Unit E.03 – Ethical Marketing Issues

What you’ll learn to do: describe the types of ethical and social responsibility issues that marketing must address

We will begin by introducing definitions to clarify ethical terms and then turn to the issues that marketing professionals most often encounter.

If you’ve taken other business courses, you’ve probably studied business ethics and have some familiarity with examples of corporate malfeasance (which is a fancy term for unethical behavior).  These cases typically involve financial fraud. (Read about investor Bernie Madoff, the man responsible for the largest financial fraud in U.S. history). Financial fraud is certainly an example of unethical (and, often, illegal) behavior, but it isn’t directly related to marketing. Despite the presence of financial scandals in the news, you might be surprised to learn that the ethical issues U.S. businesses worry about the most are related to marketing.^[1] Take a look at their “top eight” list of ethical concerns, below:

1. Gifts, gratuities, bribes (marketing and sales)
2. Price discrimination and unfair pricing (marketing and sales)
3. Dishonest advertising (marketing and sales)
4. Miscellaneous unfair competitive practices
5. Cheating customers, unfair credit practices, and overselling (marketing and sales)
6. Price collusion by competitors or price fixing (marketing and sales)
7. Dishonesty in making or keeping a contract
8. Unfairness to employees and prejudice in hiring

You will notice that five of the eight ethical issues cited are governed by the marketing function, and the other three can certainly affect or involve marketing. In this section, you’ll learn more about these issues and the challenges in overcoming them. As with ethics in general, the line between ethical behavior and unethical behavior can be very fine indeed.

The specific things you’ll learn in this section include:

• Define ethics in the context of marketing
• Identify common ethical issues and their impact on individuals and organizations
• Identify ethical issues introduced through new marketing channels
• Explain the role of social responsibility in marketing

Ethics is the set of moral principles or values that guides behavior. There is a general recognition that many, if not most, business decisions involve some ethical judgment.

Each party in a marketing transaction brings a set of expectations regarding how the business relationship will exist and how transactions should be conducted. For example, when you as a consumer wish to purchase something from a retailer, you bring the following expectations about the transaction: (a) you want to be treated fairly by the salesperson, (b) you want to pay a reasonable price, (c) you want the product to be available as advertised and in the indicated condition, and (d) you want it to perform as promised. Unfortunately, your expectations might not be in agreement with those of the retailer. The retail salesperson may not “have time for you,” or the retailer’s notion of a “reasonable” price may be higher than yours, or the advertising for the product may be misleading. These differences in expectations can lead to ethical questions that are sometimes difficult to analyze.

To create greater clarity for marketing professionals, the American Marketing Association has created the American Marketing Association Statement of Ethics. It’s helpful to review this short document in order to understand the scope of issues that marketing professionals face. The preamble of the document defines a number of key terms and explains why ethics are of particular importance to marketers:

The American Marketing Association commits itself to promoting the highest standard of professional ethical norms and values for its members (practitioners, academics, and students). Norms are established standards of conduct that are expected and maintained by society and/or professional organizations. Values represent the collective conception of what communities find desirable, important, and morally proper. Values also serve as the criteria for evaluating our own personal actions and the actions of others. As marketers, we recognize that we not only serve our organizations but also act as stewards of society in creating, facilitating, and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stakeholders (e.g., customers, employees, investors, peers, channel members, regulators and the host community).[Emphasis added]^[2]

The exchange process between an organization and a customer is based on a relationship of trust. The Statement of Ethics aims to protect that trust.

Let’s start by taking at look at a hypothetical business situation:

The question becomes more challenging when the customer relationship is more complicated. In every case—even the simplest—it’s a judgment call. Suppose your company compensates customers for providing references. A company might give some small thank-you gift to acknowledge that taking reference calls requires time, and that the company appreciates the client’s support. Is that unethical? Possibly. On one hand, it’s reasonable and desirable to express your appreciation to the customer, since part of maintaining the customer relationship is letting customers know that you value them and their time. On the other hand, there’s a risk, especially if the gift is large, that the customer might be influenced or even induced to give your company or product a favorable review. There is a point where the compensation begins to distort the customer dialogue and relationship, and then it’s clearly unethical—and if you’re inducing a customer to alter their behavior in exchange for a gift, it’s bribery.

Marketing professionals face regularly face questions of this kind. Where the organization appreciates a close partnership with a client, a thank-you gift may well be appropriate.  The challenge is to choose one of the right size that expresses appreciation but doesn’t compromise the integrity of the client or the marketing organization.

Below is a list that shows how marketing professionals responded to a survey on the most difficult ethical issues they face.^[3]

Most Difficult Ethical Issues Marketing Professionals Face

• 15% of marketing professionals say bribery is the most difficult ethical issue
  • Gifts from outside vendors, payment of questionable commissions, “money under the table”
• 14% of marketing professionals say fairness is the most difficult ethical issue
  • Unfairly placing company interests over family obligations, taking credit for the work of others, inducing customers to use services not needed, manipulation of others
• 12% of marketing professionals say honesty is the most difficult ethical issue
  • Lying to customers to obtain orders, misrepresenting services and capabilities
• 12% of marketing professionals say price is the most difficult ethical issue
  • Differential pricing, charging higher prices than firms with similar products while claiming superiority
• 11% of marketing professionals say product is the most difficult ethical issue
  • Product safety, product and brand infringement, exaggerated performance claims, products that do not benefit consumers
• 10% of marketing professionals say personnel is the most difficult ethical issue
  • Firing, hiring, employee evaluation
• 5% of marketing professionals say confidentiality is the most difficult ethical issue
  • Temptations to use or obtain classified, secret, or competitive information
• 4% of marketing professionals say advertising is the most difficult ethical issue
  • Crossing the line between exaggeration and misrepresentation, misleading customers
• 4% of marketing professionals say manipulation of data is the most difficult ethical issue
  • Falsifying figures or misusing statistics or information, distortion

Notice that many of the responses include watchwords like “questionable,” “exaggerated,” “distortion,” and “crossing the line.” In marketing, the greatest challenge is to influence the behavior of the target customer (by getting them to buy) without violating the customer’s trust or acting unethically. With the rise of social media, customers are in a much better position to share frank evaluations of products and services publicly, and this gives marketers a new means of capturing unbiased customer feedback. (It also opens the door to the problem of “fake customer reviews,” but that’s another issue.)

New marketing channels create opportunities for new tactics, but sometimes these developments bring new ethical challenges. Eventually society may establish what is acceptable behavior and what is not, but that process takes time.

In the following blog post, marketer Augie Ray explains growing sensitivities around the appropriate uses of social media, and shares his guidance to marketers who are seeking to create a trusted relationship with their customers and prospects.

Social Media Ethics on Display (or Not) During Week of Boston Marathon Tragedy

Instead of considering this in the abstract, let’s examine two brands’ actions last week, during the frightening events in Boston. NBC Bay Area posted a photo of a young bombing victim and implored people to “‘Like’ this to wish him a continued speedy recovery.”  This desperate attempt to trade on people’s feelings for a young victim of the bombing in order to receive a bit of EdgeRank-building engagement is horrifyingly unethical, in my book. (And if you do not agree, then please tell me how “liking” an NBC post lends support to or otherwise helps this poor hospitalized child.)

Ford, a brand I praised for authenticity in my last blog post, waded into dubious water with a Facebook status update following the capture of the second bombing suspect. The brand said, “To the first responders of Boston: Thank you. You are true American heroes.” Nothing wrong with that—in fact, I love that a brand like Ford feels it can express sincere appreciation for the sacrifices of those who serve. The problem was that Ford didn’t post that as text but included it within a beauty shot of their products, complete with the Ford logo and tagline.

Not everyone will agree, but I feel that Ford’s use of brand imagery not only reduced the sincerity of the message but demonstrated questionable ethics. Before you disagree, I would ask you to view the two status updates below—one Ford could have posted and the other it actually did—and consider three questions:

1. Which is a more authentic expression of appreciation to people who sacrificed their safety to protect us?
2. What does the product and brand imagery of the post on the right add (if anything) to the sincerity of the gratitude compared to the simple text version?
3. Which version more clearly puts the focus on the heroes in Boston?

The version on the left imagines what Ford could have posted as text while the one on the right is what Ford actually posted following the capture of the second bombing suspect in Watertown, MA.

Issues of ethics are difficult to discuss. They often are not clear cut, and while it is easy to see when a company crosses the line with both feet (as did NBC Bay Area), it can tough to discern as brands toe the gray line (as did Ford, in my opinion).

It is even tougher to see when you yourself cross ethical lines. If your boss wants to know why your brand has half a million customers but only 25,000 fans on Facebook, a sweepstakes to accumulate fans may not seem unethical. Your perspective may change, however, if you put yourself on the other side of this equation; if you do not want to see your friends becoming shills for brands in return for freebies and giveaways, then your brand should not follow this path. It is unethical to treat your own customers in a way you would not appreciate from the brands you buy or the people you know. (Fifty years ago, David Ogilvy, the father of modern advertising, expressed the same sentiment when he said, “Never write an advertisement which you wouldn’t want your family to read. You wouldn’t tell lies to your own wife. Don’t tell them to mine.”)

We are roughly ten years into the social media era, and I think perhaps it is time to reset our moral compasses, not to save our souls but to improve business results. Study after study demonstrate that consumers want something more from brands than silly images and memes; they want ethical behaviors and communications.^[4] The 2012 Edelman Trust Barometer Study found that customers increasingly expect brands to “place customers ahead of profits and have ethical business practices,” and Interbrand’s 2018 brand study noted that successful businesses are those who are willing “to simultaneously look through a microscope and a telescope, to have the courage to intercept the future, not just flow with it, and, to take decisive action that makes a real impact.”

I’d like to believe this is always the case in every business situation, but when it comes to social media marketing, the ethical path also happens to be the best one for enhancing brands and business results.

Before you click “submit” to your next social media post, don’t simply ask whether it will achieve its goal, fit best practices, or suit the brand. Ask yourself if it is honest, transparent, and ethical. That is a much higher standard, but higher standards are what consumers want and what brands increasingly wish to deliver, aren’t they?

So far we have focused on ethical dilemmas in terms of risk. If a company acts unethically, it risks damaging its reputation and its customers’ trust—worse, it can face lawsuits and criminal prosecution. In this section we’ll discuss one of the ways in which companies attempt to get out in front of such risks by taking a proactive stance on ethics, instead.  As you saw with Tesla, companies that place “doing the right thing” at the center of their corporate mission and strategy often see a competitive advantage. Increasingly, they’re finding that good corporate citizenship not only benefits customers and communities but is good business, too.

Corporate social responsibility is the ethical behavior of a company toward society. It means acting responsibly toward the stakeholders—not just the shareholders—who have a legitimate interest in the business.

Shareholders own a portion or “share” of a business. Stakeholders do not own the business, but they have some stake or interest in it because they are affected by the business’s strategies and tactics.  Examples of stakeholders are employees, suppliers, business partners, and the community in which the business operates.^[5]

Below are a few examples of businesses behaving ethically in ways that have a positive impact on their stakeholders.

Xeros Supports Employee Volunteerism

Xerox is one of many companies that creates opportunities for its employees to contribute to their local communities. In 1974 Xerox launched the Xerox Community Involvement Program, which supports employee involvement in community-focused causes. Since that time more than half a million Xerox employees have participated in the program.  , as the name suggests, . In its most current reporting on the impact of the program Xerox has announced spending $1.3 million for 13,000 of its employees to participate in 800 community projects. Xerox benefits from the program through community recognition, but also in supporting its employees make contributions that are important to them increasing their loyalty to their employer. ^[6]

Anheuser-Busch Wants Customers to Drink Responsibly

In January 2014, Anheuser-Busch ran the following Super Bowl ad featuring a cute puppy and the famous Budweiser Clydesdale horses. The ad plays on romance and nostalgia to remind viewers of the brand’s history (and to sell more beer).

In September 2014, the company brought back the puppy, this time to promote responsible drinking:

On its Web site, Anheiser-Busch lists a number of programs it has launched to reduce drunk driving. These are marketing programs that were developed to reduce the risk for consumers using the company’s products.

Anheuser-Busch is opposed to drunk driving and we believe it is 100 percent preventable. According to the U.S. Department of Transportation, drunk-driving fatalities have decreased 53 percent since 1982 to record lows, but we recognize there is still work to be done.  As part of our effort to prevent drunk driving, we have key initiatives like the Budweiser Designate a Driver campaign and Bud Light safe ride home programs, including Bud Light Alert Cab and Bud Light Tow to Go.

The company is actively promoting safety for its customers and their communities.

Target Invests in Communities

Target places an emphasis on being a “good corporate citizen” in the communities it serves. Each year the company publishes a corporate responsibility report that shares its goals and progress in a number of areas including the environment, team member well-being, education, and volunteerism.

Target shows that it is committed to protecting the environment by increasing the number of organic foods it offers and by putting in place measures to reduce waste and greenhouse gasses.

The company also makes significant contributions to education by paying for employees’ education, and by contributing to schools in its local communities. In 2014 Target donated $31,722,837 to more than 84,000 schools in all fifty states and the District of Columbia.

Haagen-Dazs Cares about Its Tiniest Suppliers

Recently, the ice-cream company Haagen-Daz initiated a campaign to raise awareness about the threats to honey bees, which are rapidly disappearing and are vital to the global food chain (and many of the ingredients in flavored ice cream). The company started a honeybee microsite and is donating a portion of the proceeds from its honeybee brand to bee research. In November 2014, it raised an additional $7,000 for research during a two-day Twitter campaign (#HelpHoneyBees hashtag).^[7]

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