Running Head: STATEMENT OF ETHICS 1

Marketing and Ethics and Corporate Responsibility

Dr. Charles Needham Jr. and Maria Needham

STATEMENT OF ETHICS 2

Abstract

Marketing is the process of planning and executing the concepts,

promotion, pricing, and distribution of ideas, and goods.

Marketers use strategies to guide how, when and where product

information goes before consumers. Ethics in marketing is the

standards guiding marketing actions and decisions. An individual

has their moral values from youth to adult. Leaders in the

Marketing organizations must develop standards for everyone in

the firm to follow when working with consumers. Every employee in

the organization must follow the same standards. A firm can

damages its reputation if all employees do not morally agree with

the ethics of the firm. Unethical practices in marketing can come

disguised with price fixing, price differentiation, bribery,

unfair selling methods, deceptive advertising, and unsafe

products. The focus is not always on unfair practices; however,

the focus is usually on unsafe practices. Marketing ethics

relates with morals in marketing practices. Marketing complaints

STATEMENT OF ETHICS 3

warrants serious consideration because marketing is associated

with pleasing the consumer.

The definition of marketing is the process of planning and

executing the concept, promotion, pricing, and distribution of

ideas, and goods (Hair, Bush & Ortinau, 2003). Marketing provides

services to create exchanges that satisfy organizational and

individual objectives. Marketers use strategies to guide how,

when, and where product information goes prior to the

distribution for consumers. The marketer’s persuade consumers to

STATEMENT OF ETHICS 4

buy a particular brand or product (Hair, Bush & Ortinau, 2003).

The topic includes major ethical problem areas external to an

organization and considerations in formulating a marketing

strategy and implementing within an organization.

Before a company implements any marketing plan, a plan needs

devising for the entire organization. Strategies come from the

top level of the organization to provide context for planning in

each department of the company (Donnelly, 2002). Successful

profit and nonprofit organizations remain in business for years

because they offer the right product. Some companies have failed

because the management fails to recognize the changing

environments and the emphasis placed on developing business

systems that permits continuous improvement (Donnelly, 2002).

Ethics in marketing is the standards guiding marketing

actions and decisions. An individual has moral values based on

cultural development (Perreault, Cannon, & McCarthy, 2008).

Organizations develop standards for everyone in the firm to

follow when working with consumers. Every employee in the

organization must follow the same standards. A firm's good

reputation depends on all employees morally agreeing with the

STATEMENT OF ETHICS 5

ethics of the firm (Seal, 2006). Marketing ethics reflect on the

development of moral values and norms for responsible marketing

practices (Seal, 2006).

Marketing segment focuses on a target segment (Donnelly,

2002). The process of marketing segmentation analysis is broken

down into six steps. The steps are delineate firms' current

situation, consumer wants, and needs, divide markets on relevant

dimensions, develop product positioning, decide segmentation

strategy, and design marketing mix strategy (Donnelly, 2002).

Ethics provides a central element of the goals of a marketing

plan.

Forces within the Marketing Function

Unethical practices in marketing correlates to price fixing,

price differentiation, bribery, unfair selling methods, deceptive

advertising, and unsafe products (Sele, 2006). The focus is not

always on unfair practices; however, the focus is usually on

unsafe practices. Marketing complaints needs serious

consideration because marketing is associated with pleasing the

consumer (Perreault, et al., 2008).

Ethic in Pricing

STATEMENT OF ETHICS 6

Price is the value placed on a product (Perreault et al.,

2008). Companies differentiate to sell the product.

Differentiating the price may not seem fair in some areas of the

world. Some ways companies may differentiate is by using price

bidding. Price bidding is when companies bid on jobs based on

the purchase specifications provided by the consumer. This

practice can become unethical when contractors falsify records to

make the company look superior to competitors (Perreault, et al.,

2008).

The internal reference price is the price the consumer used

in the past (Perreault, et al., 2008). The marketers may inflate

the average reference price to give more value to the product,

referred as price baiting. Price baiting is using a low priced

item as a bait to attract consumers; however, when the consumer

enters the store, the employees will attempt to sell the most

expensive item. Bait pricing is unethical and exist because of

over aggressive sales people (Perreault, et al, 2008).

Deceptive Advertising

Marketing managers have to think ethical when deciding on

target segmentation (Lindsey-Mullikin, 2011). Some consumers may

STATEMENT OF ETHICS 7

not fit the goals of the company's advertisement and marketers

can fall subject to criticism. Expensive shoes that target poor

children in the inner city are an example of advertising outside

the practical scope of consumers (Lindsey-Mullikin, 2011). The

company receives criticism because the children may not

necessarily have the money for the expensive shoes. The Federal

Trade Commission (FTC) controls false adverting (Perreault, et

al., 2008). Advertising agencies and advertises equally must

share responsibility for false or misleading ads. Bargain

assurance creates policy concerns (Lindsey-Mullikin, 2011).

Retailers assure the consumers’ confidence with the best deals

and the best prices. Consumers select a price based on the

bargain assurance, which may misleads them.

The practice of bargain assurances often substitutes for

price competition (Lindsey-Mullikin, 2011). Some ongoing bargain

assurances are everyday low prices used by Wal-Mart and other

retailers. Another example is loyalty frequency, which reward

programs provided commonly by the airline industry with price

matching refunds used by retailers (Lindsey-Mullikin, 2011).

STATEMENT OF ETHICS 8

Component values are partitioned prices and bundling products

and prices (Lindsey-Mullikin, 2011). Companies also use price

comparisons, which are a) vague referent price comparisons; b)

comparison to rival prices; c) comparison with seller's own,

former, or future prices; d) percentage off claims; e) up to

claims; f) buy now claims; g) sale signs and quantity limitations

(Lindsey-Mullikin, 2011).Ongoing values must not create a sense

of urgency in the consumer. The consumers do not want to invest

in looking for lower prices elsewhere. The convenience of one

stop shopping is more attractive to consumers. Loyalty frequency

awards are a program company’s offer free or at reduced prices on

future purchases and the consumers earn points from the purchase

(Lindsey-Mullikin, 2011). The bases of loyalty programs are when

organization attempt to keep existing consumers while trying to

get new customers. Loyalty programs are more expensive if

retailers fail to reward the consumers, but the retailers must

not become guilty of false advertisement or breach of contract

(Lindsey-Mullikin, 2011). Not all pricing strategies are

unethical (Terblanche, 2005). Sometimes the consumer has an

advantage. Marketing practice use by employees becomes taint with

STATEMENT OF ETHICS 9

unnecessary and unethical practices disguised as marketing

activities. A solution to the problem of unethical practice is

marketing educators and practitioners strongly encourage the

importance of ethics in marketing (Lindsey-Mullikin, 2011).

Products in Ethics

Product Life Cycle

Business leaders change products over the life cycle

directed toward target markets at different stages (Perreault,

et. al, 2008). The product life cycle divides into four major

stages, which are market introduction, market growth, market

maturity, and sales decline. During the marketing introduction

stage, strategist brings new products to the market because of

lacking sales. During this stage, companies could lose money from

spending on the product, place, and promotion.

The market growth stage is when sales are profitable and

starts falling (Perreault, et. al, 2008). Marketers need to

create effective strategies at this stage because mistakes could

come by marketers not understanding the product life cycle.

Monopolistic competing is typical at the growth stage of creating

an effective strategy. The market maturity stage is when sales

STATEMENT OF ETHICS 10

declines and the competition become stronger (Perreault, et al.,

2008). Company profits decline because of high promotion cost,

and competitor cost cutting referred to as price sensitivity.

Price sensitivity is a factor when the competitors copy the

product and consumers pick the product based on similarity

(Perreault, et al., 2008).

The sales decline stage occurs when new products replace old

products (Perreault, et al., 2008). The strongest firms will

continue to profit because they have successfully differentiated

the products. Marketing strategist must move new products quickly

throughout the life cycle of a product if the product has unique

characteristics. Ethical consideration is involved in new

product decisions (Perreault, et al.). Many business leaders

delay the launch of important products until patents end or slow

sales on existing products. Companies’ managers face ethical

dilemmas when they stop supplying replacement parts for an

existing product. Companies receive criticism for releasing

variations of products (Perreault, et al.).

Product safety

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Product safety occurs when marketing managers screen

products for safety (Perreault, et al., 2008). The U.S. Consumer

Product Safety Act (1972) ensures a better design and better

product safety. Strategy planning becomes complicated because

consumers pay more for safer products. The employees of the

firms hold some liability for unsafe products if marketers do not

screen products correctly (Perreault, et al., 2008). Product

liability is the legal obligations a firm must pay to consumers

injured by products. Product liability is an ethical matter;

therefore, marketers must have sensitivity when screening new

products.

External Environmental forces

The external environment is the economic, technological,

political, legal, cultural, and social environment outside the

organization (Perreault, et al., 2008). The external entities

could cause a possible threat. Marketing managers must provide

strategies to overcome external threats. Competition in the

marketing industry create new threats; pure competitive,

STATEMENT OF ETHICS 12

oligopoly, monopolistic competition, and monopoly are four basic

competitive threats (Perreault, et al., 2008). Marketers use

competitive analysis by using Michael Porter's five competitive

forces. The five forces occur when a firm’s management considers

entering a new industry. The five competitive forces are the

threat of new entrants, bargaining power of suppliers, rivalry

among existing competitors, bargaining power of buyers, and the

threat of substitute products (Perreault, et al.). Identifying

potential competitors includes marketers identifying competitive

rivals and competitive barriers. Marketing's external

environment will become increasingly complex and less predictable

because of informed consumers, options available to consumers,

advances in technology, and the expanding global village

(Terblanche, 2005).

Competition and Ethics

Monopoly situations occur when one firm controls a broad

product market (Perreault, et al., 2008). Business leaders of

companies must try to differentiate themselves from other

companies by using ads, which promote the product as being better

STATEMENT OF ETHICS 13

than the competition. Marketers must focus on satisfying a

customer's need and provide value to avoid strict competition.

Competitor analysis of the marketing firm provides the

strength and weakness of competitors (Perreault, et al., 2008).

Identifying a potential competitor is the first step. Firms

marketing team usually focus on other firms that have similar

products. Competitive barriers occur because the employees of the

firms create barriers for other firms to enter the market. A

marketer also should seek information about the competition.

Using the internet is a way to search for competitor information

(Perreault, et al., 2008). Ethical issues rises when information

becomes apparent concerning competitors because people may change

jobs and give away the competitors secrets. People may hack into

the computer system and seek information about competitors.

Spying on the competitor to obtain trade secrets is illegal and

firms can receive a charged for a large sum of money (Perreault,

et al., 2008).

Slotting allowances is an ethical issue, and can have

illegal ramifications under the anti-trust laws (Bloom & Cannon,

1991). Slotting is an allowance when a grocer charges a

STATEMENT OF ETHICS 14

manufacturer a fee before putting a new product on the shelf

(Bloom & Cannon, 1991). Slotting allowance creates a barrier for

small manufacturers because they are less able to pay the fee

larger firms can pay. The entrepreneurs of smaller firms have

complained that monopolistic behavior of slotting causes price

discrimination and predatory promotion (Bloom & Cannon, 1991).

One company that challenged slotting allowances is Bigelow

Tea. The executives of Bigelow tea claimed that Lipton tea

controlled too much of the market (Bloom & Cannon 1991). Lipton

Tea gained a monopolistic advantage, expected, by Bigelow, which

increased prices for space, promotion, and advertisement.

Marketers see slotting allowances as insurance against new

product failure (Bloom & Cannon, 1991). New product failure is

high when the product is not tested which can lead to high

expenses (Bloom & Cannon, 1991).

Ethics in Technology

STATEMENT OF ETHICS 15

Technology converts resources to output using computer

applications (Perreault, et al., 2008). Marketers use technology

to promote new products and find new ways of lunching products.

The internet is an avenue where technology has rapidly increased

(Perreault, et al., 2008). Marketers can promote the product to

millions of people simultaneously. Airline manages take advantage

of pricing by auctioning seats not sold (Perreault, et al.,

2008).

Marketers have to determine what is ethical in technology

(Perreault, et. al., 2008). Many firms enter into consumers’

personal email without prior consent to sell products, which is

email tapping. Email tapping is a form of privacy invasion

(Perreault, et al., 2008). Environmental concerns can become

unethical when companies distribute products that are not safe

for the environment (Perreault, et al., 2008). An example comes

in the form of plastic containers with technological shrewdness;

however, not recyclable. Marketers have to focus on the cultural,

social, and political environment when using new technology

(Perreault, et al., 2008). Organizations exchange information

on consumers by way of the internet to develop relationships and

STATEMENT OF ETHICS 16

increase sales (Perreault, et al., 2008). Consumers gather

information by warranty applications, credit card applications,

discount affinity cards, and when consumers dial 800 numbers

(Rapp, Hill, Gaines, & Wilson, 2009). Direct marketing is when

advertisers gain access to consumers who purchase products and

take advantage of promotions. The process is an invasion of

privacy to the consumer by unsolicited advertisement (Rapp, et

al., 2009).

Ethics in the Political, Cultural, and Social Environment

Entering new products markets in other countries can develop

two types of ethical problems (Sele, 2006).One problem is the

products may not meet ethical standards for developing countries

but forbidden in Western markets. Another problem is other

countries may not have the infrastructure equipped to create many

products. For example, Cocoa Cola delayed launching in India

because of unsafe drinking water. The product reemerged in 1993

when the water was safe for consumption (Sele, 2006). Misleading

information on the packaging, counterfeit products, and

intentional aging are all ethical concerns a corporation needs to

consider entering a foreign market. The government can become

STATEMENT OF ETHICS 17

involved by imposing laws and regulation, but some governments do

not show as much concerns as other governments (Sele, 2006).

Consumers domestically and abroad can show involvement by

boycotts and sanctions (Sele, 2006).

Ethics in other Nations

Price leads to many factors of ethics in poor nations

because the poor countries cannot benefit if the prices are not

lower enough (Sele, 2006). Company executives need to consider

being socially responsible when creating a product in poor

nations (Sele, 2006). Thus, promotion should depend on culture of

the country and language of the consumers. Rather than promoting

an international identity, the companies should promote a

cultural identity. Promoting a cultural identify in advertising

creates more informed consumers (Sele, 2006).

Firms can improve meeting customers' needs in multi-

international markets by addressing the needs of low-income

consumers through cultural sensitivity, ecological sustainment,

and creating economically profitable products (Torres, 2011).

China is the second largest economy in the world with rapid

growth (Torres, 2011). When entering the Chinese market,

STATEMENT OF ETHICS 18

marketers should think globally and act locally reflecting on the

cultural environment. Understanding China's political, legal,

social, and cultural environment can help marketers create

winning strategies (Torres, 2011).

Ethics in the Legal Environment

Marketing managers need to focus on safety (Perreault, et.

al, 2008). Congress passed an antimonopoly law in 1890 to

encourage competition. The antimonopoly law received revisions to

protect the consumer. The antimonopoly laws affect the four P’s

of marketing (Perreault, et. al, 2008). The four P’s are a)

price, b) place, c) product, and d) promotion. Businesses are

subject to fines and managers can go to prison for breaking civil

laws related to consumer protection. The Consumer Protection Act

(Perreault, et al., 2008) is a law for the protection of the

consumer and safety of products.

Ethical Consideration on Formulating a Marketing Strategy

STATEMENT OF ETHICS 19

The American Marketing Association is a professional

organization that set standards through a code of ethics

(Perreault, et. al, 2008). The members of the American Marketing

Association must embrace the code of ethics. The responsibility

of the marketer is to accept responsibility for their behavior.

This philosophy means adhering to fair practices, safe product

manufacturing, engaging in fair pricing, and sharing in the

honest vision with others in the organization (Perreault, et al.,

2008).

Conclusion

Marketing is the process of planning and executing the

concepts, promotion, pricing, and distribution of ideas, and

goods (Hair, Bush & Ortinau, 2003). Marketers use strategies to

guide how, when and where product information goes before

consumers (Perreault, et al., 2008). Ethics in marketing is the

standards guiding marketing actions and decisions. The executive

of the organizations must develop standards for everyone in the

firm to follow when working with consumers. Every employee in the

organization must follow the same standards. A firm' damages its

STATEMENT OF ETHICS 20

reputation if all employees do not morally agree with the ethics

of the firm (Seal, 2006).

Firms practice many illegal strategies to sell their product

(Seal, 2006). These practices may appear illegal from the

perspective of the consumer; however, these illegal practices are

against the law and needs addressing. Laws are in place to combat

the illegal practices; however not enough marketing practitioners

and marketing managers enforce the law. Consumers should have

the knowledge on illegal marketing practices and they should

protest. Marketers should accept responsibility for their

behavior, adhere to safe marketing practices, and adhere to the

laws set forth by the American Marketing Association (Seal).

STATEMENT OF ETHICS 21

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STATEMENT OF ETHICS 22

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