Principles of Marketing

1. 20 Principles of Marketing Marketing Ethics and Social Responsibility

2. Learning Objectives After studying this chapter, you should be able to: • Identify the major social criticisms of marketing • Define consumerism and environmentalism and explain how they affect marketing strategies • Describe the principles of socially responsible marketing • Explain the role of ethics in marketing 20-2

3. Chapter Outline • Social Criticisms of Marketing • Citizen and Public Actions to Regulate Marketing • Business Actions Toward Socially Responsible Marketing 20-3

4. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers • High cost of distribution • High advertising and promotion costs • Excessive markups • Deceptive practices 20-4

5. Complaint: Intermediaries mark up prices beyond their value due to inefficiencies and unnecessary or duplicative services Response: Markups reflect the cost of the services that consumers expect Convenience Larger stores and assortments More service Return privileges Social Criticisms of Marketing Marketing’s Impact on Individual Consumers High Cost of Distribution 20-5

6. Complaint: Prices are inflated to absorb advertising and sales promotion costs, and packaging only adds to the psychological, not functional, value of the product Response: Advertising does add to product cost but also to product value by informing potential customers of the availability and merits of the product Social Criticisms of Marketing Marketing’s Impact on Individual Consumers High Advertising and Promotion costs 20-6

7. Complaint: Companies mark up products excessively Response: Most businesses try to deal fairly with consumers because they want to build relationships and repeat business Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Excessive Markups 20-7

8. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices Complaint: Companies use deceptive practices that lead customers to believe they will get more value than they actually do. These practices fall into three categories: • Deceptive pricing • Deceptive promotion • Deceptive packaging 20-8

9. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices 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 misrepresenting the product’s features or performance or luring the customer to the store for a bargain that is out of stock Deceptive packaging includes exaggerating packaging contents through subtle design, using misleading labeling or describing size in misleading terms 20-9

10. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices Legislation to protect consumer from deceptive practices • Wheeler-Lea Act—gives the Federal Trade Commission (FTC) power to regulate “unfair or deceptive acts or practices” Is it deception or alluring or puffery that is just an exaggeration for effect? • Products that are harmful • Products that provide little benefit • Products that are not made well 20-10

11. Complaint: Salespeople use high-pressure selling that persuades people to buy goods they had no intention of buying Response: Most selling involves building long-term relationships and valued customers. High pressure or deceptive selling can damage these relationships. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices High-Pressure Selling 20-11

12. Complaint: Products have poor quality, provide little benefit, and can be harmful Response: Today’s marketers know that customer-driven quality results in customer value and satisfaction that creates profitable customer relationships. There is no value in marketing shoddy, harmful, or unsafe products. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices Shoddy, Harmful, or Unsafe Products 20-12

13. Complaint: Producers follow a program of planned obsolescence, causing their products to become obsolete before they actually need replacement. Producers also continually change consumers’ concepts of acceptable styles to encourage more and earlier buying. Response: Planned obsolescence is really the result of competitive market forces leading to ever-improving goods and services. Marketers know that customers like style changes and want the latest innovations even if older models still work. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices Planned Obsolescence 20-13

14. Complaint: American marketers serve disadvantaged customers poorly. Some retail companies “redline” poor neighborhoods and avoid placing stores there. Response: Some marketers profitably target these customers, and the FTC has taken action against marketers that do advertise false values, wrongfully deny service, or charge disadvantaged customers too much. Social Criticisms of Marketing Marketing’s Impact on Individual Consumers Deceptive Practices Poor Service to Disadvantaged Consumers 20-14

15. Complaint: The marketing system urges too much interest in material possessions. People are judged by what they own rather than who they are, creating false wants that benefit industry more than they benefit consumers. Response: People do have strong defenses against advertising an other marketing tools. Marketers are most effective when they appeal to existing wants rather than creating new ones. The high failure rate of new products shows that companies cannot control demand. Social Criticisms of Marketing Marketing’s Impact on Society as a Whole False Wants and Too Much Materialism 20-15

16. Complaint: Businesses oversell private goods at the expense of public goods and require more public goods to support them Response: There needs to be a balance between private and public goods Producers should bear full social costs of their operations Consumers should pay the social costs of their purchases Social Criticisms of Marketing Marketing’s Impact on Society as a Whole Too Few Social Goods 20-16

17. Complaint: Marketing and advertising creates cultural pollution Response: Marketing and advertising are planned to reach only a target audience, and advertising makes radio and television free to users and helps to keep the cost of newspapers and magazines down. Today’s consumers have alternatives to avoid marketing and advertising from technology. Social Criticisms of Marketing Marketing’s Impact on Society as a Whole Cultural Pollution 20-17

18. Complaint: Businesses wield too much political power over mass media, limiting media to report independently and objectively Response: American industries do promote their own interests, and regulators are seeking to balance the interests of big businesses against the public Microsoft Tobacco Social Criticisms of Marketing Marketing’s Impact on Society as a Whole Too Much Political Power 20-18

19. Social Criticisms of Marketing Marketing’s Impact on Other Businesses • Acquisition of competitors • Marketing practices • Unfair competitive marketing practices 20-19

20. Social Criticisms of Marketing Marketing’s Impact on Other Businesses Acquisition of competitors can sometimes be good for society when the acquiring company gains economies of scale that lead to lower prices Marketing practices can also bar new competitors from entering an industry and can create use patents, heavy promotional spending to drive out existing competitors Unfair competitive marketing practices such as setting prices below cost, threatening to cut off business with suppliers, or discouraging the buying of a competitor’s product can hurt or destroy other firms 20-20

21. Citizen and Public Actions to Regulate Marketing Consumerism is the organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers Environmentalism is an organized movement of concerned citizens, businesses, and government agencies to protect and improve people’s living environment 20-21

22. Citizen and Public Actions to Regulate Marketing Consumerism 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 warning and controls • The right to charge any price for the product, provided no discrimination exists among similar kinds or 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 programs, provided they are not unfair or misleading 20-22

23. Citizen and Public Actions to Regulate Marketing Environmentalism People and organizations should operate with more care for the environment The marketing system’s goal should not be to maximize consumption, consumer choice, or satisfaction, but rather to maximize life quality. Environmental costs should be included in both producer and consumer decision making. 20-23

24. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability • Pollution prevention • Product stewardship • Design for environment (DFE) • New environmental technologies • Sustainability vision 20-24

25. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability Pollution prevention involves not just cleaning up waste but also eliminating or minimizing waste before it is created Product stewardship involves minimizing the pollution from production and all environmental impact throughout the full product life cycle Design for environment (DFE) involves thinking ahead to design products that are easier to recover, reuse, or recycle 20-25

26. Citizen and Public Actions to Regulate Marketing Environmentalism Environmental Sustainability New environmental technologies involve looking ahead and planning new technologies for competitive advantage Sustainability vision is a guide to the future that shows the company that the company’s products, process, and policies must evolve and what is needed to get there 20-26

27. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Enlightened marketing refers to a company’s marketing effort supporting the best long-run performance of the marketing system and consists of five principles: • Consumer-oriented marketing • Customer-value marketing • Innovative marketing • Sense-of-mission marketing • Societal marketing 20-27

28. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Consumer-oriented marketing means that a company should view and organize its marketing activities from the consumer’s perspective Customer-value marketing means that the company should put most of its resources into customer-value-building marketing investments—long-term customer loyalty and relationships—by continually improving the value consumers receive from the firm’s market offerings Innovative marketing requires the company to continually seek real product and marketing improvements 20-28

29. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Sense-of-mission marketing means the company should define its mission in broad social terms rather than narrow product terms Societal marketing means the company makes marketing decisions by considering consumers’ wants and interests, the company’s requirements, and society’s long-run interests • Views societal problems as opportunities • Designs pleasing and beneficial products 20-29

30. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Deficient products have neither immediate appeal nor long-term benefits • Bad-tasting and ineffective medicine Pleasing products have high immediate satisfaction but may hurt consumers in the long run • Cigarettes and junk food 20-30

31. Business Actions Toward Socially Responsible Marketing Enlightened Marketing Salutary products have low appeal but may benefit consumers in the long run • Seat belts and air bags Desirable products give both immediate satisfaction and high long-term benefits • Tasty and nutritious breakfast food 20-31

32. Business Actions Toward Socially Responsible Marketing Marketing Ethics Corporate marketing ethics are broad guidelines that everyone in the organization must follow that cover distributor relations, advertising standards, customer service, pricing, product development, and general ethical standards 20-32

33. Business Actions Toward Socially Responsible Marketing Marketing Ethics Philosophies Issues are decided by the free market and legal system Responsibility is not on the system but in the hands of the individual company and managers 20-33

34. The End