Five Ethical Issues In Marketing Commerce Essay

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First consider marketing. Our understanding of what is required of a marketing professional has changed over the last decade. It used to be adequate to discuss product, promotion and price. A modern marketing professional is also expected to develop his/her relationship with the customer or client.

The change can be seen in the text book definitions.

In 1985 the American Marketing Association defined marketing as "The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organisational objectives". (AMA 1985)

Twelve years later, in 1997, an academic called Grőnroos defined marketing" to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of parties involved are met. This is achieved by mutual exchange and fulfilment of promises.

By engaging with their customers marketing professionals are able to secure report business. Loyalty schemes are a device for building that loyalty within the retail and customer service sectors. Marketing professionals talk in terms of fulfilment, meaning fulfilment of their relationship with the customer.

Moreover, the new text book definition, more accurately describes business to business (B2B) marketing activities. B2B marketing and relationship building can take many years to reach fruition.

During the last two decades, while marketing professionals were increasing their awareness of customer/ client relationships, society has become much more aware of ethical issues. Ethical issues are concerned with making appropriate responses to social situations. Failure to make the correct social response can exposure a business to reputational issues, the unwelcome attention of political activists and legal sanctions. A modern business that is interested in developing long term relationships with their customers and other stakeholders has to take an interest in ethics.

In 1994 the moral philosopher Elaine Sternberg argued that a business that is focused for the long term will tend to make the correct moral decisions. Her view is that a company has a duty to the shareholders to maximise monetary return over the long term. Focus on the long term discourages the development and marketing of socially undesirable products. Moreover, good corporate governance encourages the company to accurately report its activities and respond to the ethical concerns of the shareholders.

Within this framework, a modern business needs to keep abreast of top five ethical issues in marketing.

1. Compliance and Corporate Responsibility.

Compliance to legislation and statutory requirements is paramount. All directors have a responsibility top to ensure that the company operates within the law. This includes providing financial statements that are timely, true and fair, implementing appropriate health and safety legislation, complying with employment legislation and complying with consumer legislation. The company must also comply with legislation and code of conduct that is specific to its line of business. Data protection and money laundering rules must be followed.

2. Fairness

Interactions with a customer, or client must be guided by a principle of fairness. The marketing literature should be honest and not misleading. Products should be sold that are suitable for the stated purpose.

Fairness is particularly important in an industry such as financial services or insurance that sells an intangible product. The insurance industry sells a "promise" to pay a future claim. Integrity and a clear adherence to operational policy is important for the insurance industry.

The company must avoid allegations of mis-selling at all cost.

To avoid allegations of unfair behaviour, there should be a clear and fair mechanism for dealing with complaints.

3. Pro-active Response to Ethical Concerns

Ethical issues in marketing, and in society as a whole have increased in recent years. This reflects the increasing wealth and education of society. In future, goods and services will be sold less on a needs basis and more as part of a value judgement. A company that responds to ethical concerns is likely to enjoy a stronger reputation, greater market share and add more value to its products than a less ethically aware rival.

Companies that committed to the organic food movement successfully developed their businesses on the basis of ethical concerns. Companies that are interested in micro-credit successfully service an ethical need to supply credit to people of limited means. Companies that intend to develop their business based on alternative energy or low carbon emission solutions illustrate the potential of ethical issues for future business development.

A pro-active response to ethical concerns need not involve very high profile projects such as concern for global warming. Good employment practice and exemplary corporate governance can be used to demonstrate a strong ethical commitment.

4. Reactive Response to Ethical Concerns

Ethical issues in marketing also require a response to changes in public opinion and a response to situations where the company is placed on the ethical wrong foot. Advances in science and public opinion mean that a well intentioned company can end up producing a product that is no longer fashionable. This sometimes happens in the healthcare and nutrition sector. Companies that produced unsaturated fat spreads during the 1970s thought that their produce was ethically desirable, but were unaware of the cancer risks at the time. In our fast changing world, companies must monitor developing public opinion and ethical concerns to avoid ending up with a commitment to an ethically out of date product.

Companies also need to have a pre-prepared public relations strategy that can come into play should the company inadvertently engage in unethical conduct. Difficult situations could arise if a rouge salesman, or other employee does not follow company policy. In these cases the company should comply with investigations and explain that the situation arose through the behaviour of a maverick employee. Trading partners can inadvertently expose a company to unethical situations. In finance, care is needed to identify the source of client finds, otherwise the company could be inadvertently handling money derived from unethical or criminal activities. In manufacturing care is needed to ensure that sub-contractors are responsible employers, otherwise the company could encounter ethical pressure groups that disapprove of sweatshop conditions and the use of child labour.

5. Community Involvement

In future society will becomes increasingly aware of ethical issues. Marketing professionals will also take an increasing interest in long term relationships with customers, clients and stakeholders. A prudent company has to position to maximise this interest. An active interesting in the local community, promotion of local charities and a responsible attitude to employers can be used to demonstrate that the company "cares" and has an ethical stance. These activities can be reported in the local press and provide good publicity to support the corporate governance sections of the Annual Report.

Further Reading

Grőnroos C. (1997) From Marketing Mix to Relationship Marketing - Towards a Paradigm Shift in Marketing. Management Decision 35(4), pp. 322-39.

Sternberg E. (1994) Just Business, Oxford University Press ISBN 0-19-829663-0


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