Chapter 5

Business Ethics in Marketing

5.1. Introduction
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 organizations responsible for those are ethical.
In response to this consumer demand organizations have increased their focus on
ethical marketing.
When companies are reviewing marketing strategies they need to consider
whether their marketing decisions are ethical and reflect consumer and market
expectations
Marketing ethics addresses principles and standards that define acceptable
conduct in the market place. Marketing ethics also refers to the marketers’
standards of conduct and moral values.
Ethical Marketing is an honest and factual representation of products/services
delivered in a framework of cultural and social values for the consumer.
Marketing usually occurs in the context of an organization, and unethical activities
usually develop from the pressure to meet performance objectives.
Some obvious ethical issues in marketing involves clear cut attempts to deceive or
take advantage of a situation. 1
5.2. The Major Ethical Issues in Marketing Decisions
Ethical issues in marketing arise from the conflicts and lack of agreement on
particular issues.
Parties involved in marketing transactions have a set of expectations about how
the business relationships will take shape and how transactions need to be conducted
Each marketing concept has its own ethical issues. In this section we will see the
major areas in marketing arise ethical issues
1. Ethical Problems in Market Research
Market research has experienced a resurgence with the widespread use of the
Internet and the popularity of social networking.
It is easier than ever before for companies to connect directly with customers and
collect individual information that goes into a computer database to be matched with
other pieces of data collected during unrelated transactions.
The way a company conducts its market research these days can have serious
ethical repercussions. Some of the ethical issues in marketing research include:
Invalid or unreliable research studies
Invasion of consumer privacy, not respecting confidentiality
Failure to secure voluntary and informed participation
Competitive intelligence gathering

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2. Ethics in Advertising and Promotion
In the early days of existence of corporations, especially during 1940s and 1950s,
tobacco was advertised as a substance that promotes health.
Of late, an advertiser who does not meet the ethical standards is considered an
offender against morality by the law. This days the most common ethical concern in
promotion include:
Deception: The American Federal Trade Commission (FTC) defines deception as
“a misrepresentation, omission, or practice that is likely to mislead the consumer
acting reasonably in the circumstances, to the consumer’s detriment”. Examples:
Overstating a product’s feature or performance.
Deception in advertising can be either an exaggeration of products’ attributes (for
example, a shampoo that helps fighting dandruff in 2 weeks whereas results are
significant only after one month) or
a unrealistic statement about products’ performance (for example, a pill that would
help lose 30 Lbs. in one week).
Sexuality is a major point of discussion when ethical issues in advertising content
are considered.
Violence is also an important ethical issue in advertising, especially where
children should not be affected by the content.
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Ethics in Advertising and Promotion…….Cont’d
Some select types of advertising may strongly offend some groups of people even
when they are of strong interest to others.
Female hygiene products as well as hemorrhoids and constipation medication are
good examples.
The advertisements of condoms are important in the interest of AIDS-prevention,
but are sometimes seen undesirable and strongly condemned in various societies.
A negative advertising policy lets the advertiser highlight various disadvantages
of the competitors’ products rather than showing the inherent advantages of their
own products or services.

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3. Ethics in Delivery or distribution Channels
Ethical concerns are sometimes linked with the segmenting, targeting and
positioning process.
Efforts to target consumer populations can be subject to unethical attitudes
particularly vulnerable consumer populations, such as children, the poorest
minorities, and the uneducated.
Marketing to children also raises ethical concerns. children cannot really make
fully-informed choices or they can be flooded with marketing material that is going
to alter their behavior.
Direct marketing is one of the most controversial methods of advertising channels,
especially when the approaches included are unsolicited. Some common examples
include TV and Telephonic commercials and the direct mail.
Electronic spam and telemarketing also push the limits of ethical standards and
legality in a strong manner.

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6. Pricing Ethics
Marketers should be allowed to charge any price they want provided there is no
price discrimination among consumers and that prices are all inclusive.
However, too high prices are not ethical, when they do not reflect the existing cost
structure but are a means to take advantage of consumers.
This is especially true in the case of monopolies, oligopolies or cartels. Besides,
advertised prices should always be realistic prices that consumers will find in
stores.
The odd-pricing and partitioned prices practices can also be questionable on
ethical grounds.
The major areas of pricing considered unethical and illegal include:
Deceptive Pricing: Where a salesperson tries to influence customers to buy a
higher-priced item.
Price Discrimination: if similar buyers are charged different prices for the same
based on their ability to pay.
Price fixing: It is an agreement among firms in an industry to set up prices at
certain levels. Two types of price fixing:
Bid rigging is a commercial contract is promised to one party, however, for the
sake of appearance several other parties also present a bid.
Predatory pricing is the practice of sale of a product at a negligible price,
intending to throw competitors out of the market, or to create barriers to entry. 6
7. Ethics in product/package strategy
Marketers are supposed to identify and satisfy needs of consumers.
Products/services design and performance related ethical concerns include:
When Products offered do not always contribute to satisfying existing needs
but sometimes create new needs through the promotion of materialism.
It appears not to be ethical from marketers to forget the first role of marketing
at the benefit of mercantilism.
Products not made well or products delivering little benefit or less benefit than
promised are commonplace criticism made to marketers.
More questionable is the case of harmful products due to poor design or lack
of quality.
Marketers should refer to the maxim ‘Do unto others, as you would have them
do unto you’ to judge whether a product is acceptable or not.
Moreover, pre-tests should be conducted to ensure the compliance of products
to safety standards.
Packaging can also be a source of ethical concerns. For Example:
Exaggerating packaging (for example through design) or misleading labels
Excessive or environmentally-unfriendly packaging

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3.3. Marketing Ethics and Consumer Rights (Protection)
Another core aspect of market ethics is the evaluation made with regard to the
place market structures provide for the interest of consumers or clients.
Although the actors in the market include both the business and the consumer,
taking in to account the weak bargaining force of the consumer constitute the issue
of consumer protection from market failure becomes essential.
Generally four approaches exist: market approach, contractual approach, due
care approach and social cost approach.
1. Market approach- consumer safety is seen as a good that is most efficiently
provided through the mechanism of free market.
Such is carried out by making producers and sellers respond to consumer demand.
Critics claim the ineffectiveness of such approach by pointing the complexity of
products to be understood by consumers because of:
failure of markets in providing consumers with full product information either
from negligence or business secrete.
As profit oriented entities businesses will obviously prioritize gain than consumer
interest.
Hence one cannot expect corporations to respond to consumer safety issues by
their own initiative at all times

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Marketing Ethics and Consumer Rights…….Cont’d
2. Contract approach- The relationship between a firm and a consumer is
essentially a contractual one.
Whether oral or written every business transaction in the modern era presupposes
the existence of contractual agreement between parties.
A firm’s moral duty emanate from the terms of the contract. Usually contractual
terms are expected to incorporate issues in connection to:
a)Duty to comply to contract terms- contract terms will create moral obligation on
the business to guarantee:
the reliability of product sold,
issues in connection to maintainability,
the duration of service life of the good and
safety of the product under transaction.
a)Duty to disclose product nature- moral obligation on the side of producer or
seller to explain in explicit terms the nature and characteristic of the product.
b)Duty to avoid misrepresentation- the moral obligation not to fraud or lie to the
consumer on subject matter of contract.
c)Duty to avoid duress and undue influence- moral obligation not to use force,
threat of force or any related power in connection to the contract

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Marketing Ethics and Consumer Rights…….Cont’d
3. Due care approach- manufacturers and sellers of a product have a moral
obligation to ensure consumers are not harmed as a result of the product they put to
market much stronger.
The due care theory expects a moral obligation from the business person in areas
of product design, production and information.
These three are of paramount importance in reducing complaints likely to arise
from consumers hence putting firms in a better moral standing.
4.Social cost view- claims a business should pay the cost of any injuries sustained
from any defect of a product even when they have taken all due care.
By widening the scope of responsibility it acts as a precautionary call for
businesses to take the utmost possible care regarding their product so that a high
level of consumer protection is achieved.
businesses will be liable even in the absence of clear fault so long as the injury is
sustained to a consumer in relation to the use of their products or services.
This notion of strict liability is the best protection provided for consumers of all
the four approaches.
The issue of consumer protection is not only an academic phenomena.
There are laws and regulations generally designed to protect the consumers from
unethical practices by businesses.
These laws and regulations recognize that consumers have certain basic rights 10 in
the market place.
Marketing Ethics and Consumer Rights…….Cont’d
Political-legal environment component of the marketing environment consisting of
laws that require firms to operate under competitive conditions
The UN has developed a consumer protection guideline to be followed by its
members by addressing the following points:
a)The right to safety: to be protected against products, production processes, and
services which are hazardous to health or life.
b)The right to be informed: To be given facts needed to make an informed choice,
and to be protected against dishonest or misleading advertising and labeling.
c)The right to choose: to be able to select from a range of products and services,
offered at competitive prices, with an assurance of satisfactory quality.
d)The right to be heard: to have consumer interests represented in the making and
execution of government policy, and in the development of products and services
e)The right to satisfaction of basic needs: to have access to basic essential goods
and services, adequate food, clothing, health care, education and sanitation.
f)The right to redress: to receive a fair settlement of just claims, including
compensation for misrepresentation, shoddy goods or unsatisfactory services.
g)The right to consumer education: to acquire knowledge and skills needed to
make informed, confident choices about goods and services
h)The right to a healthy environment: to live and work in an environment which
is non threatening to the well- being of present and future generations. 11
Marketing Ethics and Consumer Rights…….Cont’d
Ethiopian consumer protection law has also recognized the need to protect the
consumers from harmful acts of the business.
It has explicitly stated the following as rights of the consumer:
a)The right to get sufficient and accurate information or explanation as to the
quality and type of goods and services one purchases
b)The right to purchase goods and services on the basis of personal choice
c)The right not to be forced to purchase because one bargained on price or looked
in to quality or option of goods and services
d)The right to be received humbly and respectfully by any business person and
to be protected from such acts as insult, threat, frustration and defamation
e)The right to claim compensation or related rights thereof from manufacturers,
importers, wholesalers or retailers for damages suffered because of purchase or use
of goods and services.
On top of these, the law makes it a duty on businesses to:
display price of goods and services,
to affix labels related to the name of good, made in, content, expiry date and the
like on goods.
When a consumer faces a defective good or service within 15 days of purchase,
he/she is entitled to report to a government organ enabling good replacement,
service redelivery free of charge or refund of purchase price from the business. 12
3.4. The 10 Principles for Ethical Marketing Practices
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.

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