Ethics in Marketing and Advertising

Group 1 F 012 : Arshi Bari F 031 : Neha Kapoor F 042 : Riddhi Malhotra F 046 : Sakshi Joshi F 050 : Sheetal Kasbekar F 051 : Shimona Yadav F 113 : Naheed Shoogufan

What do we mean by Ethics?

Moral Principles that govern behaviour
Marketing Ethics: Applied Ethics that deal with the moral principles behind the operations of Marketing Why? Decide and define an acceptable code of conduct in the marketplace, to be followed by everyone

Understanding Ethics: Most unethical practices are not for personal gain, but for achievement of organizational goals

Ethics in Marketing
Is Marketing inherently evil?
According to some schools of thought, marketing essentially commits one of the following:
Damage Personal Autonomy: Harm to competitors: Buyers self determination in infringed Fierce competition and unethical marketing practices in saturated markets Promotes consumerism and waste, harm to society in general

Manipulating Social Values:

Ethical Leadership in Marketing

Being an ethical person in daily life Problems with Ethical Marketing Leadership: Main Goal is to satisfy stakeholders, which could clash with the pursuit of Ethical Behaviour Even marketing managers are forced to think about bottom lines and quarterly expectations Marketing Core of any business. Hence, ethical marketing decisions need to be co-ordinated with the rest of the organization Being an ethical leader in implementing Marketing decisions

Ethical Issues in Marketing

Defining Target Segments
Targeting uneducated / vulnerable consumers, like children, the elderly and citizens of developing nations Selective marketing discouraging demand from undesirable market segments

Marketing Research
Invasion of Privacy Stereotyping Approximation, assumptions and categorization

Pricing
Price Discriminations Price Wars

Ethics in a Marketing Firm

Organization Trade Channel

Marketing

Sales

Production

Procurement

HR

A marketing firm can be studied by separately studying the different functions of the organization. Different types of Ethical Decisions need to be taken in all the different functions of a marketing firm.

Types of Unethical Practices

Situation Example

Providing false information to consumers / Hiding information from consumers

Marketing Belittling competition

Hiding side effects of a certain product, wrongly claiming effects of a product, promotion of unsafe products
Going for a negative campaign against direct competitors instead of positive campaign for own product Making false promises, offering unfeasible schemes, offering bribes to retailers Keeping consumers in the dark about a price increase or reducing quantity of product at the same price

Unethically dealing with retailers Sales Unethically dealing with consumers

Types of Unethical Practices

Situation Environmental issues Example Releasing effluents, bribing environmental institutions Not providing proper safety conditions to labour, not providing them enough representation Using substandard raw materials in order to reduce costs

Labour issues Production Quality of raw materials

Types of Unethical Practices

Situation Vendor Discrimination Example Not using fair methods for choosing vendor Accepting gifts from vendors, allowing vendors to have nonprofessional relations with employees Not giving same commissions and schemes to everyone Allowing channel partners to gift employees, Accepting black money through transactions

Procurement

Bribes

Distributor Discrimination

Trade Channels

Bribes

Types of Unethical Practices

Situation Discrimination Example Regional / gender bias during recruitments Promotions based on personal relations rather than performances Encouraging glass ceiling for women

Bias HR Harassments

Dumping
What?
Is a kind of predatory pricing when manufacturers export to another country at a price below that in home market or in quantities unexplainable through normal market competition

Why?

Goods maybe sold below cost to drive competition's profits down and force them to exit the market To get rid of surplus goods if the company is about to shut down or product will be replaced by newer version WTO, General Agreement on Tariffs and Trade (GATT) (Article VI) allows countries the option to take action against dumping According to Article VI of GATT, dumping investigations shall, except in special circumstances, be concluded within one year, and in no case more than 18 months after initiation

Anti Dumping Actions

Cartel Formation
What?
A group of firms that gets together to make output and price decisions It is a formal organization where there is a small number of sellers and usually involve homogeneous products Oligopolistic firms join a cartel to increase their market power By working together, the cartel members are able to behave like a monopolist The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition
The Indian Competition Act prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on competition in markets in India Any agreement entered into by enterprises engaged in identical or similar trade of goods or services, including cartels, shall be presumed to have adverse effect on competition and therefore void

Why?

Indian Competition Act, 2002

Various Dubious Pricing Strategies

Fair Pricing
Producers sell products at wholesale costs that pay for the labor, materials and overhead to make the products with a reasonable margin of profit At times retailers cut prices to stimulate sales of particular products or to sell large quantities of popular products. At times firms cut prices to sell off outdated stock or to make way for a new line of products A company uses unethical pricing cuts to squash the sales of competitors by selling the same products for lower prices A company sets a low price on a new product in an attempt to gain market share, typically with the intention of raising prices in the future The purpose of penetration pricing is to attract customers away from competitors with low initial prices on new products and brands Predatory pricing involves setting prices so low that it forces competitors out of a market It allows the company to raise its prices to a level that is higher than normal market levels. Pricing designed to have a positive psychological impact. For example, selling a product at Rs 999, rather than Rs 1000. Setting a different price for the same product in different segments to the market. This can be for different classes, such as ages, or for different opening times.

Price Cutting Penetration Pricing Predatory Pricing

Psychological Pricing Price discrimination

Ways of unethical advertising

Surrogate Advertising Puffery Exaggeration Unverified claims Women stereotyping

Women used as sex symbols for promoting products

Comparative advertising

Surrogate Advertising
Surrogate advertising is advertising which embeds a brand or product message inside an advertisement which is ostensibly for another brand or product. There are a number of reasons for companies to use surrogate advertising. 1. To circumvent a ban on direct advertisements of particular products. Many nations have laws restricting alcohol and tobacco advertising. 2. Surrogate advertising may also be used when companies want to cultivate an image of social responsibility

Examples

Exaggeration
Using false claims in advertisement of a product (Exaggeration often takes place by not telling the whole truth )

Puffery
Puffery is language used in the promotion of a product which is designed to make the product seem more appealing with the use of claims which are usually subjective
1. Consumers do not take it seriously. 2. Understand that the claim is not literal 3. Consider it when evaluating a product to decide whether or not to purchase it, 4. When batteries say that they last forever, 5. Likewise, when a consumer buys the world's finest luggage,

Unverified Claims
It includes advertisements of energy drinks which tells

us about the number of vitamins and how they help children grow taller and stronger
There is no way of verifying the false claims For example Horlicks, Maltova, Tiger biscuits

Women stereotyping
Women are generally associated with household work and confused and usually wrong in decision making

Women stereotyping

Women are shown doing domestic work usually which reflects the stereotyping of the female image

Women used as sex symbols in advertisements

Unhealthy brand comparison

Such comparisons are considered unhealthy as they create confusion

in the mind of the consumers to make the right decision.

For example Comparative advertising between Pepsi and Coke

Nestle Boycott - Issues

1. Prompted by concern about Nestle's aggressive marketing of breast milk substitutes particularly in less economically developed countries Claims that the promotion of infant formula over breastfeeding led to health problems & deaths among infants Breast milk has many natural benefits lacking in formula. WHO recommends that babies should be exclusively breast fed for the first six months Nestl distributed free samples to hospitals; after leaving the formula was no longer free, but as supplementation had interfered with lactation, family must keep buying it

2.

3.

4.

5.

Did not label products in appropriate language and offered gifts & sponsorship to influence health workers to promote its products

Nestle Boycott - Action

Nestl's strategy was 1st written about in New Internationalist magazine in 1973 & book called The Baby Killer

Nestl sued publisher. After 2 yr trial court favored Nestl as they couldnt be held responsible for infant deaths by law

Widespread publicity led to launch of boycott in USA & it soon spread to Australia, Canada, New Zealand & Europe In 1981 WHA adopted Resolution WHA34.22 which included International Code of Marketing of Breast-milk Substitutes Nestl, which agreed to implement it & boycott was suspended

Coca Cola Opening Happiness?

Monopolistic Marketing Channel Stuffing Bribery H2NO Program
In 2005, Coca-Cola in Europe agreed to end deals with shops & bars to stock its drinks exclusively after EU investigation found it stifled competition Survey found that Coca-Cola broadcasted a high proportion of their ads during children's television Coca-Cola charged in with "forcing bottlers to purchase millions of dollars of beverage concentrate to make its sales seem higher Coca-Cola has been accused of bribing the American Academy of Pediatric Dentistry (AAPD) H2NO is a campaign by Coca-Cola to dissuade consumers from ordering tap water drinks at resturants

Coca Cola Opening Happiness?

Pesticide Use Water Shortage & Pollution
In 2003 CSE said that Coca Cola products had 30 times the level of pesticide residues permitted under EU regulations

Plachimada plant in Kerala is shut for 17 months now because village council has refused to renew its license

Racial Discrimination
Health Effects

In 2003, protesters claimed hardly any black people in top management, were paid less & fired more often

Studies indicate it is main source of calories, cause tooth decay & high fructose corn syrup is linked to obesity and diabetes

Fairness creams: An ethical dilemma

P&Gs Olay Total Effects, with claims of being Indias best anti-aging cream, was made to withdraw its TV commercial (TVC) as it was completely unsubstantiated and unqualified and a mere attempt to mislead consumers

The complaint received by ASCI stated that it was unclear on what basis the claim was being made by the MNC and that substantiating such a strong claim would amount to disparaging all other anti-aging products sold in India

Meanwhile, HULs Fair & Lovely TVC showed shots with a central focus on an unbranded jar which clearly resembled P&Gs Olay Total Effects jar

Considering the P&G brand was being targeted by HUL quite blatantly, the advertiser decided to take it off the air before ASCI asked the FMCG major to withdraw its ad

Fairness creams: An ethical dilemma

HULs other skincare brand, Ponds Flawless White, also came under the scanner as its claim was highly exaggerated, unsubstantiated and would mislead consumers The fact that HULs Ponds flawless white was expected to completely erase dark spots and scars and all other facial skin imprecations was not a credible claim ASCI felt, and the advertiser has assured appropriate modification in its ad. The claim by HULs other brand, Ponds Age Miracle, of performing a miracle on the consumers skin within a 7-day period was also not accepted by ASCI. In fact, realising the false claims made by its brand, HUL decided to take it off the air before ASCI could send it a notice Even LOreal-owned Garnier skincare brands claim of making skin tones fairer in just 7 days was considered to be misleading to consumers. The ad, created by Publicis India, was not seen as credible by ASCI. The advertiser has assured appropriate modification of the claim

Adverts under the scanner

http://www.youtube.com/watch?v=eO7XqrdBztQ http://www.youtube.com/watch?v=_NzWAu21dWk http://www.youtube.com/watch?v=tcBC5SRpthM http://www.youtube.com/watch?v=eO7XqrdBztQ

Papa Johns v/s Pizza Hut

Papa John's claims its pizza is "better" than Pizza Hut's. One of the ads stated Papa John's "won big time" in taste tests over Pizza Hut. Other ads in the campaign alleged Papa John's sauce and dough were better than Pizza Hut's because they were made with fresh tomatoes and filtered water Pizza huts lawyers filed a case & the judge ordered Papa John's to stop using the "Better ingredients. Better pizza" slogan and awarded Pizza Hut $467,619 in damages Later the verdict was overturned and ruled in favor of Papa John's as jurors were never asked if consumers relied on Papa John's "better" claims when deciding what pizza to buy Making false, misleading and exaggerated claims over no evidence to belittle the competitiors is an example of unethical advertising

Consumer Protection What and How

Rights given to a "consumer" to protect him/her from being cheated by salesman/manufacturer/shopkeeper. Designed to ensure fair trade competition and the free flow of truthful information in the marketplace. Designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional protection for the weak and those unable to take care of themselves.

ILLITERACY AND IGNORANCE

UNORGANIZED CONSUMERS

SPURIOUS GOODS

DECEPTIVE ADVERTISING

MALPRACTICES OF BUSINESSMEN

Laws that safeguard Consumer Interests

Advertising Standards Council of India The Drugs and Magic Remedies (Objectionable Advertisements) Act 1954

The Consumer Protection Act, 1986

The Infant Milk Substitute, Feeding Bottles and Infant Foods Act, 1992

Bureau of Indian Standards Amd Bill, 2012

Food Products (Amendment) Order

Advertising Standards Council of India (ASCI)

MAIN OBJECTIVE

To promote responsible advertising thus enhancing the public's confidence in Advertising.

1. To ensure the truthfulness and honesty of representations and claims made by advertisements and to safeguard against misleading advertisements. 2. To ensure that advertisements are not offensive to generally accepted standards of public decency. 3. To safeguard against the indiscriminate use of advertising for the promotion of products which are regarded as hazardous to society or to individuals to a degree or of a type which is unacceptable to society at large 4. To ensure that advertisements observe fairness in competition so that the consumers need to be informed on choices in the marketplace and the cannons of generally accepted competitive behaviour in business are both served. Cable Television Network Regulation Act

CODE OF ADVERTISING

The Consumer Protection Act. 1986

Can issue interim orders stopping such advertisements pending disposal of the case Can give directions to the advertiser to discontinue such advertisements and not to repeat it. Can award compensation for any loss or suffering caused on account of such unfair trade practice, they can also award punitive damages and costs of litigation. Can direct the advertiser to issue corrective advertisement. Section 14 h ( c ) of the Act , describing the powers of the court, says that the court can order corrective advertisement to neutralize the effect of misleading advertisement at the cost of the opposite party responsible for issuing such misleading advertisement.

The Bureau of Indian Standards Amendment Bill, 2012

The Bill amends the Bureau of Indian Standards Act, 1986 (the principal Act). The principal Act establishes the Bureau of Indian Standards (BIS) for the harmonisation of standards, marking and quality certification of goods. The Bill seeks to establish BIS as the national standards body. Under the principal Act, manufacturers may use standard marks under licenses issued by the BIS. The Bill allows manufacturers to use a self declaration of conformity on the basis of registration with the BIS. The Bill prohibits any person not possessing a self declaration or registration of conformity, from claiming that his article or process conforms to the Indian Standard.

Drugs and Magic Remedies (Objectionable Advertisements) Act 1954

The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, basically prohibits four kinds of advertisements pertaining to drugs and magical cures: a) The procurement of miscarriage in women or prevention of conception in women b) the maintenance or improvement of the capacity of human being for sexual pleasure c) correction of menstrual disorders in women. Section 3 further prohibits any advertisement promoting drugs for the diagnosis, cure, mitigation, treatment or prevention of any disease, disorder or condition specified in the Schedule And the schedule lists a number of diseases, disorders or conditions.

The Infant Milk Substitute, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act 1992

Section 3 of 7 the Act says that No Person Shall:(a)advertise or take part in the publication of any advertisement, for the distribution, sale or supply of infant milk substitutes or feeding bottles or infant foods. (b) give an impression or create a belief in any manner that feeding of infant milk substitutes and infant foods is equivalent to or better than mothers milk.

Fruit Products (Amendment) Order 2005

Clause 11m sub-clause 3 says that Sweetened aerated water containing no fruit juice or fruit pulp or containing less than 10 % of fruit juice or fruit pulp shall have a clear and conspicuous marking on the body of the container to the effect contains no fruit. In case artificial flavour has been used, the words artificially flavoured shall be declared on the label. The publicity and advertisements made for sweetened aerated waters through any media shall also conspicuously explain / display the fact that those products do not contain any fruit juice

Other Regulatory Authorities

Telecom Regulatory Authority of India Insurance Regulatory Development Authority Securities and Exchange Board of India

Reserve Bank of India

Medical Council of India Textiles Committee Independent regulatory authority for Retail coming up soon

Survey Results
Suppose your company has come up with a new product that is effective in its major purpose, but has a few undesirable side effects too. Would your promotional activities comprise of a caution? Never Always Sometimes

Suppose your company has come up with a product category, in which your direct competitor enjoys the largest market share. Would your communication to consumers contain any reference to negative points of the competitors products? Never Sometimes

How often would you say your company makes promises of promotional schemes to retailers and is not able to meet it for various reasons?

Always

Sometimes 17%

Never

20% 10%

30% 50% 70%

70%

33%

Survey Results
Suppose youve had to increase the price of your product by a marginal amount. Would you typically communicate the same to the consumer through advertisements? Yes Not sure 10% No Yes Not sure No 30% 70% In your factories, is there an operative labour union which takes care of the needs of the workers? Which of the following does your company consider to be most important, with respect to raw materials used?

Cost effective

Quality

20%
30% 60% 10% 70%

Survey Results
Which of the following does your company consider to be most important, with respect to the final product?

Quality

Easy Avaialbility

20%

Suppose there is an employee in your organization who has a sick family member and is in dire need of money. But, his/her performance during the last few months has not been upto the mark. Even after several reminders and warnings, he has not been able to perform. What would the company do? assign easy project
Give him time off 40%

On a scale of 1 to 10, how much importance is given to safety norms for workers in production?

10

20% 40% 40%

80%

60%

Survey Results
If any employee is seen on a slow growth, he is given a special mentoring Program: Does the company have special facilities for the handicapped and the disabled? What kind of an appraisal system do you have ?

Always

Never

Sometimes Yes No

Vertical Vertical and horizontal 360 degrees

30% 50% 50% 50% 50% 40%

20%
10%

Survey Results
Does the company fall above the prescribed ratio for gender diversity? Are all your vendors in the same channel given same incentives/commissions? Do you allow employees to receive gifts from channel partners?

Yes

No

Yes

No

Yes

No

20%
30% 50% 70% 50% 80%