Flashcards in MARKETING WEEK 3 ETHICAL ISSUES WITH MARKETING MIX Deck (35)
Moral principles and values that govern the actions and decisions of an individual or group.
DEFINE BUSINESS ETHICS
Moral principles and values that guide a firm’s behaviour – for example poor ethics is the use of child labour and forced labour whereas good ethics..
DEFINE MARKETING ETHICS
Moral principles and values that guide behaviour within the field of marketing and cover issues such as product safety, truthfulness in marketing communications, honesty in relationships with customers and distributors, pricing issues and the impact of marketing decisions on the environment and society.
WHAT ARE SOME OF THE MAIN AREAS OF MARKETING ETHICS?
Marketing mix effects on consumers, societal issues, environmental issues, political issues.
WHAT HAVE BEEN RESPONSES TO ETHICAL ISSUES?
Societal responses: Consumerism, environmentalism, ethical consumption
WHO ARE TH TOP 5 BEST CSR REPUTATIONS IN THE WORLD?
What are some ethical issues with distribution?
-Restriction in supply
What are slotting allowances?
Power shift from manufacturers to retailers. A fee paid to retailer in an agreement to place product on the retailers shelves. Critics argue that smaller companies cannot compete. Retailers argue that they are simply charging for a scarce commodity, shelf space.
What are Grey Markets?
Occur when a product is sold through an unauthorised distribution channel. e.g sourcing abroad and selling brand names in discount stores. Tesco was recently in a law suit with Levi jeans for sourcing low priced levi jeans abroad and selling them in the UK for an undercut price of their competitors. Levi claimed that this undermined the exclusive nature of their brand and was damaging. Supporters of grey markets claim that they encourage competition and offer more choice for consumers.
Explain restrictions in supply
Small suppliers concerned that large manufacturers and retailers will squeeze them out of the supply chain. France combats this by having law that requires 10% of shelf space for small suppliers.
Explain fair trading
Free market forces - small commodity producers faced with large powerful suppliers results in very low prices. Often suppliers in developing countries hardest hit by this trend. Clothing brands such as Nike and Primark have been criticised for their treatment of their suppliers in developing countries.
MAIN ETHICAL ISSUES WITH DIRECT (PERSONAL) COMMUNICATIONS
The hard sell
Explain the issue of deception
Challenged with telling whole truth and risk loosing sale or misleading the customer to clinch it. Forms of deception include exaggeration, lying, or withholding important info that could reduce appeal.
Example of deception
Lloyds TSB paid out £500 million in compensation for mis-selling endowment mortgages.
The hard sell
High pressurised tactics often used to press a customer to make a quick decision. This can be a particular problem when the sale is for a very expensive product such as a car than can require careful credit planning on the part of the consumer.
The act of giving payment, gifts or other inducements in order to secure a sale. They are seen to violate principle of fairness in commercial negotiations. A major problem faced by companies is the varying culture and acceptance of bribes in different countries. in one country bribes are looked down upon whereas in another country they may be common business practice. International businesses have a challenge to successfully navigate this issue ethically without suffering commercially in the short term.
Explain reciprocal buying
When a customer only agrees to purchase something from a supplier if that supplier agrees to purchase something from the buyer. While many argue that it undermines the principle of fairness as not all supplier are in a position to return purchase, it can work in favour of some buyers who do not have cash but would be able to offer goods as part of the 'payment'. Some see it as a return to rudimentary trading systems where money was not the main focus of trading.
WHAT ARE THE MAIN ETHICAL ISSUES WITH ADVERTISING?
-Advertising to children
-Advertisings influence on societie's values
-Promoting anti-social behaviour
-Use of trade inducements
Explain advertising to children issue
Critics argue that children are especially susceptible to persuasion and therefore need special protection from advertising. Others claim children are remarkably streetwise and can look after themselves.
Restrictions on what type of products may be advertised to children, where and when are in place in many developed countries.
Toy, clothing and entertainment product advertising has been criticised for encouraging 'pester-power' and leading to family conflicts.
It is important to note, advertising may only be part of the issue because many products are bought for and by children with little or no advertising.
Explain the issue of misleading advertising
Exaggerated claims and concealed facts. find other than textbook examples.
Explain advertising's influence on society's values.
Many claim that advertising promotes materialism by stressing the importance of material possessions.
Explain promoting anti-social behaviour
Drinks promotions in pubs and clubs for example may lead to excessive drinking, increased violence and long-term health problems.
Explain the use of trade inducements
Retailers sometimes accept inducements from manufacturers to encourage their salespeople to push their products. This often takes the form of bonus payments to salespeople. Salespersons then have an incentive to focus on certain product lines when dealing with customers.. customers may then be poorly advised as to the best product for them.
WHAT ARE SOME ETHICAL ISSUES SURROUNDING PRICING STRATEGIES
-Penetration pricing and obesity
Explain price fixing
A major driving force of lower prices is competition. Producers may then see it as beneficial not to compete on price. This is an act of collusion and is banned in many countries including in the EU.
Explain predatory pricing
Firm cuts its prices with the aim of driving out competition. The intent is to potentially suffer initial loss but then increase profitability after competition is removed. Small companies are particularly vulnerable to predatory pricing because they have less retained profit and other revenue streams to rely on to survive a price war.
Explain deceptive pricing
When customers are mislead by price deals offered by companies. Examples include misleading price comparisons. When a store sets artificially high prices for a short time in order to later claim 'lower' sale prices. Some countries have laws stating the minimum period over which the regular price should be charged before it can be used as a reference price in a sale.
Explain penetration pricing and obesity
Controversial issue occurs when businesses such as fast food companies offer low prices on fatty foods to young people which is then claimed to contribute to obesity.
This claim is rebutted by critics who claim that such consumers should be able to make informed decisions considering the amount of healthy eating promotion in the media. It has become common knowledge that fatty foods are unhealthy.
This occurs when a supplier offers better price to one buyer and not to another. Very commonly used when age is a differentiating factor.
This practice can be justified, however, when the cost of supplying different customers varies, where the price differences reflect different levels of competition and where different volumes are purchased.