Ethical issues in marketing

Executive Summary

Is Marketing Ethics an Oxymoron?

Marketing is the mechanism primarily aimed at maximizing brand equity and customer value. This question has arisen due to the techniques employed by brand managers, who prefer short run gains and employ expedients to maximize sales. Many marketers have positioned their offerings in order to achieve maximum variable pay leading to agency problem. Therefore it becomes imperative to critically analyze marketing and ethical issues related to the practices.

Many would come up with a resounding 'Yes' when it comes to the question of Marketing and Ethics. We should explore the mindset of the marketers that whether they are really concerned with the welfare of the consumers or do they just target the 'bottom line' of the firm?

A very interesting example revolving around this issue is the goal of a Coca Cola brand manager in Swedish office, who would like to see consumers drinking Coke for breakfast instead of juice and other supplements. So the question arises- Is this in the best interest of the consumer?

Change is in the air and has been initiated in the outlook of the customers and the marketers toward the marketing profession; marketers need a holistic approach toward the end customer. Therefore it should be the top priority of the companies to consider the relationship with customers as paramount rather than obsession with their own goals.

Some experts may opine whether there is a place, for ethics in marketing or not. In discussing, concerns that consumers and advocacy, groups have with the apparent lack of concern for consumers', well being, we must address the challenges, that marketers have to 'self regulate' and become more, socially responsible. It is really no different to the expectations of every stakeholder: It is the responsibility of every one, in an organized society, to behave ethically. The trouble surrounding the marketing industry is that if there is no change in the ways marketers act and display more social responsibility, they are bound to be subjected to stringent government controls.

The ethics of marketing and its relationship with the customers forms a cornerstone to the success of the companies. It is natural that customers expect to be treated in a fair manner and with heed. Reliability of service, trustworthiness, responsiveness, understanding and reception of value addition to products are some of the important expectations of the end consumer. They do not, want, 'lip service', unrealistic, promises, or misleading, offerings. Those products which are inherently poor for the customers must be taken off the shelves as the consumer would never want a product/brand that does not add value to them. So there are ethical dilemmas for marketers to meet these expectations and the corresponding ethical implications are also grand.

Due to the ever-increasing influx of marketing professionals in this field and in particular 'information marketing' domain, these issues have to be addressed with priority. There needs to be, a new foundation for marketing and the ethical implications, of marketers targeting specific, groups or segments of customers. It's been a regular practice to service those customers who form the chunk of the total turnover of the organization, i.e. who provide the greatest returns to the company, most of the times to the exclusion of other segment of customers. The products have been positioned particularly for the most profitable customer. Is it the only goal of the firm to maximize profits to the exclusion of societal welfare? This tends to create a feeling of distrust and apathy for those customers who are second priority for the companies. They feel that marketers do not care after the product is sold. The directive of 'caveat emptor'- 'Let the buyer beware' should lose significance on account of value creation for the customers and increasing competition. In other words it should be the seller who must be aware that customers are not lost due to expedient marketing gimmicks.

It is not to undervalue the overall goal of the organization that the customers should be treated with priority and over-obsession with creating value for them. Firms should understand the needs and wants of the customer and simultaneously fulfill the organizational goals. This unfortunately, creates a conflict between, the priorities of the marketer, the needs and wants, of the consumer and, the goals of the organization (profits), and is the basis for much of the confusion and concerns, about ethical marketing practices.

To overcome the challenges of this phenomenon to the organizations and partly to the customers all the stakeholders must take a more comprehensive approach or rather an all encompassing view of the marketing process. Ethical decision making, for businesses will require, them to take an "enlightened self interest" approach, to serving the consumer, to insure that, there marketing practices are ethically sound.

It is also the responsibility, of the consumers to be more self aware and well-informed about, the product offerings, and selection of products, for, use and purchase decision. The customers who are well-informed and can rationalize market offerings should definitely research the products they buy. In addition they must be well aware, of their needs, as opposed to their wants, and consider appropriate decisions in line with their consumption of necessities. They say that in order for the consumers to expect firms to respect and heed them, and provide a level of service consistent with their needs, they must do a due diligence exercise and obviate being misled by the marketers

It is the service level which provides the consumers a bit extra offering than just the product itself. Partly that offering provides consumers with the assurance that the marketing conducted by the marketers to them is based on ethical principles. Two questions arise while dealing with this issue.

Do organizations; treat their customers, with respect?
Are they honest and forthright, in their communications, with consumers?

In this modern era people are becoming more aware of their consumer rights, further advocacy groups have been mounting pressure on firms and Government. This is bound to enhance the emphasis on the organizational priorities toward the relationship between their marketing programs and ethical implications which ensue.

A good example to note is the relationship between the consumer and the service provider in the services industry. It is good service level that matters the most, thus good service in addition to valuable product offerings prop the marketing efforts of the organizations. It is a proven fact that consumers will prefer other brands/products if they perceive of unethical treatment by a company. This results in a cascading effect wherein the affected customer, through word of mouth, provides negative feedback about the company's products and these result in reduction of customer base.

The information flow has also increased substantially in this internet and networking era, and people have access to new technologies. Thus in a very less time the current and prospective customers can have the feedback of a particular brand. The risk that organizations face by treating their customers/clients unethically is too great to let this happen. Thus poor and unethical marketing gimmicks reduce the brand loyalty in the long run.

Hunt-Vitel Model for Ethical Decision-Making

The diagram is an illustration of the Hunt-Vitel model to understand the ethics governing actions, which primarily impact macro marketing issues. The impact is studied through a correlation between an individual or an organization and the surrounding environment.

Cultural environment consists of religion, legal and political system. This is particularly responsible for rational decision-making on grounds of biases, faith etc and regard for the formal institutions of State.

Professional environment is molded by the interpersonal relations with the colleagues and subordinates etc in line with the senior management, mission and vision of the firm. It gives rise to informal and formal codes which guides personal actions. Professional conduct affects the decision-making process due to constructive politics of the organization.

Industry environment revolves around the organizational environment and due to competitive scenarios it has serious implications for actions of individuals and institutions.

Organizational environment is a product of professional and individual's environment. The culture of the firm as well as the visionary leadership together molds the environment and informal and tacit codes of the organization.

An important factor which guides ethical decision making is the personal characteristics of an individual. The components of personality like value system, belief and character impact the right decisions to a large extent.

There is a correlation between professional, organizational and industry environment which is shown in this model, which is treated as a system. So together with personal attributes the approaches to factor in are the perceived ethical considerations, and also the individual would weigh various probabilities and desirability of a particular course of action.

The prevailing code in the individual's environment gives rise to deontological approach to ethical decision making whereby a person considers the formal regulations and tries to act within the legal framework. These combining forces give rise to the individual's intentions which impacts his behavior.

This model is useful in explaining the moral considerations, ethical dilemmas and critical issues in Marketing Management which a marketer encounters based on competitive environment, his preference of furthering personal goals and to maximize the turnover of the organization by any means.

A framework for Ethical Conformity in Marketing

Stakeholders and the market in general expect firms to respond to ethically charged issues through their marketing practices and other behaviors. A few examples of ethically charged issues which have called for the attention of the firms are global warming, natural resource depletion, worldwide poverty, spread of disease, humongous accrual of human direct and indirect waste etc. Firms do respond to such concerns and a host of some normative concerns along a continuum with their practices, such is generally noticed in the market place.

In the case of ethical 'over conformity', firms exceed stakeholder expectations by adopting marketing programs and behaviors that go above and beyond what society has determined is acceptable. On the opposite end, firms choose 'under conformity' or a conscious subversion of ethical norms through a firm's marketing programs, activities, and behaviors. Conformity, which lies in between 'over conformity' and 'under conformity', is simply meeting society's ethical standard with the afore-mentioned marketing programs.

Ethics, by definition, blur the lines between actions and behaviors considered appropriate and acceptable, as well as both legal and moral. Society's ethical dimensions are in fact results of the laws and regulations prevailing in the society and in consonance with the formalized regulatory mechanism. Due to the overwhelming majority of various stakeholders demanding implementation of formalized actions, appropriate regulatory responses to correct certain ethical issues have evolved of late.

A good example of a marketing activity related to ethical dimensions is the use of RFID technologies to trace consumers without their cognizance, remain within the grey blurred area between regulations and acceptable levels of society. The socially normative influences shaping marketing ethics and other behaviors have often been linked to institutional factors. In practice as well practices and behavior of firms which have generated from the organizational environment occur in response to the norms of the society.

An institutional approach to understanding the organizational environment places a central emphasis on legitimacy concerns. Following this logic, a firm may conform with respect to its marketing practices in an effort to attain legitimacy given the social forces impinging upon it. Normative pressures evolving from the institutional environment are dispersed throughout the gamut of stakeholder groups, suggesting that a firm's behaviors and activities concern not only consumers and users of its products, but also society as a whole.

Institutional theory, in particular, implies tradeoffs that firms must make between conformity and differentiation. Indeed, if firms facing the same institutional constraints conform similarly to normative pressures, the collective of firms would approach a state of perfect competition where no firms possess competitive advantage through differentiation and all players compete for the same scarce resources.

Yet, although differentiation can be a vehicle through which firms accrue important resources and advantages, minimum acceptable levels of conformity are required for a firm to remain legitimate in the eyes of its many stakeholders. Based on these often contradictory objectives, firms strive to strike the ideal balance of differentiation and conformity in their marketing strategies and practices.

Marketing practices or behaviors that do not conform to normative expectations, therefore, deviate from ethical norms either by exceeding or falling short of them. So too with the environmental norms example, marketing practices have clearly deviated both negatively and positively in response. To illustrate, it has been suggested that General Motors lags behind its competitors in the development and production of fuel-efficient and hybrid vehicles, and continues to heavily market fuel-inefficient sport utility vehicles.

Conversely, automakers like Volkswagen and Toyota have been extolled for creating green technologies and for their promotion of clean and alternative energy sources.

The role of firm identity

Identity involves all that is central, distinctive, and enduring about a firm. It is the combinative construal of firm culture, history, structure, characteristics, status, and reputation with competitors, customers, stakeholders, and society at large. Identities impose patterns on the underlying social codes comprising the core of the firm. A firm's identity, moreover, is formulated and cemented over an extended period of time. Because it is comprised of both internal and self-reflective components as well as external construal of activities such as reputation and other external evaluations, identity provides a rich approach to understanding firm behavior.

According to institutional theory, firms morph to reflect core stakeholder preferences and values, as well as certain socially desirable characteristics of aspirational firms and competitors. Indeed, it has been shown that firms often engage in a degree of isomorphic behavior to attain legitimacy in the face of normative pressures.

However, in response to institutional norms, firms also largely draw from their unique identities and the more tangible manifestations of the identity such as structures, practices, and routines. Because each firm identity is comprised of a distinctive blend of culture, climate, firm history, and other internal and external influences, it is unlikely that two firms respond to institutional factors identically.

For example, for firms like Unilever that have demonstrated a commitment to ethics, internal elements of identity and external image construal interplay to influence the unique formulation and implementation of marketing programs as well as the marketing messages and communications conveyed by the firm.

It is these marketing activities and communication mechanisms and their resulting transient images that resonate with institutional actors and stakeholders, such as Unilever's Dove Brand and its "Campaign for Real Beauty" to promote healthy body images and build self-esteem among women.

For firms with ethics predominating in their identities, the internal value system and the construal of the image the firm seeks to project across all its constituencies, demands attention to ethical standards inculcated across its activities in the market interface. These firms' messaging and marketing activities manifest this value and belief regarding the importance of ethics in the firm's culture and cognitive systems. In contrast, firms that respond to social norms in an ethically neutral or perhaps unethical fashion, necessarily lack a similar prevalence of ethics in their identities.

Our framework evaluates the condition of firm response to ethically charged social norms as deliberate strategic choice, regardless of whether the prevalence of ethics in the firm identity is positive, negative, or neutral. From a strategic choice perspective, we cast both 'over conformity' and 'under conformity' as intentional outgrowths of the firm identity because that is how the firm sees itself, what the firm is, and what the firm seeks to project.

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