dana-nicoleta lascu kenneth e. clow - textbook · pdf file · 2012-07-25is sex an...

Textbook Media Press 1 Chapter 3

Dana-Nicoleta Lascu Kenneth E. Clow


Chapter Objectives

• Identify ethical issues in marketing.

• Discuss legislation and regulatory agencies that impact

marketing.

• Describe the role of the Federal Trade Commission.

• Discuss the role of the Better Business Bureau.

• Discuss the social responsibility of business firms.


3-1 Chapter Overview

• To fulfill the goal of marketing, marketers must persuade

consumers to buy a firm’s products.

• Ethical issues will inevitably arise about the material that is

being transmitted and the medium of transmission.

• As a result, laws have been passed that protect the consumer.

• Firms have also come to be expected to act in a socially

responsible manner.


3-2 Ethical Issues in Marketing

• Questions Marketing Practitioners Should Ask:

What are the materials used in developing the product?

- e.g., Are materials hazardous?

How is marketing material is transmitted?

- e.g., Is sex an appropriate promotional appeal?

To whom is it transmitted?

- e.g., Is it okay to market to children?


Marketing to Youth

Pros Cons

Huge market (over $170 billion a year)

Potential creation of brand loyalty

Youth are adventurous.

Youth can change tastes over night

What are the ethical issues involved when marketing to youth?

3-2 Ethical Issues in Marketing


3-2 Ethical Issues In Marketing

Ethics Concepts

• Morals: Personal beliefs or standards used to guide an

individual’s actions.

Morals direct people as they make decisions.

• Ethics: Philosophical principles that serve as operational

guidelines for both individuals and organizations concerning

what is right and wrong.

Morals and ethics establish boundaries regarding

acceptable and unacceptable conduct.


…Business Ethics Violations

Enron

WorldCom

Arthur Andersen

3-2 Ethical Issues In Marketing

These companies have spurred the need for a higher level of ethical behavior within companies.


3-2a Marketing Causes People to Buy More

Than They Can Afford

• Marketing persuasion induces people to buy goods that

they do not need and cannot afford.

Consumers seek instant gratification, and fewer consumers are

willing to save money

• Ethical questions to consider?

Should consumers be able to overspend?

Does easy credit contribute to overspending?

Is marketing responding to desires of consumers or promoting

overspending?


3-2b Marketing Overemphasizes Materialism

• Questions to consider:

Does marketing create materialism

or does marketing respond to materialistic desires?

Is materialism good or bad?

• Materialism is consistent with free enterprise.

• It is easy to show how materialism has had a positive impact

and has increased the standard of living.


3-2c Marketing Increases the Prices

of Goods and Services

• Marketing creates intangible benefits.

Value of brand name.

• Marketing allows consumers to become better informed.

Marketing spreads information about products that consumers

would otherwise know nothing about.

• Companies cannot reduce marketing expenditures unless

competitors do the same.

Marketing is necessary to remain competitive

• Marketing contributes to GDP.

Marketing accounts for 2.4% of GDP in the United States.

Yes, but ….


3-2d Marketing Capitalizes

on Human Weaknesses

• Does marketing capitalize on human weakness

or does it respond to human desires?

• Promoting goods or services of a personal nature during times

of human vulnerability.

• Examples:

Marketing with a patriotic theme following the September 11

attacks.

Marketing that promotes the idea that happiness is dependent on

physical attractiveness.

Is this good marketing or unethical behavior?


3-2e Marketing Shapes Inappropriate Cultural Values

• Companies aggressively market their products,

even if they are harmful to individuals and/or society.

Alcohol and tobacco are believed to have

a negative impact on society, but are widely marketed.

• Advertisements are becoming more offensive, particularly by

capitalizing on sex and nudity.

• Questions to consider:

Would restrictions violate free speech and free enterprise?

Does marketing shape values or does marketing respond to

current values?


• $12 billion a year is spent on marketing products to children

ages 4 to 12.

• Market managers hire child psychologists to determine how to

best target children.

• Are children a fair target?

They have not reached maturity.

They don’t have adult reasoning.

It is difficult for them to differentiate between

fact and fiction.

They can be easily manipulated.

Advertising to Children

3-2e Marketing Shapes

Inappropriate Cultural Values (contd.)


Sex Sells!

• Does sexual appeal sell products?

• Is sex in advertising overdone?

• Is marketing promoting inappropriate sexual behavior?

• Is marketing responding to sexual attitudes in society?

• Should sex in advertising be regulated?

If so, how? If not, why not?

3-2e Marketing Shapes

Inappropriate Cultural Values (contd.)


3-2f Marketing Uses Deceptive

and Misleading Techniques

Is Bribery Acceptable?

• Can salespeople be trusted?

The buyer-seller relationship can become adversarial, pitting

buyers against sellers.

• In the business sector it is acceptable to ‘bribe’ with gifts to

sell a product.

• In many cultures gifts and bribery are acceptable and

expected.

• Should marketers be able to bribe in the United States and in

their global operations if their competitors can do it?


3-2f Marketing Uses Deceptive

and Misleading Techniques (contd.)

• One misleading technique is the bait and switch

marketers lure a consumer in with a deal than try to sell them a higher priced product.

- Illegal if the seller intentionally does not stock enough of the sale item or if they use excessive pressure to ‘switch’ the consumer to the higher priced product.

• Many ads are legally not deceptive or misleading but do have a clear bias.

When does an advertisement become misleading or deceptive?


3-2g Marketing Violates Consumer Rights to Privacy

• The more information marketers can gain about you, the more

efficiently they can market to you.

• This information can be gathered in a number of different

places:

• Marketers use this information to create groups that become

their target market.

Magazines selling subscription lists. Warranties and surveys that are filled out with personal

information. Credit card companies, banks, and schools. The Internet

It is not efficient for them to market to you as an individual.


3-2h Marketing’s Role in Society

• Many marketing tactics may be legal, but they are perceived

by many people as unethical.

• Marketers must keep individual and group concerns in mind

when making marketing decisions

• The American Marketing Association (AMA) has adopted a

code of ethics to help marketers make the right decisions.


• One should ask the following questions when evaluating

whether a marketing decision is unethical:

• Company beliefs or policy may influence the individual in

making marketing decisions.

3-2i Individual Roles in Marketing Ethics

Is it only viewed as unethical by a few because it does not have a serious impact on the rest of society?

Is it viewed as unethical by most people because it can have long-lasting negative effects on society?


3.2i Individual Roles in Marketing Ethics (contd.)

A Framework for Ethical/Unethical Decisions


3-3 Marketing Regulations

• Federal and state governments of the United States have

passed a number of laws dealing with the ethical issues just

raised.

• These laws typically pertain to:

• Overriding principles:

Focus on

- ensuring free trade and open competition between firms.

- need to protect consumers form unscrupulous businesses.

Price fixing

Free enterprise

Food quality

Fair interest rates

Product safety

Protection of children

Deceptive advertising


3-3 Marketing Regulations (contd.)

Legislation Description1890 Sherman Antitrust Act Prohibits trusts, monopolies, and activities designed to restrict free trade.

1906 Federal Food and Drug Act Created the Food and Drug Administration and prohibits the manufacture and sale of falsely labeled

foods and drugs.

1914 Clayton Act Prohibits price discrimination to different buyers, tying contracts that require buyers of one product to

also purchase another item, and combining two or more competing firms by pooling ownership of stock.

1914 Federal Trade Commission Act Created the Federal Trade Commission (FTC) to address antitrust matters and investigate unfair methods of

competition.

1936 Robinson-Patman Act Prohibits charging different prices to different buyers of the same merchandise and requires sellers that

offer a service to one buyer to make the same service available to all buyers.

1938 Wheeler-Lea Amendment Expanded the power of the FTC to investigate and prohibit false and misleading advertising and practices

that could injure the public.

1946 Lanham Act Established protection of trademarks.

1966 Fair Packaging and Labeling Act Requires that manufacturers provide a label containing contents, who made the product, and how much

of each item it contains.

1972 Consumer Product Safety Act Established the Consumer Product Safety Commission (CPSC), which sets safety standards for products

and ensures that manufacturers follow safety standard regulations.

1976 Hart-Scott-Rodino Act Requires corporations wanting to merge to notify and seek approval of the government before any action

is taken.

1990 Children’s Television Act Limits the number and times advertisements can be aired during children’s programs.


Federal Agencies Regulating Marketing Practice

3-3 Marketing Regulations (contd.)

Agency ResponsibilityFood and Drug Administration (FDA) Regulates and oversees the manufacturing, distribution, and labeling of

food and drugs.

Federal Communications Commission (FCC) Regulates the television, radio, and telephone industries.

U.S. Postal Service (USPS) Responsible for mail delivery and investigating mail fraud schemes and

any other illegal marketing activities using

Bureau of Alcohol, Tobacco, and Firearms (ATF)Oversees the manufacture, sale, and distribution of tobacco and alcohol.

Federal Trade Commission (FTC) Primary agency responsible for ensuring free trade among businesses

and investigating false, deceptive, or misleading claims in advertising and

other types of marketing communications.

Consumer Product Safety Commission (CPSC) Sets safety standards for products used by consumers in or around their

home.


3-3a The Food and Drug Administration

• Oversees the sale of all food and drug products.

• All drugs must be FDA approved before they can be sold to

the public

• Ensures that all food is safely processed, packaged, and

labeled.

Requires nutrition facts placed on all food containers


3-3b The Federal Trade Commission

Deceptive and Misleading Communication

• The FTC has a high impact on marketing, ensuring free trade among businesses and investigating claims of false or deceptive advertising.

• A firm can commit false advertising if:

A substantial number of consumers are left with false impressions or if the

communication involves misrepresentation and if this misrepresentation

induces people to make a purchase.

Note: When a firm engages in puffery or makes an exaggeration without making an overt attempt to mislead, it is not considered deceptive or misleading.


3-3b The Federal Trade Commission (contd.)

Complaint Procedure

• Complaint is filed with the FTC by consumers, businesses,

Congress, the media, and the FTC itself. Investigation is

confidential initially.

• Consent order: Agreement by involved parties.

• Administrative complaint: Formal proceeding to court.

• Cease and desist order if a violation of the law has occurred.

• Court of Appeals: If the company is not satisfied with the

decision, it can appeal the case.


3-3b The Federal Trade Commission (contd.)

Procedures

• Corrective advertising

Issued in the most severe cases of deceptive advertising.

Only used if the FTC concludes that consumers believed the deceptive ad and that it is necessary to bring them back to a neutral state like that which existed prior to the misinformation.

• Substantiation of claims

FTC requires companies to substantiate any claims made in their advertisements and the inability to do so could result in FTC action.

• Trade regulation rulings:

Industry-wide FTC rulings.

Any decision made in a trade regulation ruling would apply to every firm in the industry.


3-3c Industry Regulations

Various industry regulatory agencies can reduce the work of the FTC. Although they have no legal power, they can apply pressure and settle disputes within the advertising and business industry.

• Better Business Bureau (BBB): Keeps records and summaries of complaints filed against individual

companies for potential customers who want to learn about the company.

• BBB National Advertising Division (NAD) Hears complaints and investigates, then negotiates with the business in

question, keeping the case from escalating.

• National Advertising Review Board (NARB) Takes unresolved cases from NAD and issues orders similar to those of the

FTC; while not legally binding, it keeps the case out of the courts. If the firm in question refuses compliance, the case is turned over to the FTC.


3-4 Social Responsibility

• 83% of Americans believe that it is important for companies

to support the needs of society.

• This can be done by:

Producing environmentally safe products

Controlling emissions and wastes

Becoming involved in meeting societal needs, e.g., donations,

community sponsoring, etc.

Philanthropy (cause-related marketing)


3-4a Cause-Related Marketing

• Involves a long-term partnership between a company and a non-profit organization.

• This relationship must be integrated into the corporation’s marketing plan.

• Both parties must benefit. The company will support the non-profit if the campaign increases sales.

• Companies need to follow through and show a genuine effort.


3-4b Green Marketing

• Development and promotion of products that are

environmentally safe.

• Demonstrates social responsibility.

• Keys to successful green marketing:

Develop a strong brand name and association with green

products.

Reduce costs of producing green products.

Make green products attractive to the public.

dana-nicoleta lascu kenneth e. clow - textbook · pdf file · 2012-07-25is sex an...

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