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2 Ethical Considerations in Business-to-Business Marketing McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Agenda Marketing Ethics: An Overview Marketing Strategy and Ethics An Ethical Issue: The Organizational Buying Function and Buyer-Seller Relationships Ethical Issues in Marketing Research Ethics and the Management of the Pricing Function Ethics and Sales Force Management Ethics and Advertising Strategy 2-2 Marketing Ethics: An Overview Marketers must be capable of formulating and implementing policies based not only on economic reasoning, but on ethical and professional values as well. Influencing factors: • Individual factors – attitudes and values. • Opportunity presenting itself - likelihood of punishment, no professional codes of ethics, no corporate policies to discourage unethical decision making. • Values, attitudes, and behaviors of others – “culture” as illustrated by peers, supervisors, top management. 2-3 Marketing Ethics: An Overview A Reputation for Integrity Takes years to earn. Takes one bad decision to destroy. Once a bad decision is made, it is often impossible to reverse and may end business relationships. 2-4 Marketing Ethics: An Overview Respect, Honor, Integrity How would you feel about working for someone who had no integrity? How would you feel about purchasing important products from someone with no integrity? How would you feel about having people with no integrity working for you (where you are responsible for what they do)? 2-5 Marketing Ethics: An Overview Ethics in the Future Businesses are increasingly operating as part of society, not only in their traditional role of improving standard of living (by generating jobs, offering products and services, and paying taxes), but also via a sensitivity that supports employees, empowers customers and investors, and deals with needs of local, national, and international communities. 2-6 Marketing Ethics: An Overview What Does Ethics Involve? • Three Views on Corporate Management Responsibility Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free-market system, not with managers or organizations. 2-7 Marketing Ethics: An Overview What Does Ethics Involve? • Three Views on Corporate Management Responsibility (con’t.) Hand of government: Corporation has no moral responsibility beyond legal obedience. Regulatory hand of law and political process turn these objectives into common good. Hand of management: Encourages corporations to exercise independent, noneconomic judgment over matters of morals and ethics that face them. 2-8 Marketing Ethics: An Overview Sample Corporate Code of Ethics Integrity and ethics exist in the individual or they do not exist at all. They must be upheld by the individual or they are not upheld at all. In order for integrity and ethics to be characteristics of this company, we who make up the corporation must strive to be honest and trustworthy in all our relationships. . . (Courtesy of Boeing Company) 2-9 Marketing Strategy and Ethics Business Ethics is Not a One-Sided Proposition • Buying Centers may be faced with: Participating in collusive bidding Placing restrictive conditions when defining specifications Overestimating demand to receive a price concession Purchasing “sample order” that are magnified Burying obscure contract clauses in small type Accepting bribes or gifts 2-10 Marketing Strategy and Ethics Business Ethics is Not a One-Sided Proposition •Sellers may be faced with: Overselling Promising more than can be delivered Exaggerated claims and lying Failing to keep confidences or promises Accepting bribes or gifts Offering inappropriate or illegal entertainment 2-11 Ethical Issues in Marketing Research Society’s rights • The right to be informed of research results that may impact society as a whole • The right to expect objective research results Clients’ rights • The right to confidentiality • The right to expect quality research Researcher’s Rights • The right for protection against improper solicitation of proposals • The right to accurate presentation of findings • The right to confidentiality of proprietary information on techniques 2-12 Ethics and the Management of the Pricing Function Setting an unfair price Altering product quality without changing price Practicing price discrimination with smaller accounts Price fixing 2-13 Ethics and the Management of the Pricing Function Typical Examples of Antitrust Violations • Bid Rigging • Price Fixing • Tying • Market Allocations • Using a Competitor’s Quote to Requote or Rebid • Reciprocity 2-14 Ethics and Sales Force Management Ethics in Dealing with Customers • Taking Bribes – should be refused tactfully • Accepting or Giving Gifts – may or may not be improper • Entertainment – may or may not be improper • Reciprocity – giving preference to a supplier who is also a customer 2-15 Ethics and Sales Force Management Ethics in Dealing with Employers • Moonlighting - Holding more than one job. • Changing jobs to a competitor - May unavoidably involve taking company training, customer knowledge, customer goodwill, or confidential information. • Expense Accounts - Present special temptations and are most frequent areas for ethical abuse. • Contests - May result in stockpiling orders until contest begins, selling unneeded products to friends for later return, overselling. 2-16 Ethics and Advertising Strategy Truth in Advertising • It is immoral to: Lie, mislead, or deceive in advertising. Fail to indicate dangers that are not normally expected. • It is not immoral to: Use a metaphor or other figure of speech if these will be understood as figurative language. Persuade as well as to inform. 2-17 Ethics and Advertising Strategy Comparative advertising • If comparisons are made, then they must be accurate. • Care must be taken not to imply that if a product is superior to competition in one characteristic, then it is superior overall. • Better to point out competitive differences, leaving business customer to judge superiority of product. 2-18