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Business practices have come under increasing scrutiny in recent years as public awareeness of and interest in business activities has risen. Public accountability has become a requirement to the public, as concerns over price-fixing, product safety, bribery, deceptive advertising, and other issues have become prominent. And Marketing is often seen as the worst offender, probably because it is the most visible of business activities, but possibly because Marketers do indeed behave less-than-ethically. This lecture examines what "unethical Marketing" is, and looks at the distinction between legal and illegal unethical activities. Following this review of basic ethics, numerous examples of Marketing ethics issues are presented, along with links whenever possible. "Points to Ponder" are provided after each vignette, which the reader would be advised to consider. Ethics in Marketing What are "Marketing ethics?" Is it an oxymoron, a blatant contradiction of terms? Or do Marketers operate with a silent code of ethics? It is doubtful there can be Marketing without ethics, for to do so would imply amoral business. Business would suffer without the key values of trust, fairness, honesty, and respect. "Marketing without ethics" is thus an impossibility, because societies dictate that these values be present, and if they were not, it would no longer benefit Marketers to advertise, because no one would trust them. In other words, there is to some degree self-governance, because itis in the Marketer's best interests for these ethics to exist. They allow the Marketer to pursue his ultimate goal: profit. Unethical Marketing, on the other hand, is distinct from the above. It involves a breach of ethics, these values of society, and uses unethical means to achieve corporate or personal goals. It is thus deviant behavior and therefore dysfunctional; it is not amoral, for the morals are pre-existent. Under what circumstances would a Marketer engage in unethical behavior? It is seldom the result of deliberate unethical actions, but rather the outcome of compromise, thoughtlessness, and misunderstanding. In other words, unethical Marketing occurs because of sloppy thinking and poor decision making, which leads one down the path of impropriety. When faced with corporate pressures, Marketing managers may make decisions that compromise ethical conduct. These rash decisions can often be rationalized as passed off as being the only way a company can remain competitive. For example, a firm rushes a new product to market in order to keep up with the competition, but fails to test the product adequately, resulting in consumer injury. The frequent rationalization is caveat emptor, let the buyer beware. In a free market, this is true to a large extent, but may be over-used by the unethical Marketer as an excuse for his behavior. There are five types of responses that the unethical Marketer may make in response to his unethical behavior:
Ethical Marketing managers should have respect and concern for the welfare of anyone who is affected by the Marketer's decisions. This summarizes Kant's "categorical imperative," which says in essence that one should act only to the extent that they would will it to become a universal law, and that another human being should never be treated as merely a means to an end. Of course, not all unethiucal conduct is illegal. It is quite possible for a Marketing manager to make an unethical decision which is perfectly legal. There are areas not yet covered by law, or, because of their complexity, the law cannot be easily applied. Thus, we are left with a foursome of possible outcomes:
A closer look at the 4Ps shows there to be a wide variety of potentially unethical Marketing activities, as listed below: Product
In the center lay the many codes of ethics in existence, be they from firms themselves, or particular industries or even professional bodies, like the American Marketing Association, which balance the interests of both parties. To the left of center (leaning toward the firm) is most industry practice. The best companies are situated here. To the right of center lay the Consumer Sovereignty School, stressing information and freedom of choice. In reality, while "most firms" will lay somewhere to the left of center, there are elements of each extreme in the way Marketing is conducted. For example, caveat emptor stresses profit maximization as the ultimate goal, and even encourages companies to "skate on thin ice" to test the limits of the law. Caveat venditor says that consumer satisfaction is paramount, and that the firm is ultimately liable ("strict liability" is the term) for any and all damages accruing to user of faulty products. The contemporary Marketer tries to appease both sets of demands, but the ultimate authority still resides with the company, hence explaining the slightly left-of-center position of most firms. The firm is responsible to both publics, but the stockholding public still takes some precedence. The right-of-center position, Consumer Sovereignty, is also worthy of attention, for it implies that consumers are free to make their own informed choices. It also implies that consumers are "free" to bear the consequences of their decisions. Thus, "consumer sovereignty" is an excellent defense for companies who market products that may involve some degree of risk to the user. In fact, this argument is often invoked whenever the sale of controversial products is involved, including some of the ones presented below. This remainder of the lecture will explore a variety of products and practices that have raised ethical eyebrows in recent years. The students is advised to apply the "caveat venditor" and "caveat emptor" test, as well as the notion of consumer sovereignty when analyzing each issue.
Full-Line Forcing An emerging trend among some manufacturers is to force retailers to carry the manufacturer's entire line, or else the retailer will not be able to carry anything that the manufacturer makes. In other words, manufacturers are holding their hottest products for ransom, and the ransom note is very easy to understand: purchase the entire line, or purchase nothing. At the trade show I attend regularly, I counted no less than five large manufacturers in the bicycle industry who were forcing their entire lines upon retailers. Each of these manufacturers makes complete lines of road and off-road bicycles, but in recent years has added helmets, clothing, gloves, cyclo-computers, and a variety of other accessories. If the independent bike shops refuse to carry the accessories, they may not be able to take delivery of bikes (or, alternately, they may not be very timely deliveries). Manufacturers respond that this type of policy is necessary to keep retailers from "cherry picking," selecting only the hottest products from a manufacturer, and ignoring the others. Requirements usually make retailers buy a certain percentage of accessories, as well as purchase bikes across the line, not just best-sellers. It should be noted that the profit margins on bicycles are in the range of 33-35-percent, while that of accessory items is 45-50-percent. In other words, accessories are far more profitable than the bikes themselves. And, with bicycles enjoying a recent surge in sales in the last decade (as many as 12 million units sold each year), manufacturers have realized there is an incredible after-market potential for sales. Of course, not everyone is excited about the prospect of having to commit to these purchase requirements. One independent sales representative with whom I spoke told about how difficult it is for him to sell his lines to retailers because they already purchase everything from one company. The pros and cons of this situation are as follows:
Other companies that have made substantial growth in accessory lines are Cannondale , Trek, and Specialized. GT Riteway and Raleigh have also made significant progress in this direction. Points to Ponder
At a time when the industry's largest brewers are amassing an incredible power base and market share (Anheuser-Busch and Miller Brewing Company together have about 75-percent share), it is somewhat ironic to see several of the largest brewers trying desperately to look like small brewers. The microbrew phenomenon is the fastest growing segment in an industry that has gone as flat as a day-old glass of beer. While the industry languishes with little or no growth, microbrews (or "craft beers," as the brewers like to call them) are growing at a double-digit rate. Still, the micros have, colectively, only about one-percent of the market, and there are over 1000 different micro brands. So why would the largest brewers in the industry be so interested in this segment? Since one-percent translates into about $250 million, this is no small piece of the action in real terms. But in order to try to get a part of this action, the big brewers are masquerading as small brewers. For example: The Miller Brewing Company has ownership interest in the Leinenkugel Brewing Company (Chippewa Falls, WI), and also "owns" the Plank Road Brewing Company, a newly-created division that brews Icehouse, Red Dog, and Southpaw. The Anheuser-Busch Brewing Company has ownership interest in the Red Hook Brewing Company in Seattle, WA. And the Coors Brewing Company markets Killian's Red as if it were a microbrew, when in fact it is brewed side-by-side with all of the other Coors brands. The potential ethical issue is that the big breweries are doing a good job of concealing their ownership interests, trying to distance themselves from these would-be craft beers. Yet, they seem very willing to pursue growth in this small but growing segment of the market. The big brewers want desperately for their new brands to be seen as craft beers like the many hundreds of other craft beers already available. Points to Ponder
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