Transcript Chapter 4

CHAPTER 4
Ethics and
Social
Responsibility
in Marketing
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-1
After reading this chapter you should
be able to:
• Appreciate the nature and significance of ethics
in marketing.
• Understand the differences between legal and
ethical behaviour in marketing.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-2
After reading this chapter you should
be able to:
• Identify factors that influence ethical and
unethical marketing decisions.
• Distinguish among the different concepts of
ethics and social responsibility.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-3
Nature and Significance of Marketing
Ethics
• Ethics are the moral principles and values that
govern the actions and decisions of an individual or
group.
• They serve as guidelines on how to act rightly and
justly when faced with moral dilemmas.
• But how do know what is right and wrong ethically?
• A good place to start is the difference between what
is legally right and is right.
• The text on p.86 offers some good examples of
ethical dilemmas in marketing.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-4
Current Perceptions of Ethical
Behaviour
• Some companies now have an ethical code that all
employees must abide by.
• Some companies don’t though and this is where
ethical issues can arise between an organisation and
its stakeholders.
• Some industries, such as the car industry or oil
industry, are seen by many in society to be industries
where ethics has been forgotten in the pursuit of
markets and customers.
• However as ethics is of increased importance to
consumers companies in all industries are making
strong efforts to improve their level of perceived
ethical business practices with stakeholders.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-5
Concept Check
1. What are ethics?
2. What are three possible reasons for the present
state of ethical conduct in business?
1. Ethics are the moral principles and values that
govern the actions and decisions of an individual or
group and serve as guidelines on how to act rightly
and justly when faced with moral dilemmas.
2. (1) Pressure on business people to make decisions in
a society with diverse values; (2) Business decisions
being judged by groups with different values and
interests; and (3) Ethical business conduct may have
declined.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-6
Societal Culture and Norms
• Culture refers to the set of values, ideas and attitudes that
are learned and shared among the members of a group.
• Culture serves as a socialising force that determines what is
considered to be morally right or wrong within a group.
• It is therefore a powerful force on companies and their ethical
behaviour.
• Just because it is okay to market one product a certain way
in one country does not make that correct to market it that
way in another.
• In some countries piracy of movies, music and books is
widespread, yet in others to commit this crime would result in
years in jail.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-7
Business Culture and Industry
Practices
• Business Culture consists of the effective rules of the
game, the boundaries between competitive and
unethical behaviour.
• Just as culture varies between country and country,
business culture can vary tremendously between
industry and industry.
• For this reason ethics in some industries is nearly
unheard of but in others if a business were to conduct
itself in an unethical way it would soon find itself out
of business.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-8
Ethics of Exchange
• As you already know the exchange process underlies
every transaction in marketing.
• However, in this exchange there is usually an
unequal relationship between one party and the
other.
• As a individual consumer you have little power over
the companies you deal with.
• This can lead some companies to exploit this
relationship.
• However the, Trade Practices Act and the ACCC
which enforces it, do protect all consumers in all
transactions.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4-9
Ethics of Competition
• Business culture also influences ethics when dealing
with competition from other businesses.
• The two most common forms of unethical behaviour
in competition are:
– Economic espionage and;
– Bribery
• Economic espionage involves gathering information,
usually illegally, on competitors.
• Bribery is of course paying someone money for them
to do something for you they shouldn’t. An example
might be paying a purchasing officer to buy your
products over that of another company.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 10
Corporate Culture and Expectations
• A third influence on ethical practices is corporate
culture.
• Corporate culture reflects the shared values, beliefs
and purpose of employees that affect the individual and
group behaviour.
• The corporate culture is best symbolised by how the
staff dress, the working environment and how
employees are compensated.
• Many companies also have a code of ethics for
ensuring that their staff always do the right thing
ethically.
• The ethical behaviour of top management and coworkers is critical in ensuring that all business practices
remain ethical.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 11
Personal Moral Philosophy and Ethical
Behaviour
• Ethical choices are ultimately based on the personal
moral philosophy of the decision maker concerned.
• Moral philosophy is learned through the process of
socialisation with friends and family and by formal
education.
• Two prominent personal moral philosophies have
direct bearing on market practice:
– Moral idealism. This is a moral philosophy that considers
certain individual rights or duties as universal, regardless of
the outcome.
– Utilitarianism. This is a moral philosophy that focuses on the
‘the greatest good for the greatest number’.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 12
Concept Check
1. Give examples of three different types of unethical
marketing behaviour.
2. What is meant by moral idealism?
1. Animal testing, marketing fast food to children and
cold calling.
2. Moral idealism is a moral philosophy that considers
certain individual rights or duties as universal,
regardless of the outcome. This philosophy can be
traced back to the Greek philosopher Socrates who
addressed the problem of ‘how we ought to live’.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 13
Understanding Social Responsibility in
Marketing
• The societal marketing concept discussed in chapter
1 stresses marketing’s social responsibility by not
only for consumer’s needs but also providing for
society’s welfare.
• Social responsibility is the idea that organisations are
part of a larger society and are accountable to that
society for their actions.
• The three main concepts of social responsibility are:
– Profit responsibility
– Stakeholder responsibility
– Societal responsibility
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 14
Three Concepts of Social
Responsibility
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PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 15
Profit Responsibility
•
•
•
•
Profit responsibility holds that
companies have a simple
duty— to maximise profits for
their owners or shareholders.
Nonetheless, there are
concerns about profiteering.
Profiteering occurs when a
company makes excessive
profits, usually by taking
advantage of a shortage of
supply to charge extremely high
prices.
Petrol companies in Australia
are often accused of profiteering
in holiday times.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 16
Stakeholder Responsibility
• Frequent criticism of the
profit view has led to a
broader concept of social
responsibility.
• Stakeholder responsibility
focuses on the obligations
an organisation has to those
who can affect achievement
of its objectives.
• These constituencies include
customers, employees,
suppliers and distributors.
• Starbucks Coffee is one
company that believes in
stakeholder responsibility.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 17
Societal Responsibility
• An even broader concept of social responsibility has emerged in
recent years.
• Societal responsibility refers to obligations that organisations
have to (1) preserve the ecological environment and (2) serve
the general public.
• Companies have responded to this concern through what is
known as green marketing —marketing efforts to produce,
promote and reclaim environmentally sensitive products.
• Socially responsible efforts on behalf of the general public are
becoming more common.
• A formal practice is cause-related marketing, which occurs when
the charitable contributions of a firm are tied directly to the
customer revenues produced through the promotion of one of its
products.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 18
The Social Audit
•
•
•
Converting socially responsible ideas into actions involves
careful planning and monitoring of programs.
Many companies develop, implement and evaluate their social
responsibility efforts by means of a social audit, which is a
systematic assessment of a firm’s objectives, strategies and
performance in terms of social responsibility.
A social audit consists of five steps:
1. Recognition of a firm’s social expectations and the rationale for
engaging in social responsibility endeavours.
2. Identification of social responsibility causes or programs consistent
with the company’s mission.
3. Determination of organisational objectives and priorities for
programs and activities it will undertake.
4. Specification of the type and amount of resources necessary to
achieve social responsibility objectives.
5. Evaluation of social responsibility programs and activities
undertaken and assessment of future involvement.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 19
Turning the Table: Consumer Ethics
and Social Responsibility
• Consumers also have an obligation to act ethically
and responsibly in the exchange process and in the
use of products.
• Unfortunately, consumer behaviour is somewhat
inconsistent.
• Unethical practices of consumers are a serious
concern to marketers.
• These practices include filing warranty claims after
the claim period, making fraudulent returns of
merchandise, providing inaccurate information on
credit applications, tampering with electricity and gas
meters, recording copyrighted music and DVDs, and
submitting fraudulent insurance claims.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 20
Ronald McDonald House for Children
Should marketing and social responsibility
programs be integrated?
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 21
Concept Check
1. Marketing efforts to produce, promote and reclaim
environmentally sensitive products are called
__________________.
2. What is a social audit?
1. Green Marketing
2. A social audit is a systematic assessment of a firm’s
objectives, strategies, and performance in terms of
social responsibility.
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 22
Finish
• Questions?
Copyright  2008 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing: The Core by Kerin et al
Slides prepared by Andrew Hughes, Australian National University
4 - 23