Research Paper On Marketing Ethics b1915

Conceptual Framework of Corporate Marketing Ethics and its Relative Importance

Vivek Parashar Lecturer of Marketing Center for Management Development (CMD) Dr. K.N Modi Foundation Modinagar – 201204 Email id- [email protected] Mob: 08899080891

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Abstract Markets present a clash of interest between various players. There is competition for resources, customers and price etc, which breeds ground for activities that may not get ethical sanctions. A certain code of conduct, policies and practices called ethics are required to manage markets and marketing. Marketing is the heart of all businesses and all other functions depend upon the same for keeping the business moving. It is one business function that interacts the most with markets, in fact markets are meant to sell and they exist only when they sell! In such a scenario there are bound to be multiple players and a clash is inevitable. Such clash leads to malpractices like hoarding, price competitions, brand wars and use of unfair tactics, which is precisely where marketing ethics come into play. It is important when addressing marketing ethics to recognize that it should be examined from an individual, organizational, and societal perspective. Examining marketing ethics from a broader issue perspective provides foundational background that provides a complete understanding of the domain of marketing ethics This paper tries to explore the basic premise of being ethically and morally responsible, why marketing ethics are important? Ethical analysis of Marketing Mix and some other major Marketing issues, Ethical Norms and Values for Marketers and finally few CSR initiatives by few Indian/MNCs. What are Ethics (In Marketing Context)? Ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in of rights, obligations, benefits to society, fairness, or specific virtues. Ethics are a collection of principles of right conduct that shape the decisions people or organizations make. Ethical marketing is a process through which companies generate customer interest in products/services, build strong customer interest/relationships, and create value for all stakeholders by incorporating social and environmental considerations in products and promotions. Practicing ethics in marketing means deliberately applying standards of fairness, or 2

moral rights and wrongs, to marketing decision making, behavior, and practice in the organization. For marketers, ethics in the workplace refers to rules (standards, principles) governing the conduct of organizational and the consequences of marketing decisions (Ferrell, 2005). Simply put, ethics means principle or values by which marketing ought to be conducted in the market place. Logically also when there are huge number of transactions involved, a certain code or guiding principles are required to ensure that operations and industry competitiveness is fair and beneficial to the end . There are different philosophies or schools of thought for ethics in marketing, one is the political philosophy and the other is the transaction focused. Whereas one school of thought says that all marketing efforts should be focused on maximizing the shareholder value and that this is the only marketing ethics; the other believes that that marketing and market is equally responsible to consumers, other stake holders and the shareholders The tactic of targeting targeted segments, creating needs that were inexistent till now, transparency about the source of labor and environmental risks, transparency about the use of source and the ingredients, appropriate labeling, mentioning associated health risks, advertising jurisprudence and not making false promises fall within the ambit of marketing ethics. Like other ethical disciplines, marketing ethics is also looked up from various perspectives. There is the perspective of virtue, expediency and other perspectives. But like other ethics there is also the difficulty of deciding the agency responsible for ethical practice. Since there is not one single agency responsible for ethics this gives the independence to an individual or to any marketing agency to act on its own and be ethical! Marketing ethics unlike other business ethics is not only restricted to the field of marketing alone. It influences many aspects of our life and especially in developing perceptions in the minds of people and creating identities, classes and sections in the society. The visual channels of communication used for marketing sometimes lead to closure of knowledge, opinions, ideas and beliefs. It creates prejudices in the mind of people. When marketing practices depart from standards that society considers acceptable, the market process becomes less efficient— sometimes it is even interrupted

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Standards for marketing ethics guide companies in their efforts to do "the right thing." These standards help identify acceptable practices, foster internal control, and deal honestly and fairly with customers. They also ensure businesses comply with the law. Sometimes companies develop and publish their own ethical standards; other times they comply with the regulations or guidelines of their professional or industry associations. Why Marketing Ethics are Important? With the dawn of new era of globalization, companies have realized the importance and essentiality of Ethics to build long term mutual satisfying relationships with its customers, there has been greater focus on organizations' adhering to ethical values rather than simply providing products. Today most organizations are very sensitive to the needs and opinions of their customers and look for ways to protect their long-term interests. Kotler and Levy, in their book, Corporate Social Responsibility define corporate social responsibility as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources”. Some of the benefits of being socially & ethically responsible include •

Enhanced company and brand image

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Easier to attract and retain employees

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Increased market share

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Lower operating costs and

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Easier to attract investors. A socially – responsible firm will care about customers, employees, suppliers, the local community, society, and the environment.

Behaving ethically in business is widely regarded as good business practice. For the new generation of corporate leaders, optimization of profits is the key, rather than the maximization of profit.

Hence, there is a shift from ability to share holders to

social responsibility to customers and other stake holders. Few reasons behind this rational are:

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When an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services.

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Ethical abuses frequently lead to pressure (social or government) for institutions to assume greater responsibility for their actions. Since abuses do occur, some people believe that questionable business practices abound. As a result, consumer interest groups, professional associations, and self-regulatory groups exert considerable influence on marketing.

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Calls for Social Responsibility have also subjected marketing practices to a wide range of National and State Regulations designed to either protect consumer rights or to stimulate trade

There are many reasons to understand and develop the most effective approaches to manage marketing ethics. Ethical misconducts are usually resolved through a legal system. But the negative publicity associated with an event hurts the reputation of the firm more than the legal penalties. There must be a plan and infrastructure to find out what is happening and to deal with it as soon as possible rather than covering up, ignoring and assuming that no one will ever learn these ethical and legal lapses. There is need to discover, disclose, expose and resolve these issues as they occur. Businesses that effectively manage the ethics can systemically absorb, react and appropriately handle the business volatilities. Marketing Ethics – Important issues: Marketing ethics can be best understood in the light of few major marketing , it help us to address important guidelines for creating Ethical Marketing Mix: Ethical Product Product is the first and fore-most important element of marketing mix. A product is anything that can be offered to a market to satisfy need or want. The producers know more about the product than the buyer, so he should be extra careful as not to break the trust of the buyer.

Product development 5

Any new product development program should take into current ethical issues •

How will the product be produced? You need to consider the materials, energy, and labor used to produce the product to assess whether the production process has any detrimental social or environmental impact.

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How will the product be used? You need to consider whether the product can be used for any unethical purpose. You also need to consider the resources the product will consume during its lifetime, balancing performance requirements against sustainability.

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How long will the product last? Here you need to balance your need for future product sales or upgrades against concerns about built-in obsolescence. You also need to consider how customers can dispose of the product at the end of its life. Chonko (1995) has given some conditions, which should be considered while product development. •

Initiation of the Idea — whose creativity, is involved behind the idea to develop the product?

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Planning and Screening of Product Design — which criteria the firm follows -only profitability and not safety utility or keeping a balance between profitability a n d safety-welfare? This stage depends upon the status of the in-company

investments. The moment when the economics of scale are

achieved, the company shows more concern for utility and safety of the product. •

Development of the Product —if little attention is paid to the way consumer sh o u l d a c t u a l l y u s e t h e p r o d u c t s , t h e m a r k e t e r s m u s t b e r e a d y t o b e a r t h e consequences of failure of the product so the crux of marketing ethics says that extra precautions are required in product development and evaluation.

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Marketing Strategy— which kind of marketing strategy should be adopted? How much strong is the product to face the competition? Are extra efforts needed in marketing strategy to compensate some of its weak points? Or do you think you should be honest about its weak points?

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As the very success of any product depends upon its marketing strategy so it is required to answer all the above questions before adopting anyone. •

Introducing the Product in the Market —should the company go for test m a r k e t i n g ? W h a t s h o u l d b e t h e s a m p l e s i z e t h e n ? S h o u l d t h e c o m p a n y b e transparent about its policies and strategies? Are they aware of the risks?

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Decline Stage —how the company should react in product decline stage? Should they go for some fair treatment try to overcome with decline s t a g e ? D o t h e companies follow pushing strategy to push the product by devious means, once a letter product is available in the market?

Pricing Your pricing should offer value for the money, although it does not necessarily need to represent the lowest price on the market. If your price structure is based on a number of elements, make sure that customers understand the total cost they will pay. There should be no “hidden extras.” The same guidelines apply if you offer customers credit. Distribution Ethics applies to distribution in two ways: •

The physical distribution of your products, where you should seek to minimize the impact on the environment of your logistics operations;

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The accessibility of your products, where certain customer groups may be disadvantaged by your distribution policies. In financial services, for example, there is concern about the exclusion of customers through the closure of bank branches.

Packaging and labeling Packaging has become an ethical issue for marketing for a number of reasons: 7

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Packaging is a major component of domestic waste and therefore an important contribution to landfill.

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Discarded packaging is very visible as litter.

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Packaging reduction initiatives can reduce the environmental impact of a product while also saving companies money.

However, packaging also has an important role to play in protecting products and communicating the brand identity at the point of sale. You therefore have to balance the marketing benefits of packaging against the growing environmental concerns. You should also ensure that your labeling provides clear, accurate information to customers, particularly in relation to environmental issues or topics such as energy efficiency. Promotion of Product Ethical issues related to promotion can be analyzed under two headings as advertising and personal selling. ments are one of the ways of marketing which is criticised most from an ethical point of view. Unilateral advertising message, preconceived advertising messages, ments' breaking programmes are criticized (Chonko, 1995: 225-226). Whether ments are ethics or not is determined according to the extent of loss of ments to consumers. Loss can be defined in three ways: breach of the autonomy with control or manipulation, aggression to privacy, and breach of right to know (Nebenzahl/Jaffe, 1998: 806-807). Ethical problems in advertising can be analysed under two main headings: the content of advertising message and agent/customer relationships (Dunn/Barban/Krugman/Reid, 1990:78). The relationship between advertising and ethics can be analysed from the point of view of persuasive trait of advertising, deception, puffery and making promises that cannot be kept. Other ethical issues related to advertising include advertising to children, demonstrations, mock-ups, endorsements and testimonials (Drumwright, 1993: 610). Personal selling is one of the marketing fields in which there is faulty behaviour from the ethical point of view is selling. For example, in one study, it is found that unethical behavior is positively related to the performance of the salesperson. In other study, % 39 of participants feels 8

that salesperson deceive them. This grows out of ethical conflict peculiar to selling (Dubinsky/Nataraajan/ Huang, 2004:298). Selling ethics presents a morality framework which guides sales people in daily routine relation with their customers. Retailing If your business is dependent on retailers, developments in the retail sector have created a new set of ethical issues for marketers. The growing concentration of retail business means that retailers are in a position to exert considerable influence over both customers and suppliers. A major retailer could, for example, limit customer choice by only stocking certain profitable lines. It could also fail to offer value for the money by eliminating price competition. Retailers are also charged with squeezing suppliers’ costs to the extent where companies could be damaged. In an effort to offer low-priced products, retailers may be tempted to source supplies from countries where employment conditions are poor. Are you marketing ethically? Marketing practitioners must recognize that they not only serve their enterprises but also act as stewards of society in creating facilitating and executing the efficient and effective transactions that are part of the greater economy Marketers should embrace the highest ethical norms of practicing professionals and the ethical values implied by their responsibility toward stakeholders. Following are few Ground rules that will help you to reiterate your Marketing Program: •

Marketers must accept responsibility for the consequences of their activities.

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Honesty, Integrity and Quality are far more important than quick profits

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Communications made about offered products and services are not deceptive - products and services are safe and fit for intended uses.

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Conduct your business so as to build long term loyalty

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Marketers must embrace, communicate and practice the fundamental ethical values

Social Responsibility of business in India by Indian Companies/MNCs: In a global CSR study undertaken in 7 countries (viz. India, South Korea, Thailand, Singapore, Malaysia, The Philippines and Indonesia) by the U.K. based International Centre for CSR in 2003, India has been ranked second in the list. This ideally shows the value that is important to customers in India. Bharat Petroleum and Maruti Udyog have been ranked as the best companies in the country. The next comes in the list are Tata Motors and Hero Honda. Canara Bank, Indal, Gujarat Ambuja and Wipro are involved in community development work of building roads, running schools and hospitals. ACC has been rendering social service for over Five decades. They are setting up schools, health centers, agro-based industries and improving the quality of rural life. BHEL is actively involved in the Welfare of the surrounding communities is helping the organization to earn good will of the local people BHEL is also providing drinking water facilities, construction of roads and culverts, provision of health facilities, educational facilities, and so on companies like ONGCs are encouraging sports by placing good players on their pay rolls. TISCO, TELCO and HINDALCO won the award for excelling in CSR, tly given by FICCI and Business world for the 2003. ONGC has also committed resources by adopting a few villages to implement then President Dr. Abdul Kalam’s idea of PURA (Provision of Urban Amenities in Rural Areas). NTPC has established a trust to work for the cause of the physically challenged people. Similarly in the private sectors like Infosys, Wipro and Reliance are believed to be most socially responsible corporations. Today, India can be legitimately proud to have had the second largest number of companies from any country subscribing to the Global Compact. Several public sector companies have ed together to form the Global Compact Society of India. ITC has been afforesting private degraded land to augment the supply of raw material for its paper factory.

Similarly, Hindustan Lever which requires good quality water for the

manufacture of its food products has been improving the quality of water in many communities. Companies like Cadbury India, Glaxo and Richardson Hindustan are helping farmers to grow crops which serve as raw materials for them. Lipton in Eath district of Uttar Pradesh has started veterinary hospitals in the region from where it buys milk. British Gas (which sells compressed natural gas to India) has started teaching unemployed youngsters how to become mechanics for 10

gas-based auto-rickshaws in Delhi. In some other organizations the approach has been to take up such philanthropic activities in which they can make a difference. Coca – Cola’s footprint in India was significant as well. The Company employed 7000 citizens and believed that for every direct job, 30 – 40 more were created in the supply chain. Like its parent, Coke India’s Corporate Social Responsibility (CSR) initiatives were both community and environment – focused. Priorities included education, where primary education projects had been set up to benefit children in slums and villages, water conservation, where the Company ed community – based rainwater harvesting projects to restore water levels and promote conservation education, and health. Pepsi Cola is also helping in rural areas in their economic development. It further offered to transfer food-processing, packaging, and water-treatment technology to India. Pepsi’s bundle of benefits won four Ps for entering a market, Pepsi added two additional Ps, namely, politics and public opinion. Similarly almost all MNCs like Microsoft, Mc Donald, Nokia, Unilever, ITC are also adopting social responsibility of business in order to have sustainable market development and growth not only in their countries but also in the host countries.

Conclusion In conventional marketing theory, customers are primarily influenced by product, price, availability, and customer service. However, with growing concerns about sustainability, customers are increasingly influenced by the company policies behind products and brands. They understand the social and environmental impacts of different types of production process, and the degree of social responsibility with which companies treat their workers, invest their money, or conduct their affairs. Industry experience indicates that customers are increasingly likely to prefer products from a company that they perceive as having a good ethical reputation Companies need to evaluate whether they are truly practicing ethical and socially responsible marketing. Business success and continually satisfying the customer and other stakeholders are closely tied to adoption and implementation of high standards of business and marketing 11

conduct.

The most ired companies in the world abide by a code of serving people’s

interests, not only their own. The following are the suggestions that the society must use: • The law to define, as clearly as possible, those practices that is illegal, anti-social and

Unethical. • Companies must develop a written code of ethics, build a company tradition of ethical

behavior • Individual marketers must practice a social conscience in their specific dealings with

customers and various stakeholders. Companies that are able to innovate new solutions and values in a socially responsible way are the most likely to succeed. Good marketing is about satisfying and developing a long-term relationship with our customers. Caring about your customers not only results in profits (or achieving your organization’s objectives if an organization is not-for-profit), it is the ethical thing to do. Deceiving customers may help a firm’s profits in the short-run, but is not the way to build a successful business. A firm has to care about all stakeholders: customers, employees, suppliers and distributors, local communities in which they do business, society, and the environment. “It is my belief that good marketing is ethical marketing”

References •

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American Marketing Association. (1998). American Marketing Association Code of Ethics. New York: Author.

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http://www.scu.edu/ethics/practicing/decision/whatisethics.htm

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The General Theory of Marketing Ethics: A Revision and Three Questions - Shelby D. Hunt and Scott J. Vitell