MARKETING AND SOCIETY: SOCIAL
RESPONSIBILITY AND MARKETING ETHICS
Philip Kotler and Gary Armstrong
Introduction, Greg Emery
OF ALL THE AREAS OF BUSINESS—finance, accounting, operations, management,
human resources—it is perhaps marketing that receives the most ethical criticism. Critics accuse marketing of harming consumers and the general public
through practices of pricing products unnecessarily high, employing false or
deceptive advertising, producing unsafe or useless products or products that
have unnecessary “built-in” obsolescence, providing poor service to disadvantaged consumers, and so on.
In this article, Philip Kotler and Gary Armstrong argue that whatever
“harm,” if any, is caused to consumers, this harm is unintentional because
most businesses do try to deal fairly with consumers—if for no other reason
than that they want repeat business. That is, Kotler and Armstrong argue that
most companies avoid dishonest or injurious practices because such practices harm their business in the long run.
Kotler and Armstrong contend that marketers have little to gain from
deceptive practices because such maneuvers, while they may work in the
short run, will damage the marketer’s long-run relationships with customers.
That is, today’s marketers know that being customer-driven (treating customers right) results in customer satisfaction, which in turn creates long-term
customer relationships—the most profitable kind.
Kotler and Armstrong go on to address the criticisms that marketing creates false or unnecessary needs and wants in individuals and, consequently,
stimulates too much interest in material possessions, and that marketing creates “cultural pollution”—continually polluting people’s minds with messages of materialism, sex, power, status, and so on. Kotler and Armstrong
respond by claiming that such criticisms overstate the power of business to
create needs and wants or to cause “cultural pollution.” They explain that
marketers are most effective when they appeal to existing needs and wants
rather than when they attempt to create new ones.
Shifting gears, Kotler and Armstrong describe two consumer grassroots
movements that have arisen to keep businesses in line: consumerism and
environmentalism. Consumerism is an organized movement of citizens and
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS government agencies concerned with improving the rights and power of
buyers in relation to sellers. Consumerists believe that the balance of power
lies on the sellers’, rather then the buyers’, side, and thus consumers need
protection. That is, consumerists argue that the buyer has too little information, education, and protection to make wise decisions when facing sophisticated sellers.
Environmentalism is concerned with marketing’s effects on the environment and with the environmental costs of serving consumer needs and
wants. Environmentalists want people and organizations to operate with
more care for the environment and argue that marketing’s goal should not be
to maximize consumption, consumer choice, or consumer satisfaction, but
rather to maximize life quality.
In response to the above criticisms of marketing, Kotler and Armstrong
contend that companies need to develop ethics policies that cover distributor,
employee and customer relations, advertising standards, customer service,
pricing policies, product development, and so on. Consequently, they propose seven principles that might guide the formulation of effective corporate
ethics policies. These principles are as follows:
1. The principle of consumer and producer freedom: As much as possible, marketing decisions should be made by consumers and producers
under relative freedom.
2. The principle of curbing potential harm: As much as possible, transactions freely entered into by producers and consumers are their private business.
3. The principle of meeting basic needs: The marketing system should
serve disadvantaged consumers as well as affluent ones.
4. The principle of economic efficiency: The marketing system should
strive to supply goods and services efficiently and at low prices.
5. The principle of innovation: The marketing system should encourage
authentic innovation to bring down production and distribution costs
and to develop new products to meet changing consumer needs.
6. The principle of consumer education and information: The marketing
system should invest heavily in consumer education and information
to increase long-run consumer satisfaction and welfare.
7. The principle of consumer protection: The marketing system must
provide consumer protection.
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS While reading this article, consider whether Kotler and Armstrong’s
seven guiding principles adequately insure that the consumer will be protected from harm. What other elements or principles may need to be considered or added? Are these principles sufficient to address the complexities of
today’s digital marketplace?
SOCIAL CRITICISM OF MARKETING
M
arketing receives much criticism. Some of this criticism is justified;
much is not. Social critics claim that certain marketing practices hurt
individual consumers, society as a whole, and other business firms.
MARKETING’S IMPACT ON INDIVIDUAL CONSUMERS
Consumers have many concerns about how well the American marketing
system serves their interests. Surveys usually show that consumers hold
mixed or even slightly unfavorable attitudes toward marketing practices.
Consumers, consumer advocates, government agencies, and other critics
have accused marketing of harming consumers through high prices, deceptive practices, high-pressure selling, shoddy or unsafe products, planned
obsolescence, and poor service to disadvantaged consumers.
High Prices
Many critics charge that the American marketing system causes prices to be
higher than they would be under more “sensible” systems. They point to
three factors—high costs of distribution, high advertising and promotion
costs, and excessive markups.
High Costs of Distribution
A longstanding charge is that greedy intermediaries mark up prices beyond
the value of their services. Critics charge that there are too many intermediaries, that intermediaries are inefficient and poorly run, or that they provide
unnecessary or duplicate services. As a result, distribution costs too much,
and consumers pay for these excessive costs in the form of higher prices.
“Social Criticisms of Marketing,” by Philip Kotler and Gary Armstrong, reprinted from Principles of Marketing, Eighth Edition, 1999, Prentice-Hall, pp. 605–31.
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS How do resellers answer these charges? They argue as follows: First,
intermediaries do work that would otherwise have to be done by manufacturers or consumers. Second, markups reflect services that consumers themselves want—more convenience, larger stores and assortment, longer store
hours, return privileges, and others. Third, the costs of operating stores keep
rising, forcing retailers to raise their prices. Finally, retail competition is so
intense that margins are actually quite low. For example, after taxes, supermarket chains are typically left with barely one percent profit on their sales.
If some resellers try to charge too much relative to the value they add, other
resellers will step in with lower prices. Low-price stores such as Wal-Mart,
Home Depot, and other discounters pressure their competitors to operate
efficiently and keep their prices down.
High Advertising and Promotion Costs
Modern marketing is also accused of pushing up prices to finance heavy
advertising and sales promotion. For example, a dozen tablets of a heavily
promoted brand of aspirin sell for the same price as 100 tablets of less promoted brands. Differentiated products—cosmetics, detergents, toiletries—
include promotion and packaging costs that can amount to 40 percent or
more of the manufacturer’s price to the retailer. Critics charge that much of
the packaging and promotion adds only psychological value to the product
rather than functional value. Retailers use additional promotion-advertising,
displays, and sweepstakes that add several cents more to retail prices.
Marketers answer these charges in several ways. First, consumers want
psychological benefits—they want to feel wealthy, attractive, or special.
Consumers can usually buy functional versions of products at lower prices
but often are willing to pay more for products that also provide desired psychological benefits. Second, branding gives buyers confidence. A brand
name implies a certain quality, and consumers are willing to pay for wellknown brands even if they cost a little more. Third, heavy advertising is
needed to inform millions of potential buyers of the merits of a brand. If consumers want to know what is available on the market, they must expect manufacturers to spend large sums of money on advertising. Fourth, heavy
advertising and promotion may be necessary for a firm to match competitors’ efforts. The business would lose “share of mind” if it did not match
competitive spending. At the same time, companies are cost-conscious about
promotion and try to spend their money wisely. Finally, heavy sales promotion is needed from time to time because goods are produced ahead of
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS demand in a mass-production economy. Special incentives have to be
offered in order to sell inventories.
Excessive Markups
Critics also charge that some companies mark up goods excessively. They
point to the drug industry, where a pill costing 5 cents to make may cost the
consumer 40 cents to buy. They point to the pricing tactics of funeral homes
that prey on the confused emotions of bereaved relatives and to the high
charges of television repair and auto repair people.
Marketers respond that most businesses try to deal fairly with consumers because they want repeat business. Most consumer abuses are unintentional. When shady marketers do take advantage of consumers, they
should be reported to Better Business Bureaus and to state and federal agencies. Marketers also respond that consumers often don’t understand the reason for high markups. For example, pharmaceutical markups must cover the
costs of purchasing, promoting, and distributing existing medicines plus the
high research and development costs of formulating and testing new
medicines.
Deceptive Practices
Marketers are sometimes accused of deceptive practices that lead consumers
to believe they will get more value than they actually do. Deceptive practices
fall into three groups: deceptive pricing, promotion, and packaging. Deceptive Pricing includes practices such as falsely advertising “factory” or
“wholesale” prices or a large price reduction from a phony high retail list
price. Deceptive Promotion includes practices such as overstating the product’s features or performance, luring the customer to the store for a bargain
that is out of stock, or running rigged contests. Deceptive packaging includes
exaggerating package contents through subtle design, not filling the package
to the top, using misleading labeling, or describing size in misleading
terms. . . .
Marketers argue that most companies avoid deceptive practices because
such practices harm their business in the long run. If consumers do not get
what they expect, they will switch to more reliable products. In addition,
consumers usually protect themselves from deception. Most consumers recognize a marketer’s selling intent and are careful when they buy, sometimes
to the point of not believing completely true product claims. . . .
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS High-Pressure Selling
Salespeople are sometimes accused of high-pressure selling that persuades
people to buy goods they had no thought of buying. It is often said that encyclopedias, insurance, real estate, cars, and jewelry are sold, not bought.
Salespeople are trained to deliver smooth talks to entice purchase. They sell
hard because sales contests and high commissions promise big rewards to
those who sell the most.
Marketers know that buyers often can be talked into buying unwanted or
unneeded things. Laws require door-to-door and telephone salespeople to
announce that they are selling a product. Buyers also have a “three-day cooling-off period” in which they can cancel a contract after rethinking it. In
addition, consumers can complain to Better Business Bureaus or to state
consumer protection agencies when they feet that undue selling pressure has
been applied. But in most cases, marketers have little to gain from high-pressure selling. Such tactics may work in the short run but will damage the marketer’s long-run relationships with customers.
Shoddy or Unsafe Products
Another criticism is that products lack the quality they should have. One
complaint is that many products are not made well and services are not performed well. A second complaint is that many products deliver little benefit.
For example, some consumers are surprised to learn that many of the
“healthy” foods being marketed today, such as cholesterol-free salad dressings, low-fat frozen dinners, and high-fiber bran cereals, may have little
nutritional value. . . .
A third complaint concerns product safety. Product safety has been a
problem for several reasons, including manufacturer indifference, increased
production complexity, poorly trained labor, and poor quality control. For
years, Consumers Union—the organization that publishes Consumer
Reports—has reported various hazards in tested products: electrical dangers
in appliances, carbon monoxide poisoning from room heaters, injury risks
from lawn mowers, and faulty automobile design, among many others. The
organization’s testing and other activities have helped consumers make better buying decisions and encouraged businesses to eliminate product flaws.
However, most manufacturers want to produce quality goods. The way a
company deals with product quality and safety problems can damage or help
its reputation. Companies selling poor-quality or unsafe products risk damaging conflicts with consumer groups and regulators. Moreover, unsafe
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS products can result in product liability suits and large awards for damages.
More fundamentally, consumers who are unhappy with a firm’s products
may avoid future purchases and talk other consumers into doing the same.
Today’s marketers know that customer-driven quality results in customer
satisfaction, which in turn creates profitable customer relationships.
Planned Obsolescence
Critics also have charged that some producers follow a program of planned
obsolescence, causing their products to become obsolete before they actually
should need replacement. For example, critics charge that some producers
continually change consumer concepts of acceptable styles to encourage
more and earlier buying. An obvious example is constantly changing clothing fashions. Other producers are accused of holding back attractive functional features, then introducing them later to make older models obsolete.
Critics claim that this occurs in the consumer electronics and computer
industries. For example, Intel and Microsoft have been accused in recent
years of holding back their next generation computer chips or software until
demand is exhausted for the current generation. Still other producers are
accused of using materials and components that will break, wear, rust, or rot
sooner than they should.
Marketers respond that consumers like style changes; they get tired of
the old goods and want a new look in fashion or a new design in cars. No one
has to buy the new look, and if too few people like it, it will simply fail.
Companies frequently withhold new features when they are not fully tested,
when they add more cost to the product than consumers are willing to pay,
and for other good reasons. But they do so at the risk that a competitor will
introduce the new feature and steal the market. Moreover, companies often
put in new materials to lower their costs and prices. They do not design their
products to break down earlier, because they do not want to lose customers
to other brands. Instead, they implement total quality programs to ensure that
products will consistently meet or exceed customer expectations. Thus,
much of so-called planned obsolescence is the working of the competitive
and technological forces in a free society—forces that lead to ever-improving goods and services.
Poor Service to Disadvantaged Consumers
Finally, the American marketing system has been accused of poorly serving
disadvantaged consumers. Critics claim that the urban poor often have to
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS shop in smaller stores that carry inferior goods and charge higher prices. A
Consumers Union Study compared the food-shopping habits of low-income
consumers and the prices they pay relative to middle-income consumers in
the same city. The study found that the poor do pay more for inferior goods.
The results suggested that the presence of large national chain stores in lowincome neighborhoods made a big difference in keeping prices down. However, the study also found evidence of “redlining,” a type of economic
discrimination in which major chain retailers avoid placing stores in disadvantaged neighborhoods. . . .
MARKETING’S IMPACT ON SOCIETY AS A WHOLE
The American marketing system has been accused of adding to several
“evils” in American society at large. Advertising has been a special target—
so much so that the American Association of Advertising Agencies launched
a campaign to defend advertising against what it felt to be common but
untrue criticisms.
False Wants and Too Much Materialism
Critics have charged that the marketing system urges too much interest in
material possessions. People are judged by what they own rather than by
who they are. To be considered successful, people must own a large home,
two cars, and the latest consumer electronics. This drive for wealth and possessions hit new highs in the 1980s, when phrases such as “greed is good”
and “shop ’til you drop” seemed to characterize the times. In the 1990s,
although many social scientists have noted a reaction against the opulence
and waste of the 1980s and a return to more basic values and social commitment, our infatuation with material things continues. . . .
The critics do not view this interest in material things as a natural state
of mind but rather as a matter of false wants created by marketing. . . . These
criticisms overstate the power of business to create needs, however. People
have strong defenses against advertising and other marketing tools. Marketers are most effective when they appeal to existing wants rather than
when they attempt to create new ones. . . .
Too Few Social Goods
Business has been accused of overselling private goods at the expense of
public goods. As private goods increase, they require more public services
that are usually not forthcoming. For example, an increase in automobile
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS ownership (private good) requires more highways, traffic control, parking
spaces, and police services (public goods). The overselling of private goods
results in “social costs.” For cars, the social costs include traffic congestion,
air pollution, and deaths and injuries from car accidents. . . .
Cultural Pollution
Critics charge the marketing system with creating cultural pollution. Our
senses are being constantly assaulted by advertising. Commercials interrupt
serious programs; pages of ads obscure printed matter; billboards mar beautiful scenery. These interruptions continually pollute people’s minds with
messages of materialism, sex, power, or status. Although most people do not
find advertising overly annoying (some even think it is the best part of television programming), some critics call for sweeping changes.
Marketers answer the charges of “commercial noise” with these arguments: First, they hope that their ads reach primarily the target audience. But
because of mass-communication channels, some ads are bound to reach people who have no interest in the product and are therefore bored or annoyed.
People who buy magazines addressed to their interests—such as Vogue or
Fortune—rarely complain about the ads because the magazines advertise
products of interest. Second, ads make much of television and radio free to
users and keep down the costs of magazines and newspapers. Many people
think commercials are a small price to pay for these benefits. Finally, today’s
consumers have alternatives. For example, they can zip and zap television
commercials or avoid them altogether on many cable or satellite channels.
Thus, advertisers are making their ads more entertaining and informative.
Too Much Political Power
Another criticism is that business wields too much political power. “Oil,”
“tobacco,” “auto,” and “pharmaceuticals” senators support an industry’s
interests against the public interest. Advertisers are accused of holding too
much power over the mass media, limiting their freedom to report independently and objectively. . . .
American industries do promote and protect their own interests. They
have a right to representation in Congress and the mass media, although their
influence can become too great. Fortunately, many powerful business interests once thought to be untouchable have been tamed in the public
interest. . . .
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS MARKETING’S IMPACT ON OTHER BUSINESSES
Critics also charge that a company’s marketing practices can harm other
companies and reduce competition. Three problems are involved: acquisitions of competitors, marketing practices that create barriers to entry, and
unfair competitive marketing practices.
Critics claim that firms are harmed and competition reduced when companies expand by acquiring competitors rather than by developing their own
new products. . . . [Such acquisitions] have caused concern that vigorous
young competitors will be absorbed and that competition will be reduced. In
virtually every major industry—banks, electric utilities, railroads, telecommunications companies, hospitals, aircraft makers—the number of major
competitors is shrinking.
Acquisition is a complex subject. Acquisitions can sometimes be good
for society. The acquiring company may gain economies of scale that lead to
lower costs and lower prices. A well-managed company may take over a
poorly managed company and improve its efficiency. An industry that was
not very competitive might become more competitive after the acquisition.
But acquisitions can also be harmful and, therefore, are closely regulated by
the government.
Critics have also charged that marketing practices bar new companies
from entering an industry. Large marketing companies can use patents and
heavy promotion spending, and can tie up suppliers or dealers to keep out or
drive out competitors. Those concerned with antitrust regulation recognize
that some barriers are the natural result of the economic advantages of doing
business on a large scale. Other barriers could be challenged by existing and
new laws. For example, some critics have proposed a progressive tax on
advertising spending to reduce the role of selling costs as a major barrier to
entry.
Finally, some firms have in fact used unfair competitive marketing practices with the intention of hurting or destroying other firms. They may set
their prices below costs, threaten to cut off business with suppliers, or discourage the buying of a competitor’s products. Various laws work to prevent
such predatory competition. It is difficult, however, to prove that the intent
or action was really predatory. . . . The question is whether this [is] unfair
competition or the healthy competition of a more efficient company against
the less efficient.
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS CITIZEN AND PUBLIC ACTIONS TO REGULATE MARKETING
Because some people view business as the cause of many economic and
social ills, grassroots movements have arisen from time to time to keep business in line. The two major movements have been consumerism and environmentalism.
Consumerism
. . . Consumerism is an organized movement of citizens and government
agencies to improve the rights and power of buyers in relation to sellers. Traditional sellers’ rights include:
• The right to introduce any product in any size and style, provided it is
not hazardous to personal health or safety; or, if it is, to include proper
warnings and controls.
• The right to charge any price for the product, provided no discrimination exists among similar kinds of buyers.
• The right to spend any amount to promote the product, provided it is
not defined as unfair competition.
• The right to use any product message, provided it is not misleading or
dishonest in content or execution.
• The right to use any buying incentive schemes, provided they are not
unfair or misleading.
Traditional buyers’ rights include:
• The right not to buy a product that is offered for sale.
• The right to expect the product to be safe.
• The right to expect the product to perform as claimed.
Comparing these rights, many believe that the balance of power lies on
the sellers’ side. True, the buyer can refuse to buy. But critics feel that the
buyer has too little information, education, and protection to make wise decisions when facing sophisticated sellers. Consumer advocates call for the following additional consumer rights:
• The right to be well-informed about important aspects of the product.
• The right to be protected against questionable products and marketing
practices.
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS • The right to influence products and marketing practices in ways that
will improve the “quality of life.”
Each proposed right has led to more specific proposals by consumerists.
The right to be informed includes the right to know the true interest on a loan
(truth in lending), the true cost per unit of a brand (unit pricing), the ingredients in a product (ingredient labeling), the nutritional value of foods (nutritional labeling), product freshness (open dating), and the true benefits of a
product (truth in advertising). Proposals related to consumer protection
include strengthening consumer rights in cases of business fraud, requiring
greater product safety, and giving more power to government agencies. Proposals relating to quality of life include controlling the ingredients that go
into certain products (detergents) and packaging (soft-drink containers),
reducing the level of advertising “noise,” and putting consumer representatives on company boards to protect consumer interests.
Consumers have not only the right but also the responsibility to protect
themselves instead of leaving this function to someone else. Consumers who
believe they got a bad deal have several remedies available, including contacting the company or the media; contacting federal, state, or local agencies; and going to courts.
ENVIRONMENTALISM
Whereas consumerists consider whether the marketing system is efficiently
serving consumer wants, environmentalists are concerned with marketing’s
effects on the environment and with the costs of serving consumer needs and
wants. Environmentalism is an organized movement of concerned citizens,
businesses, and government agencies to protect and improve people’s living
environment. Environmentalists are not against marketing and consumption;
they simply want people and organizations to operate with more care for the
environment. The marketing system’s goal, they assert, should not be to
maximize consumption, consumer choice, or consumer satisfaction, but
rather to maximize life quality. “Life quality” means not only the quantity
and quality of consumer goods and services, but also the quality of the environment. Environmentalists want environmental costs included in both producer and consumer decision-making. . . .
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS MARKETING ETHICS
Conscientious marketers face many moral dilemmas. The best thing to do is
often unclear. Because not all managers have fine moral sensitivity, companies need to develop corporate marketing ethics policies—broad guidelines
that everyone in the organization must follow. These policies should cover
distributor relations, advertising standards, customer service, pricing, product development, and general ethical standards. . . .
But what principle should guide companies and marketing managers on
issues of ethics and social responsibility? One philosophy is that such issues
are decided by the free market and legal system. Under this principle, companies and their managers are not responsible for making moral judgments.
Companies can in good conscience do whatever the system allows.
A second philosophy puts responsibility not in the system, but in the
hands of individual companies and managers. This more enlightened philosophy suggests that a company should have a “social conscience.” Companies and managers should apply high standards of ethics and morality when
making corporate decisions, regardless of “what the system allows.” . . .
Each company and marketing manager must work out a philosophy of
socially responsible and ethical behavior. Under the societal marketing
concept (emphasis added), each manager must look beyond what is legal
and allowed and develop standards based on personal integrity, corporate
conscience, and long-run consumer welfare. A clear and responsible philosophy will help the marketing manager deal with the many knotty questions
posed by marketing and other human activities.
As with environmentalism, the issue of ethics provides special challenges for international marketers. Business standards and practices vary a
great deal from one country to the next. For example, whereas bribes and
kickbacks are illegal for U.S. firms, they are standard business practice in
many South American countries. The question arises as to whether a company must lower its ethical standards to compete effectively in countries
with lower standards. . . .
Many industrial and professional associations have suggested codes of
ethics, and many companies are now adopting their own codes. For example,
the American Marketing Association, an international association of marketing managers and scholars, developed the code of ethics. . . . Companies are
also developing programs to teach managers about important ethics issues
and help them find the proper responses. They hold ethics workshops and
seminars and set up ethics committees. . . .
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS The future holds many challenges and opportunities for marketing managers as they move into the twenty-first century. Technological advances in
solar energy, personal computers, interactive television, modern medicine,
and new forms of transportation, recreation, and communication provide
abundant marketing opportunities. However, forces in the socioeconomic,
cultural, and natural environments increase the limits under which marketing
can be carried out. Companies that are able to create new values in a socially
responsible way will have a world to conquer.
PRINCIPLES FOR PUBLIC POLICY TOWARD MARKETING
Finally, we propose several principles that might guide the formulation of
public policy toward marketing. These principles reflect assumptions underlying much of modern marketing theory and practice.
• The principle of consumer and producer freedom: As much as possible, marketing decisions should be made by consumers and producers
under relative freedom. Marketing freedom is important if a marketing system is to deliver a high standard of living. People can achieve
satisfaction in their own terms rather than in terms defined by someone else. This leads to greater fulfillment through a closer matching of
products to desires. Freedom for producers and consumers is the cornerstone of a dynamic marketing system. But more principles are
needed to implement this freedom and prevent abuses.
• The principle of curbing potential harm: As much as possible, transactions freely entered into by producers and consumers are their private business. The political system curbs producer or consumer
freedom only to prevent transactions that harm or threaten to harm the
producer, consumer, or third parties. Transactional harm is a widely
recognized grounds for government intervention. The major issue is
whether there is sufficient actual or potential harm to justify the intervention.
• The principle of meeting basic needs: The marketing system should
serve disadvantaged consumers as well as affluent ones. In a freeenterprise system, producers make goods for markets that are willing
and able to buy. Certain groups who lack purchasing power may go
without needed goods and services, causing physical or psychological
harm. While preserving the principle of producer and consumer freedom, the marketing system should support economic and political
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS actions to solve this problem. It should strive to meet the basic needs
of all people, and all people should share to some extent in the standard of living it creates.
• The principle of economic efficiency: The marketing system strives to
supply goods and services efficiently and at low prices. The extent to
which a society’s needs and wants can be satisfied depends on how
efficiently its scarce resources are used. Free economies rely on active
competition and informed buyers to make a market efficient. To make
profits, competitors must watch their costs carefully while developing
products, prices, and marketing programs that serve buyer needs.
Buyers get the most satisfaction by finding out about different competing products, prices, and qualities and choosing carefully. The
presence of active competition and well-informed buyers keeps quality high and prices low.
• The principle of innovation: The marketing system encourages
authentic innovation to bring down production and distribution costs
and to develop new products to meet changing consumer needs. Much
innovation is really imitation of other brands, with a slight difference
to provide a selling point—the consumer may face ten very similar
brands in a product class. But an effective marketing system encourage real product innovation and differentiation to meet the wants of
different market segments.
• The principle of consumer education and information: An effective
marketing system invests heavily in consumer education and information to increase long-run consumer satisfaction and welfare. The principle of economic efficiency requires this investment especially in
cases where products are confusing because of their numbers and
conflicting claims. Ideally, companies will provide enough information about their product. But consumer groups and the government
can also give out information and ratings. Students in public schools
can take courses in consumer education to learn better buying skills.
• The principle of consumer protection: Consumer education and information cannot do the whole job of protecting consumers. The marketing system must also provide consumer protection. Modern products
are so complex that even trained consumers cannot evaluate them
with confidence. Consumers do not know whether a mobile phone
gives off cancer-causing radiation, whether a new automobile has
MARKETING AND SOCIETY: SOCIAL RESPONSIBILITY AND MARKETING ETHICS safety flaws, or whether a new drug product has dangerous sideeffects. A government agency has to review and judge the safety levels of various foods, drugs, toys, appliances, fabrics, automobiles, and
housing. Consumers may buy products but fail to understand the environmental consequences, so consumer protection also covers production and marketing activities that might harm the environment.
Finally, consumer protection prevents deceptive practices and highpressure selling techniques against which consumers would be
defenseless.
These seven principles are based on the assumption that marketing’s
goal is not to maximize company profits or total consumption or consumer
choice, but rather to maximize life quality. Life quality means meeting basic
needs, having available many good products, and enjoying the natural and
cultural environment. Properly managed, the marketing system can help to
create and deliver a higher quality of life to people around the world.