20
Principles of Marketing
Marketing Ethics
and
Social Responsibility
Learning Objectives
After studying this chapter, you should be able
to:
1.
Identify the major social criticisms of
marketing
2.
Define consumerism and environmentalism
and explain how they affect marketing
strategies
3.
Describe the principles of socially
responsible marketing
4.
Explain the role of ethics in marketing
20-2
Chapter Outline
1.
2.
3.
Social Criticisms of Marketing
Citizen and Public Actions to Regulate
Marketing
Business Actions Toward Socially
Responsible Marketing
20-3
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
•
•
•
•
High cost of distribution
High advertising and promotion costs
Excessive markups
Deceptive practices
20-4
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
High Cost of Distribution
Complaint:
Intermediaries mark
up prices beyond their
value due to
inefficiencies and
unnecessary or
duplicative services
Response:
Markups reflect the cost of
the services that
consumers expect
• Convenience
• Larger stores and
assortments
• More service
20-5
• Return privileges
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
High Advertising and Promotion costs
Complaint:
Response:
Prices are inflated to
absorb advertising and
sales promotion costs,
and packaging only
adds to the
psychological, not
functional, value of the
product
Advertising does add to
product cost but also to
product value by
informing potential
customers of the
availability and merits of
the product
20-6
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Excessive Markups
Complaint:
Companies mark up
products excessively
Response:
Most businesses try to
deal fairly with
consumers because
they want to build
relationships and repeat
business
20-7
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Complaint: Companies use deceptive practices that
lead customers to believe they will get more
value than they actually do. These practices
fall into three categories:
•
Deceptive pricing
•
Deceptive promotion
•
Deceptive packaging
20-8
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
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 misrepresenting
the product’s features or performance or luring the customer
to the store for a bargain that is out of stock
Deceptive packaging includes exaggerating packaging contents
through subtle design, using misleading labeling or describing
size in misleading terms
20-9
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Legislation to protect consumer from deceptive practices
•
Wheeler-Lea Act—gives the Federal Trade Commission (FTC)
power to regulate “unfair or deceptive acts or practices”
Is it deception or alluring or puffery that is just an exaggeration for
effect?
•
Products that are harmful
•
Products that provide little benefit
•
Products that are not made well
20-10
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
High-Pressure Selling
Complaint:
Response:
Salespeople use highMost selling involves
pressure selling that
building long-term
persuades people to
relationships and valued
buy goods they had no
customers. High
intention of buying
pressure or deceptive
selling can damage
these relationships.
20-11
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Shoddy, Harmful, or Unsafe Products
Complaint:
Products have poor
quality, provide little
benefit, and can be
harmful
Response:
Today’s marketers know that
customer-driven quality
results in customer value
and satisfaction that creates
profitable customer
relationships. There is no
value in marketing shoddy,
harmful, or unsafe products.
20-12
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Planned Obsolescence
Complaint:
Producers follow a program of
planned obsolescence,
causing their products to
become obsolete before
they actually need
replacement. Producers
also continually change
consumers’ concepts of
acceptable styles to
encourage more and
earlier buying.
Response:
Planned obsolescence is really
the result of competitive
market forces leading to
ever-improving goods and
services. Marketers know
that customers like style
changes and want the latest
innovations even if older
models still work.
20-13
Social Criticisms of Marketing
Marketing’s Impact on Individual Consumers
Deceptive Practices
Poor Service to Disadvantaged Consumers
Response:
Complaint:
American marketers serve Some marketers profitably
target these customers,
disadvantaged
and the FTC has taken
customers poorly.
action against
Some retail companies
marketers that do
“redline” poor
advertise false values,
neighborhoods and
wrongfully deny service,
avoid placing stores
or charge
there.
disadvantaged
customers too much.
20-14
Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
False Wants and Too Much Materialism
Complaint:
The marketing system urges too
much interest in material
possessions. People are
judged by what they own
rather than who they are,
creating false wants that
benefit industry more than
they benefit consumers.
Response:
People do have strong defenses
against advertising an other
marketing tools. Marketers
are most effective when they
appeal to existing wants
rather than creating new
ones. The high failure rate of
new products shows that
companies cannot control
demand.
20-15
Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Too Few Social Goods
Complaint:
Businesses oversell private
goods at the expense of
public goods and require
more public goods to
support them
Response:
There needs to be a balance
between private and public
goods
•
Producers should bear full
social costs of their
operations
•
Consumers should pay the
social costs of their
purchases
20-16
Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Cultural Pollution
Complaint:
Marketing and advertising
creates cultural
pollution
Response:
Marketing and advertising are
planned to reach only a target
audience, and advertising makes
radio and television free to users
and helps to keep the cost of
newspapers and magazines
down. Today’s consumers have
alternatives to avoid marketing
and advertising from technology.
20-17
Social Criticisms of Marketing
Marketing’s Impact on Society as a Whole
Too Much Political Power
Complaint:
Businesses wield too much
political power over
mass media, limiting
media to report
independently and
objectively
Response:
American industries do
promote their own
interests, and regulators
are seeking to balance
the interests of big
businesses against the
public
•
•
Microsoft
Tobacco
20-18
Social Criticisms of Marketing
Marketing’s Impact on Other Businesses
•
•
•
Acquisition of competitors
Marketing practices
Unfair competitive marketing practices
20-19
Social Criticisms of Marketing
Marketing’s Impact on Other Businesses
Acquisition of competitors can sometimes be good for society
when the acquiring company gains economies of scale that
lead to lower prices
Marketing practices can also bar new competitors from entering
an industry and can create use patents, heavy promotional
spending to drive out existing competitors
Unfair competitive marketing practices such as setting prices
below cost, threatening to cut off business with suppliers, or
discouraging the buying of a competitor’s product can hurt or
destroy other firms
20-20
Citizen and Public Actions to
Regulate Marketing
Consumerism is the organized movement of
citizens and government agencies to improve
the rights and power of buyers in relation to
sellers
Environmentalism is an organized movement of
concerned citizens, businesses, and
government agencies to protect and improve
people’s living environment
20-21
Citizen and Public Actions to
Regulate Marketing
Consumerism
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 warning and controls
•
The right to charge any price for the product, provided no
discrimination exists among similar kinds or 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 programs, provided they
are not unfair or misleading
20-22
Citizen and Public Actions to
Regulate Marketing
Environmentalism
People and organizations should operate with
more care for the environment
The marketing system’s goal should not be to
maximize consumption, consumer choice, or
satisfaction, but rather to maximize life
quality. Environmental costs should be
included in both producer and consumer
decision making.
20-23
Citizen and Public Actions to
Regulate Marketing
Environmentalism
Environmental Sustainability
•
•
•
•
•
Pollution prevention
Product stewardship
Design for environment (DFE)
New environmental technologies
Sustainability vision
20-24
Citizen and Public Actions to
Regulate Marketing
Environmentalism
Environmental Sustainability
Pollution prevention involves not just cleaning up waste but also
eliminating or minimizing waste before it is created
Product stewardship involves minimizing the pollution from
production and all environmental impact throughout the full
product life cycle
Design for environment (DFE) involves thinking ahead to
design products that are easier to recover, reuse, or recycle
20-25
Citizen and Public Actions to
Regulate Marketing
Environmentalism
Environmental Sustainability
New environmental technologies involve looking
ahead and planning new technologies for
competitive advantage
Sustainability vision is a guide to the future that
shows the company that the company’s products,
process, and policies must evolve and what is
needed to get there
20-26
Business Actions Toward
Socially Responsible Marketing
Enlightened Marketing
Enlightened marketing refers to a company’s
marketing effort supporting the best long-run
performance of the marketing system and consists
of five principles:
•
Consumer-oriented marketing
•
Customer-value marketing
•
Innovative marketing
•
Sense-of-mission marketing
•
Societal marketing
20-27
Business Actions Toward
Socially Responsible Marketing
Enlightened Marketing
Consumer-oriented marketing means that a company should
view and organize its marketing activities from the consumer’s
perspective
Customer-value marketing means that the company should put
most of its resources into customer-value-building marketing
investments—long-term customer loyalty and relationships—by
continually improving the value consumers receive from the
firm’s market offerings
Innovative marketing requires the company to continually seek
real product and marketing improvements
20-28
Business Actions Toward
Socially Responsible Marketing
Enlightened Marketing
Sense-of-mission marketing means the company
should define its mission in broad social terms
rather than narrow product terms
Societal marketing means the company makes
marketing decisions by considering consumers’
wants and interests, the company’s requirements,
and society’s long-run interests
•
Views societal problems as opportunities
•
Designs pleasing and beneficial products
20-29
Business Actions Toward
Socially Responsible Marketing
Enlightened Marketing
Deficient products have neither immediate appeal nor
long-term benefits
•
Bad-tasting and ineffective medicine
Pleasing products have high immediate satisfaction but
may hurt consumers in the long run
•
Cigarettes and junk food
20-30
Business Actions Toward
Socially Responsible Marketing
Enlightened Marketing
Salutary products have low appeal but may benefit
consumers in the long run
•
Seat belts and air bags
Desirable products give both immediate satisfaction and
high long-term benefits
•
Tasty and nutritious breakfast food
20-31
Business Actions Toward
Socially Responsible Marketing
Marketing Ethics
Corporate marketing ethics are broad guidelines
that everyone in the organization must follow that
cover distributor relations, advertising standards,
customer service, pricing, product development,
and general ethical standards
20-32
Business Actions Toward
Socially Responsible Marketing
Marketing Ethics
Philosophies
Issues are decided by the free market and legal
system
Responsibility is not on the system but in the
hands of the individual company and
managers
20-33
The End