Dana-Nicoleta Lascu Kenneth E. Clow

Transcription

1 Dana-Nicoleta Lascu Kenneth E. Clow Textbook Media Press 1

2 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. Textbook Media Press 2

3 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. Textbook Media Press 3

4 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? Textbook Media Press 4

5 3-2 Ethical Issues in Marketing Marketing to Youth Pros Huge market (over $170 billion a year) Potential creation of brand loyalty Cons Youth are adventurous. Youth can change tastes over night What are the ethical issues involved when marketing to youth? Textbook Media Press 5

6 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. Textbook Media Press 6

7 3-2 Ethical Issues In Marketing Business Ethics Violations Enron WorldCom Arthur Andersen These companies have spurred the need for a higher level of ethical behavior within companies. Textbook Media Press 7

8 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? Textbook Media Press 8

9 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. Textbook Media Press 9

10 3-2c Marketing Increases the Prices of Goods and Services Yes, but. 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. Textbook Media Press 10

11 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? Textbook Media Press 11

12 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? Textbook Media Press 12

13 3-2e Marketing Shapes Inappropriate Cultural Values (contd.) Advertising to Children $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. Textbook Media Press 13

14 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? Textbook Media Press 14

15 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? Textbook Media Press 15

16 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? Textbook Media Press 16

17 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: Magazines selling subscription lists. Warranties and surveys that are filled out with personal information. Credit card companies, banks, and schools. The Internet Marketers use this information to create groups that become their target market. It is not efficient for them to market to you as an individual. Textbook Media Press 17

18 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. Textbook Media Press 18

19 3-2i Individual Roles in Marketing Ethics One should ask the following questions when evaluating whether a marketing decision is unethical: 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 longlasting negative effects on society? Company beliefs or policy may influence the individual in making marketing decisions. Textbook Media Press 19

20 3.2i Individual Roles in Marketing Ethics (contd.) A Framework for Ethical/Unethical Decisions Textbook Media Press 20

21 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 Price fixing Free enterprise Food quality Fair interest rates Product safety Protection of children Deceptive advertising - ensuring free trade and open competition between firms. - need to protect consumers form unscrupulous businesses. Textbook Media Press 21

22 3-3 Marketing Regulations (contd.) Legislation Description 1890 Sherman Antitrust Act Prohibits trusts, monopolies, and activities designed to restrict free trade Federal Food and Drug Act Created the Food and Drug Administration and prohibits the manufacture and sale of falsely labeled foods and drugs 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 Federal Trade Commission Act Created the Federal Trade Commission (FTC) to address antitrust matters and investigate unfair methods of competition 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 Wheeler-Lea Amendment Expanded the power of the FTC to investigate and prohibit false and misleading advertising and practices that could injure the public Lanham Act Established protection of trademarks 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 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 Hart-Scott-Rodino Act Requires corporations wanting to merge to notify and seek approval of the government before any action is taken Children s Television Act Limits the number and times advertisements can be aired during children s programs. Textbook Media Press 22

23 3-3 Marketing Regulations (contd.) Federal Agencies Regulating Marketing Practice Agency Food and Drug Administration (FDA) Responsibility 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. Textbook Media Press 23

24 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 Textbook Media Press 24

25 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. Textbook Media Press 25

26 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. Textbook Media Press 26

27 3-3b The Federal Trade Commission (contd.) Corrective advertising Procedures 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. Textbook Media Press 27

28 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. Textbook Media Press 28

29 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) Textbook Media Press 29

30 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. Textbook Media Press 30

31 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. Textbook Media Press 31