Ethical Issues in Relationship Marketing

1. Ethical Issues in Relationship Marketing Teacher – ShahedRahman

2. Introduction • Channel Relationship model – ethical and social responsibility forces are important components • Balance between the interest of buyer and sellers • Marketing decisions should be made in accordance with accepted ethical principles

3. Marketing Ethics • The moral standards that underlie exchange process • It advances the position that ethics is expected on interactive decision behaviors • Channel members must balance their own moral needs, as reflected in their own personal value systems with the interests of a firm’s internal and external stakeholders. • Critics often charge that marketing is the functional area most likely to be the source of unethical behavior in a business

4. Exchange Conviction ( Belief) • Addresses the level of confidence and faith a channel member is willing to invest in other channel members. WIN -WIN • Several factors influence exchange conviction: • Performance Outcomes • Competitive Arena • Expediency • Custom

5. Performance Outcomes • Firms market value we understand from performance measure such as growth • Sales – Market share and Profits • Increased investment attracts more suppliers and customers • How ethically that partners deal with performance measures such as profit or sales.

6. Competitive Arena • As competition intensifies, firms may be more likely to engage in unethical practices to preserve their market position. • Keep their customer no matter what the cost • Firms may be willing to do whatever it takes to counter competitive challenges.

7. Expediency ( Just to Fit- Convenience) • Individual driven by a short term view of economic conditions tend to take the path of least resistance. • Even though it will make a positive contribution in the career – students do not take the difficult courses voluntarily • So they take the short cut on ethics to attain the firm’s objectives

8. Custom • May people expect that used car sales person use puffery to exaggerate product quality. • Industry convention or custom is such that these or similar actions are expected • Channel members often use their experience with the industry custom as cues for managing their confidence in the ethicality of other channel partners

9. Social Tact (Perception) and Relationship Ethics • Social Tact describes individuals’ way of dealing with others in their environment. • Develops overtime • Relationship ethics describe the process by which organizational ethics are adapted to suit the needs of particular exchange relationships • Each channel member’s representatives – individual employees who interact on behalf of their respective firms – are responsible for moral footing of a relationship.

10. The ethics Continuum ( Scale) • One firms actions can affect another firm’s action in many ways • Breaches of ethics will reduce the level of cooperation present in any exchange • Buyers are aware of seller’s persuasive tactics • Is the seller is an honest person ? • Is the seller truly interested in the buyer welfare? • Balance between the essentially opposing views held by buying and selling channel members is reflected in an ethics continuum

11. Caveat Emptor • Ideology is based on belief that the pursuit of profit maximization is the overriding organizational ethic. • Dictates by the moral baseline provided by the law represents the only constraints on ethical business practice • Genuinely applies within a channel relationship • The goal is to maximize profits within the constraints of laws and regulations

12. Caveat Venditor • Caveat Venditor anchors the other end of our ethics continuum • Seller beware – draws on the pursuit of customer satisfaction • Customer satisfaction taken to its extreme Seller’s Interest Favored Buyer’s Interests Favored Codes of Ethics

13. Rationalization of Unethical Buyer Behavior • Denial Responsibility • Deny personal accountability • Denial Injury • Its no big deal, nobody got hurt • Returning damaged goods ‘normal in this industry’ • Denial of Victim • As a countervailing mechanism for a seller’s exercise of power • Condemning the Condemners • Acquisition of their own misconduct by pointing out that others have also engaged in similar behaviors • Unethical practice is the normative behavior • Appeal to Higher Loyalties • I know that was questionable but I had to compensate my own hardworking employees they are supporting their families

14. Ethical Dilemmas in Relationship Management • Exclusionary Tactics • Aimed at restricting normal channel flows • Sometimes granted exclusive distribution rights for a product • Free market system slow down • Example – toys r us and K-mart different terms and conditions • Diverting Practices • Unauthorized distribution of products • Gray marketing • Gray marketing damages channel relations • Normal profit margin can no longer be earned by legitimate channel members because the unauthorized distributors rarely offer the same service as authorized dealers

15. Ethical Dilemmas in Relationship Management • Repressive Control Maneuvers • Coercive attempts to manipulate another channel members business practices • Full line forcing • Levis forced retailers to carry its whole line • Anticompetitive Channel Promotions • Involve efforts by one channel member to control the distribution of its products

16. Anti Competitive Channel Promotions • Brand Discounts • Often provided to a channel member in return for shelf space • Greater shelf space is traded off in return for lower prices • Discount may eliminate the opportunity for small, limited line producers to obtain shelf space • Aggregate (Combined) Rebates • Currency or merchandise credit offered on the basis of total line sales • Demand signaling • Manufacturer’s use of pre launch advertising and skimming wholesaler pricing to convince retailers that its new product is a winner • Slotting Allowances • Street money or placement fees • Little public data is available on the scope of slotting allowances

17. Moral Codes • How channel members use rules and standards to tell right from wrong. • A sound business decision or an unfair practice • Depends on whom you ask. • No single moral code offers a full proof guideline for deciding what is ethical and unethical across all possible situations

18. Moral Codes - Get The Definition from text book • Rules-Based Moral Codes • Consequences –Based Moral Codes • Experience based moral Codes • Situational Differences • Multiple Cues • A Presumption of Rightness Get The Definition from text book