Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
Chapter 8: Ethics and Social Responsibility in Marketing Strategy
Chapter Outline
I. Introduction
A. Beyond the Pages 8.1 discusses how Salesforce.com has integrated social
responsibility into its marketing strategy.
B. The role of ethics and social responsibility in the strategic planning process has
become more important as many firms have seen their image, reputation, and
marketing efforts destroyed by problems in these areas.
C. Research has shown that ethical behavior can not only enhance a company’s
reputation, but also contribute significantly to its bottom line.
D. Irresponsible actions that anger customers, employees, or competitors may
jeopardize a firm’s financial standing and also lead to legal repercussions.
II. Ethics and Social Responsibility in Marketing Strategy
A. Dimensions of Social Responsibility
1. Social responsibility is a broad concept that relates to an organization’s
2. From an economic perspective, firms must be responsible to all
stakeholders for financial success. The economic responsibility of making
a profit serves employees and the community at large.
3. Firms also have expectations, at a minimum, to obey laws and regulations.
4. Marketing ethics refers to principles and standards that define acceptable
marketing conduct as determined by the public, government regulators,
private interest groups, competitors, and the firm itself.
5. Philanthropic activities, which go beyond marketing ethics, are not
required of a company, but they promote human welfare or goodwill
above and beyond the economic, legal, and ethical dimensions of social
responsibility.
a) Many firms link their products to a particular social cause on an
ongoing or short-term basis, a practice known as cause-related
marketing.
b) Other firms go further and adopt strategic philanthropy, the
synergistic use of organizational core competencies and resources
to address key stakeholders’ interests and achieve both
organizational and social benefits.
B. Sustainability
1. Sustainability includes the assessment and improvement of business
strategies, economic sectors, work practices, technologies, and lifestyles—
all while maintaining the natural environment.
2. Leadership in Energy and Environmental Design (LEED) standards
provide a framework for incorporating greener building materials and
more efficient operations into the construction of facilities.
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
3. Many products can be certified as “green” by environmental organizations
such as Green Seal, the Forest Stewardship Council, or the Rainforest
Alliance.
4. Green marketing involves stakeholder assessment to create meaningful
long-term relationships with customers, while maintaining, supporting,
and enhancing the natural environment.
5. Greenwashing occurs when companies mislead consumers into thinking
that a good or service is more environmentally friendly than it actually is.
This generally takes the form of misleading product labels.
6. Beyond the Pages 8.2 discusses the difficulties that consumers face in
looking for truly eco-friendly products.
C. Marketing Ethics and Strategy
1. Marketing ethics includes the principles and standards that guide the
behavior of individuals and groups in making marketing decisions.
2. The most basic of these standards have been codified as laws and
3. Repeated ethical misconduct in a particular business or industry
sometimes requires the government to intervene, a situation that can be
expensive and inconvenient for businesses and consumers.
4. The reputation of the firm is one of the most important considerations for
consumers. Marketers should be aware of stakeholders and the need to
build trust. [Exhibit 8.2]
5. Corporate reputation, image, and branding are more important than ever
and are among the most critical aspects of sustaining relationships with
key stakeholders.
D. The Challenges of Being Ethical and Socially Responsible
1. Business decisions involve complex and detailed discussions in which
correctness may not be so apparent.
2. Individuals who have limited business experience often find themselves
required to make sudden decisions about product quality, advertising,
pricing, bribery, hiring practices, privacy, and pollution control.
3. A person’s experiences and decisions at home, in school, and in the
community may be quite different from the experiences and the decisions
that he or she has to make at work.
4. When personal values are inconsistent with the configuration of values
held by the work group, the potential for ethical midconduct increases.
5. It is imperative that employees become familiar with the types of
misconduct that can occur within their organizations. [Exhibit 8.3]
III. Ethical Issues in the Marketing Program
A. An ethical issue is an identifiable problem, situation, or opportunity that requires
an individual or organization to choose from among several actions that must be
evaluated as right or wrong, ethical or unethical. [Exhibit 8.4]
B. Product-Related Ethical Issues
1. Product-related ethical issues generally arise when the firm fails to
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
disclose risks associated with a product or information regarding the
function, value, or use of a product.
2. Ethical issues can arise in product design as pressures build to substitute
inferior materials or product components to reduce costs. Similarly, ethical
issues can arise when the firm fails to inform customers about changes in
quality or quantity of product sold.
3. Counterfeit products abound today, particularly in the areas of clothing,
audio and video products, and computer software. Any product that can be
easily copied is vulnerable to counterfeit activities.
C. Pricing-Related Ethical Issues
1. Pricing is one of the most heavily watched and regulated of all marketing
activities. Given that a difference in price can create such a significant
competitive advantage, any effort to artificially give one company an edge
over another is subject to legal or regulatory intervention.
2. Price discrimination occurs when firms charge different prices to different
3. Price fixing occurs when rival firms collaborate to set prices. The Justice
Department has determined that, while following a competitor’s lead in an
upward or downward trend is acceptable, there can be no signaling of
prices to competitors in this process.
4. Predatory pricing occurs when a firm charges very low prices for a
product with the intent of driving competition out of business or out of a
specific market. Predatory pricing is illegal; however, it is extremely
difficult to prove in court.
5. Superficial discounting occurs when a firm advertises a sale price as a
1. Managing ethical issues in distribution and supply chain strategy is very
challenging due to the complexity of most supply chains and the fact that
supply chains today are global.
2. Although companies often create a Supplier Code of Conduct, they are
required to conduct regular audits to ensure that factories are following
compliance standards—which in turn can incur significant costs to
companies in both time and finances.
3. Managing supply chain ethics is important because stakeholders hold the
firm responsible for all ethical conduct related to product availability and
the integrity of the product.
E. Promotion-Related Ethical Issues
1. Marketing practices that are false or misleading can destroy customers’
trust in an organization.
2. Ethical issues also arise when firms use ambiguous statements, in which
claims are so weak that the viewer, reader, or listener must infer the
advertiser’s intended message.
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
3. Bribery occurs when an incentive (usually money or expensive gifts) is
offered in exchange for an illicit advantage. Even a bribe that is offered to
benefit the organization is usually considered unethical.
4. Fraudulent activity has dramatically increased in the area of direct
marketing, in which companies use the telephone and non-personal media
to communicate information to customers, who then purchase products via
mail, telephone, or the Internet.
IV. Managing and Controlling Ethical Issues
A. Regulating Marketing Ethics
1. Many firms attempt to regulate themselves in an effort to demonstrate
ethical responsibility and prevent regulation by federal or state
governments.
2. The best-known self-regulatory association is the Better Business Bureau.
When a firm violates what the BBB believes to be good business
practices, the bureau warns consumers.
3. Self-regulatory programs have a number of advantages over government
regulation:
a) They are usually less costly.
b) Their guidelines are generally more practical and realistic.
c) They reduce the need to expand government bureaucracy.
4. Beyond the Pages 8.3 discusses how the U.S. government is trying to
maintain trust in the banking system.
B. Codes of Conduct
1. Codes of conduct (also called codes of ethics) consist of formalized rules
and standards that describe what the company expects of its employees.
2. A code of conduct that does not address specific high-risk activities within
the scope of daily operations is inadequate. [Exhibit 8.5]
3. Core values or principles that should be contained in a code of conduct
include trustworthiness, respect, responsibility, fairness, caring, and
citizenship.
4. Codes of conduct will not resolve every ethical issue encountered in daily
operations, but they help employees and managers deal with ethical
dilemmas by prescribing or limiting specific activities.
C. Ethical Leadership
1. Ethical cultures emerge from strong leadership. Employees look to the
leader as a model of acceptable behavior.
2. Having a strong ethical climate depends on top mangers who consistently
model the firm’s policies and standards. Great leaders:
a) create a common goal or vision for the company
b) obtain buy-in, or support, from significant partners
c) motivate others to be ethical
d) use the resources that are available to them
e) enjoy their jobs and approach them with an almost contagious
tenacity, passion, and commitment
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
3. The culture of the organization—as well as superiors, peers, and
subordinates—can play a key role in guiding employee behavior.
V. Relationship to Marketing and Financial Performance
A. One of the most powerful arguments for including ethics and social responsibility
in the strategic planning process is the evidence of a link between ethics, social
responsibility, and financial performance.
1. An ethical climate calls for organizational members to incorporate the
interests of all stakeholders, including customers, in their decisions and
actions.
2. Employees working in an ethical climate will make an extra effort to
better understand the demands and concerns of customers.
3. As employees perceive an improvement in the ethical climate of their
firm, their commitment to the achievement of high-quality standards also
increases. They become more willing to personally support the quality
initiatives of the firm.
B. Stakeholder Orientation
1. A stakeholder orientation, or the degree to which the firm understands and
addresses stakeholder demands, is comprised of three activities:
a) the organization-wide generation of data about stakeholder groups
and the assessment of the firm’s effects on these groups
b) the distribution of this information throughout the firm
c) the organization’s responsiveness as a whole to this intelligence
2. The responsiveness of the organization to stakeholder intelligence consists
of the initiatives that the firm adopts to ensure that it abides by or exceeds
stakeholder expectations and has a positive impact on stakeholder issues.
3. A stakeholder orientation can be viewed as a continuum in that firms are
likely to adopt the concept to varying degrees.
C. Marketing Financial Performance
1. A climate of ethics and social responsibility creates a large measure of
2. Research indicates a strong association between social responsibility and
customer loyalty in that customers are likely to keep buying from firms
perceived as doing the right thing.
3. A direct association exists between corporate social responsibility and
customer satisfaction, profits, and market value. [Exhibit 8.6]
VI. Incorporating Ethics and Social Responsibility into Strategic Planning
A. Many firms integrate ethics and social responsibility into their strategic planning
through ethics compliance programs or integrity initiatives that make legal
compliance, ethics, and social responsibility an organization-wide effort.
B. The marketing plan should include distinct elements of ethics and social
responsibility that reflect an understanding of the risks associated with ethical and
legal misconduct, the ethical and social consequences of strategic choices, and the
values of organizational members and stakeholders.
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
C. A marketing plan that ignores social responsibility or is silent about ethical
requirements leaves the guidance of ethical and socially responsible behavior to
the work group, which risks ethical breakdowns and damage to the firm.
Questions for Discussion
1. Why is marketing ethics a strategic consideration in organizational decisions? Who is
most important in managing marketing ethics: the individual or the firm’s leadership?
Explain your answer.
For all of the reasons discussed in this chapter, marketing ethics clearly should be a
2. Why have we seen more evidence of widespread ethical marketing dilemmas within
firms today? Is it necessary to gain the cooperation of marketing managers to overstate
revenue and earnings in a corporation?
Students will likely argue two points. First, we see widespread ethical dilemmas because
3. What is the relationship between marketing ethics and organizational performance? What
are the elements of a strong ethical compliance program to support responsible marketing
and a successful marketing strategy?
Marketing ethics is tied to performance in many ways. Employees working in an ethical
Chapter 8 Lecture Notes
Ethics and Social Responsibility in Marketing Strategy
Exercises
1. Visit the Federal Trade Commission website (www.ftc.gov). What is the FTC’s current
mission? What are the primary areas for which the FTC has responsibility? Review the
last two months of press releases from the FTC. Based on these releases, what appears to
be the major marketing ethical issues of concern at this time?
As of this writing, the mission of the FTC is:
To prevent business practices that are anticompetitive or deceptive or
2. Visit the Better Business Bureau website (www.bbb.org). Review the criteria for the
BBB Marketplace Torch Awards. What are the most important marketing activities
necessary for a firm to receive this award?
3. Look at several print, broadcast, online, or outdoor advertisements and try to find an ad
that you believe is questionable from an ethical perspective. Defend why you believe the
ad is ethically questionable.
Student responses will vary based on the advertising in question.