MARKETING WEEK 3 ETHICAL ISSUES WITH MARKETING MIX

Question 1

DEFINE ETHICS

Answer 1

Moral principles and values that govern the actions and decisions of an individual or group.

Question 2

DEFINE BUSINESS ETHICS

Answer 2

Moral principles and values that guide a firm’s behaviour – for example poor ethics is the use of child labour and forced labour whereas good ethics..

Question 3

DEFINE MARKETING ETHICS

Answer 3

Moral principles and values that guide behaviour within the field of marketing and cover issues such as product safety, truthfulness in marketing communications, honesty in relationships with customers and distributors, pricing issues and the impact of marketing decisions on the environment and society.

Question 4

WHAT ARE SOME OF THE MAIN AREAS OF MARKETING ETHICS?

Answer 4

Marketing mix effects on consumers, societal issues, environmental issues, political issues.

Question 5

WHAT HAVE BEEN RESPONSES TO ETHICAL ISSUES?

Answer 5

Businesses: CSR

Societal responses: Consumerism, environmentalism, ethical consumption

Question 6

WHO ARE TH TOP 5 BEST CSR REPUTATIONS IN THE WORLD?

Answer 6

Find out.

Question 7

What are some ethical issues with distribution?

Answer 7

• Slotting allowances
• Grey markets
• Exclusive dealing
• Restriction in supply
• Fair trading

Question 8

What are slotting allowances?

Answer 8

Power shift from manufacturers to retailers. A fee paid to retailer in an agreement to place product on the retailers shelves. Critics argue that smaller companies cannot compete. Retailers argue that they are simply charging for a scarce commodity, shelf space.

Question 9

What are Grey Markets?

Answer 9

Occur when a product is sold through an unauthorised distribution channel. e.g sourcing abroad and selling brand names in discount stores. Tesco was recently in a law suit with Levi jeans for sourcing low priced levi jeans abroad and selling them in the UK for an undercut price of their competitors. Levi claimed that this undermined the exclusive nature of their brand and was damaging. Supporters of grey markets claim that they encourage competition and offer more choice for consumers.

Question 10

Explain restrictions in supply

Answer 10

Small suppliers concerned that large manufacturers and retailers will squeeze them out of the supply chain. France combats this by having law that requires 10% of shelf space for small suppliers.

Question 11

Explain fair trading

Answer 11

Free market forces - small commodity producers faced with large powerful suppliers results in very low prices. Often suppliers in developing countries hardest hit by this trend. Clothing brands such as Nike and Primark have been criticised for their treatment of their suppliers in developing countries.

Question 12

MAIN ETHICAL ISSUES WITH DIRECT (PERSONAL) COMMUNICATIONS

Answer 12

Deception
The hard sell
Bribery
Reciprocal Buying

Question 13

Explain the issue of deception

Answer 13

Challenged with telling whole truth and risk loosing sale or misleading the customer to clinch it. Forms of deception include exaggeration, lying, or withholding important info that could reduce appeal.

Question 14

Example of deception

Answer 14

Lloyds TSB paid out £500 million in compensation for mis-selling endowment mortgages.

Question 15

The hard sell

Answer 15

High pressurised tactics often used to press a customer to make a quick decision. This can be a particular problem when the sale is for a very expensive product such as a car than can require careful credit planning on the part of the consumer.

Question 16

Explain bribery

Answer 16

The act of giving payment, gifts or other inducements in order to secure a sale. They are seen to violate principle of fairness in commercial negotiations. A major problem faced by companies is the varying culture and acceptance of bribes in different countries. in one country bribes are looked down upon whereas in another country they may be common business practice. International businesses have a challenge to successfully navigate this issue ethically without suffering commercially in the short term.

Question 17

Explain reciprocal buying

Answer 17

When a customer only agrees to purchase something from a supplier if that supplier agrees to purchase something from the buyer. While many argue that it undermines the principle of fairness as not all supplier are in a position to return purchase, it can work in favour of some buyers who do not have cash but would be able to offer goods as part of the ‘payment’. Some see it as a return to rudimentary trading systems where money was not the main focus of trading.

Question 18

WHAT ARE THE MAIN ETHICAL ISSUES WITH ADVERTISING?

Answer 18

• Advertising to children
• Misleading advertising
• Advertisings influence on societie’s values
• Promoting anti-social behaviour
• Use of trade inducements

Question 19

Explain advertising to children issue

Answer 19

Critics argue that children are especially susceptible to persuasion and therefore need special protection from advertising. Others claim children are remarkably streetwise and can look after themselves.

Restrictions on what type of products may be advertised to children, where and when are in place in many developed countries.

Toy, clothing and entertainment product advertising has been criticised for encouraging ‘pester-power’ and leading to family conflicts.

It is important to note, advertising may only be part of the issue because many products are bought for and by children with little or no advertising.

Question 20

Explain the issue of misleading advertising

Answer 20

Exaggerated claims and concealed facts. find other than textbook examples.

Question 21

Explain advertising’s influence on society’s values.

Answer 21

Many claim that advertising promotes materialism by stressing the importance of material possessions.

Question 22

Explain promoting anti-social behaviour

Answer 22

Drinks promotions in pubs and clubs for example may lead to excessive drinking, increased violence and long-term health problems.

Question 23

Explain the use of trade inducements

Answer 23

Retailers sometimes accept inducements from manufacturers to encourage their salespeople to push their products. This often takes the form of bonus payments to salespeople. Salespersons then have an incentive to focus on certain product lines when dealing with customers.. customers may then be poorly advised as to the best product for them.

Question 24

WHAT ARE SOME ETHICAL ISSUES SURROUNDING PRICING STRATEGIES

Answer 24

• Price fixing
• Predatory pricing
• Deceptive pricing
• Penetration pricing and obesity
• Price discrimination
• Product dumping

Question 25

Explain price fixing

Answer 25

A major driving force of lower prices is competition. Producers may then see it as beneficial not to compete on price. This is an act of collusion and is banned in many countries including in the EU.

Question 26

Explain predatory pricing

Answer 26

Firm cuts its prices with the aim of driving out competition. The intent is to potentially suffer initial loss but then increase profitability after competition is removed. Small companies are particularly vulnerable to predatory pricing because they have less retained profit and other revenue streams to rely on to survive a price war.

Question 27

Explain deceptive pricing

Answer 27

When customers are mislead by price deals offered by companies. Examples include misleading price comparisons. When a store sets artificially high prices for a short time in order to later claim ‘lower’ sale prices. Some countries have laws stating the minimum period over which the regular price should be charged before it can be used as a reference price in a sale.

Question 28

Explain penetration pricing and obesity

Answer 28

Controversial issue occurs when businesses such as fast food companies offer low prices on fatty foods to young people which is then claimed to contribute to obesity.

This claim is rebutted by critics who claim that such consumers should be able to make informed decisions considering the amount of healthy eating promotion in the media. It has become common knowledge that fatty foods are unhealthy.

Question 29

Price discrimination

Answer 29

This occurs when a supplier offers better price to one buyer and not to another. Very commonly used when age is a differentiating factor.

This practice can be justified, however, when the cost of supplying different customers varies, where the price differences reflect different levels of competition and where different volumes are purchased.

Question 30

Product dumping

Answer 30

Practice of exporting products at price lower than than charged in domestic market.. even can be lower than cost of production. Can occur for a variety of reasons. For example, a country can change health and safety regulations which make a product unsalable in the domestic market and so companies will offload the product onto a foreign market at a lower price in order to minimise loss.

Question 31

WHAT ARE THE MAIN ETHICAL ISSUES WITH PRODUCTS?

Answer 31

• Product safety
• Planned Obsolescence
• Deceptive packaging
• Anti-branding and developing economies

Question 32

Explain the issue of product safety

Answer 32

Particular issue when it comes to consumables. For examples genetically modified (GM) products (crops). Raise questions about safety.

Tobacco, salty foods, high sugar content all are areas of concern.

Question 33

Explain issue of planed obsolescence

Answer 33

Many products are not designed to last a long time. Makes sense from producers perspective as it encourages repeat purchase to replace good. Critics claim that while many customers are happy with continually purchasing new goods (e.g clothes) many would be happy to continue using outdated models so long as they were in working condition. This means planned obsolescence can reduce consumer choice.

Competition keeps this practice in check and stops excessive planned obsolescence.

Question 34

Explain issue of deceptive packaging

Answer 34

Can occur with oversized packaging. (slack packaging).

Also misleading labelling (not disclosing all ingredients/components) or ‘loose language’ such as using terms like ‘farm fresh cheese’ when it was intact produced in a factor. Typical words include fresh, natural, pure, traditional and original.

Question 35

Explain issue of anti-branding and developing economies

Answer 35

Critics of brands accuse the practice of concentrating power and wealth in the hands of companies and economies that are already rich and powerful, whereas poor countries have to compete on price with less established or no brand.

The internet has provided a forum for open debate and communication on this issue and as a result anti-brand sentiments are arguably on the increase as awareness of issues surrounding large corporate brands increases.