Chapter Eight:

Ethics and
Marketing

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• Chapter Objectives
• After reading this chapter, you will be able to:
– Apply an ethical framework to marketing issues.
– Describe the three key concerns of ethical analysis of marketing issues.
– Describe two interpretations of “responsibility” and apply them to the
topic of product safety.
– Explain contractual standards for establishing business’s
responsibilities for safe products.
– Articulate the tort standards for establishing business’s responsibilities
for safe products.
– Analyze the ethical arguments for and against strict product liability.
– Discuss how to evaluate both ethical and unethical means by which to
influence people through advertising.

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• Chapter Objectives
• After reading this chapter, you will be able to:
– Explain the ethical justification for advertising.
– Trace debates about advertising’s influence on customer autonomy.
– Distinguish ethical from unethical target marketing, using marketing to
vulnerable populations as an example.
– Discuss business’s responsibilities for the activities of its supply chain.

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• Ethics and Marketing

A magazine is simply a device to induce

people to read advertising.
James Collins

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• Introduction
• Some believe the very purpose of business is found within the
marketing function.
• The American Marketing Association defines marketing in a
way that echoes the stakeholder model of CSR in Chapter 5.
– According to the AMA, 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.”
• An exchange between a seller and a buyer is central to the
market economy and the core idea behind marketing.
– Marketing ethics examines the responsibilities associated with
bringing a product to market, promoting it to buyers, and exchanging
it with them.

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• Introduction
• All of these factors are elements of marketing.
– What, how, why, and under what condition is something produced?
– What price is acceptable, reasonable, fair?
– How can the product be promoted to support, enhance, and maintain
sales?
– Where, when, and under what condition should the product be placed
in the marketplace?
• These four general categories – product, price, promotion,
placement – are sometimes referred to as the “Four Ps” of
marketing.
• Each of these elements raises important ethical questions.

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 • Table 8.1
Ethical Issues in
Marketing: A
Framework

This framework does

not determine the
right answer but
instead identifies
rights, responsibilities,
duties and
obligations, causes
and consequences.

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• Marketing: An Ethical Framework
• A simple situation in which two parties freely agree to an
exchange is prima facie ethically legitimate.
– There must be respect for autonomy and a mutual benefit.
– In order to assess prima facie, conditions must be met.
• The agreement must have resulted from an informed and voluntary
consent, and
• there was no fraud, deception, or coercion involved.
– When these conditions are violated, autonomy is not respected and
mutual benefit is not attained.
– Even when conditions are met, other values may override the freedom
of individuals to contract for mutually beneficial purposes.
• Society’s values of law and order override the freedom of drug dealers.

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• Marketing: An Ethical Framework
• Keep three concerns in mind when approaching any ethical
issue in marketing.

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• Marketing: An Ethical Framework
• Is it not always easy to determine if someone is being treated
with respect in marketing situations.
– First, the person must freely consent to the transaction.
– The more consumers need a product, the less free they are to choose and the
more protection they deserve within the marketplace.
– Practices aimed at vulnerable populations raise questions of voluntariness.

– Second, consent must be not only voluntary, but also informed.

– The complexity of many consumer products and services can mean that
consumers may not fully understand what they are purchasing.
– Many purchases do not result in actual benefit due to impulse buying or
unsafe products.

– Third, decide if other values are affected.

– Primary social values of fairness, justice, health, and safety are some of the
values that can be jeopardized by some marketing practices.

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• Responsibility for Products: Safety and
Liability
• In general, business has an ethical responsibility to design,
manufacture, and promote its products in ways that avoid
causing harm to consumers.
– Responsibility may mean the cause of something and in another sense
it involves accountability.
• Both law and ethics rely on this when evaluating cases in
which products or services cause harm in the marketplace.
– Contract law, and the ethics implicit in contracts, is one legal approach
to product safety.
– Tort law provides a second legal approach to product safety.
– A third legal doctrine, strict liability, addresses cases in which no one is
at fault but someone has been harmed.

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• Contractual Standards for Product Safety
caveat emptor approach
• Assumes every purchase
involves informed consent
and is ethically legitimate.
• Business’s only legal and
ethical responsibility is to
provide a good or service at
an agreed-upon price.
• Even this has ethical
constraints not to coerce,
defraud, or deceive buyers.
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implied warranty of
merchantability
• In selling a product, a
business implicitly assures it
is suitable for its purpose.
• This standard shifts the
burden of proof from the
consumer to the producer.
• Many businesses issue a
disclaimer of liability or offer
a limited warranty.
• Tort Standards for Product Safety
• Contract law would not
apply to the majority of
business situations in which
consumers do not have a
contractual relation with
the business that created or
manufactured the product.
• Negligence, a concept from
the area of law known as
torts, provides a second
avenue for consumers to
hold producers responsible
for their products.

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• Tort Standards for Product Safety
• The distinction between contract law and tort law calls
attention to two different ways to understand ethical duties.
– Under a contract model, the only duties a person owes are those
explicitly promised to another party.
– Tort law holds that we all owe other people certain general duties, even
if we have not explicitly and voluntarily assumed them.
• Negligence is a central component of tort law.
– What duties, exactly, do producers owe to consumers?

• The answer falls along a continuum.

– One end – producers owe only things promised in the sales agreement.
– The other end – strict liability where producers owe for any and all
harms caused by their products.

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• Tort Standards for Product Safety
• The middle of the continuum
holds many interpretations of
negligence.
– Negligence can be a failure to
exercise reasonable care or
ordinary vigilance resulting in
injury.
– Negligence involves the ability
to foresee consequences and
failing to avoid harmful ones.
– The standards of what can be
foreseen raises ethical
challenges.
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– One standard would hold
people liable only for those
harms they actually foresaw.
– A preferable standard would
require people to avoid harms
that they should have thought
about.
– This “reasonable person”
standard is used most often in
legal cases.
– This too can be interpreted in
many ways.
– Many interpret the standard
as thoughtful, reflective, and
judicious decision making.
• Strict Product Liability
• The negligence standard of tort law focuses on the sense of
responsibility involving someone being at fault.
• But there are cases in which consumers are injured in which
no negligence was involved.
– But the question of accountability remains.
– Who should pay for damages when no one is at fault?

• The legal doctrine of strict product liability holds

manufacturers accountable in such cases
– and it raises unique ethical questions.

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• Ethics and Marketing

If you make customers unhappy in the physical

world, they might each tell 6 friends. If you
make customers unhappy on the Internet, they
can each tell 6,000 friends.
Jeff Bezos, Amazon CEO

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• Ethical Debates on Product Liability
• Within the U.S., calls to reform product liability laws are
common – but the criticism is not universal.
– The EU follows a strict product liability approach.

• U.S. critics say liability standards and resulting insurance costs

have imposed significant costs on contemporary business.
– Singling out the strict product liability standard as especially unfair.

• The rationale to justify strict product liability is problematic.

– Defenders say by holding business strictly liable, it creates incentive for
business to produce safer goods and services.
– Also, holding business liable allocates the costs to the party best able
to bear the financial burden.
• Each rationale is open to serious objections.

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• Ethical Debates on Product Liability
The incentive argument The financial burden argument
• This seems to misunderstand • This rationale also suffers a
the nature of strict liability. serious defect.
– Holding someone accountable – This argument claims business
for harm provides incentive is best able to pay for
only if the person could have damages.
done otherwise.
– Yet, many businesses have
– This means the harm was been bankrupted by product
foreseeable and failure to act is liability claims.
negligent.
– Holding business liable for
unforeseeable harms does not
better protect future
consumers.

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• Ethical Debates on Product Liability
• If neither the company nor the consumer is at fault,
– who should pay for the injuries? The government is a third option.

• Holding business accountable might be a persuasive argument.

– Accountability focuses on those situations where no one is at fault.
– When business is held accountable, the costs for injuries eventually fall
on those consumers who buy the product through higher costs
• especially higher insurance costs.

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• Responsibility for Products: Advertising and Sales
• Advertising is a second area of marketing receiving legal and
philosophical attention within business ethics.
• The goal of all marketing is the sale and a major element of
marketing is sales promotion,
– the attempt to influence the buyer to complete a purchase.

• There are ethically good and bad ways of influencing others.

– Often sales and advertising employs deceptive or manipulative means
of influence, or are aimed at susceptible audiences.
• To manipulate something is to guide its behavior, bypassing autonomy.
• Manipulation may be done with or without deception.
– Marketing research allows companies to satisfy demands but also
allows for knowledge that may be used to manipulate.
– Some marketing targets those susceptible to manipulation.
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• Ethical Issues in Advertising
• The ethical defense of
advertising is that it
– provides information for
market exchanges
– contributes to market
efficiency and overall
happiness, and
– provides information
necessary for individuals to
make informed choices.
• Note that each of these
rationales provides an ethical
justification only if the
information is true and
accurate.
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• The principle-based
tradition in ethics would
object the strongest to
manipulation.
• The utilitarian tradition
would offer a conditional
critique of manipulation,
– depending on the
consequences.
• The worst form of
manipulation occurs when
vulnerable people are
targeted for abuse.
• Ethical Issues in Advertising
• Some general guidelines.
– Marketing practices that seek to discover which consumers might
already and independently be predisposed to purchasing a product
are ethically legitimate.
– Marketing practices that seek to identify populations easily influenced
and manipulated, are ethically questionable.
• Sales and marketing that appeal to fear, anxiety, or other irrational
motivations are ethically improper.
– Marketing research seeks the psychology of potential customers.
• Not all psychological categories are alike.
• Some are more cognitive and rational than others.

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• Marketing Ethics and Consumer Autonomy
• Defenders of advertising argue that the majority of
advertising provides information to consumers,
– information that contributes to an efficient economic markets.

• Beyond the question of what advertising does for people,

– a second questions asks what adverting specifically and marketing in
general does to people.
– Marketing offers information but it also helps shape culture and the
individuals socialized within that culture.
• How it does this and the kind of people we become as a result is of
fundamental ethical importance.
• Critic’s claims either deny the influence or maintain that marketing is only
a mirror of the culture.

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• Marketing Ethics and Consumer Autonomy
• Galbraith claimed that advertising and marketing created the
very consumer demand that production aimed to satisfy.
– Dubbed the “dependence effect,” it asserted that consumer demand
depended on what producers had to sell.
• This had three major and unwelcome implications.
• First, by creating wants, advertising was changing the “law” of supply and
demand – demand turns out to be a function of supply.
• Second, advertising and marketing creates irrational and trivial consumer
wants and distorts the entire economy.
• Finally, by creating consumer wants, advertising and other marketing
practices violate consumer autonomy.
– In short, consumers are being manipulated by advertising.

– Ethically, the crucial point is the assertion that advertising violates

consumer autonomy.

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• Marketing Ethics and Consumer Autonomy
• But can advertising violate consumer autonomy, and, if it can,
does this occur?
– One facet of this debate claims that advertising controls consumer
behavior – evidence suggests that this is false.
– But consumer autonomy might be violated in a subtler way.
• Rather than controlling behavior, perhaps advertising creates the wants
and desires on the basis of which consumers act.
• The focus here becomes the concept of autonomous desires rather than
autonomous behavior.
• Consumer autonomy is violated by advertising’s ability to create non-
autonomous desires.
– After basic needs are met, why do people consume the way they do?
– The ethical question is how much marketing has influenced
unnecessary purchases.

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• Ethics and Marketing

I am the world’s worst salesman; therefore, I must

make it easy for people to buy.
F. W. Woolworth (1852 – 1919)

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• Marketing to Vulnerable Populations
• Based on market research a
car retailer learns a typical
customer is:
– a single woman,
– between 30 and 40 years old,
– makes over $30,000,
– and enjoys the outdoors.
• The car dealer targets
advertising and direct mail
to this audience.
– Ads depict attractive and
active young people using
their cars.
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• A second targeted campaign
sells emergency call devices
to older widows living alone.
– The ad shows an elderly
woman crying out “I’ve fallen
and can’t get up!”
• This campaign seems
ethically offensive.
– Exploiting the fear and anxiety
many older people experience.
• Do marketers have special
responsibility to vulnerable
individuals?
• Marketing to Vulnerable Populations
• There is consumer vulnerability which occurs when a person
– has an impaired ability to make an informed consent to the market
exchange.
– A vulnerable consumer lacks the intellectual capacities, psychological
ability, or maturity to make informed consumer judgments.
• Children are an example.

• There is a second sense of vulnerability, called general

vulnerability which occurs when someone is susceptible to
some specific physical, psychological, or financial harm.
• Some marketing practices target uninformed and vulnerable
consumers.
• Others target vulnerable populations.

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• Marketing to Vulnerable Populations
• Some groups are vulnerable in both senses.
– People can become vulnerable as a consumer because they are
vulnerable in some other general sense.
• Marketing campaigns that target elderly individuals for products such as
supplemental medical insurance, life insurance, emergency call devices,
etc. often play on fears, anxiety, and guilt.
– There are also cases where people become vulnerable to other harms
because they are vulnerable as consumers.
• This strategy is the most abhorrent case of unethical marketing.
• Certain products – tobacco and alcohol – can make an individual
vulnerable to a wide range of health risks.

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• Marketing to Vulnerable Populations
• One final form of marketing to a vulnerable population is
called stealth or undercover marketing and refers to
– those situations where we are subject to directed commercial activity
without our knowledge.
• Undercover marketing is an intentional effort to hide the true marketing
element of the interaction.
• Stealth marketing has hit the Internet too – you are never sure who posts
reviews of products online.
– “Buzz marketing” happens when people are paid to create a “buzz”
around a new product by using it and discussing it online.
– Experts consider stealth marketing extraordinarily effective.
– These practices would seem unethical on principle and utilitarian
grounds.

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• Supply Chain Responsibility
• There are other relationships beyond the consumer –
business relationship – there is supply chain relationships.
• Ordinarily, we do not hold a person responsible for the actions
of someone else – but this is not always the case.
– The doctrine of respondent superior holds an employer responsible for
the actions of their employees when performing ordinary duties.
• Most of the ethical rationale for business’s responsibility for
the actions of its suppliers stems from two conditions:
– suppliers often act at the direction of business, and
– business often exercises significant influence over the actions of its
suppliers.
– The new concept of responsibility travels far deeper throughout the
entire supply chain system.

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• Table 8.1
A market exchange is prima facie ethically legitimate because of respect for
autonomy and mutual benefit.
This ethical judgment is conditional because the transaction must be truly
voluntary; informed consent is needed; benefits might not occur; and, other values
might conflict.
These four condition imply the following four questions, each of which requires
considering several factors:
First, is the exchange “voluntary”? Are there real alternative choices available? Is
there anxiety and stress in some purchasing situations? Is there price-fixing,
monopolies, price gouging, etc.? Are there targeted and vulnerable consumers?
Second, is consent to change really “informed? Is there a lack of information,
deception, or complicated information?
Third, are people truly benefited? This includes subjects like impulse buying,
“affluenza,” and consumerism. Are there injuries from unsafe products? Are there
“contrived” wants?
The fourth condition is competing values. Is there justice? Are there externalities?
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