REPORT ON ETHICAL MARKETING

ABSTRACT

 This report begins by examining several potentially ethical recent marketing practices. Since most marketing managers face ethical dilemmas during their careers, it is essential to study the moral consequences of these decisions. A typology of ways that managers might confront ethical issues is proposed. The significant organizational, personal and societal costs emanating from unethical behavior are also discussed. Both relatively simple frameworks and more comprehensive models for evaluating ethical decisions in marketing are summarized. Finally, the fact that organizational commitment to fostering ethical marketing decisions can be accomplished by top management leadership, codes of ethics, ethics seminars/programs and ethical audits is examined.

Executive summary

Introduction

Ethical marketing refers to the application of marketing ethics into the marketing process. Briefly, marketing ethics refers to the philosophical examination, from a moral standpoint, of particular marketing issues that are matters of moral judgment. Ethical marketing generally results in a more socially responsible and culturally sensitive business community. The establishment of marketing ethics has the potential to benefit society as a whole, both in the short- and long-term. Ethical marketing should be part of business ethics in the sense that marketing forms a significant part of any business model. Study of Ethical marketing should be included in applied ethics and involves examination of whether or not an honest and factual representation of a product or service has been delivered in a framework of cultural and social values.
It promotes qualitative benefits to its customers, which other similar companies, products or services fail to recognize. The concern with ethical issues, such as child labor, working conditions, relationships with third world countries and environmental problems, has changed the attitude of the Western World towards a more socially responsible way of thinking. This has influenced companies and their response is to market their products in a more socially responsible way.
The increasing trend of fair trade is an example of the impact of ethical marketing. The idea of fair trade is that consumers pay a guaranteed commodity price to a small group of producers. The producers agree to pay fair labor prices and conserve the environment. This agreement sets the stage for a commerce that is ethically sound.
The philosophy of marketing is not lost with this newfound ethical slant, but rather hopes to win customer loyalty by reinforcing the positive values of the brand, creating a strong citizen brand. However, this new way of thinking does create new challenges for the marketer of the 21st century, in terms of invention and development of products to add long-term benefits without reducing the product’s desirable qualities.

Ethical Marketing

               

–      how well an individual’s or an organization’s marketing activities exhibit ethical values

–      Does good ethics = good business?

 

What is ethical marketing

Ethical Marketing
Ethical marketing is about whether a firms marketing decision is morally right or wrong. The morality of the marketing decision can encompass any part of marketing from advertising to the pricing of their product or service, to the sourcing of their raw materials.
In today’s corporate world ethical marketing is playing a larger role in marketing strategy. An increasing number of consumers are buying products/services because they feel that the products, services or organisations responsible for those are ethical. In response to this consumer demand organisations have increased their focus on ethical marketing. The UK Co-operative bank is good example of an organisation that tries to follow a ethical principal, based on what the customers feel strong about.
When companies are reviewing marketing strategies they need to consider whether the marketing decisions that they are making are ethical and reflect consumer and market expectations.
An individual’s view of ethics and morality is influenced by a variety of things including their culture, background, experience, upbringing/family, peers, community, religion and country.

After a company has decided to implement ethical marketing they will need to make the following decisions:

1.       Define what is ethical.

2.       Which branch of ethics will they subscribe to.

3.       How will the ethical approach to marketing be implemented.

4.        In which areas of the firm’s operations should ethical marketing be implemented e.g. employees, suppliers, consumers/clients, production techniques, distribution or the whole value chain.

A number of questions a firm must ask itself include:

1.      Should the firm employ children to their products?

2.      Do the firm’s suppliers use child labour?

3.      Does the firm know? Today, child labour is a very big issue, does your firm want to associate itself with this?

4.      Does the firm exaggerate the benefits of its products on its packaging?

5.      Are claims overstated? Many firms do make bold claims. The company needs to make sure these claims are fully supported.

6.      Does the firm conduct in high pressurized selling techniques or focus on customer groups that are vulnerable e.g. pensioners? With markets very competitive obtaining customer loyalty is becoming very difficult. High pressurized selling techniques could result in the firms loosing reputation within its market.

7.      Does the firm squeeze even more margins out of their supplier to the extent that it impacts on the suppliers’ profit margin and may well have an impact on the quality of the products sold to you?

Basic concepts of ethical marketing

Ethics are a collection of principles of right conduct that shape the decisions people or organizations make. Practicing ethics in marketing means deliberately applying standards of fairness, or moral rights and wrongs, to marketing decision making, behavior, and practice in the organization.
In a market economy, a business may be expected to act in what it believes to be its own best interest. The purpose of marketing is to create a competitive advantage. An organization achieves an advantage when it does a better job than its competitors at satisfying the product and service requirements of its target markets. Those organizations that develop a competitive advantage are able to satisfy the needs of both customers and the organization.
As our economic system has become more successful at providing for needs and wants, there has been greater focus on organizations' adhering to ethical values rather than simply providing products. This focus has come about for two reasons. First, when an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services. When marketing practices depart from standards that society considers acceptable, the market process becomes less efficient—sometimes it is even interrupted. Not employing ethical marketing practices may lead to dissatisfied customers, bad publicity, a lack of trust, lost business, or, sometimes, legal action. Thus, most organizations are very sensitive to the needs and opinions of their customers and look for ways to protect their long-term interests.
Second, 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. Calls for social responsibility have also subjected marketing practices to a wide range of federal and state regulations designed to either protect consumer rights or to stimulate trade.
The Federal Trade Commission (FTC) and other federal and state government agencies are charged both with enforcing the laws and creating policies to limit unfair marketing practices. Because regulation cannot be developed to cover every possible abuse, organizations and industry groups often develop codes of ethical conduct or rules for behavior to serve as a guide in decision making.

Societal Culture and Norms

• Culture refers to the set of values, ideas, and attitudes of a homogeneous group of people that are transmitted from one generation to the next.
• Culture also serves as a socializing force that dictates what is morally right and just.
• This means that moral standards are relative to particular societies, often reflecting the laws and regulations that affect social and economic behavior, including marketing practices.
• It is common to observe different ethical views in different countries.

• Societal values affect business practices regarding the use of another’s ideas, copyright, trademark, or patent.
• These are viewed as intellectual property, and unauthorized use is deemed unethical and illegal in the U.S.
• This is not the case everywhere.
• Unauthorized use of copyrighted software and other intellectual property in global markets costs the U.S. economy $250 billion annually in lost revenue.

Business Culture and Industry Practices

Business cultures -  

• Comprise the
• The effective rules of the game
• The boundaries between competitive and unethical behavior
• The codes of conduct in business dealings.

• Affects ethical conduct
• In the exchange relationship between sellers and buyers
• In the competitive behavior among sellers.

Corporate Culture and Expectations

• Corporate culture
• reflects the shared values, beliefs, and purposes of employees that affect individual and group behavior

• Corporate ethical culture manifests itself in
• codes of ethics and the
• ethical actions of top management and co-workers.

10 principles of ethical contact by marketers that was drawn up by the Word of Mouth Marketing Association — designed especially for achieving successful ethical marketing strategies..

How to do it right

1. Be truthful and never knowingly relay false information
2. Full disclosure — including employment and affiliations.
3. Respect all community guidelines [set by bloggers and community managers].
4. Never ask a blogger to lie.
5. Take extra care when dealing with bloggers that appeal to minors.
6. No manipulation of advertising or affiliate programs to impact blogger income.
7. Refrain from using automated systems for distributing messages.
8. Full disclosure of incentives and payments given.
9. Sending a product to a blogger does not guarantee coverage.
10. Request that bloggers reveal the source of products they review.

GO GREEN CONCEPT

COMPANIES PREFER TO GO GREEN IN ORDER TO PRACTICE ETHICAL MARKETING.

Companies Going Green Benefits

Even though in the past most companies were resistant to implementing technology which would reduce environmental pollution and save energy as it would mean changing the way things are done which have been built over several years. However, contrary to what people believe, there are several benefits of companies going green. One of the main reasons as to why are companies going green is that people are becoming far more conscious and are buying products only from producers who produce environment friendly products. Moreover, people have become conscious of recycling things and there are many who ask how does recycling affect environment. The simple answer to that is when a thing which is already used is used again, it reduces the cost of making a particular thing, thereby reducing the need of power.

The main reason for the initial resistance of companies to go green is that the whole process of change would be time consuming and expensive. This is partially true, but then if these environment friendly products are used, they would help save a lot of money in the long run. Let's say that you have a business, and you employ 1,000 employees. Every day, you need to communicate with all the employees and if you do this on paper, imagine the amount of paper you would need every day. On the other hand, if you digitize this paperwork and send emails, you can not only save your costs of buying paper and at the same time saving valuable trees from being cut down, thereby saving the environment. Moreover using fluorescent light bulbs costs more when you buy them compared to standard light bulb, but when you compare the life of both the bulbs, the fluorescent light bulbs lasts much longer.

Major Companies Going Green

Some of the major companies which have implemented green strategies include Bank of America, General Electric, Dupont and Home Depot. There are many more, but these are worth mentioning as they have been most resistant to change. Today, Bank of America uses much less paper than it has traditionally used and the best part is that the customer base of the company has not reduced at all, rather it has increased. Moreover, they recycle paper internally and the best part is they offer employees a cash back offer to a certain limit if they buy hybrid vehicles. You may like to know more on hybrid cars and the environment.

On its part General Electric have started developing environmental friendly product, especially, solar panels and has successfully generated billions in revenue. The company was one of the worst polluters, but has today taken steps to clean up the areas in which their plants are located.

Environmentalists over the last several years criticized Dupont due to their ways of not caring for the environment. However, due to government regulations and people's sustained pressure, the company has taken steps to drastically lower its emissions of polluting greenhouse gases. Moreover, it has appointed an eminent environmentalist as its advisor on its board and the best part is they have successfully reduced pollution by more than 50%.

Home depot is another company which has taken recent steps to implement green technology. They were the largest retailer of old-growth wood products in the world, but the people started objecting to what they were doing, cutting down trees to make their products.

Tips for Companies Going Green

The following are few ways in which companies can go green.

• See to it that all mechanical equipments are well maintained.
• Recycle or donate old equipment or computers.
• Buy energy-efficient printers, PCs, etc.
• Cleaning products which are eco-friendly should only be bought as these are non-toxic and biodegradable.
• Instead of using general batteries, rechargeable batteries can be used.
• Amount of paper should be reduced by trying to go for online bill payment, online banking and emails.
• Wherever possible double-sided printing should be used.
• Recycle ink cartridges, aluminum, plastic and paper.

Ethical/Legal Framework in Marketing

1. Ethics deal with personal moral principles and values.
2. Laws are society's values and standards that are enforceable in the courts.
3. There are numerous situations where judgment plays a large role in defining ethical and legal boundaries.
4. Actions that are technically legal could be viewed as unethical
5. Actions considered to be ethical may not be seen as legal.

Companies practicing Ethical Marketing

Examples – Novartis a pharmaceutical company.

Novartis recognizes that its credibility as a leading, ethical healthcare company depends, among other things, on upholding high standards of marketing and communication. As a pharmaceutical company, it has an obligation to provide accurate information and education about their products and their use to healthcare professionals and consumers.

As well as adhering to the principles of ethical business conduct enshrined in their Code of Conduct, Corporate Citizenship Policy and Guidelines, Novartis Pharma associates are guided by the specific standards for marketing activities set out in the Novartis Pharma Principles and Practices for Professionals (NP⁴) updated in 2008. Similar policies are in place for the other Novartis divisions.

All Novartis associates engaged in the promotion of prescription pharmaceutical products must adhere to practice policies and guidelines which find their basic reference on the following principles:

1. Promotional practices must be consistent with patients' benefit, must be ethical and must be in good taste.
2. Information provided must take account of customer needs and must be based on product information as it has been approved by the local authority, derived from the approved Basic Product Information.
3. Event sponsorship must be clearly disclosed and the primary objective of a meeting must be scientific in nature.
4. Hospitality must be appropriate, in good taste consistent with local practices and secondary to the main purpose of the meeting.
5. Gifts must be modest and relevant to the practice of medicine.
6. Personal incentives to prescribe are prohibited.
7. Samples must be handled with the prime objective of familiarizing the customer.
8. Sales representatives must have appropriate training and product knowledge.
9. Compensation for healthcare professionals must be provided only for actual, reasonable and necessary services.

10.  e major Oracle Corp and fast-food chain McDonald's.

ACCENTURE

Accenture Named One of the “World’s Most Ethical Companies” For Third Consecutive Year.

“Accenture’s promotion of a sound ethical environment shines within its industry and shows a clear understanding that operating under the highest standards for business behavior goes beyond goodwill and is linked to performance and profitability,” said Alex Brigham, executive director of the Ethisphere Institute. “This year’s World’s Most Ethical Companies award was more competitive than ever, because companies realize that making ethics a priority is critical amidst a tough economic environment.”

Accenturehas been recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies for the third consecutive year. Out of a record number of nominations for the award, Accenture secured a spot on the 2010 list by implementing meticulous business practices and initiatives that are instrumental to the company’s success, benefit the community and raise the bar for ethical standards.
“They are honored that the pledge to build a company on a solid ethical foundation has been recognized with a place on the 2010 World's Most Ethical Companies list," said Chad Fentress, associate general counsel for compliance & regulatory matters at Accenture. “We believe high performing companies must have a deep commitment to ethics from the top as well as a sustained dedication to these same high standards from employees at every level."

Theories propounded on ethical marketing

Chris Arnold’s        Ethical Marketing and the New Consumer   

                                                 

Eco-ethical marketing requires creativity and openness to experimentation and learning from failure.

12 Tips for Ethical Marketing

1. People beats planet. Between people and planet, consumers are more likely to pay more for perceived human benefits, such as Fair Trade or proceeds benefiting charity, than environmental benefits, such as organic or low carbon footprint.  Community-based values are particularly compelling.
2. Values are a must. “Consumers are looking for the ethos behind the brand…consumers want to know that a company isn’t just driven by money,” Arnold states.  Gone are the days when profit as sole motivator could fly.
3. Heartstrings win over logic. Consumers respond to emotional angles more than rational ones.  Luckily, ethical and environmental aspects can be highly emotive, so make sure to position them that way.
4. Honesty is king. Make an honest gesture about where you are – even if you’re still working to become green – people will appreciate your honesty.  For God’s sake,don’t greenwash.
5. Get creative with your packaging. Make your product’s packaging a selling point, or design a second life into the packaging so that consumers can continue to use the package for another purpose once they get it home.  (While you’re at it, design a second life for your product.)
6. People don’t trust ads. Use channels other than advertising to communicate with your audience.
7. Action speaks louder than words. Spend money on making a great product rather than marketing it.
8. Market the ease of the green or ethical aspects of your product.  People are lazy.
9. Beware of market research. Basing a marketing campaign on statistics is a dangerous trap, given that market research is often flawed.  For example, people cannot be relied on to answer truthfully about how they would act in a situation.
10. Balance ethical and traditional values. Products don’t sell on ethics alone.  Arnold advises choosing the 1 or 2 key ethical values and blending them with the key traditional values (such as value and quality).
11. Choose your words wisely – different words elicit different impressions from different people.
12. Maintain coherent messaging across the company.  If a company’s marketing campaigns send conflicting messages, no one wins.

 

Green to Gold 

How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage.

                                                                   

by: Daniel Esty, Andrew Winston.

HUNT-VITELL THEORY OF ETHICS

OVERVIEW OF THE HUNT-VITELL THEORY

The purpose of the original Journal of Macromarketing article that developed the H-V theory was to (1) provide a general theory of ethical decision making and (2) represent the theory in a process model. The theory would draw on both the deontological and teleological ethical traditions in moral philosophy.

 

Facts, Ethical reputation & rankings

 

 

Geneva-based Covalence has published its quarterly ethical reputation rankings.

Toyota, Unilever, HSBC Top Ethical Reputation Rankings

 

 

Best Ethical Quote Score and Best Ethical Quote Progress are given by confronting positive and negative news. Best Reported Performance is calculated by quantifying positive news only – it shows how companies report on their ethical performance without considering criticisms and demands. Some companies being highly targeted by activists have a low Ethical Quote Score while at the same time ranking high in terms of Reported Performance. We can assume that “ethical demands” (negative news i.e. stakeholder issues, campaigns, expectations) stimulate “ethical offers” (positive news i.e. initiatives, reporting, communication by companies).

 

The main results across sectors are:

• Toyota gets Best Ethical Quote Score across sectors ahead of Unilever and HSBC.
• Automobiles and Technology occupy best progress category
• Wal-Mart, Toyota and General Motors again show best Reported Performance
• Emerging topics in Q2 2008 have been: Social Stability, Lobbying Practices, International Presence, Product Environmental Risk, and Social Sponsorship, while the following criteria have lost importance: Wages, Anticorruption, Policy, Environmental Impact of Production, United Nations Policy, and Eco Innovative Product (see below).

World's 100 top companies practicing ethical marketing –

Aerospace	Apparel	Auctions	Automotive	Banking
Harris Corporation Rockwell Collins Inc The Aerospace Corporation	Comme Il Faut Nike Patagonia	Barrett Jackson Auction Company	Cummins Ford [ Images ] Motor Company Johnson Controls	Rabobank Standard Chartered Bank Westpac Banking Corporation
Business Services	Chemicals	Computer Hardware	Computer Software	Construction and engineering
Accenture Noblis Pitney Bowes Dun & Bradstreet Paychex	Ashland Dow Corning Corporation Ecolab Flint Hills Resources	Hewlett-Packard Company	Adobe Systems Salesforce.com Symantec Teradata	CH2M Hill CRH Fluor Granite Construction Parsons
Consumer Electronics	Consumer Productss	Diversified Industries	Electronics and Semiconductors	Energy and Utilities
Ricoh Xerox	Henkel Kao L'oreal Mattel	General Electric Co	Freescale Semiconductor Texas Instruments	Duke Energy FPL Group National Grid Sempra Energy Wisconsin Energy Corporation
Environmental Services	Financial Services	Food and Beverage	Food Service	Food Stores
Waste Management	American Express The Hartford The Principal Financial Group	Campbell Soup Company General Mills PepsiCo Solae	ARAMARK Sodexo	Trader Joe's Wegmans Whole Foods Market
Forestry, Paper and Packaging	Healthcare	Hotels, Travel & Hospitality	Industrial Manufacturing	Insurance
International Paper Stora Enso Oyj Svenska Cellulosa Weyerhaeuser	Cleveland Clinic Hospital Corporation of America J M Smith Corporation Johns Hopkins Premier	Rezidor Hotel Group Wyndham Worldwide	Caterpillar Deere & Company Eaton Milliken and Company Rockwell Automation Timken	Aflac Swiss Re Wisconsin Physicians Service
Internet	Media, Publishing and Entertainment	Medical Devices	Pharmaceuticals	Real Estate
Google Zappos	Thomson Reuters Time Warner	Becton, Dickinson and Company Royal Philips	AstraZeneca Novo Nordisk	Jones Lang LaSalle
Restaurants and Cafes	Best Buy	Telecom Hardware	Telecom Services	Transportation and Logistics
Starbucks Coffee Company Specialty Retail	Gap IKEA Target Ten Thousand Villages	Avaya Cisco Systems	Cummins Ford Motor Company Johnson Controls	Nippon Yusen Kabushi Kaisha UPS

CONCLUSION

Because marketing decisions often require specialized knowledge, ethical issues are often more complicated than those faced in personal life— and effective decision making requires consistency. Because each business situation is different, and not all decisions are simple, many organizations have embraced ethical codes of conduct and rules of professional ethics to guide managers and employees. However, sometimes self-regulation proves insufficient to protect the interest of customers, organizations, or society. At that point, pressures for regulation and enactment of legislation to protect the interests of all parties in the exchange process will likely occur.

To return to an earlier point, some managers when given the opportunity to act unethically, especially when that action will lead to personal gain, will choose to be unethical. All marketing managers will not behave like saints anymore than one could expect perfect behavior from all doctors, lawyers, or college professors. Nevertheless, for the organization that takes its ethical duties seriously, the provision of mechanisms to help managers better morally reason through ethical problems and the establishment of a corporate culture which will help direct managerial actions toward beneficial ends goes far in the establishment of an ethically enlightened marketing organization.

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