Download Chapter 20: Marketing and Society: Social Responsibility and

Chapter 20: Marketing and Society: Social Responsibility and
Marketing Ethics
What's Ahead
Social Criticisms of Marketing
Marketing's Impact on Individual Consumers
Marketing's Impact on Society as a Whole
Marketing's Impact on Other Businesses
Citizen and Public Actions to Regulate Marketing
Consumerism
Environmentalism
Public Actions to Regulate Marketing
Business Actions Toward Socially Responsible Marketing
Enlightened Marketing
Marketing Ethics
Chapter Wrap-Up
What's Ahead
When Ben Cohen and Jerry Greenfield first met in the seventh grade, they were, by their own
admission, the "two slowest kids round the track." However, in 1978, after staring a life of mediocrity
full in the face, the two friends decided to try something different. They took a $5 correspondence
course on making ice cream, borrowed $12,000, and started their own scoop shop—Ben & Jerry's
Handmade—in an abandoned gas station in Burlington, Vermont. The rest, as they say, is history.
Two decades later, despite many growing pains, Ben & Jerry's has become the nation's number-two
superpremium ice cream brand, with a 39 percent market share that trails only Häagen-Dazs's 43
percent share. Last year, Ben & Jerry's sold more than $209 million worth of ice cream and frozen
yogurt products through supermarkets, convenience stores, and 150 Ben & Jerry's scoop shops around
the country.
Why the strong appeal? For one thing, Ben & Jerry's is a master at creating innovative flavors such as
Rainforest Crunch, Cherry Garcia, Chocolate Chip Cookie Dough, Phish Food, Chunky Monkey, and
Chubby Hubby. Moreover, the company has taken on the appealing, laid-back personality of its
founders. "If you passed [Ben and Jerry] in the street," notes one industry observer, "with their sloppy
T-shirts and portly figures. . . , you'd probably think they were a couple of Grateful Dead roadies.
[Under their leadership, Ben & Jerry's] markets its products with a combination of down-home hippie
folksiness and 'right-on' credibility."
But behind the creative flavors and folksy image, Ben & Jerry's is a company that cares deeply about
its social responsibilities. The company's mission statement challenges all employees, from top
management to ice cream scoopers in each store, to include concern for individual and community
welfare in their day-to-day decisions. It reads as follows:
Ben & Jerry's is dedicated to the creation and demonstration of a new corporate concept of linked
prosperity. Our mission consists of three interrelated parts: Product: To make, distribute and sell the
finest quality all natural ice cream and related products in a variety of innovative flavors made from
Vermont dairy products. Economic: To operate the company on a sound financial basis of profitable
growth, increasing value for shareholders, and creating career opportunities and financial rewards for
our employees. Social: To operate the company in a way that actively recognizes the central role that
business plays in the structure of society by initiating innovative ways to improve the quality of life of
the broad community—local, national, and international. Underlying the mission of Ben & Jerry's is
the determination to seek new and creative ways of addressing all three parts, while holding a deep
respect for the individuals, inside and outside the company, and for the communities of which they are
a part.
The notion of linked prosperity—also called values-led business or caring capitalism—forms the heart
and soul of the company. Ben & Jerry's aims to do well while also doing good.
Ben & Jerry's does more than just pay lip service to social and environmental concerns—the mission
also translates into specific company policies and actions. For example, whereas the average U.S.
corporation earmarks less than 2 percent of pretax profits to philanthropy, Ben & Jerry's has a set
policy to donate a whopping 7.5 percent to a variety of social and environmental causes (last year that
amounted to about $792,600). The funds are dispensed through the Ben & Jerry's Foundation,
employee Community Action Teams, and corporate grants made by the company's Director of Social
Mission Development. Each supports projects that exhibit "creative problem solving and hopefulness .
. . relating to children and families, disadvantaged groups, and the environment."
The company routinely assesses the environmental and social impact of almost everything it does. For
example, it buys only hormone-free milk and cream and uses only organic fruits and nuts. After two
years of research, Ben & Jerry's last year switched to a new, environmentally friendly pint container
they call the Eco-Pint. Its Rainforest Crunch ice cream contains Brazil nuts harvested by cooperative
farms benefiting tribal peoples in the Amazon rain forests. Closer to home, Ben & Jerry's recently
sponsored a concert in Burlington, Vermont, by rock band Phish to raise money to clean up Lake
Champlain.
Ben & Jerry's also goes to great lengths to buy from minority and disadvantaged suppliers. For
example, even though it raises ingredient prices a few cents a pint, Ben & Jerry's buys the brownies
for its Chocolate Fudge Brownie ice cream from a nonprofit New York bakery that trains and employs
disadvantaged workers. To use the brownies, it had to devise a new ice cream recipe and change its
production process. Similarly, to support Vermont farmers and their causes, Ben & Jerry's buys its
hormone-free milk and cream exclusively from Vermont dairies, an action which cost the company an
extra $375,000 last year.
Ben & Jerry's obeys its social conscience in other ways as well. For example, it used to make a
popular ice cream called Oreo Mint but discontinued the flavor because it didn't like doing business
with tobacco merchant RJR, whose Nabisco unit at the time supplied the Oreos. The company
changed recipes and started making a new flavor called Mint Chocolate Cookie. For their social
responsibility and their involvement in community action programs, Ben and Jerry were awarded with
the National Retail Federation's American Spirit Award for 1999.
Such caring capitalism has earned Ben & Jerry's a measure of respect and the loyal patronage of many
consumers. However, there is a downside—having a double bottom line of values and profits is not
easy. Such policies cost money, which some critics claim is "wasted on righteousness." In the words
of one especially harsh critic, "Ben and Jerry want to use ice cream to solve the world's problems.
They call it running a values-led business; I call it a mess. What makes it a mess are its conflicting
objectives. Operating a business is tough enough. Once you add social goals to the demands of serving
customers, making a profit, and returning value to shareholders, you tie yourself up in knots. [Ben and
Jerry's] ideas are simplistic, and partly as a result their company has been hurt."
For sure, it's sometimes difficult to take good intentions to the bank. Over the years, the company has
at times found it difficult to live up to the title of the founders' recent book Ben & Jerry's Double Dip:
Lead with Your Values and Make Money Too. It's done fine with the values part but has produced less
than stellar financial returns. Over the past several years, its once-meteoric sales growth has slowed,
its profits have wavered, and its stock price has languished. Notes the critic: "As for dividends, to date
they have been entirely spiritual."
However, such spiritual returns appear to satisfy Ben & Jerry's owners, still mostly small shareholders
from Vermont rather than large institutions. Shareholder's meetings—which include a cabaret style
production, a state-of-the-ice-cream address by the CEO, and plenty of free ice cream—are well
attended. The general consensus among shareholders is that they're just happy to be a part of the
company, regardless of the stock's performance. "According to Jerry, [shareholder meetings] are
incredibly well attended by the locals in a carnival-type atmosphere," states an industry analyst. "The
shareholders who do ask questions . . . ask the board why it isn't being more progressive and radical."
They appear to agree with Alan Parker, Ben & Jerry's director of investor relations and social
accounting, who says, "We . . . desire to be the kind of company that measures its success as much by
its social contribution as by its financial success."1
Responsible marketers discover what consumers want and respond with the right products, priced to
give good value to buyers and profit to the producer. The marketing concept is a philosophy of
customer satisfaction and mutual gain. Its practice leads the economy by an invisible hand to satisfy
the many and changing needs of millions of consumers.
Not all marketers follow the marketing concept, however. In fact, some companies use questionable
marketing practices, and some marketing actions that seem innocent in themselves strongly affect the
larger society. Consider the sale of cigarettes. On the face of it, companies should be free to sell
cigarettes, and smokers should be free to buy them. But this transaction affects the public interest.
First, the smoker is harming his or her health and may be shortening his or her own life. Second,
smoking places a financial burden on the smoker's family and on society at large. Third, other people
around the smoker may suffer discomfort and harm from secondhand smoke. Finally, marketing
cigarettes to adults might also influence young people to begin smoking. Thus, the marketing of
tobacco products has sparked substantial debate and negotiation in recent years.2 This example shows
that private transactions may involve larger questions of public policy.
This chapter examines the social effects of private marketing practices. We examine several questions:
What are the most frequent social criticisms of marketing? What steps have private citizens taken to
curb marketing ills? What steps have legislators and government agencies taken to curb marketing
ills? What steps have enlightened companies taken to carry out socially responsible and ethical
marketing? We examine how marketing affects and is affected by each of these issues.
Social Criticisms of Marketing
Marketing receives much criticism. Some of this criticism is justified; much is not. Social critics claim
that certain marketing practices hurt individual consumers, society as a whole, and other business
firms.
MARKETING'S IMPACT ON INDIVIDUAL CONSUMERS
Consumers have many concerns about how well the American marketing system serves their interests.
Surveys usually show that consumers hold mixed or even slightly unfavorable attitudes toward
marketing practices. Consumers, consumer advocates, government agencies, and other critics have
accused marketing of harming consumers through high prices, deceptive practices, high-pressure
selling, shoddy or unsafe products, planned obsolescence, and poor service to disadvantaged
consumers.
Consider how redlining in the new technology area is causing a "digital divide."
High Prices
Many critics charge that the American marketing system causes prices to be higher than they would be
under more "sensible" systems. They point to three factors—high costs of distribution, high
advertising and promotion costs, and excessive markups.
High Costs of Distribution
A long-standing charge is that greedy intermediaries mark up prices beyond the value of their
services. Critics charge that there are too many intermediaries, that intermediaries are inefficient and
poorly run, or that they provide unnecessary or duplicate services. As a result, distribution costs too
much, and consumers pay for these excessive costs in the form of higher prices.
How do resellers answer these charges? They argue that intermediaries do work that would otherwise
have to be done by manufacturers or consumers. Markups reflect services that consumers themselves
want—more convenience, larger stores and assortment, longer store hours, return privileges, and
others. Moreover, the costs of operating stores keep rising, forcing retailers to raise their prices. In
fact, they argue, retail competition is so intense that margins are actually quite low. For example, after
taxes, supermarket chains are typically left with barely 1 percent profit on their sales. If some resellers
try to charge too much relative to the value they add, other resellers will step in with lower prices.
Low-price stores such as Wal-Mart, Best Buy, and other discounters pressure their competitors to
operate efficiently and keep their prices down.
High Advertising and Promotion Costs
Modern marketing is also accused of pushing up prices to finance heavy advertising and sales
promotion. For example, a dozen tablets of a heavily promoted brand of aspirin sell for the same price
as 100 tablets of less promoted brands. Differentiated products—cosmetics, detergents, toiletries—
include promotion and packaging costs that can amount to 40 percent or more of the manufacturer's
price to the retailer. Critics charge that much of the packaging and promotion adds only psychological
value to the product rather than functional value. Retailers use additional promotion—advertising,
displays, and sweepstakes—that add several cents more to retail prices.
Marketers respond that consumers can usually buy functional versions of products at lower prices.
However, they want and are willing to pay more for products that also provide psychological
benefits—that make them feel wealthy, attractive, or special. Brand-name products may cost more, but
branding gives buyers confidence. Heavy advertising adds to product costs but is needed to inform
millions of potential buyers of the merits of a brand. If consumers want to know what is available on
the market, they must expect manufacturers to spend large sums of money on advertising. Also, heavy
advertising and promotion may be necessary for a firm to match competitors' efforts—the business
would lose "share of mind" if it did not match competitive spending. At the same time, companies are
cost-conscious about promotion and try to spend their money wisely.
A heavily promoted brand of antacid sells for much more than a virtually identical nonbranded or storebranded product. Critics charge that promotion adds only psychological value to the product rather than
functional value.
Excessive Markups
Critics also charge that some companies mark up goods excessively. They point to the drug industry,
where a pill costing 5 cents to make may cost the consumer $2 to buy. They point to the pricing tactics
of funeral homes that prey on the confused emotions of bereaved relatives and to the high charges for
television repair and auto repair.
Marketers respond that most businesses try to deal fairly with consumers because they want repeat
business. Most consumer abuses are unintentional. When shady marketers do take advantage of
consumers, they should be reported to Better Business Bureaus and to state and federal agencies.
Marketers also respond that consumers often don't understand the reason for high markups. For
example, pharmaceutical markups must cover the costs of purchasing, promoting, and distributing
existing medicines plus the high research and development costs of formulating and testing new
medicines.
Deceptive Practices
Marketers are sometimes accused of deceptive practices that lead consumers to believe they will get
more value than they actually do. Deceptive practices fall into three groups: deceptive pricing,
promotion, and packaging. Deceptive pricing includes practices such as falsely advertising "factory"
or "wholesale" prices or a large price reduction from a phony high retail list price. Deceptive
promotion includes practices such as overstating the product's features or performance, luring the
customer to the store for a bargain that is out of stock, or running rigged contests. Deceptive
packaging includes exaggerating package contents through subtle design, not filling the package to the
top, using misleading labeling, or describing size in misleading terms.
To be sure, questionable marketing practices do occur. For example, at one time or another, we've all
gotten an envelope in the mail screaming something like "You have won $10,000,000!" In recent
years, sweepstakes companies have come under the gun for their deceptive communication practices.
In fact, many states have brought lawsuits against companies like American Family Publishers and
Publishers Clearing House. The suits allege that the companies' promotional strategies entice people to
buy thousands of dollars' worth of products hoping to better their odds of winning. The Wisconsin
Attorney General asserts that "there are older consumers who send [sweepstakes companies] checks
and money orders on a weekly basis with a note that says they were very upset that the prize patrol did
not come."3
Deceptive practices have led to legislation and other consumer protection actions. For example, in
1938 Congress reacted to such blatant deceptions as Fleischmann's Yeast's claim to straighten crooked
teeth by enacting the Wheeler-Lea Act giving the Federal Trade Commission (FTC) power to regulate
"unfair or deceptive acts or practices." The FTC has published several guidelines listing deceptive
practices. The toughest problem is defining what is "deceptive." For example, some years ago, Shell
Oil advertised that Super Shell gasoline with platformate gave more mileage than did the same
gasoline without platformate. Now this was true, but what Shell did not say is that almost all gasoline
includes platformate. Its defense was that it had never claimed that platformate was found only in
Shell gasoline. But even though the message was literally true, the FTC felt that the ad's intent was to
deceive.
Marketers argue that most companies avoid deceptive practices because such practices harm their
business in the long run. If consumers do not get what they expect, they will switch to more reliable
products. In addition, consumers usually protect themselves from deception. Most consumers
recognize a marketer's selling intent and are careful when they buy, sometimes to the point of not
believing completely true product claims. One noted marketing thinker, Theodore Levitt, claims that
some advertising puffery is bound to occur—and that it may even be desirable: "There is hardly a
company that would not go down in ruin if it refused to provide fluff, because nobody will buy pure
functionality. . . . Worse, it denies . . . man's honest needs and values. Without distortion,
embellishment, and elaboration, life would be drab, dull, anguished, and at its existential worst."4
High-Pressure Selling
Salespeople are sometimes accused of high-pressure selling that persuades people to buy goods they
had no thought of buying. It is often said that encyclopedias, insurance, real estate, cars, and jewelry
are sold, not bought. Salespeople are trained to deliver smooth, canned talks to entice purchase. They
sell hard because sales contests promise big prizes to those who sell the most.
Marketers know that buyers often can be talked into buying unwanted or unneeded things. Laws
require door-to-door and telephone salespeople to announce that they are selling a product. Buyers
also have a "three-day cooling-off period" in which they can cancel a contract after rethinking it. In
addition, consumers can complain to Better Business Bureaus or to state consumer protection agencies
when they feel that undue selling pressure has been applied. But in most cases, marketers have little to
gain from high-pressure selling. Such tactics may work in the short run but will damage the marketer's
long-run relationships with customers.
Shoddy or Unsafe Products
Another criticism is that products lack the quality they should have. One complaint is that many
products are not made well and services not performed well. A second complaint is that many
products deliver little benefit. For example, some consumers are surprised to learn that many of the
"healthy" foods being marketed today, such as cholesterol-free salad dressings, low-fat frozen dinners,
and high-fiber bran cereals, may have little nutritional value. In fact, they may even be harmful.
[Despite] sincere efforts on the part of most marketers to provide healthier products, . . . many
promises emblazoned on packages and used as ad slogans continue to confuse nutritionally
uninformed consumers and . . . may actually be harmful to that group. . . . [Many consumers]
incorrectly assume the product is "safe" and eat greater amounts than are good for them. . . . For
example, General Foods USA's new Entenmann's "low-cholesterol, low-calorie" cherry coffee cake . .
. may confuse some consumers who shouldn't eat much of it. While each serving is only 90 calories,
not everyone realizes that the suggested serving is tiny [one-thirteenth of the small cake]. Although
eating half an Entenmann's cake may be better than eating half a dozen Dunkin' Donuts, . . . neither
should be eaten in great amounts by people on restrictive diets.5
A third complaint concerns product safety. Product safety has been a problem for several reasons,
including manufacturer indifference, increased production complexity, poorly trained labor, and poor
quality control. For years, Consumers Union—the nonprofit testing and information organization that
publishes Consumer Reports—has reported various hazards in tested products: electrical dangers in
appliances, carbon monoxide poisoning from room heaters, injury risks from lawn mowers, and faulty
automobile design, among many others. The organization's testing and other activities have helped
consumers make better buying decisions and encouraged businesses to eliminate product flaws.
However, most manufacturers want to produce quality goods. The way a company deals with product
quality and safety problems can damage or help its reputation. Companies selling poor-quality or
unsafe products risk damaging conflicts with consumer groups and regulators. Moreover, unsafe
products can result in product liability suits and large awards for damages. More fundamentally,
consumers who are unhappy with a firm's products may avoid future purchases and talk other
consumers into doing the same. Today's marketers know that customer-driven quality results in
customer satisfaction, which in turn creates profitable customer relationships.
Planned Obsolescence
Critics also have charged that some producers follow a program of planned obsolescence, causing
their products to become obsolete before they actually should need replacement. For example, critics
charge that some producers continually change consumer concepts of acceptable styles to encourage
more and earlier buying. An obvious example is constantly changing clothing fashions. Other
producers are accused of holding back attractive functional features, then introducing them later to
make older models obsolete. Critics claim that this occurs in the consumer electronics and computer
industries. For example, Intel and Microsoft have been accused in recent years of holding back their
next-generation computer chips or software until demand is exhausted for the current generation. Still
other producers are accused of using materials and components that will break, wear, rust, or rot
sooner than they should. One writer put it this way: "The marvels of modern technology include the
development of a soda can which, when discarded, will last forever—and a . . . car, which, when
properly cared for, will rust out in two or three years."6
Marketers respond that consumers like style changes; they get tired of the old goods and want a new
look in fashion or a new design in cars. No one has to buy the new look, and if too few people like it,
it will simply fail. Companies frequently withhold new features when they are not fully tested, when
they add more cost to the product than consumers are willing to pay, and for other good reasons. But
they do so at the risk that a competitor will introduce the new feature and steal the market. Moreover,
companies often put in new materials to lower their costs and prices. They do not design their
products to break down earlier, because they do not want to lose customers to other brands. Instead,
they implement total quality programs to ensure that products will consistently meet or exceed
customer expectations. Thus, much of so-called planned obsolescence is the working of the
competitive and technological forces in a free society—forces that lead to ever-improving goods and
services.7
Poor Service to Disadvantaged Consumers
Finally, the American marketing system has been accused of poorly serving disadvantaged consumers.
For example, critics claim that the urban poor often have to shop in smaller stores that carry inferior
goods and charge higher prices. A Consumers Union study compared the food-shopping habits of lowincome consumers and the prices they pay relative to middle-income consumers in the same city. The
study found that the poor do pay more for inferior goods. The results suggested that the presence of
large national chain stores in low-income neighborhoods made a big difference in keeping prices
down. However, the study also found evidence of "redlining," a type of economic discrimination in
which major chain retailers avoid placing stores in disadvantaged neighborhoods. Similar redlining
charges have been leveled at the home insurance, consumer lending, and banking industries.8
Clearly, better marketing systems must be built in low-income areas—one hope is to get large retailers
to open outlets in low-income areas. Moreover, low-income people clearly need consumer protection.
The FTC has taken action against merchants who advertise false values, sell old merchandise as new,
or charge too much for credit. The commission is also trying to make it harder for merchants to win
court judgments against low-income people who were wheedled into buying something.
MARKETING'S IMPACT ON SOCIETY AS A WHOLE
The American marketing system has been accused of adding to several "evils" in American society at
large. Advertising has been a special target—so much so that the American Association of Advertising
Agencies launched a campaign to defend advertising against what it felt to be common but untrue
criticisms.
The American Marketing Association runs ads to counter common advertising criticisms.
False Wants and Too Much Materialism
Critics have charged that the marketing system urges too much interest in material possessions. People
are judged by what they own rather than by who they are. To be considered successful, people must
own a large home, two cars, and the latest consumer electronics. This drive for wealth and possessions
hit new highs in the 1980s, when phrases such as "greed is good" and "shop 'til you drop" seemed to
characterize the times.
In the new millennium, even though many social scientists have noted a reaction against the opulence
and waste of the previous decades and a return to more basic values and social commitment, our
infatuation with material things continues.
It's hard to escape the notion that what Americans really value is stuff. Since 1987, we've had more
shopping malls than high schools. We average six hours a week shopping and only forty minutes
playing with our children. Our rate of saving is 2 percent—only a quarter of what it was in the 1950s,
when we earned less than half as much in real dollars. In each of the past three years, more U.S
citizens have declared personal bankruptcy than have graduated from college. All this acquisition isn't
making us happier; the number of Americans calling themselves "very happy" peaked in 1957.9
The critics do not view this interest in material things as a natural state of mind but rather as a matter
of false wants created by marketing. Businesses hire Madison Avenue to stimulate people's desires for
goods, and Madison Avenue uses the mass media to create materialistic models of the good life.
People work harder to earn the necessary money. Their purchases increase the output of American
industry, and industry in turn uses Madison Avenue to stimulate more desire for the industrial output.
Thus, marketing is seen as creating false wants that benefit industry more than they benefit consumers.
These criticisms overstate the power of business to create needs, however. People have strong
defenses against advertising and other marketing tools. Marketers are most effective when they appeal
to existing wants rather than when they attempt to create new ones. Furthermore, people seek
information when making important purchases and often do not rely on single sources. Even minor
purchases that may be affected by advertising messages lead to repeat purchases only if the product
performs as promised. Finally, the high failure rate of new products shows that companies are not able
to control demand.
On a deeper level, our wants and values are influenced not only by marketers but also by family, peer
groups, religion, ethnic background, and education. If Americans are highly materialistic, these values
arose out of basic socialization processes that go much deeper than business and mass media could
produce alone. Moreover, some social critics see materialism as a positive and rewarding force:
When we purchase an object, what we really buy is meaning. Commercialism is the water we swim in,
the air we breathe, our sunlight and our shade. . . . Materialism is a vital source of meaning and
happiness in the modern world. . . . We have not just asked to go this way, we have demanded. Now
most of the world is lining up, pushing and shoving, eager to elbow into the mall. Getting and
spending has become the most passionate, and often the most imaginative, endeavor of modern life.
While this is dreary and depressing to some, as doubtless it should be, it is liberating and democratic
to many more.10
Consider the plight of an industry that may actually suffer because of its target
audience's materialistic habits.
Too Few Social Goods
Business has been accused of overselling private goods at the expense of public goods. As private
goods increase, they require more public services that are usually not forthcoming. For example, an
increase in automobile ownership (private good) requires more highways, traffic control, parking
spaces, and police services (public goods). The overselling of private goods results in "social costs."
For cars, the social costs include traffic congestion, air pollution, and deaths and injuries from car
accidents.
A way must be found to restore a balance between private and public goods. One option is to make
producers bear the full social costs of their operations. For example, the government could require
automobile manufacturers to build cars with even more safety features and better pollution control
systems. Automakers would then raise their prices to cover extra costs. If buyers found the price of
some cars too high, however, the producers of these cars would disappear, and demand would move to
those producers that could support the sum of the private and social costs.
A second option is to make consumers pay the social costs. For example, a number of highway
authorities around the world are starting to charge "congestion tolls" in an effort to reduce traffic
congestion:
Already, in Southern California, drivers are being charged premiums to travel in underused car pool
lanes; Singapore, Norway, and France are managing traffic with varying tolls; peak surcharges are
being studied for roads around New York, San Francisco, Los Angeles, and other cities. [Economists]
point out that traffic jams are caused when drivers are not charged the costs they impose on others,
such as delays. The solution: Make 'em pay.11
Interestingly, in San Diego, regular drivers can use the HOV (high-occupancy vehicle) lanes, but they
must pay a price based on traffic usage at the time. The toll ranges from 50 cents off-peak to $4.00
during rush hour.12 More generally, if the costs of driving rise high enough, consumers will travel at
nonpeak times or find alternative transportation modes.
Making consumers pay the social costs: On this private highway in California, consumers pay "congestion
tolls" to drive in the unclogged fast lane.
Cultural Pollution
Critics charge the marketing system with creating cultural pollution. Our senses are being constantly
assaulted by advertising. Commercials interrupt serious programs; pages of ads obscure printed
matter; billboards mar beautiful scenery. These interruptions continually pollute people's minds with
messages of materialism, sex, power, or status. Although most people do not find advertising overly
annoying (some even think it is the best part of television programming), some critics call for
sweeping changes.
Marketers answer the charges of "commercial noise" with these arguments: First, they hope that their
ads reach primarily the target audience. But because of mass-communication channels, some ads are
bound to reach people who have no interest in the product and are therefore bored or annoyed. People
who buy magazines addressed to their interests—such as Vogue or Fortune—rarely complain about
the ads because the magazines advertise products of interest. Second, ads make much of television and
radio free to users and keep down the costs of magazines and newspapers. Many people think
commercials are a small price to pay for these benefits. Finally, today's consumers have alternatives.
For example, they can zip and zap TV commercials or avoid them altogether on many cable or
satellite channels. Thus, advertisers are making their ads more entertaining and informative.
Consider just how bad "commercial noise" can get.
Too Much Political Power
Another criticism is that business wields too much political power. "Oil," "tobacco," "auto," and
"pharmaceuticals" senators support an industry's interests against the public interest. Advertisers are
accused of holding too much power over the mass media, limiting their freedom to report
independently and objectively. One critic has asked: "How can [most magazines] afford to tell the
truth about the scandalously low nutritional value of most packaged foods . . . when these magazines
are being subsidized by such advertisers as General Foods, Kellogg's, Nabisco, and General Mills . . .
?The answer is they cannot and do not."13
American industries do promote and protect their own interests. They have a right to representation in
Congress and the mass media, although their influence can become too great. Fortunately, many
powerful business interests once thought to be untouchable have been tamed in the public interest. For
example, Standard Oil was broken up in 1911, and the meatpacking industry was disciplined in the
early 1900s after exposures by Upton Sinclair. Ralph Nader caused legislation that forced the
automobile industry to build more safety into its cars, and the Surgeon General's Report resulted in
cigarette companies putting health warnings on their packages. More recently, giants such as AT&T,
Microsoft, Intel, and R.J. Reynolds have felt the impact of regulators seeking to balance the interests
of big business against those of the public. Moreover, because the media receive advertising revenues
from many different advertisers, it is easier to resist the influence of one or a few of them. Too much
business power tends to result in counterforces that check and offset these powerful interests.
MARKETING'S IMPACT ON OTHER BUSINESSES
Critics also charge that a company's marketing practices can harm other companies and reduce
competition. Three problems are involved: acquisitions of competitors, marketing practices that create
barriers to entry, and unfair competitive marketing practices.
Critics claim that firms are harmed and competition reduced when companies expand by acquiring
competitors rather than by developing their own new products. The large number of acquisitions and
rapid pace of industry consolidation over the past two decades have caused concern that vigorous
young competitors will be absorbed and that competition will be reduced. In virtually every major
industry—financial services, utilities, transportation, automobiles, telecommunications, health care,
entertainment—the number of major competitors is shrinking.14
Acquisition is a complex subject. Acquisitions can sometimes be good for society. The acquiring
company may gain economies of scale that lead to lower costs and lower prices. A well-managed
company may take over a poorly managed company and improve its efficiency. An industry that was
not very competitive might become more competitive after the acquisition. But acquisitions can also
be harmful and, therefore, are closely regulated by the government.
Critics have also charged that marketing practices bar new companies from entering an industry.
Large marketing companies can use patents and heavy promotion spending, and can tie up suppliers or
dealers to keep out or drive out competitors. Those concerned with antitrust regulation recognize that
some barriers are the natural result of the economic advantages of doing business on a large scale.
Other barriers could be challenged by existing and new laws. For example, some critics have proposed
a progressive tax on advertising spending to reduce the role of selling costs as a major barrier to entry.
Finally, some firms have in fact used unfair competitive marketing practices with the intention of
hurting or destroying other firms. They may set their prices below costs, threaten to cut off business
with suppliers, or discourage the buying of a competitor's products. Various laws work to prevent such
predatory competition. It is difficult, however, to prove that the intent or action was really predatory.
In recent years, Wal-Mart, American Airlines, Intel, and Microsoft have all been accused of various
predatory practices. Take Microsoft, for example:
[Last year,] Microsoft's $3.4 billion in net income accounted for 41 percent of the profits of the 10
largest publicly traded software companies. Its reach extends beyond the PC into everything from
computerized toys and TV set-top boxes to selling cars and airline tickets over the Internet. In its zeal
to become a leader not just in operating systems but on the Internet, the company bundled its Internet
Explorer browser into its Windows software. This move sparked an antitrust suit by the government,
much to the delight of Microsoft's rivals. After all, Web-browsing innovator Netscape has seen its
market share plummet as it tries to sell what Microsoft gives away for free.15
Although competitors and the government charge that Microsoft's actions are predatory, the question
is whether this is unfair competition or the healthy competition of a more efficient company against
the less efficient.
Citizen and Public Actions to Regulate Marketing
Because some people view business as the cause of many economic and social ills, grassroots
movements have arisen from time to time to keep business in line. The two major movements have
been consumerism and environmentalism.
CONSUMERISM
American business firms have been the target of organized consumer movements on three occasions.
The first consumer movement took place in the early 1900s. It was fueled by rising prices, Upton
Sinclair's writings on conditions in the meat industry, and scandals in the drug industry. The second
consumer movement, in the mid-1930s, was sparked by an upturn in consumer prices during the Great
Depression and another drug scandal.
The third movement began in the 1960s. Consumers had become better educated, products had
become more complex and potentially hazardous, and people were unhappy with American
institutions. Ralph Nader appeared on the scene to force many issues, and other well-known writers
accused big business of wasteful and unethical practices. President John F. Kennedy declared that
consumers had the right to safety, to be informed, to choose, and to be heard. Congress investigated
certain industries and proposed consumer-protection legislation. Since then, many consumer groups
have been organized, and several consumer laws have been passed. The consumer movement has
spread internationally and has become very strong in Europe.16
But what is the consumer movement? Consumerism is an organized movement of citizens and
government agencies to improve the rights and power of buyers in relation to sellers. Traditional
sellers' rights include:

The right to introduce any product in any size and style, provided it is not hazardous to
personal health or safety; or, if it is, to include proper warnings and controls.

The right to charge any price for the product, provided no discrimination exists among similar
kinds of buyers.

The right to spend any amount to promote the product, provided it is not defined as unfair
competition.

The right to use any product message, provided it is not misleading or dishonest in content or
execution.

The right to use any buying incentive schemes, provided they are not unfair or misleading.
Traditional buyers' rights include:

The right not to buy a product that is offered for sale.

The right to expect the product to be safe.

The right to expect the product to perform as claimed.
Comparing these rights, many believe that the balance of power lies on the sellers' side. True, the
buyer can refuse to buy. But critics feel that the buyer has too little information, education, and
protection to make wise decisions when facing sophisticated sellers. Consumer advocates call for the
following additional consumer rights:

The right to be well informed about important aspects of the product.

The right to be protected against questionable products and marketing practices.

The right to influence products and marketing practices in ways that will improve the "quality
of life."
Each proposed right has led to more specific proposals by consumerists. The right to be informed
includes the right to know the true interest on a loan (truth in lending), the true cost per unit of a brand
(unit pricing), the ingredients in a product (ingredient labeling), the nutritional value of foods
(nutritional labeling), product freshness (open dating), and the true benefits of a product (truth in
advertising). Proposals related to consumer protection include strengthening consumer rights in cases
of business fraud, requiring greater product safety, and giving more power to government agencies.
Proposals relating to quality of life include controlling the ingredients that go into certain products
(detergents) and packaging (soft drink containers), reducing the level of advertising "noise," and
putting consumer representatives on company boards to protect consumer interests.
Consumer desire for more information led to putting ingredients, nutrition, and dating information on
product labels.
Consumers have not only the right but also the responsibility to protect themselves instead of leaving
this function to someone else. Consumers who believe they got a bad deal have several remedies
available, including contacting the company or the media; contacting federal, state, or local agencies;
and going to small-claims courts.
ENVIRONMENTALISM
Whereas consumerists consider whether the marketing system is efficiently serving consumer wants,
environmentalists are concerned with marketing's effects on the environment and with the costs of
serving consumer needs and wants. Environmentalism is an organized movement of concerned
citizens, businesses, and government agencies to protect and improve people's living environment.
Environmentalists are not against marketing and consumption; they simply want people and
organizations to operate with more care for the environment. The marketing system's goal, they assert,
should not be to maximize consumption, consumer choice, or consumer satisfaction, but rather to
maximize life quality. "Life quality" means not only the quantity and quality of consumer goods and
services but also the quality of the environment. Environmentalists want environmental costs included
in both producer and consumer decision making.
The first wave of modern environmentalism in the United States was driven by environmental groups
and concerned consumers in the 1960s and 1970s. They were concerned with damage to the
ecosystem caused by strip mining, forest depletion, acid rain, loss of the atmosphere's ozone layer,
toxic wastes, and litter. They also were concerned with the loss of recreational areas and with the
increase in health problems caused by bad air, polluted water, and chemically treated food.
The second environmentalism wave was driven by government, which passed laws and regulations
during the 1970s and 1980s governing industrial practices impacting the environment. This wave hit
some industries hard. Steel companies and utilities had to invest billions of dollars in pollution control
equipment and costlier fuels. The auto industry had to introduce expensive emission controls in cars.
The packaging industry had to find ways to reduce litter. These industries and others have often
resented and resisted environmental regulations, especially when they have been imposed too rapidly
to allow companies to make proper adjustments. Many of these companies claim they have had to
absorb large costs that have made them less competitive.
As we move into the twenty-first century, the first two environmentalism waves are merging into a
third and stronger wave in which companies are accepting responsibility for doing no harm to the
environment. They are shifting from protest to prevention, and from regulation to responsibility. More
and more companies are adopting policies of environmental sustainability—developing strategies that
both sustain the environment and produce profits for the company. According to one strategist, "The
challenge is to develop a sustainable global economy: an economy that the planet is capable of
supporting indefinitely. . . . [It's] an enormous challenge—and an enormous opportunity."17
Watch how one prominent company balances its need to grow with environmentally
sustainable policies.
Figure 20.1 shows a grid that companies can use to gauge their progress toward environmental
sustainability. At the most basic level, a company can practice pollution prevention. This involves
more than pollution control—cleaning up waste after it has been created. Pollution prevention means
eliminating or minimizing waste before it is created. Companies emphasizing prevention have
responded with "green marketing" programs—developing ecologically safer products, recyclable and
biodegradable packaging, better pollution controls, and more energy-efficient operations. They are
finding that they can be both green and competitive. Consider how the Dutch flower industry has
responded to its environmental problems:
Figure 20.1
The environmental sustainability grid
Source: Stuart L. Hart, "Beyond Greening: Strategies for a Sustainable World," Harvard Business Review,
January–February 1997, p. 74. Copyright © 1997 by the President and Fellows of Harvard College; all
rights reserved. Reprinted by permission of Harvard Business Review.
Intense cultivation of flowers in small areas was contaminating the soil and groundwater with
pesticides, herbicides, and fertilizers. Facing increasingly strict regulation, . . . the Dutch understood
that the only effective way to address the problem would be to develop a closed-loop system. In
advanced Dutch greenhouses, flowers now grow in water and rock wool, not in soil. This lowers the
risk of infestation, reducing the need for fertilizers and pesticides, which are delivered in water that
circulates and is reused. The . . . closed-loop system also reduces variation in growing conditions, thus
improving product quality. Handling costs have gone down because the flowers are cultivated on
specially designed platforms. . . .The net result is not only dramatically lower environmental impact
but also lower costs, better product quality, and enhanced global competitiveness.18
At the next level, companies can practice product stewardship—minimizing not just pollution from
production but all environmental impacts throughout the full product life cycle. Many companies are
adopting design for environment (DFE) practices, which involve thinking ahead in the design stage to
create products that are easier to recover, reuse, or recycle. DFE not only helps to sustain the
environment, it can be highly profitable:
Consider Xerox Corporation's Asset Recycle Management (ARM) program, which uses leased Xerox
copiers as sources of high-quality, low-cost parts and components for new machines. A welldeveloped [process] for taking back leased copiers combined with a sophisticated remanufacturing
process allows . . . components to be reconditioned, tested, and then reassembled into "new"
machines. Xerox estimates that ARM savings in raw materials, labor, and waste disposal in 1995
alone were in the $300-million to $400-million range. . . . By redefining product-in-use as part of the
company's asset base, Xerox has discovered a way to add value and lower costs. It can continually
provide lease customers with the latest product upgrades, giving them state-of-the-art functionality
with minimum environmental impact.19
At the third level of environmental sustainability, companies look to the future and plan for new
environmental technologies. Many organizations that have made good headway in pollution
prevention and product stewardship are still limited by existing technologies. To develop fully
sustainable strategies, they will need to develop new technologies. Monsanto is doing this by shifting
its agricultural technology base from bulk chemicals to biotechnology. By controlling plant growth
and pest resistance through bioengineering rather than through the application of pesticides or
fertilizers, Monsanto hopes to find an environmentally sustainable path to increased agricultural
yields.20
Finally, companies can develop a sustainability vision, which serves as a guide to the future. It shows
how the company's products and services, processes, and policies must evolve and what new
technologies must be developed to get there. This vision of sustainability provides a framework for
pollution control, product stewardship, and environmental technology.
Take a moment to read how a public service organization keeps track of businesses'
environmental record.
Most companies today focus on the lower-left quadrant of the grid in Figure 20.1, investing most
heavily in pollution prevention. Some forward-looking companies practice product stewardship and
are developing new environmental technologies. Few companies have well-defined sustainability
visions. However, emphasizing only one or a few cells in the environmental sustainability grid in
Figure 20.1 can be shortsighted. For example, investing only in the bottom half of the grid puts a
company in a good position today but leaves it vulnerable in the future. In contrast, a heavy emphasis
on the top half suggests that a company has good environmental vision but lacks the skills needed to
implement it. Thus, companies should work at developing all four dimensions of environmental
sustainability.
Environmentalism creates some special challenges for global marketers. As international trade barriers
come down and global markets expand, environmental issues are having an ever-greater impact on
international trade. Countries in North America, Western Europe, and other developed regions are
developing stringent environmental standards. In the United States, for example, more than two dozen
major pieces of environmental legislation have been enacted since 1970, and recent events suggest
that more regulation is on the way. A side accord to the North American Free Trade Agreement
(NAFTA) set up a commission for resolving environmental matters. The European Union's EcoManagement and Audit Regulation provides guidelines for environmental self-regulation.21
However, environmental policies still vary widely from country to country, and uniform worldwide
standards are not expected for many years. Although countries such as Denmark, Germany, Japan, and
the United States have fully developed environmental policies and high public expectations, major
countries such as China, India, Brazil, and Russia are in only the early stages of developing such
policies. Moreover, environmental factors that motivate consumers in one country may have no
impact on consumers in another. For example, PVC soft drink bottles cannot be used in Switzerland or
Germany. However, they are preferred in France, which has an extensive recycling process for them.
Thus, international companies are finding it difficult to develop standard environmental practices that
work around the world. Instead, they are creating general policies and then translating these policies
into tailored programs that meet local regulations and expectations.
PUBLIC ACTIONS TO REGULATE MARKETING
Citizen concerns about marketing practices will usually lead to public attention and legislative
proposals. New bills will be debated—many will be defeated, others will be modified, and a few will
become workable laws.
Many of the laws that affect marketing are listed in chapter 3. The task is to translate these laws into
the language that marketing executives understand as they make decisions about competitive relations,
products, price, promotion, and channels of distribution. Figure 20.2 illustrates the major legal issues
facing marketing management.
Figure 20.2
Business Actions
Toward Socially
Responsible Marketing
Major marketing decision areas that may be called into
question under the law
At first, many companies opposed consumerism and environmentalism. They thought the criticisms
were either unfair or unimportant. But by now, most companies have grown to accept the new
consumer rights, at least in principle. They might oppose certain pieces of legislation as inappropriate
ways to solve specific consumer problems, but they recognize the consumer's right to information and
protection. Many of these companies have responded positively to consumerism and
environmentalism in order to serve consumer needs better.
ENLIGHTENED MARKETING
The philosophy of enlightened marketing holds that a company's marketing should support the best
long-run performance of the marketing system. Enlightened marketing consists of five principles:
consumer-oriented marketing, innovative marketing, value marketing, sense-of-mission marketing,
and societal marketing.
Consumer-Oriented Marketing
Consumer-oriented marketing means that the company should view and organize its marketing
activities from the consumer's point of view. It should work hard to sense, serve, and satisfy the needs
of a defined group of customers. Consider the following example:
Barat College, a women's college in Lake Forest, Illinois, published a college catalog that openly
spelled out Barat College's strong and weak points. Among the weak points it shared with applicants
were the following: "An exceptionally talented student musician or mathematician . . . might be
advised to look further for a college with top faculty and facilities in that field. . . . The full range of
advanced specialized courses offered in a university will be absent. . . . The library collection is
average for a small college, but low in comparison with other high-quality institutions."
"Telling it like it is" is intended to build confidence so that applicants really know what they will find
at Barat College and to emphasize that Barat College will strive to improve its consumer value as
rapidly as time and funds permit.
Innovative Marketing
The principle of innovative marketing requires that the company continuously seek real product and
marketing improvements. The company that overlooks new and better ways to do things will
eventually lose customers to another company that has found a better way. An excellent example of an
innovative marketer is Colgate-Palmolive:
The American Marketing Association (AMA) recently named Colgate-Palmolive its new-product
marketer of the year. Colgate took the honors by launching an abundance of innovative and highly
successful new consumer products, including three AMA Edison "Best New Product" Award
winners—Colgate Total toothpaste, the Colgate Wave toothbrush, and Softsoap Aquarium Series
Liquid Soap. In all, more than a third of Colgate-Palmolive's current sales comes from products
launched during the past five years. Perhaps the best example of the company's passion for continuous
improvement is its recently introduced Total toothpaste. Marketing research showed shifts in
consumer demographics and concerns—a growing population of aging, health-conscious, and better
educated consumers. For these consumers, Colgate-Palmolive came up with Total, a breakout brand
that provides a combination of benefits, including cavity prevention, tartar control, fresh breath, and
long-lasting effects. The company also launched an innovative marketing program for the new
product, which included advertising in health magazines targeting educated consumers who have high
involvement in the health of their mouth and teeth. The new brand helped revitalize the mature
toothpaste category. Consumers responded by making Colgate-Palmolive the toothpaste market leader
for the first time since 1962, with a 32 percent share versus Procter & Gamble's 25 percent.22
Value Marketing
According to the principle of value marketing, the company should put most of its resources into
value-building marketing investments. Many things marketers do—one-shot sales promotions, minor
packaging changes, advertising puffery—may raise sales in the short run but add less value than
would actual improvements in the product's quality, features, or convenience. Enlightened marketing
calls for building long-run consumer loyalty by continually improving the value consumers receive
from the firm's marketing offer.
Sense-of-Mission Marketing
Sense-of-mission marketing means that the company should define its mission in broad social terms
rather than narrow product terms. When a company defines a social mission, employees feel better
about their work and have a clearer sense of direction. For example, defined in narrow product terms,
Ben & Jerry's mission might be "to sell ice cream and frozen yogurt." However, as discussed at the
beginning of the chapter, the company states its mission more broadly as one of "linked prosperity,"
including product, economic, and social missions. Reshaping the basic task of selling consumer
products into the larger mission of serving the interests of consumers, employees, and others in the
company's various "communities" gives Ben & Jerry's a vital sense of purpose. Like Ben & Jerry's,
many companies today are undertaking socially responsible actions or even building social
responsibility into their underlying missions.
Take a moment to read about one of the most famous instances of sense-of-mission
marketing.
Societal Marketing
Following the principle of societal marketing, an enlightened company makes marketing decisions by
considering consumers' wants and interests, the company's requirements, and society's long-run
interests. The company is aware that neglecting consumer and societal long-run interests is a
disservice to consumers and society. Alert companies view societal problems as opportunities.
Take a moment to read about how a huge sportswear corporation has tried to
become more socially responsible.
A societally oriented marketer wants to design products that are not only pleasing but also beneficial.
The difference is shown in Figure 20.3. Products can be classified according to their degree of
immediate consumer satisfaction and long-run consumer benefit. Deficient products, such as badtasting and ineffective medicine, have neither immediate appeal nor long-run benefits. Pleasing
products give high immediate satisfaction but may hurt consumers in the long run. An example is
cigarettes. Salutary products have low appeal but benefit consumers in the long run; for instance, seat
belts and air bags. Desirable products give both high immediate satisfaction and high long-run
benefits—a tasty and nutritious breakfast food.
An example of a desirable product is Herman Miller's Avian office chair, which is not just attractive
and functional but also environmentally responsible:
Herman Miller, one of the world's largest office furniture makers, has received numerous awards for
environmentally responsible products and business practices. In 1994 the company formed an Earth
Friendly Design Task Force responsible for infusing the company's design process with its
environmental values. The task force carries out life cycle analyses on the company's products,
including everything from how much of a product can be made from recycled materials to how much
of the product itself can be recycled at the end of its useful life. For example, the company's Avian
chair is designed for the lowest possible ecological impact and 100 percent recyclability. Herman
Miller reduced material used in the chair by using gas-assist injection molding for the frame, which
resulted in hollow frame members (like the bones of birds, hence the chair's name). The frame needs
no paint nor other finish. All materials are recyclable. No ozone-depleting materials are used. The
chair is shipped partially assembled, thus reducing the packaging and energy needed to ship it. Finally,
a materials schematic is imbedded in the bottom of the seat to help recycle the chair at the end of its
life. This is truly a desirable product—it's won awards for design and function and for environmental
responsibility.23
Herman Miller's Earth Friendly Design Task Force infuses the company's design process with its
environmental values. For example, the Avian chair is designed for the lowest possible ecological impact
and 100 percent recyclability.
Companies should try to turn all of their products into desirable products. The challenge posed by
pleasing products is that they sell very well but may end up hurting the consumer. The product
opportunity, therefore, is to add long-run benefits without reducing the product's pleasing qualities.
For example, Sears developed a phosphate-free laundry detergent that was also very effective. The
challenge posed by salutary products is to add some pleasing qualities so that they will become more
desirable in the consumers' minds. For example, synthetic fats and fat substitutes, such as
NutraSweet's Simplesse and Procter & Gamble's Olestra, have improved the appeal of more healthful
low-calorie and low-fat foods.
Listen to a member of one company comment on how it supports social causes
through charitable donations.
MARKETING ETHICS
Give your opinion on question of marketing and ethical conduct.
Conscientious marketers face many moral dilemmas. The best thing to do is often unclear. Because
not all managers have fine moral sensitivity, companies need to develop corporate marketing ethics
policies—broad guidelines that everyone in the organization must follow. These policies should cover
distributor relations, advertising standards, customer service, pricing, product development, and
general ethical standards.
The finest guidelines cannot resolve all the difficult ethical situations the marketer faces. Table 20.1
lists some difficult ethical situations marketers could face during their careers. If marketers choose
immediate sales-producing actions in all these cases, their marketing behavior might well be described
as immoral or even amoral. If they refuse to go along with any of the actions, they might be
ineffective as marketing managers and unhappy because of the constant moral tension. Managers need
a set of principles that will help them figure out the moral importance of each situation and decide
how far they can go in good conscience.
Table 20.1
Some Morally Difficult Situations in Marketing
1. You work for a cigarette company and up to now have not been convinced that
cigarettes cause cancer. However, recent public policy debates now leave no doubt in
your mind about the link between smoking and cancer. What would you do?
2. Your R&D department has changed one of your products slightly. It is not really
"new and improved," but you know that putting this statement on the package and in
advertising will increase sales. What would you do?
3. You have been asked to add a stripped-down model to your line that could be
advertised to pull customers into the store. The product won't be very good, but
salespeople will be able to switch buyers up to higher priced units. You are asked to
give the green light for this stripped-down version. What would you do?
4. You are thinking of hiring a product manager who just left a competitor's company.
She would be more than happy to tell you all the competitor's plans for the coming
year. What would you do?
5. One of your top dealers in an important territory recently has had family troubles,
and his sales have slipped. It looks like it will take him a while to straighten out his
family trouble. Meanwhile you are losing many sales. Legally, you can terminate the
dealer's franchise and replace him. What would you do?
6. You have a chance to win a big account that will mean a lot to you and your
company. The purchasing agent hints that a "gift" would influence the decision. Your
assistant recommends sending a fine color television set to the buyer's home. What
would you do?
7. You have heard that a competitor has a new product feature that will make a big
difference in sales. The competitor will demonstrate the feature in a private dealer
meeting at the annual trade show. You can easily send a snooper to this meeting to
learn about the new feature. What would you do?
8. You have to choose between three ad campaigns outlined by your agency. The first
(a) is a soft-sell, honest information campaign. The second (b) uses sex-loaded
emotional appeals and exaggerates the product's benefits. The third (c) involves a
noisy, irritating commercial that is sure to gain audience attention. Pretests show that
the campaigns are effective in the following order: c, b, and a. What would you do?
9. You are interviewing a capable female applicant for a job as salesperson. She is
better qualified than the men just interviewed. Nevertheless, you know that some of
your important customers prefer dealing with men, and you will lose some sales if
you hire her. What would you do?
But what principle should guide companies and marketing managers on issues of ethics and social
responsibility? One philosophy is that such issues are decided by the free market and legal system.
Under this principle, companies and their managers are not responsible for making moral judgments.
Companies can in good conscience do whatever the system allows.
A second philosophy puts responsibility not in the system but in the hands of individual companies
and managers. This more enlightened philosophy suggests that a company should have a "social
conscience." Companies and managers should apply high standards of ethics and morality when
making corporate decisions, regardless of "what the system allows." History provides an endless list of
examples of company actions that were legal and allowed but were highly irresponsible. Consider the
following example:
Prior to the Pure Food and Drug Act, the advertising for a diet pill promised that a person taking this
pill could eat virtually anything at any time and still lose weight. Too good to be true? Actually the
claim was quite true; the product lived up to its billing with frightening efficiency. It seems that the
primary active ingredient in this "diet supplement" was tapeworm larvae. These larvae would develop
in the intestinal tract and, of course, be well fed; the pill taker would in time, quite literally, starve to
death.24
Each company and marketing manager must work out a philosophy of socially responsible and ethical
behavior. Under the societal marketing concept, each manager must look beyond what is legal and
allowed and develop standards based on personal integrity, corporate conscience, and long-run
consumer welfare. A clear and responsible philosophy will help the marketing manager deal with the
many knotty questions posed by marketing and other human activities.
As with environmentalism, the issue of ethics provides special challenges for international marketers.
Business standards and practices vary a great deal from one country to the next. For example, whereas
bribes and kickbacks are illegal for U.S. firms, they are standard business practice in many South
American countries. The question arises as to whether a company must lower its ethical standards to
compete effectively in countries with lower standards. In a recent study, two researchers posed this
question to chief executives of large international companies and got a unanimous response: No.25 For
the sake of all of the company's stakeholders—customers, suppliers, employees, shareholders, and the
public—it is important to make a commitment to a common set of shared standards worldwide.
For example, John Hancock Mutual Life Insurance Company operates successfully in Southeast Asia,
an area that by Western standards has widespread questionable business and government practices.
Despite warnings from locals that Hancock would have to bend its rules to succeed, Hancock
Chairman Stephen Brown notes:
We faced up to this issue early on when we started to deal with Southeast Asia. We told our people
that we had the same ethical standards, same procedures, same policies in these countries that we have
in the United States, and we do. . . . We just felt that things like payoffs were wrong—and if we had to
do business that way, we'd rather not do business. Our employees would not feel good about having
different levels of ethics. There may be countries where you have to do that kind of thing. We haven't
found that country yet, and if we do, we won't do business there.26
Many industrial and professional associations have suggested codes of ethics, and many companies
are now adopting their own codes. For example, the American Marketing Association, an international
association of marketing managers and scholars, developed the code of ethics shown in Table 20.2.
Companies are also developing programs to teach managers about important ethics issues and help
them find the proper responses. They hold ethics workshops and seminars and set up ethics
committees.
Table 20.2
American Marketing Association Code of Ethics
Members of the American Marketing Association are committed to ethical, professional
conduct. They have joined together in subscribing to this Code of Ethics embracing the
following topics:
Responsibilities of the Marketer
Marketers must accept responsibility for the consequences of their activities and make every
effort to ensure that their decisions, recommendations, and actions function to identify, serve,
and satisfy all relevant publics: customers, organizations and society.
Marketers' Professional Conduct Must Be Guided By
1. The basic rule of professional ethics: not knowingly to do harm;
2. The adherence to all applicable laws and regulations;
3. The accurate representation of their education, training and experience; and
4. The active support, practice, and promotion of this Code of Ethics.
Honesty and Fairness
Marketers shall uphold and advance the integrity, honor, and dignity of the marketing
profession by:
1. Being honest in serving consumers, clients, employees, suppliers, distributors, and
the public;
2. Not knowingly participating in conflict of interest without prior notice to all parties
involved; and
3. Establishing equitable fee schedules including the payment or receipt of usual,
customary, and/or legal compensation for marketing exchanges.
Rights and Duties of Parties in the Marketing Exchange Process
Participants in the marketing exchange process should be able to expect that:
1. Products and services offered are safe and fit for their intended uses;
2. Communications about offered products and services are not deceptive;
3. All parties intend to discharge their obligations, financial and otherwise, in good
faith; and
4. Appropriate internal methods exist for equitable adjustment and/or redress of
grievances concerning purchases.
It Is Understood That the Above Would Include, but Is Not Limited to the Following
Responsibilities of the Marketer:
In the Area of Product Development and Management

disclosure of all substantial risks associated with product or service usage;

identification of any product component substitution that might materially change
the product or impact on the buyer's purchase decision;

identification of extra cost-added features.
In the Area of Promotions

avoidance of false and misleading advertising;

rejection of high-pressure manipulations, or misleading sales tactics;

avoidance of sales promotions that use deception or manipulation.
In the Area of Distribution

not manipulating the availability of a product for purpose of exploitation;

not using coercion in the marketing channel;

not exerting undue influence over the reseller's choice to handle a product.
In the Area of Pricing

not engaging in price fixing;

not practicing predatory pricing;

disclosing the full price associated with any purchase.
In the Area of Marketing Research

prohibiting selling or fundraising under the guise of conducting research;

maintaining research integrity by avoiding misrepresentation and omission of
pertinent research data;

treating outside clients and suppliers fairly.
Organizational Relationships
Marketers should be aware of how their behavior may influence or impact on the behavior of
others in organizational relationships. They should not demand, encourage, or apply coercion
to obtain unethical behavior in their relationships with others, such as employees, suppliers,
or customers.
1. Apply confidentiality and anonymity in professional relationships with regard to
privileged information;
2. Meet their obligations and responsibilities in contracts and mutual agreements in a
timely manner;
3. Avoid taking the work of others, in whole, or in part, and representing this work as
their own or directly benefiting from it without compensation or consent of the
originator or owner;
4. Avoid manipulation to take advantage of situations to maximize personal welfare in
a way that unfairly deprives or damages the organization of others.
Any AMA member found to be in violation of any provision of this Code of Ethics may have
his or her Association membership suspended or revoked.
Source: Reprinted with permission from American Marketing Association Code of Ethics, published by the
American Marketing Association.
Further, more than 200 major U.S. companies have appointed high-level ethics officers to champion
ethics issues and to help resolve ethics problems and concerns facing employees. For example, in
1991 Nynex created a new position of vice president of ethics, supported by a dozen full-time staff
and a million-dollar budget. Since then, the new department has trained some 95,000 Nynex
employees. Such training includes sending 22,000 managers to full-day workshops that include case
studies on ethical actions in marketing, finance, and other business functions. One workshop deals
with the use of improperly obtained competitive data, which managers are instructed is not
permitted.27
Many companies have developed innovative ways to educate employees about ethics:
Citicorp has developed an ethics board game, which teams of employees use to solve hypothetical
quandaries. General Electric employees can tap into specially designed software on their personal
computers to get answers to ethical questions. At Texas Instruments, employees are treated to a
weekly column on ethics over an electronic news service. One popular feature: a kind of Dear Abby
mailbag, answers provided by the company's ethics officer, . . . that deals with the troublesome issues
employees face most often.28
Still, written codes and ethics programs do not ensure ethical behavior. Ethics and social responsibility
require a total corporate commitment. They must be a component of the overall corporate culture.
According to David R. Whitman, chairman of the board of Whirlpool Corporation, "In the final
analysis, 'ethical behavior' must be an integral part of the organization, a way of life that is deeply
ingrained in the collective corporate body. . . . In any business enterprise, ethical behavior must be a
tradition, a way of conducting one's affairs that is passed from generation to generation of employees
at all levels of the organization. It is the responsibility of management, starting at the very top, to both
set the example by personal conduct and create an environment that not only encourages and rewards
ethical behavior, but which also makes anything less totally unacceptable."29
The future holds many challenges and opportunities for marketing managers as they move into the
new millennium. Technological advances in every area, from telecommunications, information
technology, and the Internet to health care and entertainment, provide abundant marketing
opportunities. However, forces in the socioeconomic, cultural, and natural environments increase the
limits under which marketing can be carried out. Companies that are able to create new customer
value in a socially responsible way will have a world to conquer.
Key Terms
consumerism
An organized movement of citizens and government agencies to improve the rights and
power of buyers in relation to sellers.
environmentalism
An organized movement of concerned citizens, businesses, and government agencies to
protect and improve people's living environment.
environmental sustainability
A management approach that involves developing strategies that both sustain the environment
and produce profits for the company.
enlightened marketing
A marketing philosophy holding that a company's marketing should support the best long-run
performance of the marketing system.
consumer-oriented marketing
A principle of enlightened marketing that holds that the company should view and organize
its marketing activities from the consumer's point of view.
innovative marketing
A principle of enlightened marketing that requires that a company seek real product and
marketing improvements.
value marketing
A principle of enlightened marketing that holds that a company should put most of its
resources into value-building marketing investments.
sense-of-mission marketing
A principle of enlightened marketing that holds that a company should define its mission in
broad social terms rather than narrow product terms.
societal marketing
A principle of enlightened marketing that holds that a company should make marketing
decisions by considering consumers' wants, the company's requirements, consumers' long-run
interests, and society's long-run interests.
deficient products
Products that have neither immediate appeal nor long-run benefits.
pleasing products
Products that give high immediate satisfaction but may hurt consumers in the long run.
salutary products
Products that have low appeal but may benefit consumers in the long run.
desirable products
Products that give both high immediate satisfaction and high long-run benefits.