Chapter 04 – Ethical and Social Responsibility for Sustainable Marketing
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ……………………………………. 4-2
LEARNING OBJECTIVES (LO) …………………………………………………………………………….. 4-3
KEY TERMS …………………………………………………………………………………………………………… 4-3
LECTURE NOTES
• Chapter Opener: Anheuser-Busch: Becoming the Best Beer Company in a
Better World………………………………………………………………………………………………….. 4-4
• Nature and Significance of Marketing Ethics (LO 4-1) ……………………………………….. 4-6
• Four Factors Affect Ethical Marketing Behavior (LO 4-2) …………………………………… 4-8
• Understanding Social Responsibility in Marketing (LO 4-3; LO 4-4) ………………….. 4-15
APPLYING MARKETING KNOWLEDGE ……………………………………………………………. 4-21
BUILDING YOUR MARKETING PLAN ……………………………………………………………….. 4-26
VIDEO CASE (VC)
• VC-4: Toyota: Building Cleaner, Greener Cars …………………………………………………. 4-27
APPENDIX D CASE (D)
• D-4: BP’s Deepwater Horizon: Ethics and Environmental Effects ……………………….. 4-31
IN-CLASS ACTIVITIES (ICA)
• ICA 4-1: What is Ethical and What is Not: A Survey of Your Opinions ……………….. 4-34
• ICA 4-2: The Ethics of Competitive Intelligence ……………………………………………….. 4-38
CONNECT APPLICATION EXERCISES ……………………………………………… 4-41
• Concepts of Social Responsibility Click and Drag*
• Toyota: Building Cleaner, Greener Cars Video Case
• iSeeit! Video Case: Ethical Marketing & Organization Mission Video Case
• Ethical Marketing Behavior Click and Drag*
*Note: An alternate version of each Click and Drag exercise is available in Connect for students with
accessibility needs.
ETHICAL AND SOCIAL RESPONSIBILITY
Chapter 04 – Ethical and Social Responsibility in Marketing
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 4-1 Four ways to classify marketing decisions according to ethical and legal
relationships…………………………………………………………………………………………………….. 4-5
Figure 4-2 A framework for understanding ethical behavior …………………………………………………… 4-7
Figure 4-3 American Marketing Association Statement of Ethics (abridged) ………………………….. 4-16
Figure 4-4 Three concepts of social responsibility ……………………………………………………………….. 4-19
Marketing Matters, Making Responsible Decisions, and/or Marketing inSite
Making Responsible Decisions—Ethics: Corporate Conscience in the Cola War ………………………. 4-13
Marketing Insights About Me: The Bribe Payers Index ………………………………………………………….. 4-14
Marketing Matters—Customer Value: Will Consumers Switch Brands for a Cause? Yes, If ……… 4-21
Videos
4-1: Responsibility Matters Ad …………………………………………………………………………………………….. 4-3
4-2: Häagen-Dazs Video ……………………………………………………….……………………………………………. 4-22
4-3: Corporate Greenwashing Video ……………………………………………………………………………………. 4-23
4-4: Toyota Video Case ……………………………………………………………………………………………………… 4-24
In-Class Activities (ICA)
ICA 4-1: What is Ethical and What is Not: A Survey of Your Opinions …………………………………… 4-30
ICA 4-2: The Ethics of Competitive Intelligence …………………………………………………………………… 4-32
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 4-1: Explain the differences between legal and ethical behavior in marketing.
LO 4-2: Identify factors that influence ethical and unethical marketing decisions.
LO 4-3: Describe the different concepts of social responsibility.
LO 4-4: Recognize unethical and socially irresponsible consumer behavior.
KEY TERMS
cause marketing
moral idealism
caveat emptor
social audit
code of ethics
social responsibility
Consumer Bill of Rights
sustainable development
economic espionage
triple-bottom line
ethics
utilitarianism
green marketing
whistle-blowers
laws
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LECTURE NOTES
ANHEUSER-BUSCH: BECOMING THE BEST BEER COMPANY
IN A BETTER WORLD
Since 1982, Anheuser-Busch has spent:
• More than $980 million to convince people not to use its products responsibly.
• Millions of dollars more to protect and preserve the environment.
A. Alcohol Responsibility
• In 1982, Anheuser-Busch began its “Know When to Say When” campaign to
aggressively fight alcohol misuse and underage drinking.
• In 1989, Anheuser-Busch established its Consumer Awareness and Education
department.
• Now called the Corporate Social Responsibility (CSR) department, it is charged
with developing and implementing programs, advertising, and partnerships to
promote responsible drinking, help prevent alcohol abuse, and help curb underage
drinking before it starts.
• Its Family Talk About Drinking:
a. Guidebook has been distributed to millions of parents and educators.
b. Program helps parents/adults talk with children about underage drinking. In
2011, it was extended to social media to include a dedicated Facebook page.
• In 2004, Anheuser-Busch launched its “Responsibility Matters” campaign.
[Video 4-1: Responsibility Matters Ad]
a. This effort emphasized and implemented effective education and awareness
programs that promoted responsibility and responsible behaviors.
b. Anheuser-Busch believes these efforts are partly responsible for the decline in
drunk-driving accidents, underage drinking, and other alcohol misuse forms.
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b. The website asks adults to:
• Pledge their commitment to drink responsibly.
• Share it through Facebook to encourage friends to do the same.
• The pledge is three-fold:
– Respect the legal drinking age.
• In 2013, Budweiser launched its first-ever responsible drinking blimp.
a. The airship:
• Carried the “Designate a Driver” message.
• Embarked on a 17-week tour across much of the country.
b. Flight plan coincided with major festivals, outdoor celebrations, and sporting
events in tour cities.
• Anheuser-Busch also implements programs to help prevent underage drinking by
providing retailers with tools to properly check IDs, helping prevent sales to
minors.
• Anheuser-Busch also:
a. Helps parents start and continue conversations about alcohol with their
children.
B. Environmental Preservation
• Anheuser-Busch is committed to improving its environmental performance by
focusing its efforts on the key issues of water, energy, and recycling.
• Since water is a key ingredient in beer, Anheuser-Busch strives to protect this
natural resource. In 2013, the company:
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a. Reduced water use in its breweries by 40 percent over the prior five years.
b. Had a 99.6 percent water recycling rate.
• Anheuser-Busch:
a. Has been a leading recycler of aluminum cans for more than 30 years,
recycling nearly 15 billion cans annually.
b. Has reduced, reused, and recycled other items, such as grain, beechwood
chips, plastic, cardboard, glass, and metals.
c. Has reduced its packaging materials by nearly 73,000 tons from 2009 to 2012.
• Anheuser-Busch:
a. Brews nearly one out of every six beers with renewable fuels, including
biogas and landfill gas.
I. NATURE AND SIGNIFICANCE OF MARKETING ETHICS [LO 4–1]
• Ethics are the moral principles and values that govern the actions and decisions of an
individual or group.
• Ethics serve as guidelines on how to act rightly and justly when faced with moral
dilemmas.
A. An Ethical/Legal Framework for Marketing
• [Figure 4-1] Need to distinguish between legality and ethicality of marketing
decisions.
a. Ethics deal with personal moral principles and values.
b. Laws are society’s values and standards that are enforceable in the courts.
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• There are numerous situations where judgment plays a large role in defining
ethical and legal boundaries.
a. Often, actions that are technically legal could be viewed as unethical.
b. Sometimes actions considered to be ethical may not be seen as legal.
• Examples from the ethical-legal continuum:
a. Maricopa County, AZ medical society (illegal; unethical).
b. Auto dealer computer program (legal; unethical).
B. Critical Perceptions of Ethical Behavior
• There has been a public outcry about the unethical practices of businesspeople.
Public opinion polls show:
a. 17% of U.S. adults rate ethical standards of business executives as “very high”
or “high.”
b. 76% say the lack of ethics in businesspeople contributes to tumbling societal
moral standards.
[ICA 4-1: What Is Ethical and What Is Not: A Survey of Your Opinions]
• There are at least four possible reasons the state of perceived business ethical
conduct is at its present level:
a. Increased pressure on businesspeople to make decisions in a society
characterized by diverse value systems.
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d. Ethical business conduct may have actually declined.
LEARNING REVIEW
4-1. What are ethics?
4-2. What are four possible reasons for the present state of ethical conduct in the
United States?
II. FOUR FACTORS AFFECT
ETHICAL MARKETING BEHAVIOR [LO 4-2]
[Figure 4-2] Four factors influence ethical marketing behavior.
A. Societal Culture and Norms
• Culture refers to the set of values, ideas, and attitudes that are learned and shared
among the members of a group.
a. Culture serves as a socializing force that determines what is considered to be
morally right and just.
b. Moral standards are relative (different) to particular cultures.
c. These standards often reflect the laws and regulations that affect social and
economic behavior, which can create ethical dilemmas.
d. Companies that compete in the global marketplace recognize this fact.
• Societal values and attitudes also affect ethical and legal relationships among
individuals, groups, business institutions, and organizations.
• In the U.S., the unauthorized use, reproduction, or distribution of another’s
intellectual property (copyright, trademark, or patent) is both unethical and illegal.
a. The owners of intellectual property lose billions each year, such as those in
the music, movie, and software industries.
b. Lost sales result in lost jobs, wages, royalties, and tax revenues.
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c. The Internet and file-sharing programs have increased the downloading of
copyrighted music and movies without paying the owner of this property.
d. Only one-third of college students say these actions are unethical.
B. Business Culture and Industry Practices
• Business cultures comprise:
a. The effective rules of the game.
b. The boundaries between competitive and unethical behavior.
c. The codes of conduct in business dealings.
• Business culture affects ethical conduct:
a. In the exchange relationship between sellers and buyers.
b. In the competitive behavior among sellers.
1. Ethics of Exchange.
a. Ethical exchanges between buyer and seller should result in both parties being
better off after a transaction.
b. Before the 1960s, American business culture believed in the legal concept of
caveat emptor, or “let the buyer beware.”
c. In 1962, President John F. Kennedy outlined a Consumer Bill of Rights that
codified the ethics of exchange between buyers and sellers, which were the
right to:
• Safety.
– The U.S. Consumer Product Safety Commission checks the safety of
15,000 consumer products.
• Be informed.
– Marketers have an obligation to give consumers complete and accurate
information about products and services.
– This right:
– An FTC survey of websites indicated that:
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* 92 percent collect personal information, which includes…
– The FTC wants more than posted privacy notices that merely inform
consumers of a company’s data-use policy.
• Choose.
– Freedom of choice in the form of practices by firms that do not limit
the availability of new product to consumers.
– Example:
* Supermarkets demanding slotting fees or free goods to stock items
on their shelves.
* This practice could limit the number of new products available to
consumers and interfere with their right to choose.
• Be heard.
– Consumers should have access to public-policy makers to make
complaints about products and services.
– Example:
* The FTC established and now manages the Do Not Call Registry
for consumers who do not want to receive unsolicited
telemarketing calls.
2. Ethics of Competition.
Two kinds of unethical competitive behavior are most common: (1) economic
espionage and (2) bribery.
[ICA 4-2: The Ethics of Competitive Intelligence]
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a. Economic espionage is the clandestine collection of trade secrets or
proprietary information about a company’s competitors. The practice:
• Is both illegal and unethical and carries serious criminal penalties.
• Includes trespassing, theft, fraud, misrepresentation, wiretapping,
searching competitors’ trash, and violations of written and implicit
MAKING RESPONSIBLE DECISIONS
Ethics: Corporate Conscience in the Cola War
• As a Pepsi senior executive, would you buy the marketing plan from a Coca-Cola
employee for a new Coke product at a modest price to gain a significant advantage in
the cola war?
• A Coke employee:
• In an online survey of marketing and advertising executives:
b. Corruption involves unethical conduct by a person entrusted with a position of
authority often to acquire a personal benefit.
• Bribe. When money is paid before an exchange occurs.
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– Business-to-business and government marketing than in consumer
marketing.
– Industries experiencing intense competition.
– Countries in the earlier stages of economic development.
c. A United Nations study on paying bribes to win or retain business found that:
• 15 percent of all companies in industrialized countries did this.
d. The World Bank estimated that $1 trillion is offered in bribes and kickbacks
every year in the global arena.
• Corruption on a worldwide scale is monitored by Transparency
International.
e. The prevalence of economic espionage and bribery in international marketing
has prompted these laws to curb these practices:
• The Economic Espionage Act (1996).
• Both are discussed in Chapter 7.
MARKETING INSIGHTS ABOUT ME
Is Corruption More or Less Common in My Country?
• Transparency International:
a. Monitors corruption on a global scale.
b. Polls employees of multinational firms, institutions, and political analysts.
C. Corporate Culture and Expectations
Corporate culture is the set of values, ideas, and attitudes that is learned and shared
among the members of an organization.
• The dress, sayings, and manner of work demonstrate the culture of a company.
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• Corporate culture is apparent in the expectations for ethical behavior present in
formal codes of ethics and the ethical actions of top management and co-workers.
1. Codes of Ethics.
a. A code of ethics is a formal statement of ethical principles and rules of
conduct.
b. 85–90 percent of U.S. companies have an ethics code.
c. 25 percent of large companies have corporate ethics officers.
d Ethics codes typically address:
• Contributions to government officials and political parties.
e. The lack of specificity is a major reason for the violation of ethics codes.
f. Employees must often judge whether a specific behavior is unethical.
g. [Figure 4-3] The American Marketing Association has provided a detailed
code of ethics that marketers should uphold.
• Marketers must do no harm.
• Marketers must foster trust in the marketing system.
• Marketers must embrace, communicate, and practice the fundamental
ethical values that will improve consumer confidence.
• Ethical Values:
o Honesty
o Responsibility
2. Ethical Behavior of Top Management and Co-Workers.
a. Workers sometimes violate ethics codes because of how they perceive the
behavior of top management and other co-workers.
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• Many executives have been rewarded for engaging in ethically troubling
behavior.
• Some employees who have refused to engage in unethical behavior have
been punished or received a diminished status in the firm.
b. Numerous states have laws protecting whistle-blowers, employees who report
unethical or illegal actions of their employers.
D. Your Personal Moral Philosophy and Ethical Behavior
• Ethical choices are based on the personal moral philosophy of the decision maker.
• A person’s moral philosophy is:
a. Learned:
• Through the process of socialization with friends and family.
• By formal education.
b. Influenced by the societal, business, and corporate culture.
c. Consists of two forms: moral idealism and utilitarianism.
1. Moral Idealism.
a. Moral idealism is personal moral philosophy that considers certain individual
rights or duties as universal, regardless of the outcome.
b. This philosophy:
• Exists in the Consumer Bill of Rights.
2. Utilitarianism.
a. Utilitarianism is a personal moral philosophy that:
• Focuses on “the greatest good for the greatest number.”
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• Example Nestlé’s Good Start.
c. An appreciation for the nature of ethics, coupled with a basic understanding of
why unethical behavior arises, alerts a person to when and how ethical issues
arise in marketing decisions.
d. Ultimately, ethical behavior rests with the individual, but the consequences
affect many.
LEARNING REVIEW
4-3. What rights are included in the Consumer Bill of Rights?
4-4. Economic espionage includes what kinds of activities?
4-5. What is meant by moral idealism?
III. UNDERSTANDING SOCIAL RESPONSIBILITY
FOR SUSTAINABLE MARKETING [LO 4-3]
• Social responsibility is the idea that organizations are part of a larger society and are
accountable to that society for their actions.
• Agreement on the nature and scope of social responsibility is often difficult to come
by, given the diversity of values in different societal and corporate cultures.
A. Three Concepts of Social Responsibility [Figure 4-4]
1. Profit Responsibility.
a. Holds that companies have a simple duty—to maximize profits for their
owners or stockholders.
b. Milton Friedman says, “There is one and only one social responsibility of
business—to use its resources and engage in activities designed to increase its
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2. Stakeholder Responsibility.
a. Focuses on the obligations an organization has to those who can affect
3. Societal Responsibility.
a. Refers to obligations that organizations have to:
• The preservation of the ecological environment.
• The general public.
b. Emphasizes the triple bottom line:
c. Green marketing consists of marketing efforts to produce, promote, and
reclaim environmentally sensitive products. Many green marketing efforts:
• Generated from employee suggestions (3M Pollution Prevention Pays).
d. ISO 14000 initiative:
• Is a global undertaking to further green marketing efforts developed by the
International Standards Organization (ISO) in Geneva, Switzerland.
e. Companies also engage in cause marketing, which:
• Occurs when the charitable contributions of a firm are…
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• Cause marketing differs from a firm’s standard charitable contributions,
which are outright donations.
• Incorporates all three concepts of social responsibility by:
MARKETNG MATTERS
Customer Value: Will Consumers Switch Brands for a Cause? Yes, If…
• American Express pioneered cause marketing when it:
a. Raised $1.7 million for the renovation of the Statue of Liberty.
B. The Social Audit and Sustainable Development: Doing Well by Doing Good
• A social audit is a systematic assessment of a firm’s objectives, strategies, and
performance in terms of social responsibility.
[Video 4-2: Häagen-Dasz Video]
• Frequently, marketing and social responsibility programs are integrated.
• A social audit consists of five steps:
1. Recognition of a firm’s social expectations and the rationale for engaging in
social responsibility endeavors.
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4. Specification of the type and amount of resources necessary to achieve social
responsibility objectives.
5. Evaluation of social responsibility programs and activities undertaken and
assessment of future involvement.
• Corporate attention to social audits will:
• Sustainable development involves conducting business in a way that protects the
natural environment while making economic progress.
a. Green marketing is an ecologically responsible initiative.
• Companies that show societal responsibility have been rewarded for their efforts.
Research shows that these companies:
a. Benefit from favorable word-of-mouth among consumers.
C. Turning the Table: Consumer Ethics and Social Responsibility [LO 4-4]
• Consumers also have an obligation to act ethically in:
a. The exchange process.
• Some consumers engage in unethical practices, such as fraud, providing false
information, and piracy.
• The cost to marketers in lost sales and prevention expenses is huge:
a. Misredemption of coupons: $1 billion each year. Plus, consumers who
purchase counterfeit products cost companies $250–$600 billion/year.
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• Consumers act illegally toward each other by engaging in online auction fraud, in
which consumers misrepresent their goods to others.
• Research on unethical consumer behavior indicates that these acts are rarely
motivated by economic need. Instead, consumers believe that:
a. They can get away with the unethical behavior and it is worth doing.
• Consumers’ purchase, use, and disposition of environmentally sensitive products
relate to social responsibility because they:
a. Are sensitive to ecological issues.
• Consumers are confused over which products are “green” or environmentally safe
as marketers rush to produce them.
a. May be unwilling to sacrifice convenience and pay potentially higher prices to
protect the environment.
[Video 4-3: Corporate Greenwashing Video]
• The FTC has drafted guidelines describing:
a. the circumstances when environmental claims can be made and would not
constitute misleading information with respect to…
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• An advertisement or product label touting a package as “50 percent more
recycled content than before”…
LEARNING REVIEW
4-6. What is meant by social responsibility?
4-7. Marketing efforts to produce, promote, and reclaim environmentally sensitive
products are called __________.
4-8. What is a social audit?