Male 1: Hi, I’m Bill Perreault. Marketing ethics has to do with the moral standa

Question

Male 1: Hi, I’m Bill Perreault. Marketing ethics has to do with the moral standards that guide marketing decisions and actions. Surveys suggest that most marketing managers feel that they have struggled with the issue of right and wrong in their business dealings. And not surprisingly ethical norms are sometimes violated. By their very nature, ethical problems are grey areas. Situations in which a value judgment must be made. In some cases, there may be different perspectives on the rightness or wrongness of possible solutions to a problem. And that also adds complexity to the situation.

So, how do marketers go about making the right choice? Sometimes marketers can look to the legal environment for guidance. Laws represent the minimum standards for ethical behavior in a society. Professional codes of ethics also offer direction. For example, the American Marketing Association’s Code of Ethics for Professional Conduct provides marketers with conceptual guidance regarding ethical values such as honesty and fairness and the rights and duties of parties in the exchange process.

The AMA code at its core, asks members to apply the basic rule of professional ethics which is to not knowingly do harm. It also asks members to follow all applicable laws and regulations. Recently, the AMA added a special section for marketing on the internet. One provision of this section requires members to be aware of new and emerging laws and regulations regarding this fast paced industry. Members are encouraged to actively ask consumers for consent to receive promotional email and to protect the consumer’s privacy.

Other relevant professional codes of ethics for marketers include the ones developed for advertising, public relations and marketing research. Some industries have ethical codes of conduct which rely on voluntary compliancy by industry members. The liquor industry, for example, asks that liquor manufacturers and distributors not advertise on TV. EOA members are managers of ethics, compliance and business conduct programs. The EOA provides training courses and sponsors conferences to facilitate the exchange of ideas between and among members.

Its newsletter, available online, promotes these exchanges as well as ethics news and information resources.Finally, changes in society, in consumer attitudes and values and the whole business environment provide insight into emerging ethical issues and the various perspectives surrounding them.

Male 2: Marketers come face to face with issues involving ethical questions in every aspect of the marketing mix. The product, its price, distribution and promotion. Ethical issues regarding the products and its package center on product quality and safety, truth, full disclosure and the product’s impact on the physical environment and society. Some consumers consider the product itself to be unethical because it is harmful to the user and to society. Pornography, gambling, alcoholic beverages and tobacco products have received harsh criticism from Americans who question whether such products should be legal. Some toys and video games have been heavily criticized for their negative impact on children’s values and attitudes.

The food industry is currently the focus of consumer scrutiny and several ethical issues have received a great deal of publicity. First is the problem of obesity. Ever since the Surgeon General’s report said 61 percent of American adults and 13 percent of kids are overweight, American consumers and special interest groups have made fast food chains and food processors a target of ethical inquiry.

The McGriddles breakfast sandwich launched in June 2003 by McDonalds measured at 550 calories, 33 grams of fat and 260 milligrams of cholesterol, McGriddles was put in the hall of shame by E-diets.com. Which suggested that the syrupy M on top stood for murder. McDonalds’ burgers and fries are also on the list for their contribution to obesity. Both McDonalds and Burger King are scrambling to react in a positive way by introducing

McDonalds is currently testing the Go Active meal that includes a salad, an exercise booklet and a pedometer. Burger King recently launched a new line of low fat, made to order baguette style chicken sandwiches. Product labeling in the food industry also has received criticism. The labels for bottled water have been criticized for using words, deceptive phrases and images that suggest bottled water is extraordinarily pure and uncontaminated or that the source is natural or denotes a premium quality.

A second major ethical issue which has beset the food industry concerns the treatment of animals. PETA, people for the ethical treatment of animals, has targeted Kentucky Fried Chicken and other fast food chains with a campaign against the cruel treatmentof chickens raised and killed for their restaurants. Pricing in the marketing mix raises a number of ethical issues.

Many common pricing strategies appear to be unethical to the consumer. What about frequent price changes in rapidly changing markets such as gasoline? Should gasoline cost more on the weekends than during the week? But few pricing issues are more infuriating to consumers than hidden fees that inflate the price they pay for products. Companies that cannot raise prices without losing business are charging fees and raising surcharges.

Are the following fees and surcharges ethical? Target and Best Buy make customers pay a restocking fee of 15 percent for the privilege of returning electronic items. Several of the airlines have started charging passengers for food on flights. Air travelers also pay airport security fees, landing fees and fuel surcharges. And what about shirking package sizes which effectively raise price to the consumer? Some ice cream makers are quietly reducing the size of half gallons to 1.75 quarts. The size reduction isn’t obvious even though the new weight is stated on the package because the physical package doesn’t look different.

From a consumer’s perspective this is cheating. Shouldn’t a half gallon be the standard size for ice cream? From the manufacturer’s perspective, shrinking the package size keeps the product affordable in the face of cost increases. But look what happened to the case of Eddy’s Grand. Package size was reduced 12 percent to 1.66 liters from a half gallon which is equal to 2 quarts or 1.89 liters without cutting the package price. The effect was to actually increase the price per quart 14 percent. Similar results have been observed for coffee, laundry detergents, yogurt, candy bars, chips, cookies, crackers, and frozen vegetables.

Ethical issues in the area of distribution tend to focus on channel decisions, product placement and relationships with suppliers and distributors. Wal-Mart, the world’s largest retailer, controls a large and rapidly increasing share of the distribution of entertainment products like popular music, games, movies and magazines. Wal-Mart has resolved several product placement issues in these product categories by removing racy men’s magazines from the shelves, obscuring the covers of provocative women’s magazines, and refusing to sell CDs with explicit lyrics or computer games with mature ratings.

Elsewhere in the store Wal-Mart declines to sell Previn, a morning after contraceptive pill. Such decisions are seen by some as moral victories. By others as ad-hock, knee jerk reactions to the conservative right. After all, Wal-Mart sells cheap firearms which is an important ethical issue to many Americans.

An ethical problem between the Coca-Cola Company and Burger King recently came to light when an internal auditor for Coke filed a wrongful termination suit against Coke. The issue concerned the improper influencing of a marketing research test by mid-level Coke managers for a Frozen Coke promotion that was tested in selected Burger King restaurants. If the coupon increased the sale of value meals, and enough people redeemed the coupons, Burger King would take the promotion national.

Coke managers funneled money to Boys and Girls club to stimulate a buying spree for Burger King Value meals. Burger King spent roughly 10 million dollars for a national promotion in the summer of 2001. The promotion was a disappointment. When the facts of the deception came to light a year later, Coke issued a public apology to Burger King and agreed to pay the company and its franchisees up to 21 million dollars to make amends.

Another ethical hot button in the area of distribution concerns international marketing. US manufacturers have been criticized for selling products in foreign markets that have been banned in the US. Decisions about advertising, sales promotion, personal selling and publicity are highly visible to consumers. Ethical issues in this area center on deception, full disclosure, high pressured tactics, the individual’s rights to privacy and unfair business practices that harm competition.

A recent ad that drew the anger of industry observers and health experts as well as the attention of the Federal Trade Commission concerned Kentucky Fried Chicken as a healthy alternative to a Burger King Whopper. The Whopper is considered to be one of the most fat and calorie laden burgers in the fast food category. A BK Whopper contains 43 grams or 65 percent of the daily value of fat and 13 grams or 65 percent of the daily value of saturated fat.

Two KFC Original Recipe breasts have 38 grams or 58 percent of the daily value of fat and 12 grams or 60 percent of saturated fat. The claim that two Original Recipe chicken breasts have less fat than a BK Whopper does not make it a healthy alternative. The ad then states that a skinless chicken breast has only three grams of fat. How many people eat KFC’s fried chicken without its breading and skin?

Thanks to the World Wide Web and powerful new technologies, today’s sales people are just as pushy, invasive, and disruptive as their door to door counterparts in the 50s. Although consumers have complained fiercely to state and federal law makers, spam, telemarketing, paid inclusions and other forms of direct marketing have some protection under the First Amendment of the US Constitution.

The ethical conflict is between a consumer’s right to privacy and a marketer’s right to disseminate information. Both sides have powerful arguments. Everyone agrees, however, that for the internet to realize its full potential, it has to become more trustworthy.

Male 1: Doing the right thing can be difficult for even the most well intentioned marketer. In any given situation, there are many conflicting interests to balance. Customers, share holders, employees, suppliers, distributors, the community and society as a whole. Who do you please? Who do you listen to? How do you balance the needs of the company for revenue growth and profit with the need to honor relationships with suppliers and distributors? How do you best serve customers and society’s interest at the same time? What about the long term survival of the company? Unfortunately, some managers put moral issues in the back seat when they face the pressures to achieve short-term financial goals. They rationalize and say, “If its’ not illegal, who’s to say it’s wrong?”

Male 2: Some companies do take the moral high road even in the face of numerous ethical issues and environmental constraints. Makers Mark, a well known brand in the alcohol industry is an example of a product that is guided by ethical concerns.

Male 3: __________ has a global marketing and advertising code. In addition to that, our trade association, Distilled Spirits Council of the United States, has a discus code of responsible practices. And this sets standards here in the United States which we comply with. The latest research demonstrates that 65 percent of the alcohol that is obtained by those young people that want to drink alcohol illegally, they get it from parents, friends, families and peers. And we launched a campaign that basically tries to educate parents to talk to their young people, to their children, about the problems associated with illegal, underage consumption.

Male 2: In response to ethics issues and concerns about ethical conduct, some companies have written codes of conduct and appointed ethics officers to head up training and compliance programs. Ms. Deborah Severs is director of global ethics at Eaton Corporation. A global, diversified industrial manufacturer with 2003 sales of 8.1 billion dollars.

Female 1: My role as chief ethics officer is to ensure that Eaton’s ethics and values remain front and center to all employees and in our business practices. I’m also responsible for our global ethics office which was created to provide guidance, education and training to all of our employees and to help them comply with our code of ethics in their work environments.

We also have an 800 number that employees can use to report misconduct or to ask questions. We have one code of ethics for all employees, officers and directors. A code of ethics consists of 11 principles that we expect employees to follow when they conduct business on behalf of Eaton. The principles range from conflict of interest to obeying the law to competing ethically.

At Eaton well tell employees that it’s not just about achieving great results, it’s about how we get those results. One of our ethical principles is that we do not engage in unethical or illegal trade practices. Virtually every one of our 51,000 employees received ethics training by their leaders in their home country. Every employee received a copy of the ethics guide and a copy of the code of ethics in their native language.

The ethics guide provides examples and guidance on how employees can get help with ethical dilemmas. What we’re finding is that as employees apply the code of ethics to their work environments they’re coming back to us with questions and requests for help. And we’re finding ways to make our examples fit their work environments in the countries where they’re located so that our code of ethics remains the same. It is one code of ethics. But we’re using our examples so that employees, no matter where they’re located, understand what it means for them and their work environments.

Sometimes employees view the ethics officer as the policy but we want our focus to be on is not how many employees we can catch doing something wrong, but on how many employees we can help.

The above describes how marketing decisions involve ethical questions and how marketing managers must consider the impact of marketing decisions on its stakeholders (employees, owners, customers, suppliers and distributors, society, and the environment). To help marketing managers make the right decisions, many firms have a code of ethics, as well as many professional associations, such as the American Marketing Association (AMA). In addition, the video provides an in-depth interview with the ethics officer at the Eaton Corporation, which provides valuable insights into how a comprehensive ethics program helps employees make ethical decisions. Additional discussion focuses on Federal Trade Commission regulations relating to nutritional labeling.

Answer the following questions.

How can professional codes of ethics help marketers make the correct choice?

Describe the role of the ethics officer in a corporation. What are the fundamental building blocks of a good, comprehensive ethics program that is created for the purpose of educating employees?

What are some of the issues relating to online marketing and ethical conduct?

Explanation / Answer

Answer 1:

A code of ethics is one tool for that helps marketers taking the right decision or making the right choices. A code of ethics is a like self-regulatory guideline for marketers. Though marketers are responsible for their marketing content, they must abide the code. The principles of this code include:

Code of Ethics seeks to promote honesty, fairness, and responsibility in all marketing. A code of ethics is not a hard and fast list of rules, but a general set of guidelines to assist companies as they evaluate new marketing strategies.

For companies looking to improve the image of a brand and develop long-term relationships with customers, this kind of unethical behaviour can quickly lead to failure. Customers do not want to feel manipulated by the brands they like. Companies can use ethical marketing as a way to develop a sense of trust among their customers. If a product lives up to the claims made in its advertising, it reflects positively on the entire company. It can make the consumer feel like the company is invested in the quality of the products and the value they provide customers.

A code of ethics help marketers with a careful analysis of the company, its customers, and the markets it operate within. Careful research is the best way to predict the effects of a change in strategy.

A company will then decide which features of their marketing to perform according to code of ethics. Marketing professionals must reach an agreement about how they want to deliver their campaigns. They might decide to focus on making honest claims, avoiding marketing to children, or falsely criticizing competitors. A delicate balance has to be struck between the truth of the ad and its ability to persuade the customer.

Finally, ethical marketers need to make difficult choices about how to leverage the capitol of their ethical decisions based on code of ethics. For most companies, the simple knowledge that they are doing the right thing will not be enough of a motivating factor. Marketing based on code of ethics often highlights the ethical choices a company has made in order to improve their public reputation. This can be a powerful way to connect with customers. Any effort at ethical marketing has to balance a company’s self interest with their social responsibility.

Role of Code of Ethics:

Benchmark

A well-documented code of ethics work as platform of expectations and guidelines for employee conduct. Whenever a new employee comes on aboard, organizations should discuss this code of ethics during their induction. The objective is to ensure employees understand the importance of ethics and that their jobs require adherence to the company's standards.

Training

To make it more effective, organizations should emphasize on converting this well documented piece of paper into habits or culture. This can be possible by creating mandatory trainings.

When someone actually flushes out the importance of the policy and explains its nuances, employees gain appreciation for ethics and a better understanding of their seriousness. They may also have opportunities to run work through potential situations and receive useful guidance.

Enforcement

For a code of ethics to mean anything, a company has to be willing to enforce it. Sadly, this usually requires an example of someone being disciplined or terminated for a breach of ethics. A company that wants to uphold strong ethics can't bend or give people a free pass if it wants employees to take the policy to heart.

In addition, companies must often make sacrifices to uphold standards, such as giving discounts or free merchandise because of company mistakes and making sure to do the right thing even when it isn't profitable. Employees watch and learn from management responses.

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