Understanding Marketing Ethics

Last Updated Nov 30, 2007 7:40 PM EST

Standards for marketing ethics guide companies in their efforts to do "the right thing." These standards help identify acceptable practices, foster internal control, and deal honestly and fairly with customers. They also ensure businesses comply with the law. Sometimes companies develop and publish their own ethical standards; other times they comply with the regulations or guidelines of their professional or industry associations.

What You Need to KnowIs ethical marketing the same as marketing ethics?

Marketing ethics sets out a framework for good practice in marketing, regardless of the product or market sector. Ethical marketing describes an approach to marketing in which companies set high ethical standards and communicate those positively. A tobacco company that refrained from advertising would be complying with marketing ethics. A company that sourced environmentally friendly products from a country or company that practiced excellent employee relations would be practicing ethical marketing.

What to DoTake Responsibility for Your Company's Actions

As a marketer, you must take responsibility for the consequences of your company's activities and make sure that any marketing decisions and actions meet and satisfy the needs of your customers as well as the wider needs of society. Your responsibility also extends to other organizations that you deal with, such as suppliers or agencies. You should not demand or encourage unethical behavior in the relationships these third parties have with other organizations. If you are a member of a professional marketing body, you should also ensure that you uphold and advance the integrity and honor of the marketing profession.

Deal Honestly and Fairly with Customers

You have specific rights and duties in your relationship with customers:

  • Your customers should be able to expect that products and services are safe and fit for their intended use.
  • Your product and service communications should not be deceptive.
  • Your contracts should be drawn up in good faith and honored.
  • You intend to discharge your obligations in good faith.
  • You have appropriate processes for equitable adjustment and/or redress of any grievances your customers might have about their purchases.
  • You should respect consumer rights including the right to information, the right to privacy, and the right to redress.
  • You put particular emphasis on safeguarding the rights and interests of vulnerable groups such children and the elderly.
Balance Customer Interests with Business Needs

One of the issues in marketing ethics is balancing the needs of customers with the needs of your business. In the past, the relationship has been based on the caveat "buyer beware." However, with the growth of consumer legislation, the balance has shifted to "seller beware."

Commentators believe that the development of relationship marketing can lead to positive relationships between buyers and sellers, although there are no defined ethical guidelines.

Advertising is an area where ethical conflicts between consumer and company interests can arise. Advertising has a number of important objectives, including to emphasize product value, provide information, boost sales, stimulate demand, and differentiate a product from competitive offerings. It may be difficult for a company to balance these objectives with an ethical commitment to providing clear, honest information, particularly if business conditions are difficult.

Recognize the Possibility of Ethical Conflict

Ethical conflicts occur when the viewpoints of different players—your company, your customers, and society—clash. The tobacco industry is frequently cited as an example of possible ethical conflicts. Cigarette marketing has created a profitable business for tobacco companies. That in turn has created high levels of employment in the industry—a benefit to society at one level. However, cigarettes are now regarded as harmful to health. The ethical debate is whether tobacco companies should continue to advertise cigarettes to consumers, despite the documented health risks.

Treat Green Issues Properly

Green issues have become a major concern for both companies and customers in recent years. Companies who have made genuine improvements in their environmental performance are eager to capitalize on this by communicating with customers and other stakeholders to improve the perception of their products and companies. However, because so many companies jumped on the green bandwagon, many consumers are cynical about the motives and claims of companies that are promoting green credentials.

If you want to promote your company's environmental responsibility, the claims must be clear, accurate, and capable of being substantiated. Apart from the ethical considerations, there is increasingly strict legislation on the misleading use of terms such as "natural" or the use of "environmental" colors or symbols in presenting products.

Recognize the Importance of Corporate Social Responsibility

In conventional marketing theory, customers are primarily influenced by product, price, availability, and customer service. However, with growing concerns about sustainability, customers are increasingly influenced by the company policies behind products and brands. They understand the social and environmental impacts of different types of production process, and the degree of social responsibility with which companies treat their workers, invest their money, or conduct their affairs. In the same way that you promote product and service information clearly and honestly, you should communicate your company's financial, legal, ethical, environmental, and social performance responsibly.

Assess the Social Responsibility of Your Corporate Brand

Industry experience indicates that customers are increasingly likely to prefer products from a company that they perceive as having a good ethical reputation. To assess the social responsibility of your corporate brand, you need to consider a number of factors, including:

  • Products-are they safe, manufactured from sustainable materials, and produced under responsible conditions of employment?
  • Advertising-is it honest, accurate, and culturally acceptable?
  • Pricing-does it offer value for money as well as generate profits?
  • Selling-is it ethical and free from mis-selling or high-pressure tactics?
  • Distribution-does it ensure fair access to products and services?
  • Customer service-does it meet customer requirements and make it easy to resolve disputes?
Review All Aspects of Your Business

Pricing

Your pricing should offer value for the money, although it does not necessarily need to represent the lowest price on the market. If your price structure is based on a number of elements, make sure that customers understand the total cost they will pay. There should be no "hidden extras." The same guidelines apply if you offer customers credit.

Distribution

Ethics applies to distribution in two ways:

  1. the physical distribution of your products, where you should seek to minimize the impact on the environment of your logistics operations;
  2. the accessibility of your products, where certain customer groups may be disadvantaged by your distribution policies. In financial services, for example, there is concern about the exclusion of customers through the closure of bank branches.

Packaging and labeling

Packaging has become an ethical issue for marketing for a number of reasons:

  • Packaging is a major component of domestic waste and therefore an important contribution to landfill.
  • Discarded packaging is very visible as litter.
  • Packaging reduction initiatives can reduce the environmental impact of a product while also saving companies money.

However, packaging also has an important role to play in protecting products and communicating the brand identity at the point of sale. You therefore have to balance the marketing benefits of packaging against the growing environmental concerns.

You should also ensure that your labeling provides clear, accurate information to customers, particularly in relation to environmental issues or topics such as energy efficiency.

Product development

Any new product development program should take into account current ethical issues:

How will the product be produced? You need to consider the materials, energy, and labor used to produce the product to assess whether the production process has any detrimental social or environmental impact.

How will the product be used? You need to consider whether the product can be used for any unethical purpose. You also need to consider the resources the product will consume during its lifetime, balancing performance requirements against sustainability.

How long will the product last? Here you need to balance your need for future product sales or upgrades against concerns about built-in obsolescence. You also need to consider how customers can dispose of the product at the end of its life.

Retailing

If your business is dependent on retailers, developments in the retail sector have created a new set of ethical issues for marketers. The growing concentration of retail business means that retailers are in a position to exert considerable influence over both customers and suppliers. A major retailer could, for example, limit customer choice by only stocking certain profitable lines. It could also fail to offer value for the money by eliminating price competition. Retailers are also charged with squeezing suppliers' costs to the extent where companies could be damaged. In an effort to offer low-priced products, retailers may be tempted to source supplies from countries where employment conditions are poor.

What to AvoidYou Jump on the "Green Bandwagon"

Although the range of ethical issues facing a company varies from industry to industry, meeting concerns about green issues has become a challenge that crosses all sectors. However, many companies make green claims in their advertising and communications without being able to substantiate the claims. This has led to cynicism among buyers, diluting the efforts of companies that have made genuine efforts to improve their environmental performance.

Where to Learn MoreBook:

Grayson, David and Adrian Hodges, Corporate Social Opportunity!: Seven Steps to Make Corporate Social Responsibility Work for Your Business. Greenleaf Publishing, 2004.

Web Site:

American Marketing Association: www.marketingpower.com