CHAPTER-FIVE
BUSINESS ETHICS IN MARKETING
5.1. Introduction
In today’ s corporate world ethical marketing is playing a larger role in marketing strategy. An
increasing number of consumers are buying products/services because they feel that the
products, services or organizations responsible for those are ethical. 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.
An individual’s view of ethics and morality is influenced by a variety of things including their
culture, background, experience, upbringing/family, peers, community, religion and country.
Ethical marketing is based around making the right moral decisions. Balancing ethics and
remaining competitive can be difficult. You can argue that as consumer attitudes shift having an
ethical strategy will make a firm more competitive.
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. Ethical Marketing
is an honest and factual representation of our services and the business model, delivered in a
framework of cultural and social values for the consumer.
Marketing ethics addresses principles and standards that define acceptable conduct in the
market place. Marketing usually occurs in the context of an organization, and unethical activities
usually develop from the pressure to meet performance objectives. Some obvious ethical issues
in marketing involves clear cut attempts to deceive or take advantage of a situation. Marketing
ethics also refers to the marketer’s standards of conduct and moral values. Many companies
create ethics programs to train employees to act ethically. Employees’ personal values
sometimes conflict with employers ethical standards.
5.2. 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. Each marketing
concept has its own ethical issues.
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1. Emerging Ethical Problems in Market Research
Market research has experienced resurgence with the widespread use of the Internet and the
popularity of social networking. It is easier than ever before for companies to connect directly
with customers and collect individual information that goes into a computer database to be
matched with other pieces of data collected during unrelated transactions.
The way a company conducts its market research these days can have serious ethical
repercussions, affecting the lives of consumers in ways that have yet to be fully understood.
Further, companies can be faced with a public backlash if their market research practices are
perceived as unethical. Some of the ethical issues in marketing research include:
Invalid or unreliable research studies
Invasion of consumer privacy, not respecting confidentiality
Disguising sales as research
Failure to secure voluntary and informed participation
Competitive intelligence gathering
Consumers are concerned about privacy, and Internet has increased privacy concerns
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
In the early days of existence of corporations, especially during 1940s and 1950s, tobacco was
advertised as a substance that promotes health. Of late, an advertiser who does not meet the
ethical standards is considered an offender against morality by the law. 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 detriment. 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 (for example, a shampoo that helps fighting dandruff in 2 weeks whereas results are
significant only after one month) or a unrealistic statement about products’ performance (for
example, a pill that would help lose 30 Lbs. in one week).
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Deception can also appear in sales promotion. Consumers desire to obtain more for the same
price and are therefore sensitive to sales promotion like free gift, price reduction or special
offers. The ethical risk is that companies may be tempted to take advantage of customers by
making promises and promotions that cannot be kept.
Sexuality is a major point of discussion when ethical issues in advertising content are considered.
Violence is also an important ethical issue in advertising, especially where children should not be
affected by the content. Some select types of advertising may strongly offend some groups of
people even when they are of strong interest to others. Female hygiene products as well as
hemorrhoids and constipation medication are good examples. The advertisements of condoms
are important in the interest of AIDS-prevention, but are sometimes seen by some as a method of
promoting promiscuity that is undesirable and strongly condemned in various societies. A
negative advertising policy lets the advertiser highlight various disadvantages of the competitors’
products rather than showing the inherent advantages of their own products or services. Such
policies are rampant in political advertising.
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.
Marketing to children also raises ethical concerns. Children cannot really make fully-informed
choices or they can be flooded with marketing material that is going to alter their behavior.
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. Electronic spam and telemarketing also push the
limits of ethical standards and legality in a strong manner.
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 or cartels. Besides,
advertised prices should always be realistic prices that consumers will find in stores. The odd-
pricing and partitioned prices practices can also be questionable on ethical grounds. If not used
with sensitivity, these methods cannot be considered as ethical, because marketers manipulate
consumers’ expectancies.
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There are various forms of unethical business practices related to pricing the products and
services. 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.
⎬ 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. Products offered do not
always contribute to satisfying existing needs but sometimes create new needs through the
promotion of materialism. It appears not to be ethical from marketers to forget the first role
of marketing at the benefit of mercantilism.
⎬ Ethical concerns can also appear in the performance of products/services. Ethical
marketing activity should prevent poorly made and unsafe products. Products not made well
or products delivering little benefit or less benefit than promised are commonplace criticism
made to marketers.
⎬ More questionable is the case of harmful products due to poor design or lack of quality.
Marketers should refer to the maxim ‘ Do unto others, as you would have them do unto
you’ to judge whether a product is acceptable or not. The quality of a product should always
have the priority on economic concerns. Moreover, pre-tests should be conducted to ensure
the compliance of products to safety standards.
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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
3.3. 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.
Among the various aspects of regulation, consumer protection is at the forefront of moral
discourse. Businesses are regulated as to whether the way they function in the market affects the
well beings of consumers or not. Generally four approaches exist: market approach, contractual
approach, due care approach and social cost approach.
1. Market Approach: Consumer safety is seen as a good that is most efficiently provided
through the mechanism of free market. Such is carried out by making producers and sellers
respond to consumer demand. Critics claim the ineffectiveness of such approach by pointing
the complexity of products to be understood by consumers and failure of markets in
providing consumers with full product information either from negligence or business
secrete. It is appropriate to doubt an approach which opts the business itself to remedy a
problem coming from the business itself. As profit oriented entities businesses will obviously
prioritize gain than consumer interest. Hence one cannot expect corporations to respond to
consumer safety issues by their own initiative at all times as doing so entail cost and there is
little that motivates them to do so.
2. Contract Approach: The relationship between a firm and a consumer is essentially a
contractual one. Whether oral or written every business transaction in the modern era
presupposes the existence of contractual agreement between parties. A firms moral duty
emanate from the terms of the contract. Usually contractual terms are expected to incorporate
issues in connection to
3. Duty to Comply to Contract Terms: Contract terms will create moral obligation on the
business to guarantee among others the reliability of product sold, issues in connection to
maintainability, the duration of service life of the good and safety of the product under
transaction.
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a. Duty to disclose product nature: There is a moral obligation on the side of producer or
seller to explain in explicit terms the nature and characteristic of the product.
b. Duty to avoid misrepresentation: The moral obligation not to fraud or lie to the consumer
on subject matter of contract.
c. Duty to avoid duress and undue influence: Moral obligation not to use force, threat of
force or any related power in connection to the contract
4. Due Care Approach: The more advantageous position manufacturers and sellers of a
product are in connection to sale an item has made the moral obligation of these parties to
ensure consumers are not harmed as a result of the product they put to market much stronger.
The due care theory expects a moral obligation from the business person in areas of product
design, production and information. These three are of paramount importance in reducing
complaints likely to arise from consumers hence putting firms in a better moral standing.
5. Social Cost View: Social cost view claims a manufacturer or a business should pay the cost
of any injuries sustained from any defect of a product even when they have taken all due care
in the design, producing and informing of the product. This is an extended liability on
businesses. By widening the scope of responsibility it acts as a precautionary call for
businesses to take the utmost possible care regarding their product so that a high level of
consumer protection is achieved. As one can see businesses will be liable even in the absence
of clear fault so long as the injury is sustained to a consumer in relation to the use of their
products or services. This notion of strict liability is the best protection provided for
consumers of all the four approaches.
The issue of consumer protection is not only an academic phenomenon. There are laws and
regulations generally designed to protect the consumers from unethical practices by businesses.
These laws and regulations recognize that consumers have certain basic rights in the market
place. Each marketer must rely on his/her own value system to determine what is and is not
ethical. Political-legal environment component of the marketing environment consisting of laws
and their interpretations that require firms to operate under competitive conditions and to protect
consumer rights.
Taking in to account the importance it entails the UN has developed a consumer protection
guideline to be followed by its members. The following points are taken from the UN consumer
protection listing.
⎬ The right to safety: To be protected against products, production processes, and services
which are hazardous to health or life of workers.
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⎬ The right to be informed: To be given facts needed to make an informed choice, and to be
protected against dishonest or misleading advertising and labeling.
⎬ The right to choose: to be able to select from a range of products and services, offered at
competitive prices, with an assurance of satisfactory quality.
⎬ The right to be heard: to have consumer interests represented in the making and execution of
government policy, and in the development of products and services
⎬ The right to satisfaction of basic needs: to have access to basic essential goods and services,
adequate food, clothing, shelter, health care, education and sanitation.
⎬ The right to redress: to receive a fair settlement of just claims, including compensation for
misrepresentation, shoddy goods or unsatisfactory services.
⎬ The right to consumer education: to acquire knowledge and skills needed to make informed,
confident choices about goods and services while being aware of basic consumer rights and
responsibilities and how to act on them.
⎬ The right to a healthy environment: to live and work in an environment which is non-
threatening to the well- being of present and future generations.
Ethiopian consumer protection law has also recognized the need to protect the consumers from
harmful acts of the business. It has explicitly stated the following as rights of the consumer:
⎬ The right to get sufficient and accurate information or explanation as to the quality and
type of goods and services one purchases
⎬ The right to purchase goods and services on the basis of personal choice
⎬ The right not to be forced to purchase because one bargained on price or looked in to
quality or option of goods and services
⎬ The right to be received humbly and respectfully by any business person and to be
protected from such acts of the business person as insult, threat, frustration and defamation
⎬ The right to claim compensation or related rights thereof from manufacturers, importers,
wholesalers or retailers for damages suffered because of purchase or use of goods and
services.
On top of these, the law makes it a duty on businesses to display price of goods and services, to
affix labels related to the name of good, made in, content, expiry date and the like on goods.
When a consumer faces a defective good or service within 15 days of purchase, he/she is entitled
to report to a government organ enabling good replacement, service redelivery free of charge or
refund of purchase price from the business.
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