Page 302 - Encyclopedia of Business and Finance

eobf_E 7/5/06 3:01 PM Page 279

Ethics in Marketing

BIBLIOGRAPHY Second, ethical abuses frequently lead to pressure
Aupperle, K. E., Caroll, A. B., and Hatfield, J. D. (1985). “An (social or government) for institutions to assume greater
Empirical Examination of the Relationship Between Corpo- responsibility for their actions. Since abuses do occur,
rate Responsibility and Profitability.” Academy of Manage- some people believe that questionable business practices
ment Journal 28(2): 446-463.
abound. As a result, consumer interest groups, profes-
Davis, K., and Blomstrom, R.L. (1975, June). “Five Propositions sional associations, and self-regulatory groups exert con-
for Social Responsibility.” Business Horizons, 19-24.
siderable influence on marketing. Calls for social
Friedman, M. (1989). “Freedom and Philanthropy: An Interview
responsibility have also subjected marketing practices to a
with Milton Friedman.” Business and Society Review 71: 11-
wide range of federal and state regulations designed to
18.
either protect consumer rights or to stimulate trade.
McGuire, J. B., Sundgren, A., and Schneeweis, T. (1988). “Cor-
porate Social Responsibility and Firm Financial Perfor- The Federal Trade Commission (FTC) and other fed-
mance.” Academy of Management Journal 31: 854-872. eral and state government agencies are charged both with
enforcing the laws and creating policies to limit unfair
Sethi, S. P. (1975). “Dimensions of Corporate Social Perfor-
marketing practices. Because regulation cannot be devel-
mance: An Analytical Framework.” California Management
oped to cover every possible abuse, organizations and
Review, 17(3): 58-64.
industry groups often develop codes of ethical conduct or
rules for behavior to serve as a guide in decision making.
Thomas Haynes The American Marketing Association, for example, has
developed a code of ethics (which can be viewed on its
Web site at www.ama.org). Self-regulation not only helps
a firm avoid extensive government intervention; it also
ETHICS IN MARKETING permits it to better respond to changes in market condi-
Ethics are a collection of principles of right conduct that tions. An organization’s long-term success and profitabil-
shape the decisions people or organizations make. Practic- ity depends on this ability to respond.
ing ethics in marketing means deliberately applying stan-
dards of fairness, or moral rights and wrongs, to UNFAIR OR DECEPTIVE
marketing decision making, behavior, and practice in the MARKETING PRACTICES
organization. Marketing practices are deceptive if customers believe
In a market economy, a business may be expected to they will get more value from a product or service than
act in what it believes to be its own best interest. The pur- they actually receive. Deception, which can take the form
pose of marketing is to create a competitive advantage. An of a misrepresentation, omission, or misleading practice,
organization achieves an advantage when it does a better can occur when working with any element of the market-
job than its competitors at satisfying the product and serv- ing mix. Because consumers are exposed to great quanti-
ice requirements of its target markets. Those organizations ties of information about products and firms, they often
that develop a competitive advantage are able to satisfy the become skeptical of marketing claims and selling messages
and act to protect themselves from being deceived. Thus,
needs of both customers and the organization.
when a product or service does not provide expected
As our economic system has become more success-
value, customers will often seek a different source.
ful at providing for needs and wants, there has been
Deceptive pricing practices cause customers to believe
greater focus on organizations’ adhering to ethical values
that the price they pay for some unit of value in a product
rather than simply providing products. This focus has
or service is lower than it really is. The deception might
come about for two reasons. First, when an organization
take the form of making false price comparisons, providing
behaves ethically, customers develop more positive atti-
misleading suggested selling prices, omitting important
tudes about the firm, its products, and its services. When
conditions of the sale, or making very low price offers
marketing practices depart from standards that society available only when other items are purchased as well. Pro-
considers acceptable, the market process becomes less motion practices are deceptive when the seller intention-
efficient—sometimes it is even interrupted. Not employ- ally misstates how a product is constructed or performs,
ing ethical marketing practices may lead to dissatisfied fails to disclose information regarding pyramid sales (a
customers, bad publicity, a lack of trust, lost business, or, sales technique in which a person is recruited into a plan
sometimes, legal action. Thus, most organizations are and then expects to make money by recruiting other peo-
very sensitive to the needs and opinions of their cus- ple), or employs bait-and-switch selling techniques (a tech-
tomers and look for ways to protect their long-term nique in which a business offers to sell a product or service,
interests. often at a lower price, in order to attract customers who are

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 279