•

I. NATURE AND SIGNIFICANCE OF MARKETING ETHICS

o Ethics are the moral principles and values that govern the actions and decisions
o --of an individual or group.
o They serve as guidelines on how to act rightly and justly when faced

o -- with moral dilemmas.

A. Ethical/Legal Framework in Marketing
1. Ethics deal with personal moral principles and values.
2. Laws are society's values and standards that are enforceable in the courts.
3. There are numerous situations where judgment plays a large role in
4. --defining ethical and legal boundaries.
5. Actions that are technically legal could be viewed as unethical

6. Actions considered to be ethical may not be seen as legal.

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B. Current Perceptions of Ethical Behavior
There has been a public outcry about the unethical practices of businesspeople.
Public opinion polls show
o 58% of U.S. adults rate ethical standards of business executives as "fair" or "poor.”
o 90% think white-collar crime is "very common" or "somewhat common."
o 76% say the lack of ethics in businesspeople contributes to tumbling
o --societal moral standards.
o 41% of 1,694 corporate employees in a recent survey stated that

o --they were aware of ethical problems in their companies.

There are at least four possible reasons the state of perceived business ethical conduct is at its present level:
1. Increased pressure on businesspeople to make decisions in a society
2. -- characterized by diverse value systems.
3. Growing tendency for business decisions to be judged publicly by
4. -- groups with different values and interests.
5. The public's expectations of business ethical behavior has increased.

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 6. Ethical business conduct may have declined.

•
•
ANDING ETHICAL MARKETING BEHAVIOR
p among factors that influence ethical behavior can be shown in a framework in which
societal culture and norms, affect
business culture and industry practices, affect
corporate culture and expectations–all of which affect and are affected by

personal moral philosophy and ethical behavior.

lture and Norms

Culture refers to the set of values, ideas, and attitudes of a homogeneous group of people that
-- are transmitted from one generation to the next.
Culture also serves as a socializing force that dictates what is morally right and just.
This means that moral standards are relative to particular societies, often reflecting the laws and
--regulations that affect social and economic behavior, including marketing practices.

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It is common to observe different ethical views in different countries.
Societal values affect business practices regarding the use of another’s ideas, copyright, trademark, or patent.
These are viewed as intellectual property, and unauthorized use is deemed unethical and illegal in the U.S.
This is not the case everywhere.
 Unauthorized use of copyrighted software and other intellectual property in global markets

 --costs the U.S. economy $250 billion annually in lost revenue.

ulture and Industry Practices
res
Comprise the
 The effective rules of the game
 The boundaries between competitive and unethical behavior
 The codes of conduct in business dealings.
Affects ethical conduct
 In the exchange relationship between sellers and buyers

 In the competitive behavior among sellers.

change
Ethical exchanges between buyer and seller should result in both parties being better off after a transaction.
Before the 1960s, the legal concept of caveat emptor–let the buyer beware–was pervasive in the

-- American business culture.

nsumer Bill of Rights (1962):
Right to safety.
Right to be informed.
Right to choose.

Right to be heard.
mpetition
unethical competitive behavior
Economic espionage - the clandestine collection of trade secrets or proprietary
--information about a company’s competitors.
Bribery - often disguised as gifts, consulting fees, and favors.

This practice is more common in business-to-business and government marketing than in consumer marketing.
Espionage Act and the Foreign Corrupt Practices Act address these practices in the United States.
and Expectations
Corporate culture
 reflects the shared values, beliefs, and purposes of employees that affect
 -- individual and group behavior

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Corporate ethical culture manifests itself in
 codes of ethics and the

 ethical actions of top management and co-workers.

hics
A formal statement of ethical principles and rules of conduct.
80% (est) of U.S. companies have an ethics code
One of every five large companies have corporate ethics officers.
Lack of specificity is one of the major reasons for the violation of ethics codes.

The American Marketing Association has provided a detailed code of ethics.

avior of Top Management and Co-Workers
A second reason for violating ethics codes rests in the perceived behavior of top management
--and co-workers.
Observing their behavior and gauging responses to unethical behavior may influence individual actions more than a written cod

Ethical dilemmas often bring personal and professional conflict.

 For this reason, 35 states have laws protecting whistleblowers, employees who

 --report unethical or illegal actions of their employers.

oral Philosophy and Ethical Behavior
Ultimately, ethical choices are based on the personal moral philosophy of the decision maker.
moral philosophies have direct bearing on marketing practice:
Moral Idealism.
 A personal moral philosophy that considers certain individual rights or duties as universal,
 -- regardless of the outcome.
 This philosophy exists in the Consumer Bill of Rights and is favored by moral philosophers and consumer interest group
Utilitarianism.
 A personal moral philosophy that focuses on "the greatest good for the greatest number" by
 --assessing the costs and benefits of the consequences of ethical behavior.

 This philosophy underlies the economic tenets of capitalism.

III. UNDERSTANDING SOCIAL RESPONSIBILITY IN MARKETING

o Social responsibility means that
 Organizations are part of a larger society

 Are accountable to that society for their actions.

A. Concepts of Social Responsibility

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1. Profit Responsibility
o Companies have a duty to maximize profits for their owners or stockholders.
2. Stakeholder Responsibility
o Focuses on the obligations an organization has to those who can affect achievement of its objectives.
o These constituencies include
 customers,
 employees,
 suppliers

 distributors.
3. Societal Responsibility
o Societal responsibility refers to obligations that organizations have to the

11 preservation of the ecological environment and

11 general public.
Companies have responded to this concern with two marketing practices that reflect socially responsible behavior
1. Green marketing
11 Marketing efforts to produce, promote, and reclaim environmentally sensitive products.
11 ISO 14000 consists of worldwide standards for environmental quality and green marketing pract
embraced by 84 countries.
2. Cause-related marketing

 Charitable contributions of a firm are tied directly to the customer revenues produced through the
products.
B. Social Audit: Doing Well by Doing Good
o A social audit is
 Systematic assessment regarding the social responsibility of a firm's
 objectives,
 strategies, and

 performance .
Five steps of a social audit
11 Recognition of a firm's social expectations and the rationale for engaging in social responsibility endeav
11 Identification of social responsibility causes or programs consistent with the company's mission.
11 Determination of organizational objectives and priorities for programs and activities it will undertake.
11 Specification of the type and amount of resources necessary to achieve social responsibility objectives.

11 Evaluation of social responsibility programs and activities undertaken and assessment of future involvem
Sustainable development
o conducting business in a way that protects the natural environment while making economic progress.

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 o Green marketing is an example of one such ecologically responsible initiative.
Focus of Other Initiatives
o Working conditions

o Quality-of-life issues at offshore manufacturing sites that produce goods for U.S. companies.
C. Turning the Table: Consumer Ethics and Social Responsibility
o Consumers also have an obligation To act ethically and responsibly
 In the exchange process

 In the use and disposition of products.

In the exchange process
o Unethical practices of consumers
 filing warranty claims after the claim period
 misredeeming coupons
 making fraudulent returns of merchandise
 providing inaccurate information on credit applications

 many other kinds of fraud.

In the use and disposition of products.
o Research shows that consumers
 May be unwilling to sacrifice convenience and pay potentially higher prices to protect the enviro

 Lack the knowledge to make informed decisions dealing with the purchase, use, and disposition

Nature and Scope of Marketing Ethics

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 O.C. Ferrell, Ph.D.

Professor of Marketing
Creative Enterprise Scholar

The Robert O. Anderson School

And Graduate School of Management
MSC05 3090
1 University of New Mexico
Albuquerque, NM 87131-0001

Phone: (505) 277-3468

ocferrell@mgt.unm.edu

Nature and Scope of Marketing Ethics

INTRODUCTION

Marketing ethics is viewed as important because of marketing’s interface with many diverse

stakeholders. Marketing is a key functional area in the business organization that provides a visible

interface with not only customers, but other stakeholders such as the media, investors, regulatory agencies,

channel members, trade associations, as well as others. It is important when addressing marketing ethics to

recognize that it should be examined from an individual, organizational, and societal perspective.

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Examining marketing ethics from a narrow issue perspective does not provide foundational background

that provides a complete understanding of the domain of marketing ethics. The purpose of this chapter is

to define, examine the nature and scope, identify issues, provide a decision-making framework, and trace

the historical development of marketing ethics from a practice and academic perspective.

DEFINITION OF MARKETING ETHICS

Ethics has been termed the study and philosophy of human conduct, with an emphasis on the

determination of right and wrong. For marketers, ethics in the workplace refers to rules (standards,

principles) governing the conduct of organizational members and the consequences of marketing decisions

(Ferrell, 2005). Therefore, ethical marketing from a normative perspective approach is defined as

“practices that emphasize transparent, trustworthy, and responsible personal and organizational marketing

policies and actions that exhibit integrity as well as fairness to consumers and other stakeholders (Murphy,

Laczniak, Bowie and Klein, 2005). Marketing ethics focuses on principles and standards that define

acceptable marketing conduct, as determined by various stakeholders and the organization responsible for

marketing activities. While many of the basic principles have been codified as laws and regulations to

require marketers to conform to society’s expectations of conduct, marketing ethics goes beyond legal and

regulatory issues. Ethical marketing practices and principles are core building blocks in establishing trust,

which help build long-term marketing relationships. In addition, the boundary-spanning nature of

marketing (i.e. sales, advertising, and distribution) presents many of the ethical issues faced in business

today.

Both marketing practitioners and marketing professors approach ethics from different perspectives.

For example, one perspective is that ethics is about being a moral individual and that personal values and

moral philosophies are the key to ethical decisions in marketing. Virtues such as honesty, fairness,

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responsibility, and citizenship are assumed to be values that can guide complex marketing decisions in the

context of an organization. On the other hand, approaching ethics from an organizational perspective

assumes that establishing organizational values, codes, and training is necessary to provide consistent and

shared approaches to making ethical decisions (Ferrell and Ferrell, 2005).

THE DOMAIN OF MARKETING ETHICS

Substantive Domain

The relationship between a customer and an organization exists because of mutual expectations

built on trust, good faith, and fair dealing in their interaction. In fact, there is an implied covenant of good

faith and fair dealing, and performance cannot simply be a matter of the firm’s own discretion (Ferrell,

2004). Not only is this an ethical requirement but it has been legally enforced in some states. The implied

covenant of good faith and fair dealing is to enforce the contract or transaction in a manner consistent with

the parties’ reasonable expectations (1998 WL 1991608 Mich. App.) Courts may impose “implied duties

of good faith” in marketing exchanges (Gundlach and Murphy, 1993). This obligation of good faith

appears to be an institutional or legal approach to enforcing ethical conduct in marketing.

Marketing ethics not only requires an attempt to make ethical decisions, but also to avoid the

unintended consequences of marketing activities. This requires consideration of key stakeholders and their

relevant interests (Fry and Polonsky, 2004). Market orientation has been found as the key variable in the

successful implementation of marketing strategies (Homburg, Krohmer, and Workman, 2004). But a

successful marketing strategy has not always been associated with meeting the needs and demands of all

stakeholders (Miller and Lewis, 1991). While Wal-Mart customers get low prices, Wal-Mart has many

critics, including “organized labor, feminists, human rights activists, environmentalists, local businesses,

and anti-sprawl activists…resulting in a growing negative consumer perception of Wal-Mart’s corporate

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citizenship” (Hemphill, 2005). Unfortunately, most approaches to market orientation select to elevate the

interests of one stakeholder—the customer—over those of others (Ferrell, 2004). Now that Wal-Mart has

focused mainly on customers and profits, a new direction should include all stakeholders that have an

interest in the firm’s operations and conduct. There is evolving concern that organizations must focus on

not just their customers, but also the important communities and groups that hold the firm accountable for

its actions. A new emerging logic of marketing is that it exists to provide both social and economic

processes, including a network of relationships to provide skills and knowledge to all stakeholders (Vargo

and Lusch, 2004).

This logic is captured in the new definition of marketing developed by the American Marketing

Association (2004) which states that, “marketing is an organizational function and a set of processes for

creating, communicating, and delivering value to customers and for managing customer relationships in

ways that benefit the organization and its stakeholders”. This definition emphasizes the importance of

delivering value and the responsibility of marketers to be able to create meaningful relationships that

provide benefits to all relevant stakeholders. This is the first definition of marketing to include concern for

stakeholders beyond the organization and customers.

One difference between an ordinary decision and an ethical one is that accepted rules may not

apply and the decision-maker must weigh values in a situation that he or she may not have faced before.

Another difference is the amount of emphasis placed on a person’s values when making an ethical

decision. An ethical dilemma evolves when the choice between alternative actions with moral content is

unclear. Whether a specific behavior is right or wrong, ethical or unethical, is often determined by the

concerned stakeholders and an individual’s personal ethics. Consequently, values, judgments, and

complex situations all play a critical role in ethical decision making.

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 Stakeholders designate the individuals, groups and communities that can directly or indirectly

affect, or be affected by, a firm’s activities (Freeman, 1984). Marketing stakeholders can be viewed as

both internal and external. Internal stakeholders include various departments, the board of directors,

employees, and other interested internal parties. External stakeholders include competitors, advertising

agencies, suppliers, regulators and others such as special interest groups (Miller and Lewis, 1991). The

various relationships should be identified and interests understood. The complexity surrounding a

determination of the effects of marketing transactions on all relevant stakeholders requires the

identification of stakeholders in the exchange process (Fry and Polonsky, 2004). The re-conceptualization

of the marketing concept based on a long-term, multiple stakeholder approach has also been suggested as

a prescriptive model for organizational responsibility in marketing (Kimery and Rinehart, 1998). Based on

these developments, there is a need for marketing to develop more of a stakeholder orientation rather than

a narrow customer orientation. Stakeholder orientation in marketing goes beyond markets, competitors,

and channel members to understanding and addressing all stakeholder demands. As a result, organizations

are now under pressure to demonstrate initiatives that take a balanced perspective on stakeholder interests

(Maignan, Ferrell, and Ferrell, 2005).

Historical Development of Marketing Ethics

The historical background for marketing ethics is derived from early concerns during the turn of

the 20th century concerning antitrust and consumer protection, especially adulterated food products. From

the beginning of advertising, there have always been concerns about misrepresentations and purposeful

deception of consumers. Frank Chapman Sharp started teaching a course in business ethics at the

University of Wisconsin in 1913 and Sharp and Fox (1937) published a textbook on business ethics. The

book was based on the concept of “fair service” and the authors stated “it will be possible to reduce our

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study of fair service to the principles of fair salesmanship” (Sharp and Fox, 1937). The book could have

been titled ‘Marketing Ethics’ and had chapters on commercial coercion, let the buyer beware, the limits

of persuasion, fair pricing, and the ethics of bargaining. Within the academic history of marketing, one of

the first articles that appeared in the Journal of Marketing was an article by Charles F. Phillips (1939)

entitled, “Some Theoretical Considerations Regarding Fair Trade Laws.” In this article, ethics was not

directly addressed, but the impact of resale price maintenance on competition, especially channel members

and customers, was addressed. The concern was that customers were not receiving information about

prices and might assume that the quality of coffee offered by all stores was identical. Most academic

publishing in the 1950s focused on issues such as fair trade, antitrust, advertising and pricing.

During the 1960s American society turned to causes. An anti-business attitude developed as many

critics attacked the vested interests that controlled the economic and political sides of society—the so-

called military-industrial complex. The 1960s saw the decay of inner cities and the growth of ecological

problems, such as pollution and the disposal of toxic and nuclear wastes. This period also witnessed the

rise of consumerism—activities undertaken by independent individuals, groups, and organizations to

protect their rights as consumers. In 1962 President John F. Kennedy delivered a “Special Message on

Protecting the Consumer Interest,” in which he outlined four basic consumer rights: the right to safety, the

right to be informed, the right to choose, and the right to be heard. These came to be known as the

Consumers’ Bill of Rights (Ferrell, Fraedrich, and Ferrell, 2005).

During this period of time, Robert Bartels (1967) contributed the first comprehensive model for

ethics in marketing. This first academic conceptualization of the variables that influence marketing ethics

decision making tried to determine the logical basis for marketers to determine what is right or wrong. It

presented a schematic plan for analyzing the variables inherent in the ethics of decision making; and

provided a framework for social and personal ethics in marketing decisions. The model did a good job in

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delineating variables that influence ethical decision making, including participants, cultural influencers,

role expectations, and the complexity of ethical decision making. During this same period of time, Richard

Farmer (1967) published an article, “Would You Want Your Daughter to Marry a Marketing Man?” that

maintained that much of marketing is unethical and irrelevant. This article was received so well that in

1977, Farmer published an article entitled, “Would You Want Your Son to Marry a Marketing Lady?” and

in 1987 published another article entitled, “Would You Want Your Granddaughter to Marry a Taiwanese

Marketing Man?” The titles of these articles indicate that possibly marketing ethics was not considered a

serious academic research area. The 1967 Bartels article provided a foundation for empirical research that

followed in the 1970s.

In the 1970s significant research was conducted to describe the beliefs of managers about

marketing ethics. Carroll (1975) found that young managers would go along with their supervisors to

show loyalty in dealing with matters related to judgments on morality. A follow-up study by Bowman

(1976) supported these findings. Ferrell and Weaver (1978) provided insights into organizational

relationships that influence marketing mangers’ ethical beliefs and behavior. The findings indicated that

respondents perceived that the ethical standards of their peers and top management were lower than their

own standards. Empirical research in the 1970s set the stage for frameworks that describe ethical decision

making within the context of a marketing organization.

The Ferrell and Gresham (1985) “A Contingency Framework for Understanding Ethical Decision

Making in Marketing” emphasized the interaction of the individual and organization, including

organization culture, co-workers, and opportunity to explain how ethical decisions are made. Most of the

propositions in this model have been tested to provide a grounded understanding of ethical decision

making. Hunt and Vitell (1986) “A General Theory of Marketing Ethics” is widely accepted and also

provides an empirically grounded model to illustrate how ethical decision making occurs in an

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organization. Research followed in both marketing and management literature that helped test the Ferrell

and Gresham and Hunt and Vitell models (Hunt and Vitell, 2005).

In the 1980s, business academics and practitioners acknowledged business ethics as an important

field of study. Industry developments, such as the Defense Industry Initiative on Business Ethics and

Conduct, established a method for discussing best practices and working tactics to link organizational

practice and policy to successful ethical compliance. In the 1990s, the government also provided support

and rewards for ethics programs through the Federal Sentencing Guidelines for Organizations, approved

by Congress in 1991. The Guidelines broke new ground by codifying into law incentives to reward

organizations for taking action to prevent misconduct. A special task force provided a report for updating

and refining the guidelines in 2003 (United States Sentencing Commission, 2003). In 2005, a federal

amendment to the Federal Sentencing Guidelines added oversight of ethics and compliance programs to

the responsibilities of board of director positions. The amendment places more responsibility on board

members to monitor and audit ethics programs, including marketing ethics.

While the regulatory system was developing incentives for ethical conduct in organizations, Hunt,

Wood and Chonko (1989) conducted research demonstrating a strong link between corporate ethical

values and organizational commitment in marketing. Their corporate ethical values scale is widely used in

organizational ethics research. Gundlach and Murphy (1993) build a normative framework for relational

marketing exchanges based on the ethical exchange dimensions of trust, equality, responsibility, and

commitment. They develop foundational understanding of the interrelationship of ethics and law in

marketing exchange. This is a significant contribution because some observers take the perspective that

the legal and ethical dimensions of exchange are independent. They conclude that ethical marketing

exchanges require a managerial emphasis on ethical corporate culture, ethics training programs, and on

ethical audits.

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 Dunfee, Smith and Ross (1999) suggest the need for a normative framework for marketing ethics.

Integrative Social Contract Theory (ISCT) links the decision-making process, multiple communities,

hypernorms, and ethical judgments based on the dominant legitimate norms. This framework can be used

for resolving ethical issues that arise among different communities and is significant because marketers

frequently engage in boundary-spanning relationships and cross-cultural activities. This normative

framework is significant to marketing because it emphasizes the exchange relationship between the firm

and its stakeholders, including the right to exist and even prosper in society. This theory can be used to

bridge normative and descriptive research in marketing ethics (Dunfee, Smith and Ross, 1999).

As the 21st century arrived, ethics in the world of business became a major issue with scandals

associated with Enron, WorldCom, Tyco, Qwest, Sunbeam, and Arthur Andersen. While most of these

scandals were associated with accounting fraud, in many cases companies such as Sunbeam, using

inventory sales shifting strategies (buy and hold), relied on salespersons to help implement the fraud.

These activities resulted in the passage of the Sarbanes-Oxley Act in 2002, which is the most far-reaching

change in organization control, corporate governance, and government oversight since the Securities and

Exchange Act of 1934. During this time (2000–2006) the Journal of Marketing published no articles with

the word ethics in the title, but articles did appear dealing with ethical issues (Klein, Smith and John,

2004). There is still a need to continue both theory development and empirical testing of theories of

ethical decision making in marketing.

Key Issues in Marketing Ethicsi

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 By its very nature, marketing ethics is controversial, and there is no universally accepted approach

for resolving questions. Ethical issues address a problem, situation, or opportunity that requires an

individual, group, or organization to choose among several actions that must be evaluated as right or

wrong (Ferrell, Fraedrich, and Ferrell, 2005). The organization and stakeholders define marketing ethical

issues that must be identified and resolved to build trust and effective relationships with stakeholders.

Because marketing ethics sometimes deals with subjective moral choices, this requires decisions about the

moral standards to apply and the definition of ethics issues (Murphy, Laczniak, Bowie and Klein, 2005).

However, many groups in society, including government, are defining ethical and legal issues and

proactive approaches to deal with these issues. For example, millions of blogs or personal web logs exist

on the Internet without any formal code of ethics or regulation. Many firms, such as Audi, have their own

blogs with many stakeholders requesting the formation of an ethics committee to create unified standards.

Organizations are being asked to prevent and control misconduct by implementing ethical compliance

programs. Ethics brings many rewards to organizations that nurture it, but managing ethics requires

activity and attention on several levels—complying with the law, setting ethical standards, and dealing

with the complex decisions related to trade-offs between the bottom line and ethical conduct. For example,

the Securities and Exchange Commission is looking into retailers such as Saks, Inc. and other major

department stores investigating collections or “charge backs” to manufacturers. Manufacturers often

guarantee a certain profit margin or compensate retailers for items, which did not sell well. Saks may have

improperly collected over $21 million from its vendors (D’Innocenzio, 2005).

High ethical standards require both organizations and individuals to conform to sound moral

principles. Fair Trade has emerged to link ethically minded consumers with marketers concerned with

disadvantaged producers in developing nations. Starbucks works to treat coffee farmers fairly in their

business relationships by paying premium prices, long-term contracts, affordable credit, direct purchasing,

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and investing in social projects in coffee communities

(http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf; accessed July 5, 2005). However,

general special factors must be considered when applying ethics to marketing. First, to survive, marketers

must contribute to profits or other organizational objectives. Second, marketers must balance their desire

for success against the needs and desires of society. Maintaining this balance often requires compromises

or tradeoffs. To address these unique aspects, society has developed rules—both legal and implicit—to

guide marketers in their efforts to reach their objectives in ways that do not harm individuals or society as

a whole.

External stakeholders interests, concerns, or dilemmas help trigger ethical issue intensity. For

example, the National Do-Not Call Registry has tremendous impact on telemarketers’ business practices.

Organizational culture (internal stakeholders) and individual moral philosophies and values influence the

recognition of ethical issues and marketing ethics decisions. New Belguim Brewing Company, the third

largest craft beer brewer in the United States, uses only wind energy and co-generation as well as a

vigorous recycling initiative. In addition, the company practices open-book management. The decisions or

outcomes are evaluated by both internal and external stakeholders.

Marketing ethics relates to issues such as honesty and fairness, conflicts of interest, discrimination,

privacy, and fraud. Government regulatory agencies and self-regulatory groups such as the Better

Business Bureau have developed formal mechanisms to deal with ethical issues related to marketing. The

Federal Trade Commission (FTC) enforces consumer protection laws. Within this agency, the Bureau of

Consumer Protection works to protect consumers against unfair, deceptive, or fraudulent practices. In

addition to the FTC, other federal agencies such as the Food and Drug Administration, the Consumer

Product Safety Commission, and the Federal Communications Commission try to assist consumers in

addressing deceptive, fraudulent, or damaging conduct. At the state level, consumer protection statutes

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exist, and deceptive trade practices laws exist in most states. In New Jersey, the Attorney General’s office

has filed a lawsuit against Blockbuster, Inc. for not properly disclosing terms associated with its “No More

Late Fees” policy. Overdue rentals are automatically converted to sales on the eighth day after the due

date. The New Jersey Consumer Fraud Act could result in Blockbuster paying civil penalties of up to

$10,000 for each violation (Merritt, 2005). These regulatory agencies help define many of the issues that

should be an ethical concern for marketers. Examples of issues include marketing communications that are

false and misleading, material misrepresentations in external and internal communications, and the use of

telecommunications to deceive customers. Antitrust, deception in pricing, product liability, and marketing

channel relationships all encompass ethical decisions.

A Framework for Understanding Ethical Decision Making In Marketing

Ethical decision making in marketing parallels ethical decision making across all organizational

domains. There is much overlap between marketing ethics and business ethics because the basic

frameworks that describe ethical decision making in an organization include decisions that encompass

marketing. In other words, within the context of an organization, there is an ethical component to business

decisions, regardless of whether it is marketing or some other functional area component. External

stakeholder interests, concerns or dilemmas help trigger ethical issue intensity. For example, PETA has

encouraged KFC and other fast-food restaurants to make the ethical treatment of animals a priority.

Organizational culture (internal stakeholders) and individual moral philosophies and values influence the

recognition of ethical issues and marketing ethics decisions. The decisions or outcomes are evaluated by

both internal and external stakeholders. While it is impossible to describe precisely how or why an

individual or a work group may make a specific decision, we can generalize about average or typical

behavior patterns within organizations.

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 First, as previously discussed, marketing can identify the importance of stakeholders, stakeholder

issues, and gather information to respond to significant individuals, groups, and communities. Next, in the

decision-making process, marketers should identify the importance or relevance of a perceived issue– i.e.,

the intensity of the issue (Jones, 1991). The fast food industry is being pressured by government agencies,

consumers, and special interest groups to offer healthier menu options, particularly for children. The

intensity of a particular issue is likely to vary over time and among individuals and is influenced by the

organizational culture, values and norms; the special characteristics of the situation; and the personal

pressures weighing on the decision. McDonald’s restaurants were the targets of negative publicity

associated with the release of the movie Super Size Me. In response, the company introduced more salads

and healthful portions and alternatives. Individual factors are obviously important in the evaluation and

resolution of ethical issues, and familiarity with principal, theoretical frameworks from the field of moral

philosophy is helpful in determining ethical decision making in marketing (Murphy, Laczniak, Bowie, and

Klein, 2005). Personal moral development and philosophy, organizational culture, and coworkers,

determine why different people perceive issues with varying intensity (Robin, Reidenbach, and Forrest,

1996).

The ethical climate of an organization is a significant element of organizational culture. Whereas a

firm’s overall culture establishes ideals that guide a wide range of behaviors for members of the

organization, its ethical climate focuses specifically on issues of right and wrong. The ethical climate is

the organization’s character or conscience. Codes of conduct and ethics policies, top management’s

actions on ethical issues, the values and moral development and philosophies of coworkers, and the

opportunity for misconduct all contribute to an organization’s ethical climate. In fact, the ethical climate

actually determines whether or not certain dilemmas are perceived as having an ethical intensity level that

requires a decision.

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 Opportunity usually relates to employees’ immediate job context—where they work, with whom

they work, and the nature of the work. The specific work situation includes the motivational “carrots and

sticks” that superiors can use to influence employee behavior. Pay raises, bonuses, and public recognition

are carrots, or positive reinforcement, whereas reprimands, pay penalties, demotions, and even firings act

as sticks, the negative reinforcement. For example, a salesperson who is publicly recognized and given a

large bonus for making a valuable sale that he or she obtained through unethical tactics will probably be

motivated to use unethical sales tactics in the future, even if such behavior goes against one’s personal

value system. Research has shown that there is a general tendency to discipline top sales performers more

leniently than poor sales performers for engaging in identical forms of unethical selling behavior (Bellizzi

and Hasty, 2003). Neither a company policy stating that the behavior in question was unacceptable nor a

repeated pattern of unethical behavior offsets the general tendency to favor the top sales performers. A

superior sales record appears to induce more lenient forms of discipline despite managerial actions that are

specifically instituted to produce more equal forms of discipline. Based on their research, Bellizzi and

Hasty concluded that an opportunity exists for top sales performers to be more unethical than poor sales

performers.

In 2004, the American Marketing Association approved a new code of ethics entitled, “Ethical

Norms and Values for Marketers” (see Appendix). The AMA code provides values which are assumptions

about appropriate behavior, as well as norms that provide suggested behaviors. The AMA recognizes the

diversity of marketing, and encourages members to access codes of ethics that address specific functional

areas such as marketing research, direct selling, direct marketing, and advertising.

CONCLUSIONS

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 Much progress has been made in advancing theory and research in marketing ethics. In addition,

the practice of marketing has been elevated to higher levels of ethics from professional codes of conduct

provided by the American Marketing Association, Direct Selling Association, Direct Marketing

Association, Marketing Research Association, American Federation of Advertising and the National

Advertising Division of the Council of Better Business Bureaus. In addition, most corporations have

developed comprehensive codes of conduct that address specific ethical risk areas in marketing practice.

Recent regulatory changes that require boards of directors to be responsible for oversight on all ethics

issues within an organization elevate the importance of marketing ethics. It is clear that marketing ethics is

part of organizational responsibility and individuals cannot make independent decisions about appropriate

conduct. There is recognition through academic research and regulatory initiatives that corporate culture

plays a key role in improving marketing ethics.

State of the Field and Future Directions

The latest description of the Hunt and Vitell (2005) theory of marketing ethics and their

discussions of empirical tests of the theory provides an excellent framework for understanding the “why”

questions about marketing ethics. The model shows why peoples’ ethical judgments differ in an

organizational context. This theory, as well as Ferrell and Gresham (1985), provide directions for future

empirical descriptive research in marketing ethics. While many researchers and managers believe that

personal ethics determines organizational ethics, these frameworks and empirical research question this

assumption. The role of corporate culture along with internal control of opportunity to engage in

misconduct remains a key determinant of marketing ethics.

The development of stakeholder theory and the importance of stakeholder orientation provide a

new direction for integrating ethics into marketing decisions (Maignan, Ferrell and Ferrell, 2004). This

23
perspective focuses on understanding and responding to important stakeholder groups that hold marketing

accountable for its actions. This approach assumes that stakeholders are knowledgeable on key ethics

issues and that the organization can respond in a manner that maintains marketing relationships.

Stakeholder orientation has the potential to redefine the strategic concept of market orientation by

including the interests of all stakeholders in marketing decisions. Marketing can be viewed more as a

network of relationships providing skills and knowledge to all stakeholders (Vargo and Lusch, 2004).

From this perspective marketing ethics would be an important part of the strategic planning process

(Greenley, Hooley, Broderick, and Rudd, 2004).

The role of normative theory (Dunfee, Smith and Ross, 1999) and cognitive moral development

(Goolsby and Hunt, 1992) continues to be a part of the pluralistic approach used to discover and evaluate

marketing ethics. Both descriptive and normative researchers agree that marketers do develop guidelines

and rules for ethical conduct based on accepted norms and moral philosophies. Integrative Social Contract

Theory (ISCT) (Dunfee, Smith and Ross, 1999), based on norms as the foundation of rules within

communities, provides a direction for future research. Stakeholder theory can be linked with ISCT to

examine multiple conflicting norms and discovery of norms that should have priority in marketing

decisions.

24
i
Some of the material in this section has been adapted from LeClair, Ferrell, and Fraedrich (1998), with
the permission of O’Collins Corporation.

APPENDIX

ETHICAL NORMS AND VALUES FOR MARKETERS

http://www.marketingpower.com/content435.php

Preamble
The American Marketing Association commits itself to promoting the highest standard of professional
ethical norms and values for its members. Norms are established standards of conduct that are expected
and maintained by society and/or professional organizations. Values represent the collective conception
of what people find desirable, important, and morally proper. Values serve as the criteria for evaluating
the actions of others. Marketing practitioners must recognize that they not only serve their enterprises
but also act as stewards of society in creating, facilitating, and executing the efficient and effective
transactions that are part of the greater economy. In this role, marketers should embrace the highest
ethical norms of practicing professionals and the ethical values implied by their responsibility toward
stakeholders (e.g., customers, employees, investors, channel members, regulators and the host
community).

General Norms

1. Marketers must do no harm. This means doing work for which they are appropriately trained or
experienced so that they can actively add value to their organizations and customers. It also
means adhering to all applicable laws and regulations and embodying high ethical standards in
the choices they make.

2. Marketers must foster trust in the marketing system. This means that products are appropriate
for their intended and promoted uses. It requires that marketing communications about goods
and services are not intentionally deceptive or misleading. It suggests building relationships that
provide for the equitable adjustment and/or redress of customer grievances. It implies striving
for good faith and fair dealing so as to contribute toward the efficacy of the exchange process.

3. Marketers must embrace, communicate, and practice the fundamental ethical values that will
improve consumer confidence in the integrity of the marketing exchange system. These basic
values are intentionally aspirational and include honesty, responsibility, fairness, respect,
openness and citizenship.

Ethical Values
Honesty—to be truthful and forthright in our dealings with customers and stakeholders.

• We will tell the truth in all situations and at all times.

• We will offer products of value that do what we claim in our communications.
• We will stand behind our products if they fail to deliver their claimed benefits.
• We will honor our explicit and implicit commitments and promises.

Responsibility—to accept the consequences of our marketing decisions and strategies.

• We will make strenuous efforts to serve the needs of our customers.

• We will avoid using coercion with all stakeholders.
• We will acknowledge the social obligations to stakeholders that come with increased marketing
and economic power.
• We will recognize our special commitments to economically vulnerable segments of the
market such as children, the elderly and others who may be substantially disadvantaged.

Fairness—to try to balance justly the needs of the buyer with the interests of the seller.

• We will represent our products in a clear way in selling, advertising, and other forms of
communication; this includes the avoidance of false, misleading, and deceptive promotion.
• We will reject manipulations and sales tactics that harm customer trust.
• We will not engage in price fixing, predatory pricing, price gouging, or “bait-and-switch”
tactics.
• We will not knowingly participate in material conflicts of interest.

Respect—to acknowledge the basic human dignity of all stakeholders.

• We will value individual differences even as we avoid stereotyping customers or depicting

demographic groups (e.g., gender, race, sexual orientation) in a negative or dehumanizing way
in our promotions.
• We will listen to the needs of our customers and make all reasonable efforts to monitor and
improve their satisfaction on an ongoing basis.
• We will make a special effort to understand suppliers, intermediaries, and distributors from
other cultures.
• We will appropriately acknowledge the contributions of others, such as consultants, employees
and coworkers, to our marketing endeavors.

Openness—to create transparency in our marketing operations.

• We will strive to communicate clearly with all our constituencies.

• We will accept constructive criticism from our customers and other stakeholders.
• We will explain significant product or service risks, component substitutions or other
foreseeable eventualities that could affect customers or their perception of the purchase
 decision.
• We will fully disclose list prices and terms of financing as well as available price deals and
adjustments.

Citizenship—to fulfill the economic, legal, philanthropic and societal responsibilities that serve
stakeholders in a strategic manner.

• We will strive to protect the natural environment in the execution of marketing campaigns.
• We will give back to the community through volunteerism and charitable donations.
• We will work to contribute to the overall betterment of marketing and its reputation.
• We will encourage supply chain members to ensure that trade is fair for all participants,
including producers in developing countries.

Implementation

Finally, we recognize that every industry sector and marketing subdiscipline (e.g., marketing research,
e-commerce, direct selling, direct marketing, advertising) has its own specific ethical issues that require
policies and commentary. An array of such codes can be accessed through links on the AMA Web site.
We encourage all such groups to develop and/or refine their industry and discipline-specific codes of
ethics to supplement these general norms and values.
Designing the Marketing
Mix
Market Research
•Data availability
•Infrastructure, etc
Product
Planning
•Product extension
•Product adaptation
•New invention
•Branding
•Labeling

Pricing
•Cost Plus
•Dumping
•Countertrade or Barte

Distribution Systems
•Export/Import Agents
•Export Merchant
•Gray Marketing

Advertising
•Language
•Format
•Media etc