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ChapterEight:EthicsandMarketingCopyright?2021McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.ChapterObjectives1Afterreadingthischapter,youwillbeableto:Applyanethicalframeworktomarketingissues.Describethethreekeyconcernsofethicalanalysisofmarketingissues.Describetwointerpretationsof"responsibility"andapplythemtothetopicofproductsafety.Explaincontractualstandardsforestablishingbusiness’sresponsibilitiesforsafeproducts.Articulatethetortstandardsforestablishingbusiness’sresponsibilitiesforsafeproducts.Analyzetheethicalargumentsforandagainststrictproductliability.Discusshowtoevaluatebothethicalandunethicalmeansbywhichtoinfluencepeoplethroughadvertising.ChapterObjectives2Afterreadingthischapter,youwillbeableto:Explaintheethicaljustificationforadvertising.Tracedebatesaboutadvertising’sinfluenceoncustomerautonomy.Distinguishethicalfromunethicaltargetmarketing,usingmarketingtovulnerablepopulationsasanexample.Discussbusiness’sresponsibilitiesfortheactivitiesofitssupplychain.EthicsandMarketing1Amagazineissimplyadevicetoinducepeopletoreadadvertising. JamesCollinsIntroduction1

Somebelievetheverypurposeofbusinessisfoundwithinthemarketingfunction.TheAmericanMarketingAssociationdefinesmarketinginawaythatechoesthestakeholdermodelofCSRinChapter5.AccordingtotheAMA,marketingis"anorganizationalfunctionandasetofprocessesforcreating,communicating,anddeliveringvaluetocustomersandformanagingcustomerrelationshipsinwaysthatbenefittheorganizationanditsstakeholders."Anexchangebetweenasellerandabuyeriscentraltothemarketeconomyandthecoreideabehindmarketing.Marketingethicsexaminestheresponsibilitiesassociatedwithbringingaproducttomarket,promotingittobuyers,andexchangingitwiththem.Introduction2Aproducer'sjobistofirstconsiderwho,ifanyone,islikelytobeinterestedinpurchasinghisorherproduct,orwhocanbeinfluencedtowanttopurchaseit.Theproductmightthenberedesignedorchangedbasedonmarketresearch.Oncetheproductisreadyformarket,theproducermustdecideonapricethatwillbemutuallyacceptable.Theproducermightalsoconsideradvertisingtheproducttoattractnewpotentialbuyersusingsalespersons.Theproducermightconductmarketresearchtogatherinformationandusethatinformationinproduction,pricing,promotion,andplacementdecisions.Introduction3Allthesefactorsareelementsofmarketing.What,how,why,andunderwhatconditionissomethingproduced?Whatpriceisacceptable,reasonable,fair?Howcantheproductbepromotedtosupport,enhance,andmaintainsales?Where,when,andunderwhatconditionshouldtheproductbeplacedinthemarketplace?Thesefourgeneralcategories—product,price,promotion,placement—aresometimesreferredtoasthe"FourPs"ofmarketing.Eachoftheseelementsraisesimportantethicalquestions.EthicalIssuesinMarketing:AFramework1Marketexchangeisprimafacieethicallylegitimatebecauseitinvolves:Respectforautonomy.Mutualbenefit.Thisethicaljudgmentisconditionalbecause:Thetransactionmustbetrulyvoluntary.Informedconsentisneeded.Benefitsmightnotoccur.Othervaluesmightconflict. EthicalIssuesinMarketing:AFramework2Thesefourconditionsimplythefollowingfourquestions,eachofwhichrequiresconsideringseveralfactors:Isexchange"voluntary"?RealalternativechoicesmaynotbeavailableAnxietyandstressinsomepurchasingsituationsPrice-fixing,monopolies,pricegouging,etc.Targetedandvulnerableconsumers.Isconsenttoexchangereally“informed”?Lackofinformation.Deception.Complicatedinformation. EthicalIssuesinMarketing:AFramework3Arepeopletrulybenefited?Impulsebuying,"affluenza,"consumerism.Injuries,unsafeproducts“Contrived”wants.CompetingvaluesJustice—example,"redlining"mortgagesMarketfailures(externalities).Marketing:AnEthicalFramework1Asimplesituationinwhichtwopartiesfreelyagreetoanexchangeisprimafacieethicallylegitimate.Theremustberespectforautonomyandamutualbenefit.Inordertoassessprimafacie,conditionsmustbemet.Theagreementmusthaveresultedfromaninformedandvoluntaryconsent,andTherewasnofraud,deception,orcoercioninvolved.Whentheseconditionsareviolated,autonomyisnotrespectedandmutualbenefitisnotattained.Evenwhensuchconditionsaremet,othervaluesmayoverridethefreedomofindividualstocontractformutuallybeneficialpurposes.Freedomofdrugdealerstopursuemutuallyagreeableendsisoverriddenbysociety’sconcerntomaintainlawandorderMarketing:AnEthicalFramework2Keepthreeissuesinmindwhenapproachinganyethicalissueinmarketing.Theseissuesare:Thedegreetowhichindividualsfreelyparticipateinanexchange.Thebenefitsandcostsofeachexchange.Andothervaluesaffectedbytheexchange.Marketing:AnEthicalFramework3Itisnotalwayseasytodetermineifsomeoneisbeingtreatedwithrespectinmarketingsituations.First,thepersonmustfreelyconsenttothetransaction.Themoreconsumersneedaproduct,thelessfreetheyaretochooseandthemoreprotectiontheydeservewithinthemarketplace.Practicesaimedatvulnerablepopulationsraisequestionsofvoluntariness.Second,consentmustbenotonlyvoluntary,butalsoinformed.Thecomplexityofmanyconsumerproductsandservicescanmeanthatconsumersmaynotfullyunderstandwhattheyarepurchasing.Manypurchasesdonotresultinactualbenefitduetoimpulsebuyingorunsafeproducts.Third,decideifothervaluesareaffected.Primarysocialvaluesoffairness,justice,health,andsafetyaresomeofthevaluesthatcanbejeopardizedbysomemarketingpractices.ResponsibilityforProducts:SafetyandLiabilityIngeneral,businesshasanethicalresponsibilitytodesign,manufacture,andpromoteitsproductsinwaysthatavoidcausingharmtoconsumers.Responsibilitymaymeanthecauseofsomethingandinanothersenseitinvolvesaccountability.Bothlawandethicsrelyonthiswhenevaluatingcasesinwhichproductsorservicescauseharminthemarketplace.Contractlaw,andtheethicsimplicitincontracts,isonelegalapproachtoproductsafety.Tortlawprovidesasecondlegalapproachtoproductsafety.Athirdlegaldoctrine,strictliability,addressesquestionsoflegalandethicalresponsibilityforcasesinwhichnooneisatfault,butsomeonehasbeenharmed.ContractualStandardsforProductSafetyCaveatemptorapproachAssumesthateverypurchaseinvolvestheinformedconsentofthebuyerand,therefore,itisethicallylegitimate.Business’sonlylegalandethicalresponsibilityistoprovideagoodorserviceatanagreed-uponprice.Placesethicalconstraintsonthesellernottocoerce,defraud,ordeceivebuyers.ImpliedwarrantyofmerchantabilityInsellingaproduct,abusinessimplicitlyassuresitissuitableforitspurpose.Thisstandardshiftstheburdenofprooffromtheconsumertotheproducer.Manybusinesseswillissueadisclaimerofliabilityorofferanexpressedandlimitedwarranty.TortStandardsforProductSafety1Ethicsofcontractlawwouldnotapplytothemajorityofbusinesssituationsinwhichconsumersdonothaveacontractualrelationwiththebusinessthatcreatedormanufacturedtheproduct.Negligence,aconceptfromtheareaoflawknownastorts,providesasecondavenueforconsumerstoholdproducersresponsiblefortheirproducts.Negligence:Unintentionalfailuretoexercisereasonablecarenottoharmotherpeople.Consideredtobeonestepbelow"recklessdisregard"andtwostepsbelowintentionalharm.TortStandardsforProductSafety2Thedistinctionbetweencontractlawandtortlawcallsattentiontotwodifferentwaystounderstandethicalduties.Underacontractmodel,theonlydutiesapersonowesarethoseexplicitlypromisedtoanotherparty.Tortlawholdsthatwealloweotherpeoplecertaingeneralduties,evenifwehavenotexplicitlyandvoluntarilyassumedthem.Negligenceisacentralcomponentoftortlaw.TortStandardsforProductSafety3Whatduties,exactly,doproducersowetoconsumers?Theanswerfallsalongacontinuum.Oneendofthecontinuum:Producersoweonlythosethingspromisedtotheconsumerinthesalesagreement.Strictliability:Producersowecompensationtoconsumersforanyandallharmscausedbytheirproducts.Themiddleofthecontinuumholdsmanyinterpretationsofnegligence.Negligencecanbeafailuretoexercisereasonablecareorordinaryvigilanceresultingininjury.Negligenceinvolvestheabilitytoforeseeconsequencesandfailingtoavoidharmfulones.Thestandardsofwhatcanbeforeseenraisesethicalchallenges.TortStandardsforProductSafety4Onestandardwouldholdpeopleliableonlyforthoseharmstheyactuallyforesawoccurring.Apreferablestandardwouldrequirepeopletoavoidharmsthattheyshouldhavethoughtabout."Reasonableperson"standardisusedmostofteninlegalcases.Thistoocanbeinterpretedinmanyways.Manyfactorsleadpeopletointerpretthestandardasthoughtful,reflective,andjudiciousdecisionmaking.StrictProductLiabilityThenegligencestandardoftortlawfocusesonthesenseofresponsibilityinvolvingsomeonebeingatfault.Buttherearecasesinwhichconsumersareinjuredinwhichnonegligencewasinvolved.Butthequestionofaccountabilityremains.Whoshouldpayfordamageswhennooneisatfault?Thelegaldoctrineofstrictproductliabilityholdsmanufacturersaccountableinsuchcases,asitraisesuniqueethicalquestions.EthicsandMarketing2Ifyoumakecustomersunhappyinthephysicalworld,theymighteachtell6friends.IfyoumakecustomersunhappyontheInternet,theycaneachtell6,000friends.JeffBezos,AmazonCEOEthicalDebatesonProductLiability1WithintheUnitedStates,callstoreformproductliabilitylawsarecommon—butthecriticismisnotuniversal.TheEuropeanUnionfollowsastrictliabilitystandards.U.S.criticssayliabilitystandardsandresultinginsurancecostshaveimposedsignificantcostsoncontemporarybusiness.Singlingoutthestrictproductliabilitystandardasespeciallyunfair.Therationaleusedtojustifystrictproductliabilityisproblematic.Defenderssaybyholdingbusinessstrictlyliable,itcreatesincentiveforbusinesstoproducesafergoodsandservices.Also,holdingbusinessliableallocatesthecoststothepartybestabletobearthefinancialburden.EthicalDebatesonProductLiability2TheIncentiveArgumentThisseemstomisunderstandthenatureofstrictliability.Holdingsomeoneaccountableforharmprovidesincentiveonlyifthepersoncouldhavedoneotherwise.Thismeanstheharmwasforeseeableandfailuretoactisnegligent.Holdingbusinessliableforunforeseeableharmsdoesnotprovideanincentivetobetterprotectfutureconsumers.TheFinancialBurdenArgumentThisrationalealsosuffersaseriousdefect.Thisargumentclaimsthatbusinessisbestabletopayfordamages.Yet,manybusinesseshavebeenbankruptedbyproductliabilityclaims.EthicalDebatesonProductLiability3Ifneitherthecompanynortheconsumerisatfault,whoshouldpayfortheinjuries?Thegovernmentisathirdoption.Holdingbusinessaccountablemightbeapersuasiveargument.Accountabilityfocusesonthosesituationswherenooneisatfault.Whenbusinessisheldaccountable,thecostsforinjurieseventuallyfallonthoseconsumerswhobuytheproductthroughhighercostsThisamountstotheclaimthatexternalcostsshouldbeinternalizedandthatthefullcostsofaproductshouldbepaidforbythosewhousetheproduct.ResponsibilityforProducts:AdvertisingandSales1Advertisingisasecondareaofmarketingreceivinglegalandphilosophicalattentionwithinbusinessethics.Thegoalofallmarketingisthesale,theeventualexchangebetweenthesellerandbuyer.Amajorelementofmarketingissalespromotion,theattempttoinfluencethebuyertocompleteapurchase.ResponsibilityforProducts:AdvertisingandSales2Thereareethicallygoodandbadwaysofinfluencingothers.Often,salesandadvertisingpracticesemploydeceptiveormanipulativemeansofinfluence,oraimatsusceptibleaudiences.Tomanipulatesomethingistoguideitsbehavior,bypassingitsautonomy.Manipulationmaybedonewithorwithoutdeception.Themoreonepersonknowsaboutanotherperson’spsychology,thebetterablethefirstpersonwillbetomanipulatetheother’sbehavior.Criticschargethatmanymarketingpracticesmanipulateconsumer.EthicalIssuesinAdvertising1Theethicaldefenseofadvertisingisthatit:Providesinformationformarketexchangesandthereforecontributestomarketefficiencyandtooverallhappiness.Providesinformationnecessaryforautonomousindividualstomakeinformedchoices.Notethateachoftheserationalesprovidesanethicaljustificationonlyiftheinformationistrueandaccurate.Theprinciple-basedtraditioninethicswouldhavethestrongestobjectionstomanipulation.Utilitariantraditionwouldstatethatthegoodnessorbadnessofmanipulationwoulddependontheconsequences.EthicalIssuesinAdvertising2Theworstformofmanipulationoccurswhenvulnerablepeoplearetargetedforabuse.Somegeneralguidelines.Marketingpracticesthatseektodiscoverwhichconsumersmightalreadyandindependentlybepredisposedtopurchasingaproductareethicallylegitimate.Marketingpracticesthatseektoidentifypopulationsthatcanbeeasilyinfluencedandmanipulated,areethicallyquestionable.Salesandmarketingthatappealtofear,anxiety,orotherirrationalmotivationsareethicallyimproper.Marketingresearchseekstolearnsomethingaboutthepsychologyofpotentialcustomers.Notallpsychologicalcategoriesarealike;somearemorecognitiveandrationalthanothers.MarketingEthicsandConsumerAutonomy1Defendersofadvertisingarguethatthemajorityofadvertisingprovidesinformationtoconsumers,informationthatcontributestoanefficienteconomicmarkets.Beyondthequestionofwhatadvertisingdoesforpeople,asecondethicalquestionaskswhatadvertingspecificallyandmarketingingeneraldoestopeople.Marketinghelpsshapecultureandtheindividualswhoaresocializedwithinthatculture.MarketingEthicsandConsumerAutonomy2Marketingcanhavedirectandindirectinfluenceontheverypersonswebecome.Howitdoesthisandthekindofpeoplewebecomeasaresult,isoffundamentalethicalimportance.Criticsofsuchclaimseitherdenythatmarketingcanhavesuchinfluenceormaintainthatmarketingisonlyamirrorofthecultureofwhichitisapart.MarketingEthicsandConsumerAutonomy3Galbraithclaimedthatadvertisingandmarketingcreatedtheveryconsumerdemandthatproductionaimedtosatisfy.Dubbedthe"dependenceeffect,"thisassertionheldthatconsumerdemanddependedonwhatproducershadtosell;thishadthreemajorandunwelcomeimplications.First,bycreatingwants,advertisingwaschangingthe"law"ofsupplyanddemandonitshead–demandturnsouttobeafunctionofsupply.Second,advertisingandmarketingcreatesirrationalandtrivialconsumerwantsanddistortstheentireeconomy.Finally,bycreatingconsumerwants,advertisingandothermarketingpracticesviolateconsumerautonomy.Inshort,consumersarebeingmanipulatedbyadvertising.Ethically,thecrucialpointistheassertionthatadvertisingviolatesconsumerautonomy.MarketingEthicsandConsumerAutonomy4Butcanadvertisingviolateconsumerautonomy,and,ifitcan,doeslawofsupplyanddemandbereversed?Onefacetofthisdebateclaimsthatadvertisingcontrolsconsumerbehavior—evidencesuggeststhatthisisfalse.Butconsumerautonomymightbeviolatedinasubtlerway.Ratherthancontrollingbehavior,perhapsadvertisingcreatesthewantsanddesiresonthebasisofwhichconsumersact.Thefocusherebecomestheconceptofautonomousdesiresratherthanautonomousbehavior.Consumerautonomyisviolatedbyadvertising’sabilitytocreatenon-autonomousdesires.Afterbasicneedsaremet,whydopeopleconsumethewaytheydo?Theethicalquestionishowmuchmarketinghasinfluencedthesenonnecessitypurchases.EthicsandMarketing3Iamtheworld’sworstsalesman;therefore,Imustmakeiteasyforpeopletobuy. F.W.Woolworth(1852to1919)MarketingtoVulnerablePopulations1Basedonmarketresearch,acarretailerlearnsatypicalcustomerisasinglewoman,between30and40yearsold.Shemakesanannualincomeover$50,000andenjoystheoutdoorsportsandrecreation.Thecardealertargetsadvertisinganddirectmailtoaudiencethatfitsthisdescription.Adsdepictattractiveandactiveyoungpeopleusingtheircarsandenjoyingoutdooractivities.MarketingtoVulnerablePopulations2Asecondtargetedcampaignsellsemergencycalldevicestoolderwidowslivingalone.Theadshowsanelderlywomancryingout"I’vefallenandcan’tgetup!"Thiscampaignseemsethicallyoffensiveasitisexploitingthefearandanxietymanyolderpeopleexperience.Domarketershavespecialresponsibilitytovulnerableindividuals?MarketingtoVulnerablePopulations3Thereisconsumervulnerabilitywhichoccurswhenapersonhasanimpairedabilitytomakeaninformedconsenttothemarketexchange.Avulnerableconsumerlackstheintellectualcapacities,psychologicalability,experienceormaturitytomakeinformedconsumerjudgments.Childrenareanexampleofconsumervulnerability.Thereisasecondsenseofvulnerability,calledgeneralvulnerabilitywhichoccurswhensomeoneissusceptibletosomespecificphysical,psychological,orfinancialharm.Somemarketingpracticestargetuninformedandvulnerableconsumers.Otherstargetvulnerablepopulations.MarketingtoVulnerablePopulations4Somegroupsarevulnerableinbothsenses.Peoplecanbecomevulnerableasaconsumerbecausetheyarevulnera

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