Ethical Issues in Marketing
Introduction
Marketing is an essential function in any business. Marketing without ethics would result in unmoral business. Faced with conflicting pressures, marketing managers may make compromises that include unethical business. Often, such decisions can be rationalized: an inadequately tested product has to be brought to market quickly to beat competition and payments via a third party to organized crime may protect the company's employees as well as its distribution channels (Smith & Quelch, 1996)
Identify ethical issues in marketing
The four P's of marketing: product, price, promotion and placement involve several ethical issues. Product, for example, raises obvious concerns about product safety, but the social impact of some products has drawn moral criticism. Aside from alcohol and tobacco, which are frequent targets of complaints, objections have been raised about unhealthful foods, gas-guzzling SUVs, and poor-value financial products aimed at the poor. Ethical issues about price gouging, predatory pricing (which undercuts the competition unfairly), price discrimination (charging more to some customers than others), misleading prices (such as pricing that makes it difficult for consumers to make comparisons from an unrealistic regular price), and price fixing (working with competitors to keep prices high) involve questionable profit techniques and possible market manipulations, which might be criticized by market analysts. Finally, placements raise ethical issues about anticompetitive practices such as controlling the channels of distribution and paying so-called slotting allowances for shelf space in stores, and so called gray marketing, which is the diversion of goods outside officially sanctioned channels (Boatright, 2007).
According to Durif et. al (2008), ethics is a crucial issue for an organization and is famous for its being unavoidable, unclear definition and characteristic many forms. As Durif et. al (2008) notes, marketing is overly paradoxical when it comes to ethical considerations especially because marketing is always aimed at creating a specific impact on the consumer’s perception of a product of service. Moreover, marketing is also the most commonly used scapegoat for ethical challenges in business hence subjecting it to incessant criticisms (Dufir, 2008). Admittedly there are various ethical issues of consideration in marketing
Falsity and puffery are perhaps the most commonly encountered ethical issues in marketing; while false advertisement is the act of using misleading or confusing advertisement to better positive perception of a product, puffery is the use of exaggeration in advertisement (Ferrell, Fraedrich & Ferrell, 2011). For instance, in a shaving product advert it was claimed that the moisturizing strip on the shaving razor was “six times smoother” than a competitor’s while showing a man rubbing down his face with his hands (Ferrell, Fraedrich & Ferrell, 2011). When one of the competitor tool the company that sponsored the advert to court, it was ascertained that the statement actually meant that only the moisturizing strip was six times smoother and not the shave as was depicted in the advert (Ferrell, Fraedrich & Ferrell, 2011). This examples depicts both falsity and puffery in marketing; falsity in the sense that the “six times smoother” implies the moisturizing strip on the razor rather than the shave as could be seen from the advert and puffery in the sense that a one shave cannot be justifiably described as smoother than another.
Subliminal advertisements in which certain cues are always used in an attempt to make consumers perceive a given product being advertised in a different way is yet another ethical issue of consideration in marketing. The use music to accompany adverts is a common practice in marketing where a certain type of music, most commonly distinct and able to create peculiar feeling if associated with the product being advertised, is used to boost the consumer’s perception of the product being advertised Sutherland (2007). For instance, an energy drink advert might be accompanied with a breathtaking musical performance. The breathtaking musical performance in such an advert is considered a subliminal message which, according Sutherland (2007), is capable of influencing the mood and causing a familiarity with the product being advertised.
Other ethical issues that are also common in marketing include; pricing (for instance, charging higher prices than firms with similar products while claiming superiority), Manipulation of data, Purchasing (reciprocity in the selection of suppliers) and Bribery.
These ethical issues in marketing management are further shown by Survey findings of Chonko and Hunt, which are outlined below:
Rank
Issues (with Illustrations)
Frequency
Bribery (gifts from outside vendors, “money under the table” payment of questionable commissions)
Fairness (manipulation of others, unfairly placing corporate interests over family obligations, inducing customers to use services not needed, taking credit for work of others)
Honesty (misrepresenting services and capabilities, lying to customers to obtain orders)
Prices (differential pricing, meeting competitive prices, charging higher prices than firms with similar products while claiming superiority)
Product (products that do not benefit consumers, product and brand infringements, product safety, exaggerated performance claims)
Personnel (hiring, firing, employee evaluation)
Confidentiality (temptation to use or obtain classified, secret, or competitive information)
Advertising (misleading customers, crossing the line between puffery and misleading)
Manipulation of data (distortion; falsifying figures or misusing statistics or information, internally and externally)
Purchasing (reciprocity in the selection of suppliers)
(3)
The Cases:
Ethical issues in promotion, such as the case of Volvo’s "Bear Foot" Misstep have caused a lot of criticism to many companies. In a television ad Volvo showed a monster truck riding atop the roofs of cars lined up in its path. The truck was named "Bear Foot" because of its oversized, six-foot tires, which crushed every car except a Volvo station wagon. The scene of devastation around the still standing Volvo illustrated the company's advertising message of strength and safety. The TV and print ads both appeared in October 1990 and received immediate critics for their effectiveness. In response, Volvo admitted having reinforced that the Volvo, however, charges of deceptive advertising were still made.
The idea for the ad came from a monster truck rally in Vermont in which a Volvo was the only survivor of a similar stunt. In re-creating the scene at a Texas arena, the production crew employed by the advertising agency Scali, McCabe, solves reinforced the roof of the Volvo with lumber and steel and partially sawed through the roof supports of the other cars. When word leaked out, the attorney general of Texas began an investigation that led to a lawsuit for consumer fraud. Volvo quickly settled the suit by running corrective ads and by reimbursing the state of Texas for the cost of investigation and the legal fees incurred. Scali, McCabe, solves also resigned its Volvo account, which generated $40 million a year in revenues.
In apologizing for the ads, Volvo insisted that the company was unaware of the rigged demonstration but defended the rigging all the same (Soares,1991). The reasons for the alterations to the cars, the company explained, were to enable the production crew to conduct the demonstration and to film it safety and to allow the Volvo to withstand the repeated runs of the monster truck that were required for filming. The claim being made was not false: Volvo engineers had determined that the roof could withstand the weight of a five-ton monster truck. The mistake was in not revealing to consumers that the ad was not an actual demonstration but a dramatization of the event in Vermont.
Looking at the advert critically, this was yet another case of deceptive advertising as there is no Volvo designed to withstand pressure a “Bear Foot” as was being depicted in the advert hence the advert was unethical with regards to marketing. Claiming that the “Bear Foot” advert was a dramatization rather than an actual advert was also misleading; people expect see dramatizations in movies and not in adverts. Notably, this was not the first time that Volvo and Scali, McCabe, solves had been criticized for questionable ads (Soares,1991). The year before, an ad was produced that showed a large truck driving over a Volvo with the tagline "How well does your car stand up to heavy traffic?" This ad was similar to one from the 1970s showing a Volvo withstanding the weight of six other Volvos stacked one on top of another. In both ads, jacks supported the Volvo on the bottom(Soares,1991). The reason for the jacks, according to the company, was that the ads were intended to show only the strength of the main body; no claim was being made about the tires and suspension system, which, in any event, could not withstand such a load. The tires would blow out and the suspension system would collapse.
Firestone in the case of Steel-belted radial 500 tire, Audi in the case of the 5000-S model, A.H Robbins in the Dalkon Shield case, and Ford in the case of the Ford Pinto. Owners of Audi 5000-S model complained that the cars lunged put of control when they shifted into drive or reverse. Audi blamed the drivers. This led to slumping Audi sales in the late 1986 and 1987, as well as to low company credibility (Weinstein, 1987). Audi took steps to rebuild its image and boost sales by a combination of cash incentives and other programs, as well as a 30 million, six-month media campaign (Moskal, 1988a). Critics contend that Audi didn’t correctly manage the crisis, and Audi owners were angered by the company's insensitivity and its position of blaming drivers for the problem.
In the case of the Ford-Firestone Brawl, for almost 100 years, Firestone Tire and Rubber Company had supplied tires to Ford Motor Company. This business relationship, which came from the close friendship of Harvey Firestone and Henry Ford at the beginning of the automotive age, was being strained by a dispute between these longtime partners over problems with the Firestone tires installed on Ford's popular Explorer Sports Utility Vehicle (SUV). By 2001, 203 deaths and over 700 injuries had resulted from rollovers in the Ford Explorers after the tread of Firestone tires separated.
The showdown came at a meeting on May 21, 2001, when three senior Ford executives flew to Firestone's Nashville, Tennessee, headquarters to discuss the cause of these tragic incidents with Firestone's Chief executive John Lampe. Both Ford and Bridgestone/Firestone had long been aware of safety problems with the Ford Explorer equipped with Firestone tires. Initial tests showed that it was tipping when cornering or changing lanes and could also roll over in the event of a tire failure. Soon after the Ford Explorer hit the market in March 1990, both Ford and Firestone received reports of tire failure followed by rollovers. The first complaints came from the Middle East and Venezuela, where rough road conditions weren’t uncommon. Reports of tire failure in the United States involving Firestone tires came largely from Florida, Texas, Arizona, and other warm-weather states. By the time of recall, it was evident that whatever the design flaws in the Ford Explorer and the Firestone ATX tires, the combination of an Explorer equipped with Firestone ATX tires, was a dangerous product. Firestone executives insisted that its tires were safe (Davidson & Goodpaster, 1986b). In testimony to Congress, Mr. Lampe noted that there had been 16,000 rollovers of Explorers and that the tire failure had been the cause of less than 10 percent of those accidents. Jacques Nasser, the CEO of Ford, countered by releasing data showing that during a five year period, Firestone tires on 1996 Explorers were involved in 30 deathly accidents per million tires produced while Explorers equipped with Goodyear tires were involved in only three deathly accidents per million tires produced, one-tenth the number (Davidson & Goodpaster, 1986b). It soon became apparent that each company was interpreting the data differently and using them to place responsibility on the other. John Lampe handed the Ford executives a letter severing all relations between Firestone and the Ford. The next day, Ford announced the company would replace 13 million Firestone tires at a cost of $3 billion. Jacques Nasser was surprised that Firestone would walk away from $7.5 billion in annual sales, which was 40 percent of Bridgestone/Firestone's global revenues. The relationship between Harvey Firestone and Henry Ford that kept on for a century came to an end.
Firestone has also been inducted in other ethical issues involving tire defects, Firestone first argued that there was no hard data to support the contention that its steel belted radial 500 tire was defective (Davidson & Goodpaster, 1986b). Five years after it started receiving complaints from its dealers- after several investigations by the National Highway Traffic Safety Administration, congressional hearings, legal complications; after years of vigorous defending the safety of the tire; and after 41 deaths and more than 65 injuries were linked to the product- Firestone recalled approximately 10 million of its steel-belted radial 500 tires. Firestone estimated that the after-tax cost of the recall was approximately $135 million which was 125 percent of its after tax earnings of $110 million (Davidson & Goodpaster, 1986b).
Firms are usually hesitant to pull products, because recalls are often extremely expensive in terms of the cost of withdrawal or modification, bad reputations, and a signal of quality problems. It has to be noted that product recalls affect security prices
(Hartman, 1987)
Conclusion
Unethical work can cause a lot of problems and it can be said that ethical and effective marketing managers have respect and concern for the welfare of those affected by their decisions (Smith & Quelch, 1996). Managers who remain silent or fail to incorporate their "official" ethics policies into day-to day management practice run the risk that they, their employees, and other stakeholders will be involved in questionable practices. By supporting a competitive system that respects the principles of the common moral system and the right of providing accurate and correct information, supports management, the competitive market and the company itself. (Paine, 1996)
Reference List
Boatright, John R, 2007. Ethics and the Conduct of Business New Jersey. Pearson Prentice Hall.
Davidson, Dekkers l., and Kenneth E. Goodpaster, 1983b. Managing Product Safety: The Case of the Firestone 500." Harvard Business School Case #383-130.
Durif, F, Graf, R., Hamel, A., Labbe, A., & Nadeau, A., 2008. Ethics In Marketing: Ideology Or Strategic Philanthropy? The case of American Apparel. Innovative Marketing , 4(2), 63-69.
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013). Business ethics: ethical decision making and cases. Mason, OH, South-Western/Cengage Learning.
Hartman, Raymond S.1987. Product Quality and market efficiency: The effect of product recalls on resale prices and firm valuation" Review of Economics and Statistics (Netherlands) 69, no.2, pp. 367-72
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Moskal, Brian S. 1988a. Can Audi make it back? Industry Week 236, no. 3, pp. 49-50
Paine, Lynn S. 1996. Ethics in Marketing: Corporate Policy and the Ethics of Competitor Intelligence Gathering. Chicago. pp. 279.
Smith, Craig N & Quelch John A. 1996, Ethics in Marketing: Chicago.
Soares, E. J. (1991). Promotional feats: the role of planned events in the marketing communications mix. New York, Quorum Books.
Sutherland, M, 2008. Ethics in marketing: ideology or strategic philanthropy? Subliminal Advertising, Like the Energizer Bunny, Just Keeps Going and Going. Max Sutherland’s Web, 1, 1-3.
