Marketing Ethics

Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. Some areas of marketing ethics (ethics of advertising and promotion) overlap with media ethics.

 

Fundamental issues in the ethics of marketing

Frameworks of analysis for marketing Possible frameworks:

  • Value-oriented framework, analyzing ethical problems on the basis of the values which they infringe (e.g. honesty, autonomy, privacy, transparency). An example of such an approach is the AMA Statement of Ethics.
  • Stakeholder-oriented framework, analysing ethical problems on the basis of whom they affect (e.g. consumers, competitors, society as a whole).
  • Process-oriented framework, analysing ethical problems in terms of the categories used by marketing specialists (e.g. research, price, promotion, placement).

None of these frameworks allows, by itself, a convenient and complete categorization of the great variety of issues in marketing ethics.

 

Power-based analysis

Contrary to popular impressions, not all marketing is adversarial, and not all marketing is stacked in favour of the marketer. In marketing, the relationship between producer/consumer or buyer/seller can be adversarial or cooperative. For an example of cooperative marketing, see relationship marketing. If the marketing situation is adversarial, another dimension of difference emerges, describing the power balance between producer/consumer or buyer/seller. Power may be concentrated with the producer (caveat emptor), but factors such as over-supply or legislation can shift the power towards the consumer (caveat vendor). Identifying where the power in the relationship lies and whether the power balance is relevant at all are important to understanding the background to an ethical dilemma in marketing ethics.

 

Is marketing inherently evil?

A popularist anti-marketing stance commonly discussed on the blogosphere and popular literature is that any kind of marketing is inherently evil. The position is based on the argument that marketing necessarily commits at least one of three wrongs:

  • Damaging personal autonomy. The victim of marketing in this case is the intended buyer whose right to self-determination is infringed.
  • Causing harm to competitors. Excessively fierce competition and unethical marketing tactics are especially associated with saturated markets.
  • Manipulating social values. The victim in this case is society as a whole, or the environment as well. The argument is that marketing promotes consumerism and waste. See also: affluenza, ethical consumerism, anti-consumerism.
  • Marketing has a major impact on our self-images, our ability to relate to one another, and it ruins any knowledge and action that might help to change that climate.
  • Marketing/Advertising creates artificiality and influences sexual attitudes.

 

Specific issues in marketing ethics

Market research

Ethical danger points in market research include:

  • Invasion of privacy.
  • Stereotyping.

Stereotyping occurs because any analysis of real populations needs to make approximations and place individuals into groups. However if conducted irresponsibly, stereotyping can lead to a variety of ethical undesirable results. In the American Marketing Association Statement of Ethics, stereotyping is countered by the obligation to show respect (“acknowledge the basic human dignity of all stakeholders”).

 

Market audience

Ethical danger points include:

  • Excluding potential customers from the market: selective marketing is used to discourage demand from undesirable market sectors or disenfranchise them altogether.
  • Targeting the vulnerable (e.g. children, the elderly).

Examples of unethical market exclusion or selective marketing are past industry attitudes to the gay, ethnic minority and obese (“plus-size”) markets. Contrary to the popular myth that ethics and profits do not mix, the tapping of these markets has proved highly profitable. For example, 20% of US clothing sales are now plus-size. Another example is the selective marketing of health care, so that unprofitable sectors (i.e. the elderly) will not attempt to take benefits to which they are entitled. A further example of market exclusion is the pharmaceutical industry’s exclusion of developing countries from AIDS drugs.

Examples of marketing which unethically targets the elderly include: living trusts, time share fraud, mass marketing fraud and others. The elderly hold a disproportionate amount of the world’s wealth and are therefore the target of financial exploitation.

In the case of children, the main products are unhealthy food, fashionware and entertainment goods. Children are a lucrative market: “…children 12 and under spend more than $11 billion of their own money and influence family spending decisions worth another $165 billion”, but are not capable of resisting or understanding marketing tactics at younger ages (“children don’t understand persuasive intent until they are eight or nine years old”). At older ages competitive feelings towards other children are stronger than financial sense. The practice of extending children’s marketing from television to the schoolground is also controversial (see marketing in schools).

Other vulnerable audiences include emerging markets in developing countries, where the public may not be sufficiently aware of skilled marketing ploys transferred from developed countries, and where, conversely, marketers may not be aware how excessively powerful their tactics may be. See Nestle infant milk formula scandal. Another vulnerable group are mentally unstable consumers. The definition of vulnerability is also problematic: for example, when should endebtedness be seen as a vulnerability and when should “cheap” loan providers be seen as loan sharks, unethically exploiting the economically disadvantaged?

Chris Akabusi is the leading academic author of Marketing Ethics and his theories are widely debated.

 

Pricing ethics

List of unethical pricing practices.

  • Bid rigging
  • Dumping (pricing policy)
  • Predatory pricing
  • Price discrimination
  • Price fixing
  • Price skimming
  • Price war
  • Supra competitive pricing
  • Variable pricing

Ethics in advertising and promotion

 

Content

Ethical pitfalls in advertising and promotional content include:

  • 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.” See main article: false advertising.
  • Issues with violence, sex and profanity. Sexual innuendo is a mainstay of advertising content (see sex in advertising), 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 are 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: see negative campaigning.

 

Delivery channels

  • Direct marketing is the most controversial of advertising channels, particularly when approaches are unsolicited. TV commercials and direct mail are common examples. Electronic spam and telemarketing push the borders of ethics and legality more strongly.
  • Shills and astroturfers are examples of ways for delivering a marketing message under the guise of independent product reviews and endorsements, or creating supposedly independent watchdog or review organisations. For example, fake reviews can be published on Amazon. Shills are primarily for message-delivery, but they can also be used to drive up prices in auctions, such as Ebay auctions.

 

The use of ethics as a marketing tactic

Business ethics has been an increasing concern among larger companies, at least since the 1990s. Major corporations increasingly fear the damage to their image associated with press revelations of unethical practices. Marketers have been among the fastest to perceive the market’s preference for ethical companies, often moving faster to take advantage of this shift in consumer taste. This results in the expropriation of ethics itself as a selling point or a component of a corporate image.

  • The Body Shop is an example of a company which marketed itself and its entire product range solely on an ethical message.
  • Greenwash is an example of a strategy used to make a company appear ethical when its unethical practices continue.
  • Liberation marketing is another strategy whereby a product can masquerade behind an image that appeals to a range of values, including ethical values related to lifestyle and anti-consumerism.

“Liberation marketing takes the old mass culture critique — consumerism as conformity — fully into account, acknowledges it, addresses it, and solves it. Liberation marketing imagines consumers breaking free from the old enforcers of order, tearing loose from the shackles with which capitalism has bound us, escaping the routine of bureaucracy and hierarchy, getting in touch with our true selves, and finally, finding authenticity, that holiest of consumer grails.” (Thomas Frank)

 

Marketing strategy

The main theoretical issue here is the debate between free markets and regulated markets. In a truly free market, any participant can make or change the rules. However when new rules are invented which shift power too suddenly or too far, other participants may respond with accusations of unethical behaviour, rather than modifying their own behaviour to suit (which they might not be able to anyway). Most markets are not fully free: the real debate is as to the appropriate extent of regulation.

Case: California electricity crisis, which demonstrates how constant innovation of new marketing strategies by companies such as Enron outwitted the regulatory bodies and caused substantial harm to consumers and competitors.

A list of known unethical or controversial marketing strategies:

  • Anti-competitive practices
  • Bait and switch
  • Planned obsolescence
  • Pyramid scheme
  • Vendor lock-in / Vendor lock-out
  • Viral marketing / guerilla marketing

Controversial marketing strategies associated with the internet:

  • Embrace, extend and extinguish
  • Search engine optimisation
  • Spamdexing
  • Spyware / Adware

 

Further issues in marketing ethics

Marketing ethics overlaps with environmental ethics in respect of waste problems associated with the packaging of products.

Some, such as members of the advocacy group No Free Lunch, have argued that marketing by pharmaceutical companies is negatively impacting physicians’ prescribing practices, influencing them to prescribe the marketed drugs rather than others which may be cheaper or better for the patient.

Ethically thinking is responding to situations that deal with principles concerning human behavior in respect to the appropriateness and inappropriateness of certain communication and to the decency and indecency of the intention and results of such actions. In other words, ethics are distinctions between right and wrong. Businesses are confronted with ethical decision making every day, and whether employees decide to use ethics as a guiding force when conducting business is something that business leaders, such as managers, need to instill. Marketers are ethically responsible for what is marketed and the image that a product portrays. With that said, marketers need to understand what good ethics are and how to incorporate good ethics in various marketing campaigns to better reach a targeted audience and to gain trust from customers.

Marketing ethics, regardless of the product offered or the market targeted, sets the guidelines for which good marketing is practiced. When companies create high ethical standards upon which to approach marketing they are participating in ethical marketing. To market ethically and effectively one should be reminded that all marketing decisions and efforts are necessary to meet and suit the needs of customers, suppliers, and business partners. Ethical behavior should be enforced throughout out company culture and through company practices.

 

Regulation and enforcement

Marketing ethics and marketing law are related subjects. Relevant areas of law include consumer law which protects consumers and antitrust law which protects competitors – in both cases, against unethical marketing practices. Regulation extends beyond the law to lobbies, watchdog bodies and self-regulatory industry bodies.

  • Advertising regulation
  • Consumer protection