between commercial and political disputes. Ask students if Google should have simply followed the Chinese laws or the US ethical standards and business practices in China. Topic Three: Understanding Ethics Using Scenarios Tests of ethical action assist the evaluation of ethical scenarios. Group activity: Divide students into groups, each of which takes one of these tests and then develops an example for the rest of the class. Answer C ** These scenarios are designed to stimulate discussion and offer no single correct answer. Click on each scenario to bring up the picture and questions. Each slide links back to this slide, so you may address as many as you choose. Scenario 1: Who is on the line? A company has produced software that disguises the actual caller on caller ID messages. Firms such as collection agencies or private detectives certainly would benefit from this service. Is this an ethical business practice? Some states ban such software and require businesses to display a real phone number. But the practice continues. Ask students: Why would firms want to participate in it? Scenario 2: Giving credit where credit isn’t due A catalogue retailer that appeals to families wants to pursue a new market. A market research firm suggests targeting low-income single parents, who make up an attractively large new market but have severe resource constraints. The marketing plan would offer a generous credit policy with direct payment requirements. The accounts would carry extremely high interest rates. Is the catalogue retailer offering a valuable service or encouraging unmanageable debt levels? Lower-income consumers often are denied credit, and when they get credit then pay it off, they build their credit. Rent-to-own and cheque cashing firms use this argument to justify their exorbitant fees and interest rates. Opponents argue that encouraging non–credit-worthy consumers to take credit cards harms them by making them responsible for debts they likely cannot pay off. Scenario 3: The jeweller’s tarnished image A family-owned and operated costume jewellery manufacturer traditionally has sold only to wholesalers. Recently a saleswoman approached the firm about selling its product through a network of distributors via home parties. The saleswoman generated revenue, and the firm started making plans for expansion. Then, a party attendee informs the manufacturer that she was misled into purchasing products at a home party. Is the manufacturer responsible for the actions of its distributor? When the owners learn about the deception, should they immediately stop using the distributors? Why or why not? Scenario 4: No wonder it’s so good A new soft drink, advertised as the perfect way to relax, contains no caffeine and has become very popular with woman. The marketing director learns that the firm is not disclosing that the cola contains alcohol, though below the legal limit required for reporting. However, the director worries that any alcohol may pose a danger for certain consumers. Even if the lack of disclosure is legal, is it ethical? Many people believe that legal actions de facto must be ethical, but are they really? If the chance of harm is very low, should the firm disclose the presence of the alcohol to avoid any potential issues? Scenario 5: Bright Baby’s bright idea A manufacturer of infant toys has issued a recall order for one of its products. The CEO is looking for options other than destroying all inventory of this project. Perhaps the product could be repackaged and sent to another country in which the recall is not in effect. The CEO decides to accept this recommendation. No deaths or serious injuries related to the product have been reported; is the CEO’s decision therefore ethical? Avoiding a large loss often creates the potential for ethically questionable actions. Would the scenario change if some infants had died from this product? Topic Four: Consumerism, Ethics and Social Responsibility A. Consumerism – a social movement aimed at protecting consumers from business practices that infringes upon their rights and increased environmental awareness are two key factors that are driving the trend toward greater ethics and social responsibility (SR) More than 75% of Canadian companies have established SR policies and support SR projects. B. Ethical and Social Criticisms of Marketing 1. Marketers are often criticised for misleading promotion practices 2. Marketers engage in illegal practices such as bait-and-switch 3. Marketers make exaggerated claims about their products 4. Marketers make people feel more valued for what they own or use rather for who they are. Consumer activism can result in boycotts of companies who do not act in an ethical or socially responsible manner or if they believe that a marketing practice is unethical or unfair to group of individuals. For example many students demanded that their Universities boycott Nike products for their sports teams in protest of Nike’s labour practices. Companies are criticized for engaging in unethical or illegal marketing practices, e.g. those that promote products and services to vulnerable groups such as people who are addicted to alcohol, tobacco, and gambling. Ask Students: are the criticisms of marketing justified? Instructor Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929
