Chapter Three

Marketing Ethics, Regulations,

and Social Responsibility

Chapter Objectives

• Identify ethical issues in marketing.

• Discuss legislation and regulatory agencies that impact marketing.

• Discuss the social responsibility of business firms.

Marketing Shapes Inappropriate Marketing Shapes Inappropriate Cultural ValuesCultural Values

• Companies aggressively market their products,

even if they are harmful to individuals and/or

society.

• Does marketing of products shape values or does

marketing respond to current values?

Ethical Issues in Marketing

This ad promises little This ad promises little girls and their parents girls and their parents that their girl will end up that their girl will end up as attractive as Britney as attractive as Britney Spears if they drink milk.Spears if they drink milk.

Source: Courtesy of Bozell Worldwide, Inc. as agent for

the National Fluid Milk Processor Promotion Board.

• $12 billion a year is spent on marketing products to children ages 4 to 12.

• 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.

Is this advertisement Is this advertisement merely responding to merely responding to sexual attitudes in society?sexual attitudes in society?

Source: Courtesy of Guess and Creative Director Paul Marciano.

• 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?

Does Marketing Overemphasize Does Marketing Overemphasize Materialism and Cause People to Materialism and Cause People to Buy More Than They Can AffordBuy More Than They Can Afford

• Do consumers overspend?

• Does easy credit contribute to overspending?

• Is marketing responding to desires of consumers or promoting

overspending?

• Does marketing capitalize on human weakness or does it respond to

human desires?

• Does marketing create materialistic desires or

does marketing respond to materialistic desires?

• Is materialism good or bad?

Marketing Uses Deceptive Marketing Uses Deceptive and Misleading Techniquesand Misleading Techniques

• Can salespeople be trusted?

• Is it okay to use bribes and gifts in selling to business customers?

If marketers do not use bribes at home can they do it when they

take their products internationally?

• Bait and switch

• Deceptive Advertising* (FTC Guidelines; False Advertising)

Blockbuster sued over late fees

• Channel One Advertising• Research results

What are the ethical issues involved What are the ethical issues involved

when marketing to youth?when marketing to youth?

Pros Cons

• Huge market ( 170 )over $ billion a year • Potential creation of

brand loyalty

• Youth are adventurous. • Youth can change tastes

over night.

Marketing Increases the Marketing Increases the Prices of Goods and Prices of Goods and ServicesServices

• Marketing creates intangible benefits.

• Marketing provides information.

• Companies cannot reduce marketing

expenditures unless competitors do.

• Marketing contributes to GDP.

Yes, but ….

From www.coach.com

Marketing Violates Marketing Violates Consumer Rights to Consumer Rights to PrivacyPrivacy

• Why do marketers want

information about consumers?

• What information do marketers

want?

• How should this information be

gathered?

• How should this information be

used?

Ethical/Unethical Decisions

EthicallyQuestionable

Issue

-Personal background-Experience-Social influences-Job-related influences

Individual

AlternativesAlternatives

DecisionDecisionConsequencesConsequencesMorals: 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.

Marketing Regulations • Sherman Antitrust Act—1890• Federal Food and Drug Act—1906• Clayton Act—1914• Federal Trade Commission Act—

1914• Robinson-Patman Act—1936• Wheeler-Lea Amendment—1938• Lanham Act—1946• Fair Packaging and Labeling Act—

1966• Consumer Product Safety Act—1972• Hart-Scott-Rodino Act—1976• Children’s Television Act—1990

FreeFreeTradeTrade

OpenOpenCompetitionCompetition

Federal Agencies Regulating Federal Agencies Regulating Marketing PracticeMarketing Practice

• Food and Drug Administration (FDA)• Federal Communications Commission (FCC)• U.S. Postal Service (USPS)• Consumer Product Safety Commission (CPSC)• Federal Trade Commission (FTC)

Deceptive and Misleading

Communication• Communication is deceptive or

misleading if a substantial number of consumers are left with false impression or if the communication involves misrepresentation.

• The misrepresentation induces people to make a purchase.

• Note: Puffery is not considered deceptive or misleading.

Complaint Procedure

• Complaint filed with FTC• Investigation initially

confidential• Consent order• Administrative complaint• Cease and desist order

•Court of Appeals

• Corrective advertising• Requires substantiation

of claims• Trade regulation rulings

Procedures

Industry RegulationsIndustry Regulations

• Better Business Bureau (BBB): – Keeps records and summaries of

complaints filed against individual companies.

– National Advertising Division (NAD)– National Advertising Review Board (NARB)

Social Responsibility

• 83% of Americans indicate that it is important for companies to support the needs of society through:– Environmentally safe products– Controlling emissions and wastes– Becoming involved in meeting societal needs,

e.g., donations, community sponsoring, etc.

Cause-Related Cause-Related MarketingMarketing

• Involves a long-term partnership

• Is integrated into the corporation’s marketing plan

• Both parties must benefit.

• Companies need to show a genuine effort.

Green MarketingGreen 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

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