Ethical Issues in Marketing

Reasons for unethical practices

Pressure of competition
Ethics and profit conflict
Prevailing practice in the industry

Pricing practices are regulated by the
government more forcefully than other
areas of marketing mix
FTC act- Federal Trade Commission Act
Robinson-Patman Act
Pricing
4 areas of pricing are considered unethical
1. Deceptive pricing
2. Unfair pricing
3. Price discrimination
4. Price fixing
Deceptive pricing
Bait and switch
Audi in USA
Offer discount to an inflated price
Buy one take 2 free, the first one covers the
price of the other 2
Unfair pricing
Using pricing practices to drive
competitors out of business
When competitors are driven out by low
prices, the company raises price back to
the former level.
Pricing Issues
Predatory pricing
Vertical price fixing
Horizontal price fixing
Comparative price advertising
Bait-and-switch
Scanned vs. posted prices
Pricing Issues

Price discrimination

Inside channel systems

Business to consumer
Pricing Issues
Price discrimination inside channel
systems
Justifications
Differences in cost
Differences in quality
Changing market conditions
To meet competition
Deals must be offered on a proportionately
equal basis

Pricing Issues
Business to consumer price discrimination

First degree price discrimination (charging
more to those who will pay it)
Auto dealers
Furniture
Internet sites?
Pricing Issues
Business to consumer price discrimination
Second degree price discrimination (charging
different prices based on the nature of the
offering)
Multiple unit pricing
Price bundling
Coupons
Rebates

Promotional Issues
False and misleading advertising
Creating demand for vice or unwholesome
products
Tobacco?
Alcohol?
Fattening foods?
Pornography or sexually explicit material?
Intrusive promotions
Deceptive advertising- giving false
information or misleads consumers about
beliefs of the brand. Unethical
Corrective advertising- company publicly
correct a false impression created by past
advertising.
Ethics in advertising to children- as
children cannot process information to
evaluate advt claims.
Common deceptive practices
False and misleading presentation of facts
Deliberate omitting of required information
Implying a benefit that hardly exists
Exaggerations
Unnecessary technical jargons
Creating fear in consumers
Plagiarism
Open criticism of competitor
Channel Issues
Slotting allowances
Buyback / stocklift / lift-out
Gray market merchandise
Diverted merchandise
Exclusive geographic territories
Exclusive dealing agreements
Tying contracts
Refusal to deal
Product Issues
Products that create harm
Targeted at disadvantaged groups (e.g.,
cheap wine targeted to alcoholics and
homeless people)
Quality deterioration as a result of a
harvesting strategy
Planned obsolescence
Counterfeit merchandise

Ethical Frameworks
Moral idealism universal rights and
obligations

Utilitarianism the greatest good for the
greatest number

Social justice emphasis on fairness and
equality for all individuals
Stakeholders

Stockholders
Employees
Customers
Distributors
Suppliers
Society