ETHICAL ISSUES IN MARKETING

 Mid-Term Exam

 Course: Seminar in Business Ethics & Social responsibility

 Supervised by: Dr. Enas Soliman

NAME Ahmed Hassan Ibrahim Elhadad

Registration No 19121356
Program MBA
Major: Strategic Management
Semester 4th
Group ST3

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Table of Content
SN Topic Page No.
01 What’s is Ethics 3 of 16
02 What is Marketing 3 of 16
03 Marketing Ethics 3 of 16
04 Marketing Ethics & Consumer Rights 3 of 16
05 Ethical Values 3 of 16
06 Why we need Ethics in Marketing 4 of 16
Ethics and Product decision 4 of 16
Ethics in Product /Package Strategy 5 of 16
Ethical Issues in Price 6 of 16
Ethical Issues in Promotion 7 of 16
07 Why We Need Ethics in Marketing Ethical Issues in Distribution 8 of 16
Ethical Issues in Marketing Research 9 of 16
Current ethical issues in marketing 10 of 16
Ethical Issues in International Marketing 10 of 16
8 Ethics compliance programs 12 of 16
9 Example of Organizations following ethical practices in marketing 12 of 16
10 Summary 15 of 16
11 REFERENCES 15 of 16

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3. What’s is Ethics?
3.1 Ethics is the art and science of determining good and bad or right and wrong moral behavior of a
single or group of people

4. What is Marketing?

4.1 Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of
a target market at a profit. - Philip Kotler

5. Marketing Ethics:

5.1 Marketing ethics concerns the application of ethical considerations to marketing decision making

5.2 Marketing ethics are principles that defines acceptable conduct in marketing which society
expect.

5.3 Marketing ethics can be considered as moral judgment and behavior standards in marketing
practice or moral code or system in marketing area .

5.4 Marketing ethics Marketers’ standards of conduct and moral values.

5.5  Many companies create ethics programs to train employees to act ethically.
5.6 Employees’ personal values sometimes conflict with employers’ ethical standards.
5.7 In other words, marketing ethics is the research of the base and structure of rules of conduct,
standards, and moral decisions relating to marketing decisions and practices .

6. Marketing Ethics & Consumer Rights

6.1 AMA has established a codes of ethics to provide guidelines for ethical conduct. It says, in part,
that “Marketers shall uphold and advance the integrity, honor and dignity of the marketing
profession, by being honest in serving consumers, clients, employees, suppliers, distributors,
and the public.”

7. Ethical Values
7.1 Honesty: to be truthful and forthright in our dealings with customers and stakeholders.

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7.2 Responsibility: to accept the consequences of our marketing decisions and strategies.

7.3 Fairness: to try to balance justly the needs of the buyer with the interests of the seller.

7.4 Respect: to acknowledge the basic human dignity of all stakeholders

7.5 Openness: to create transparency in our marketing operations.

7.6 Citizenship: to fulfill the economic, legal and societal responsibilities that serve stakeholders in a
strategic manner.

8. Why we need Ethics in Marketing?

8.1 When an organization behaves ethically, customers develop more positive attitudes about the
firm, its products, and its services.

8.2 When marketing practices depart from standards that society considers acceptable, the market
process becomes less efficient.

8.3 Not employing ethical marketing practices may lead to dissatisfied customers, bad publicity, a
lack of trust, lost business, or, sometimes, legal action. Thus, most organizations are very
sensitive to the needs and opinions of their customers and look for ways to protect their long-term
interests.

9. Ethical Issues in Marketing:

9.1 Marketing executives who take strategic decisions often face with ethical conditions and their
decisions is related to all sides of marketing mix as product, price, place and promotion .

9.2 Ethics and Product decision

9.2.1 Marketing executives face with a lot of ethical problems related to planning and application product
strategies. For example, in new product development process, since ethics and legal subjects are
discussed less than it is needed, faulty products are put on the market and so these products damage
consumers .

9.2.2 Other ethical issues related to product decisions, information on labels can sometimes be used as
deceptive although it is technically true , rubbish problem which packing cause after its usage , decline
of recalling of product although it is problematic, failing in terms of guarantee related to product and
performing planned product obsolence to shorten product life cycle.

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9.2.3 The application of different ethical approaches in product development organizations is likely to
influence the effectiveness and efficiency of product development .

9.2.4 This is based on the assumption that actions performed by individuals involved in product development
depend on the moral values that generally govern all areas of life.

9.2.5 Throughout history different ethical theories have been formulated and expressed. Five different moral
frameworks have been selected, described and analyzed from a product development perspective. The
five frameworks are :

 Utilitarianism : For each situation, actions should bring the most good for the most people, and both
immediate and long term effects should be considered.
 Liberty Right Ethics: The freedom to act for each individual should be respected. For the engineer,
this could mean that as long as the result of the work is leading to the common goal, the means to that
goal is a free choice for the engineer.
 Welfare Right Ethics: Transferred to a product development context, welfare rights ethics can imply
the support from the organization to the individuals that need assistance to be able to perform the task.

 Duty Ethics: The virtue ethics described by Florman put the emphasis on the loyalty to the employer
and on professionalism, but emphasis is on desirable features rather than on expected behavior.

 Ethical Egoism: Ethical egoism focuses on long term solutions that would maximize the benefit for
the individual performing the actions. Hence, care for others is not in focus, and for an engineer
developing functions for a product may not even care about the final product results. The goal would
be to make sure that the individual contribution is observed as excellent

9.3 Ethics in Product /Package Strategy

9.3.1 Example: Package strategy.
 Larger packages are more noticeable on the shelf.
 Oddly sized packages make price comparison difficult
 Actual versus apparent size
9.3.2 Example: Product strategy.
 Misleading or inadequate information

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 Excessive or environmentally-unfriendly packaging

 Product testing: on animals or insufficient testing to reveal safety concerns
 Marketing socially controversial products
 Marketing unsafe products

9.4 Ethical Issues in Price

9.4.1 Pricing is probably one of the most difficult areas of marketing when it is analyzed from the ethical

point of view.

9.4.2 Ethically, price should be equal or proportional to benefit which is taken by the consumers .

However, when monopolistic power is had, it is seen that unreasonable price increase is set .

9.4.3 Other ethical issues related to pricing include non-price price increases, misleading price reduction,

price advertisements which can be misleading or considered as deceitful and their limits are not

explained well, the practices of price fixing that affect the structure of competition, predatory pricing

which aims to have monopolistic position, discriminatory pricing, pricing applications of products

according to the products’ unit or quantity basis and practicing of misleading pricing methods (. They

are discussed below

 Price fixing: Price fixing can be defined as an agreement amongst several firms within the same
industry to standardize an offering price to become fixed. Furthermore, price fixing can occur when
firms aim to control factors and conditions within a specific market leading to control of the levels of
supply and demand which as a result can lead towards fixing prices.

 Predatory pricing: Predatory pricing refers to the adoption of a pricing strategy that aims to drive
competition out of market by selling below the expected cost of price, the adoption of such a strategy
can lead to creation of high entry barriers due to the unattractive profit rates by competing with

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existing firms in the market adopting such a strategy, it would make it difficult for competing firms to
sustain a healthy profitability or even can drive firms to be out of business.

 Deceptive pricing: Price deception can occur when firms provide signs of false communication
indicating for competitive pricing to enable gaining more credibility and market power which can lead
to firms’ ability to charge higher prices for offerings that include more signs than unsigned offerings,
this would discourage potential buyers from further search for more choices and increases the
probability of making a buying decision.
 Price discrimination: Price discrimination can occur when firms have a practice of charging different
prices for certain products and services that have the same descriptions such as quality and quantity to
different buyers in different markets . This type of pricing approach is widely adopted by service
providers such as transportations as they aim their offerings at different market segments..

 Penetration pricing: Price penetration is a pricing strategy adopted by firms to set a starting low price
to enable the most possible reach to the identified segments within a market and then to increase
gradually as sales increase .

 Unfair pricing: Unfair pricing can occur when unethical pricing techniques are adopted to influence
buyer’s decision making such as manipulation or availability of information. Unfair pricing also can
occur in the case of price gouging where prices are increased to the highest levels whilst consumers
are significantly dependent on it with limited choices available .

9.5 Ethical Issues in Promotion

9.5.1 Ethical issues related to promotion can be analyzed under two headings as advertising and personal
selling.
9.5.2 Ethical problems in advertising can be analyzed under two main headings: the content of advertising
message and agent/customer relationships .
9.5.3 The relationship between advertising and ethics can be analyzed from the point of view of persuasive
trait of advertising, deception, puffery and making promises that cannot be kept.
9.5.4 Other ethical issues related to advertising include advertising to children, demonstrations, mock-ups,
endorsements and testimonials .
9.5.5 Some areas of ethical issues in advertising and promotion are discussed below.

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 Issues over truth and honesty: In the 1940s and 1950s, tobacco used to be advertised as promoting
health. Today an advertiser who fails to tell the truth not only offends against morality but also
against the law. However the law permits "puffery" (a legal term). The difference between mere
puffery and fraud is a slippery slope: "The problem... is the slippery slope by which variations on
puffery can descend fairly quickly to lies."
 Issues with violence, sex and profanity: Sexual innuendo is a mainstay of advertising content, and
yet is also regarded as a form of sexual harassment. Violence is an issue especially for children's
advertising and advertising likely to be seen by children.
 Taste and controversy: The advertising of certain products may strongly offend some people while
being in the interests of others. Examples include: feminine hygiene products, hemorrhoid and
constipation medication. The advertising of condoms has become acceptable in the interests of AIDS-
prevention, but is nevertheless seen by some as promoting promiscuity. Some companies have
actually marketed themselves on the basis of controversial advertising - see Benetton. Sony has also
frequently attracted criticism for unethical content (portrayals of Jesus which infuriated religious
groups; racial innuendo in marketing black and white versions of its PSP product; graffiti adverts in
major US cities).
 Negative advertising techniques, such as attack ads: In negative advertising, the advertiser
highlights the disadvantages of competitor products rather than the advantages of their own. The
methods are most familiar from the political sphere.
 Deceptive advertising: when the consumer is led to believe something, which is not true Ex: gateway
computers (1998), full refund and onsite service
 Puffery: exaggerated claims of a product’s superiority statement that may not be literally true Ex:
movie (Tashan) and novel advertisements
 Cookies: small text files that automatically download to a user’s computer whenever that user visits a
Web Site and that is capable of gathering information on the user

 Bait-and-switch: Advertising one item at low prize (bait)>>>>customers into stores>>>>>>sale of

different product at higher price.(switch).Selling higher priced product is legal but advertising low
priced item is unethical

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9.6 Ethical Issues in Distribution:

9.6.1 The importance of ethical issues in channel management grows from multiple factors. The first is the
extent of cross-functional integration within, between, and among organizations required to
successfully manage distribution channels .
9.6.2 Such integration requires that (a) all members of the distribution channel have the same objectives and
be aligned to deliver customer value; (b) the relinquishment of control by traditional functional areas;
and (c) increased emphasis on relationship management , which may be less formal and more reliant on
trust and willingness to collaborate.

9.6.3 However, the development of the necessary relationships to achieve integration is difficult, and many
organizations are unaware of how power structures throughout the distribution channel may influence
performance

9.6.4 Slotting allowances: fee paid by manufacturer to retailer in exchange of keeping their product in their
shelves.
9.6.5 Grey market goods: foreign made products imported into countries by distributors that are not
authorized. Ex: selling electronics items
9.6.6 Exclusive territories: an area assigned by company to distributer in which no other distributer will
work.
9.6.7 To get good money from distributer & to create elite image Ex.Cadillac motors

9.7 Ethical Issues in Marketing Research:

9.7.1 Research Integrity including s such items as deliberately withholding information, falsifying figures,
altering re- search results, misusing statistics, ignoring pertinent data, compromising the design of a
research project, and misinterpreting the results of a research project with the objective of supporting a
predetermined personal or corporate point of view.
9.7.2 Marketing researchers often have access to data that are in some sense confidential. Sometimes a
researcher must balance what is fair to a competitor with what is best for one's own company. Most of
the confidentiality issues for agency researchers arise when they try to balance their obligations toward
different outside clients.

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9.7.3 Treating respondents fairly. It often stems from temptations to conceal from the respondent the
purpose or the sponsor of the research. Protecting the anonymity of the respondent also poses problems.
The ethical conflict usually centers on the researcher's attempts to balance the interests of the
respondent against the interests of the company. For example, a research manager for a publishing
company indicated her major problem as "concealing my firm's identity and involvement when doing
research." Another reported having "been asked to misrepresent myself for the sake of unbiased
information.

9.8 Current ethical issues in marketing

9.8.1 Tobacco advertising: Advertising of tobacco is not illegal in some country but it is unethical

 Ex: promotion of” CAMEL” with a cartoon joycamel

 State Govt of Minnesota's billboard

9.8.2 Alcohol advertising: Advertisement in the name of mineral water or club soda
 Ex: bagpiper

9.8.3 Despite the decrease in sales of hard liquor, there is an increase in alcoholic soft drinks.

9.8.4 These taste like colas or fruit juices but may contain more alcohol than beer does.

9.8.5 Advertising Aimed at children

9.8.6 Critics say continually bombarding towards children can alter their motivation and behavior
 Ex: selling of high calorie & fat containing food like pasta with offers
of free tattoo.

9.9 Ethical Issues in International Marketing:

9.9.1 Specific ethic problems that rise in international affairs are due to several factors, amongst

which:

 The diversity of political and law regulation systems.

 The diversity of economical organizing forms and levels of economic development.

 Insufficient regulations, especially in less developed countries.

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 Existing conflicts between national and regional economic interests.

 The influenced area and power of the multinational corporations, as well as their ability to elude law

regulations.

 Corruption in some areas of the world

9.9.2 In order to be able to respond to ethic challenges encountered in international marketing, managers

must understand the increasing complexity of the global business environment and its ethic issues and

to develop strategies for decision making and for forming and implementing corporate ethic policies,

keeping in mind the conditions imposed by the international business context.

9.9.3 There are differences between firms in how they approach the practice of ethical management. This

variation may be attributed to exogenous factors such as socio-cultural factors, and the type and

quality of the legal system, as well as endogenous factors such as the form of the organization and the

manner in which the relationships between the various stakeholders in the firm are defined .

9.9.4 The specialists have identified several types of companies, depending on the manner in which they are

dealing with the ethical problems :

 Social Purpose Firms – which are founded on the premise that a social problem will be solved, yet the

venture is for-profit and the impact on the market is typically perceived as economic.

 Traditional Firms – which focus primarily on economic mission. They have no explicit social mission

beyond running a good and profitable business through the exploitation of market- based

opportunities.

 Social Consequence Firms – similar to the traditional firm, except that many of their practices have

social outcomes, although these social outcomes are not the reason for the firm’s existence but an

outcome of doing business. The term corporate social responsibility most closely aligns with this form

of company.

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 Enterprising Nonprofits – which have earned income activities which very much apply the general

principles of entrepreneurship. Additionally, these organizations focus on growth and economic

sustainability, and may be funded by venture philanthropists. There are also hybrid forms that have a

combination of behaviors and characteristics that are found in more than one type

9.9.5 In international marketing, complexity rises from the combining of two or more national spaces, with

its specific restrictions and values, without eluding the international environment with its own

standards. The difficulty increases along with considering administrative, logistic and financial

techniques which are clearly less familiar than those of the national environment.

10. Ethics compliance programs

10.1 Development of code of ethics: Guidelines developed by companies to help employees to make
ethical decisions
 Ex: Dow’s code of business conduct includes ethical principles and policies to
deal with various issues

10.2 Consumerism: Social movements that protect consumers from harmful business practices
 Establishment of various act and legislations (cigarette labeling act 1966)

10.3 Green marketing: marketing of products and packages that are less toxic and recyclable.
 Ex: Aveda a skin care product manufacturer developed products without animal
contents and synthetic materials and recyclable packaging material.

10.3.1 Corrective advertising: advertising that clarifies previous deceptive claims

 Ex: Warner Lamberts corrective advertisement for LISTERINE mouthwash
“would not prevent colds or sore throat”

11. Example of Organizations following ethical practices in marketing

11.1 Warby Parker
11.1.1Warby Parker is a glasses manufacturer born out of frustration with the high prices of
prescription glasses—largely because of a virtual monopoly in the eyewear industry. Beyond
its commitment to providing eyewear at fair prices, Warby Parker practices ethical
marketing with its innovative “Buy-A-Pair, Give-A-Pair” program.

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11.1.2 The program operates on a simple concept: that everyone “has a right to see.” It delivers on this
concept by donating a pair of glasses to a person in need with every purchase. Warby Parker has
also established training resources—for giving basic eye exams and selling affordable
eyeglasses—in its outreach communities.
11.1.3In its decade of existence, this wide-reaching initiative has reached people in over 50 countries
so far. Since the COVID-19 pandemic, Warby Parker has shifted its “Give-A-Pair” program to
focus on providing personal protective equipment to healthcare workers and communities in
need.
11.1.4 In the age of COVID and well before, Warby Parker’s ethical marketing has been successful
because it includes the customer in the narrative. It positions the customer as an agent of social
responsibility and change. Warby Parker has been effective in enacting tangible social benefits
to needy communities, and it is able to provide confirmation of this benefit in emotionally
appealing content and marketing
11.2 TOMS
11.2.1  TOMS shoe company famous for its “One for One” ethical marketing, has donated over 100
million pairs of shoes since its inception in 2006. From the beginning, founder Blake Mycoskie
committed to donating shoes to children in need. Beyond creating a product with a very
recognizable style, he created an extraordinarily recognizable marketing model.
11.2.2While TOMS’ donation of shoes to millions of children is inspiring, its evolution beyond that
model is even more so. TOMS has pivoted its practices, noting on its About page, “While shoes
can have a big impact, we’ve learned that giving shoes and impact grants can have an even
bigger impact.”
11.2.3 It has thus shifted to donating $1 for every $3 the company earns as a response to the needs of a
complex and ever-changing world.
11.2.4TOMS now focuses its efforts on donating shoes and “impact grants” to partners who create
change in three areas:

 Creating a safe place to live.

 Supporting mental health.
 Fostering equal access to opportunity.

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11.2.5 TOMS’ development is expansive—its Giving Team partners with over 200 humanitarian organizations
in 80 countries worldwide. It has gone to great lengths to better understand the communities it serves and
has also expanded its partnerships to support endeavors ranging from medical care to safe and
sustainable water systems to mental health access.
11.2.6 TOMS’ growth has solidified its position as a socially responsible company, the name of which has
become synonymous with giving to those in need. TOMS is a masterclass in long-term ethical marketing
that incites tangible change.
11.3 Patagonia

11.3.1 Since 1985, Patagonia has been building its reputation as a socially responsible clothing company. With
its signature outerwear, Patagonia has been committed to a decades-long war against fast fashion.
11.3.2 Using campaigns like its famous “Don’t Buy This Jacket” ad, Patagonia’s ethical marketing approach is
multi-faceted:

 “1% for the Planet.” Patagonia puts its environmental consciousness on full display with their
“1% for the Planet” program. This marketing maneuver features a self-imposed “Earth tax,”
which the eco-conscious company donates to environmental nonprofits.
 “Wornwear.” Sharing similar sentiments to its “Don’t Buy” campaign, Patagonia’s “Wornwear”
program directly fights fast fashion. It encourages consumers to recycle and buy used garments,
all through their online store. This ends the fast fashion cycle and significantly reduces each
garment’s carbon, waste, and water footprint.
 “Activism.” Patagonia is a visible and vocal agent of change. It not only promotes social
activism; it helps connect consumers with activism in their local area on their Action Works page.
11.3.3 Patagonia has effectively woven ethical marketing into every fabric of its brand identity. This is clear
upon the first glance of its website and continues to be on every subsequent page.
11.3.4 Patagonia is a shining example of ethical marketing that is comprehensive, cohesive, and believable. This
socially aware organization has built trust with its customers through decades of activism and
commitment to change.
11.4 Everlane

11.4.1 Everlane, founded by Michael Preysman in 2010, is a clothing company that has made ethical
manufacturing its cornerstone. Everlane is as well known for its socially responsible practices as it is for
its popular vintage denim styles.
11.4.2 Centered around the premise, “We believe we can all make a difference,” Everlane outlines its principles
on a bold About page.
11.4.3 Pay special attention to its copy:

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 “Exceptional quality.” Everlane is committed to creating products that transcend fast fashion and
trends.
 “Ethical factories.” This clothing company goes into great detail about its production process and
promises a personal relationship with its factories—it audits its factories for fair wages, hours,
safety, and environmental impact.
 “Radical transparency.” Everlane’s boldest ethical marketing maneuver is its choice to reveal the
cost behind every product. It provides information on everything from the cost of materials to
labor to transportation.
11.4.4 Everlane’s ethical marketing is effective because of the definitive proof it provides. Not only does it
commit to social responsibility, it shows its work! The brand’s policy of “radical transparency” is indeed
radical—and bold. It details exactly what labor and materials cost and shows the customer how their
product is priced. This creates an incomparable sense of trust with customers.

12. Summary:
12.1 Ethics are applied to marketing mix. In case of product development, 5 different moral
frameworks are identified. They are utilitarianism: most good for the most people, liberty right :
freedom of workers, welfare right : support from organization, duty ethics: loyalty to employer and
ethical egoism : the individual contribution is observed as excellent . Price fixing, predatory pricing,
deceptive pricing, price discrimination, penetration pricing, and unfair pricing are responsible for
unethical pricing decision. Promotion is a major area of marketing mix which requires ethical
consideration. Issues such as truth and honesty in promoting goods, violence, sex and profanity in
advertising, negative advertising techniques should be considered in making ethical promotion
decision. The channel members play an important role in delivering value to the ultimate consumers.
Power relationship between manufacturer and channel members, trust among channel members and
coordination among channel members help to ensure to fulfill the goal of organization. Privacy and
confidentiality matter in case of direct marketing.

13. REFERENCES
13.1 Marketing by Solomon and Stuart 3rd edition
13.2 Marketing by Pride and Ferrel 10th edition
13.3 Marketing by Evans and Berman 8th edition
13.4 Marketing by Lamb and Hair 6th edition
13.5 Marketing Management by Kotler and Keller 13th edition
13.6 American Marketing Association (AMA). 2006a.

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13.7 Armstrong, R. W.: 1996, The Relationship Between Culture and Perception of Ethical Problems in
International Marketing, Journal of Business Ethics
13.8 Blankenship, A. B.: 1964, ‘Some Aspects of Ethics in Marketing Research’, Journal of Marketing
Research .
13.9 Bougulia Siham (2013). Marketing Mix-An Area of Unethical Practices, British Journal of Marketing
Studies,V-1
13.10 Carrigan, M., Marinova, S., & Szmigin, I. (2005). Ethics and international marketing research
background and challenges. International Marketing Review
13.11 Coney, Kenneth A. and John H. Murphy (1976), "Attitudes of Marketers Toward Ethical and
Professional Marketing Research Practices," in Proceedings: Southern Marketing Association, Henry
W. Naoh and Donald P. Robin, eds
13.12 Dean, J. (1976). Pricing Policies for New Products. Harvard Business Review.

13.13 Donaldson, T. (1989). The Ethics of International Business. New York: Oxford University Press

13.14 Elegido, J. (2011). The Ethics of Price Discrimination. Business Ethics Quarterly

13.15 Frazer, C. F.: 1979, ‘Advertising Ethics: The Role of the Educator’, Journal of Advertising

13.16 Jacoby, J.: 1994, ‘Ethical Issues in Consumer Research’, Advance in consumer research

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