4 Social Responsibility and Ethics in Marketing. Copyright © Houghton Mifflin Company. All rights reserved.4 | 2 Agenda The Nature of Social Responsibility

44Social Responsibility and Ethics

in Marketing

Copyright © Houghton Mifflin Company. All rights reserved. 4 | 2

Agenda

• The Nature of Social Responsibility

• The Nature of Ethics

• Incorporating Social Responsibility and Ethics into Strategic Planning


The Nature of Social Responsibility

• Social responsibility– An organization’s obligation to maximize

its positive impact and minimize its negative impact on society

• Stakeholders– Constituents who have a “stake” or claim

in some aspect of the company’s products, operations, markets, industry, and outcomes


The Nature of Social Responsibility (cont’d)

• The Dimensions of Social Responsibility– Marketing ethics

• Principles and standards that define acceptable marketing conduct as determined by various stakeholders

– Cause-related marketing• The practice of linking products to a particular cause on

an ongoing or short-term basis

– Strategic philanthropy• The synergistic use of organizational core

competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits


The Pyramid of Corporate Social

Responsibility

FIGURE 4.1

Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug. 1991. Copyright © 1991 by the Foundation for the School of Business

at Indiana University. Reprinted with permission.


BMW has donated over $6 million to the Susan G. Komen Breast Cancer Foundation from vehicle test drives during their “Ultimate Drive” promotion.

Copyright BMW of North America, LLC. Used with permission. The BMW name and logo are registered trademarks.



The European Eco-label

FIGURE 4.2

Courtesy of the European Commission.


Will Consumers Pay an Extra 25¢/Gallon to Reduce Pollution and Global Warming?

Source: “Americans Split on Paying Higher Prices to Reduce Pollution,” USA Today, September 4, 2001, p. A1. Used with permission


The Nature of Ethics

Ethical Ethical StandardsStandards

CompanyCompany

IndustryIndustry

GovernmentGovernment

CustomersCustomers

Interest GroupsInterest Groups

SocietySociety

InfluenceInfluenceFactorsFactors


The Nature of Ethics (cont’d)

EthicalEthicalIssuesIssues

LegalLegalIssuesIssues

EthicalEthicalIssuesIssues

LegalLegalIssuesIssues

GrayGrayAreasAreasGrayGrayAreasAreas



• Ethical Issues in Marketing– An identifiable problem, situation, or

opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical



Misconduct Observed in the Workplace

Workplace Misconduct Observed 2003 2000

Abusive or intimidating behavior toward employees

21% 24%

Lying to employees, customers, vendors, or the public

19% 26%

Withholding needed information from employees, customers, vendors or the public

18% 25%

Discrimination on the basis of race, color, gender, age or similar categories

13% 17%

Sexual harassment 11% 13%

Stealing, theft or related fraud 12% 12%

Falsifying financial records and reports 5% No data

Giving or accepting bribes, kickbacks or inappropriate gifts

4% 5%

Source: “Major Survey of America’s Workers Finds Substantial Improvements in Ethics, “Ethics Resource Center, press release, May 21, 2003, www.ethics.org/releases/nr_20030521_nbes.html.


Exercise

You are the distribution manager for a large consumer products firm. Your company is about to release a very large shipment of products. You must choose among several transportation companies. Sales representatives from these companies often make calls to your office. Your decision will mean the loss or gain of millions of dollars of revenue for these companies.


Exercise (cont’d)

1. Which of the following gifts would you be willing to accept from sales reps of the transportation companies?• Pen and pencil set (with the company’s logo)• 5-year supply of scratch pads (with logo)• Dinner for four at an exclusive restaurant• Season tickets to a professional football team• Fruits and nuts delivered to you each Christmas• Three-day, all-expense-paid golfing vacation• $500 in cash• Bag of groceries delivered to your home each week• Lavish trip to the Cayman Islands


Exercise (cont’d)

2. What role would top management, superiors, and peers play in your decision on accepting these gifts?

3. If you had the chance to take some of the gifts on the list without anyone knowing, would you?

4. Would a code of ethics or an ethical corporate culture help you in making your decision?


Exercise

How ethical are the following behaviors?1. The manufacturer of a leading insect spray

changes the formulation of its product to eliminate problems with some people being allergic to one of its ingredients. The manufacturer does not inform consumers. The change in the formula will make the product less effective.

2. A bribe is paid to a company official in the island country of Kocomo to facilitate the movement of a product in that country. Bribes are a normal and expected business practice in Kocomo.


Exercise (cont’d)

3. A beer company engages in an advertising campaign that targets undergraduate college students, many of whom are under the legal drinking age.

4. A rental car company strongly advises customers to purchase insurance when renting a car. Although most personal car insurance policies cover insured motorists when driving a rental car, most rental car customers are not aware of it.


Exercise (cont’d)

5. Consumer Reports publishes the results of a study on shampoos that provides strong evidence that all shampoos are basically the same. In fact, the results suggest that a mild dishwashing liquid will do the same job for a lot less money. After the study is published, a leading shampoo marketer claims that its latest product will remove oil, add body, condition, and replenish hair better than any competing shampoo and do it all in one step.


Factors That Influence the EthicalDecision-Making Process in Marketing

FIGURE 4.3



• The Ethical Decision-Making Process– Influence factors

• Individual—personal values and principles of right and wrong, socialization through family, social groups, religion, and education

• Organizational—work groups, committees, coworkers

• Opportunity—business and organizational conditions which limit, punish, encourage, or reward ethical/unethical decisions


The Relationship of Organizational Values to Employee Satisfaction

FIGURE 4.4

Source: Ethics Resource Center, The Ethics Resource Center’s 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work (Washington, D.C.: Ethics Resource Center, 2000), p. 85. Reprinted with permission.


Sources of Pressure to Compromise Ethics Standards at Work

FIGURE 4.5

Source: Ethics Resource Center, The Ethics Resource Center’s 2000 National Business Ethics Survey: How Employees Perceive Ethics at Work (Washington, D.C.: Ethics Resource Center, 2000), p. 38. Reprinted with permission.



• Improving Ethical Conduct in Marketing– Codes of conduct (ethics)

• Formalized rules and standards that describe what the company expects of its employees

– Ethics officers• High-ranking persons (known to respect legal

and ethical standards) in the organization who have responsibilities for– creating and distributing codes of conduct.– providing advice about ethical issues.– overseeing and enforcing of the code of conduct.








• Implementing Ethics and Legal Compliance Programs– Provide open communication and coaching on

ethical issues (create a value-based corporate culture).

– Enforce standards and impose penalties or punishment for codes of conduct violations.

– Revise compliance programs as necessary.– Make compliance programs an essential part of

the overall marketing strategy implementation.


Incorporating Social Responsibility and Ethics into Strategic Planning

Overall Strategic Marketing PlanningOverall Strategic Marketing PlanningOverall Strategic Marketing PlanningOverall Strategic Marketing Planning

EthicsEthicsIndividual andIndividual and

group decisionsgroup decisions

EthicsEthicsIndividual andIndividual and

group decisionsgroup decisions

Social Social ResponsibilityResponsibilityThe total effect of The total effect of

marketing decisions marketing decisions on societyon society

Social Social ResponsibilityResponsibilityThe total effect of The total effect of

marketing decisions marketing decisions on societyon society


Incorporating Social Responsibility and Ethics Into Strategic Planning (cont’d)

• Evaluating whether an activity is ethical and socially responsible– Ask other persons in the organization for

their approval.– Contact concerned consumer, industry,

and governmental groups.– Check company policies.– Wall Street Journal test.


Texas Instruments’ Ethics Quick Test

• Is the action legal?

• Does it comply with our values?

• If you do it, will you feel bad?

• How will it look in the newspaper?

• If you know it’s wrong, don’t do it!

• If you’re not sure, ask.

• Keep asking until you get an answer.Source: Texas Instruments. Used with permission.


Lockheed Martin’s “Warning Signs”

• “Well, maybe just this once…”• “No one will ever know…”• “It doesn’t matter how it gets done as long as it gets

done.”• “It sounds too good to be true.”• “Everyone does it!”• “Shred that document!”• “We can hide it!”• “No one will get hurt!”• “What’s in it for me?”• “This will destroy the competition!”• “We didn’t have this conversation.”


Variations in Employee Conduct

10% 40% 40% 10%

Follow their own values and beliefs; believe that their values are superior to those of others in the company

Always try to follow company policies

Go along with the work group

Take advantage of situations if -the penalty is less than the benefit-the risk of being caught is low

Copyright © 2005 O.C. Ferrell.

These percentages are based on a number of studies in the popular press and data gathered by the authors. These percentages are not exact and represent a general typology that may vary by organization.


Incorporating Social Responsibility and Ethics into Strategic Planning (cont’d)

• Being socially responsible and ethical is not easy.

• Requires organizational commitment to– constantly monitoring trends and changes in

society’s values.– developing control procedures to prevent

organizational decisions and actions from damaging customer relations.

– attempting to predict the long-term effects of products and actions taken to meet current societal wants.


Incorporating Social Responsibility and Ethics Into Strategic Planning (cont’d)

• Social responsibility and ethics improve marketing performance.– Socially responsible companies (and their

employees) can better respond to stakeholder demands.

– A company’s reputation for social responsibility is important to consumers’ buying decisions.

– Social responsibility and ethical behavior reduce the costs of legal violations, civil litigation, and damaging publicity.


Importance of Company Reputation to Consumers Today Versus Five Years Ago

Source: “Watch What You Say,” American Demographics, July 2000, p. 24. Adapted with permission.

Source: Wirthlin Worldwide

Documents

4 Social Responsibility and Ethics in Marketing. Copyright © Houghton Mifflin Company. All rights reserved.4 | 2 Agenda The Nature of Social Responsibility