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Chapter 10 Marketing and Advertising Understanding Business Ethics Stanwick and Stanwick 2nd Edition Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 1 There is Now an App for Chauvinism • On October 9, 2009, an energy drink by Pepsi called AMP began controversy and buzz in the advertising industry. – To establish a “cutting edge” marketing focus, Pepsi decided to develop an App called “amp before you score”. – This app was designed to “help” men pick up women based on certain stereotypes. – On October 22, 2009, Pepsi announced that the app was removed due to the criticism that the app supported stereotyping women. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. Alternative Views of the Foundation of Marketing and Advertising 2 • Marketing enhances product messages by attempting to strike a chord with the inner emotions of the consumer. – Therefore, an effective alternative method to describe a firm’s marketing strategy would be to apply the seven deadly sins • which are lust, gluttony, greed, sloth, wrath, envy, and pride. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 3 Green Marketing • It was assumed that since consumers are focusing on green issues, firms that promote their pro-active commitment to environmental ideals would be able to enhance their competitive advantage in the marketplace. – This resulted in the initial “green selling” approach • A post hoc evaluation and promotion of environmental features of existing products. • This was a short term focus and consumers became suspicious of the motives of the firms. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 4 Green Marketing • One reason green marketing campaigns have failed in the past is based on the firm’s ineffective targeting to the correct customers. – Consumers can be classified into five different categories. (percentages represent U.S. consumers) • True blue green – 9% • Greenback green – 6% • Sprouts – 31% • Grousers – 19% • Basic browns – 33% Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 5 Green Marketing • Alternative viewpoint is to focus on the concept of green purchases and not green consumers. • Compromise and confidence are two critical factors in determining the level of effectiveness in green products. • Four categories of purchases based on compromise and confidence Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. Green Marketing • Four categories of purchases – Win-win purchases – identified as having a clear and transparent environmental benefit with little compromise needed by the consumer – Feelgood purchases – those in which there is a significant level of compromise by the consumer in the purchasing of the product. – Why bother? Purchases – those products in which the consumer must accept a high level of compromise but has little confidence that his or her purchase will have a material environmental impact. – Why not? Purchases – have a low level of compromise and confidence Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 6 Green Marketing • Different levels of commitment described as “enviro-preneurial” marketing strategies. – Tactical level – this level focuses on the marketing and production managers for their strategic focus related to environmental issues. – Quasi-strategic level – this level focuses on how addressing environmental issues can enhance the competitive advantage of the firm. – Strategic level – this level refers to the commitment by the top level executives of the firm to develop and implement a proactive environmental marketing strategy. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 7 8 The Role of Relationship Marketing • Relationship marketing focuses on the relationship between the customers and the firm from a commitment perspective. • Relationship marketing needs to be about a two way relationship in order to ensure the consumers that their privacy rights have been protected. • The two way relationship can facilitate the development and execution of the customer relationship management model. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. The Role of Relationship Marketing • Customer Relationship Management Model – Step 1 – the development of a database which is the foundation of the model – Step 2 – analysis of the consumer data – Step 3 – selection of the customers – Step 4 – targeting the customers – Step 5 – development of relationship marketing – Step 6 – addressing the privacy issues related to the customer relationship management model – Step 7 - metrics Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 9 The Role of Consumer Boycotts • A consumer boycott can be defined as “an attempt by one or more parties to achieve certain objectives by urging individual customers to refrain from making selected purchases in the marketplace.” – The action to boycott a firm’s business is an example where the stakeholders have a direct impact on the financial performance of the firm. – Boycotts usually occur based on one event which “triggers” the motivation of the consumers. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 10 The Role of Consumer Boycotts • Four factors that are able to predict whether a consumer would participate in a boycott. 1. The desire to make a difference 2. The scope of self-enhancement 3. Counterarguments that inhibit boycotting 4. Cost to the boycotter of constrained consumption Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 11 The Ethical Challenges of Product Recalls • Reasons for product recalls 1. A design flaw in the product 2. A production defect 3. When new scientific information is released to the public which links dangers in the product not previously known 4. Accidental contamination of the product during the manufacturing process 5. Product tampering 6. Unforeseen misuse of the product by consumers 7. Product’s failure to meet the safety standards established by a governmental regulatory agency Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 12 The Ethical Challenges of Product Recalls • The Steps of a Recall 1. Policy and Planning – in this stage, management sets the tone for the recall 2. Product Development – before a recall takes place, the firm should have in place safeguards to ensure a recall is not needed 3. Communications – before the recall starts, the firm must identify who the critical stakeholders are who would be impacted by a recall 4. Logistics and Information Systems – before a recall takes place, the firm must establish a traceability system for the product as well as provide quick information of product defects Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 13 The Ethical Challenges of Product Recalls • Financial Costs of a Recall 1. Investigation costs 2. Communication costs 3. Financial incentives for consumers to try product again 4. Physical distribution costs 5. Potential engineering costs 6. Labor costs involved through all parts of the recall process 7. Costs to legally dispose of the recalled products 8. Legal costs 9. Cost of lost sales and profitability due to decreased demand 10. Potential costs to pay the government and fines and penalties Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 14 Ethics of Purchasing and Sales • Unethical activities between purchasers and suppliers are based on three concepts 1. Inter-organizational power – who has the bargaining power between the purchaser and the supplier 2. Inter-organizational relationships – concern the long term focus of the purchasing firms and the level of satisfaction between the purchaser and the supplier 3. Interpersonal relational issues – refer to the personal dynamics between the purchasing individual and the supplier salesperson. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 15 False and Misleading Advertising • In 1938, the Federal Trade Commission prohibited the use of any false advertising • Examples of false or misleading advertising – Going out of business sale – Manipulation of product size or weight – Use of filler – Use of vague or undefinable terms – Misleading pictures and/or illustrations – Bait and switch Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 16 Advertising to Children • In the early 1970s, government agencies such as the Federal Trade Commission have focused on the negative impact advertising has on children • Area of focus by government agencies to help protect children from advertising effects – Sugary cereals – Children’s educational television rules – Fast food strategies Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 17 The Sydney Principles • The International Obesity Taskforce has established guiding principles in order to attempt to protect children against the negative impact of food and beverage advertising • Based on seven specific principles that range from supporting the rights of children to the evaluation, monitoring, and enforcement of all government regulations Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 18 The Sydney Principles – Principle 1 – support the rights of children – Principle 2 – the protection of the rights of children should be the responsibility of various stakeholders – Principle 3 – be statutory in protecting children – Principle 4 – establish regulations that cover a broad array of commercial targeting including all types of medium – Principle 5 – ensure that there are certain venues in which no product advertising is allowed – Principle 6 – the establishment of international agreements to ensure that negative commercial advertising does not “link” from one neighboring county to another country – Principle 7 – all government regulations need to be evaluated, monitored, and enforced Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc. 19 20 Questions for Thought 1. Why do you think Pepsi decided to release the Amp App in the opening vignette? 2. Why is there such as concern over the protection of children through marketing and advertising? 3. Is green marketing just a fad? Explain your view. Understanding Business Ethics 2nd Edition © 2014 SAGE Publications, Inc.