Chapter VII

Ethical Marketing

Introduction
Although many of the activities of marketers are relatively free of ethical problems, others have
drawn extensive criticism and spawned, in some instances, organized consumer opposition that
challenges the prevailing philosophy of marketing.

7.1Understanding Ethical Issues in Marketing

Back in the days before truth-in-advertising laws and do-not-call registries, the generally
accepted motto for virtually all transactions was caveat emptor, or “buyer beware.” Those doing
the purchasing had to educate themselves about the products they wanted to buy and the services
they wanted to pay for. People learned how to judge whether a horse, an orange, or a bolt of
cloth was worth the price the seller asked, and they relied on the recommendations of people
they trusted to find the butchers, plumbers, hairdressers, and doctors they wanted to go to.
Today, word of mouth is still the most trusted form of marketing — as long as the consumer
trusts the source of the endorsement. Other forms of marketing can also be both effective and
ethical. In the following sections, we look at the key elements of ethically sound marketing
practices: disclosing critical information to avoid so-called stealth marketing and educating
consumers.

Ethical Implications of Stealth Marketing

Suppose you’re walking in a street one evening and a handsome young man stops you and asks
you to take his picture with his cell phone. Being a nice, accommodating sort of person, you
comply. Perhaps you say something about the cool features on the phone, and the handsome
young man says, “It’s awesome, isn’t it? Look at this!” Then may be he shows you a few of the
nifty (clever) things his phone can do.

You have just been stealth marketed.

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Stealth marketing is the practice of promoting goods or services without disclosing the
relationship between the person doing the promotion and the business that offers the good or
service. For example, bloggers (users who write diary on a website) often write about new
products, but they don’t always tell you whether they’re getting paid to blog about the product.
(In case you’re wondering, the above scenario at was a real stealth marketing campaign in 2002:
Sony Ericsson hired 60 models to hang out at tourist attractions around New York City and
Seattle, Washington, with the T68i cell phone and ask passers-by to take their photos.)

Extending stealth marketing to word-of-mouth campaigns

The good-looking guy with the cool cell phone earlier in this chapter was a stranger to you. Now
suppose you meet your best friend for lunch one day and she starts talking about this great new
makeup she discovered. The two of you discuss things like how long she has been using it, how
it looks on her, whether it causes any skin problems, and so on. She says you should try it, and
you think maybe you’ll look for it the next time you’re in the health and beauty aisle (passage
way between goods) at the drugstore. Maybe your friend has an extra coupon that she offers to
you.

Would you be surprised to discover that you’ve just been listening to a one-on- one commercial,
for which your friend receives free samples, coupons, and (as they say on game shows) other
considerations?

Believe it or not, this scenario plays out thousands of times a day — perhaps more frequently —
around the United States. So-called buzz marketers have figured out a way to combine the trusted
word-of-mouth technique with compensated endorsers (promoters). Those compensated
endorsers often are close friends, colleagues, or peers. And they don’t always tell you that they
receive compensation for talking up a product to you.

The problem with this kind of marketing technique is that failure to disclose the relationship
between the company and the endorser can tarnish (damage) both the company’s image and the
relationships between the endorser and the people he pitches (throws) the product to. Many
people would feel used or taken advantage of if they found out after the fact that a trusted friend

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or acquaintance tried to sell them on a product without acknowledging that he was paid (in some
form, though usually not in money) for doing so.

Unfortunately, some stealth marketers delve into particularly troubling territory, recruiting
teenagers to chat up products to other teens. Teenagers are acutely sensitive to peer pressure,
which makes them especially vulnerable to non disclosed word-of-mouth campaigns. In addition,
teenagers typically aren’t sophisticated enough to tell the difference between an authentic review
and shilling (gambling).

7.2 Ethical Issues in Advertising

Advertising pervades our lives. It is impossible to read a newspaper or magazine, watch a
television show, or travel the streets of cities without being bombarded by commercial messages.
Although some ads may be irritating or offensive, some advertisements provide a certain amount
of entertainment. We also derive benefit from information about products and from the boost that
advertising gives to the economy as a whole.
A typical definition of advertising, from a marketing text, is that it is “a paid form of nonpersonal
communication about an organization and/or its products that it is transmitted to a target
audience through a mass medium.” So defined, advertising is only one kind of promotional
activity.
Advertising is widely criticized. Exaggerated claims and outright falsehoods are the most
obvious targets for complaints, followed closely by the lack of taste, irritating repetition, and
offensive character of many ads. More recently, questions have been raised about the morality of
specific kinds of advertising, such as advertising for alcohol and tobacco products, and the
extensive advertising aimed at children. Particular ads are also faulted for their use of excessive
sex or violence or for presenting negative stereotypes of certain groups.
Rational Persuasion
The main concern of philosophers with advertising is whether the influence it exerts on
consumers is consistent with a respect for personal freedom or autonomy. Persuasion is a broad
category that ranges from the praising (such as guidance by parents and teachers) to the harmful
(psychoactive drugs, psychosurgery, and torture, for example). Advertising does not involve
such extreme methods, of course. Still, advertising that distrustfully exploits deep-seated
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emotions; logical thought processes can be criticized on the ground that it wrongfully deprives
people of a certain amount of freedom in the making of consumer choices. An advertising
technique that might be faulted for this reason is subliminal communication. Although many
people believe that subliminal communication is a commonly used technique in advertising,
there is little evidence to establish either its frequency or its effectiveness. It might seem scarcely
worth exploring the ethical issues in subliminal communication, therefore, except for the help it
provides in understanding the concept of rational persuasion, which is relevant to the ethical
evaluation of advertising generally.
Social and Ethical Criticisms of Advertising
Much of the controversy over advertising stems from the ways many companies use it as a
selling tool and from its impact on society’s tastes, values, and lifestyles. Specific techniques
used by advertisers are criticized as deceptive or untruthful, offensive or in bad taste, and
exploitative of certain groups, such as children. We discuss each of these criticisms, along with
advertisers’ responses. We then turn our attention to criticisms concerning the influence of
advertising on values and lifestyles, as well as charges that it perpetuates stereotyping and that
advertisers exert control over the media.
Advertising as Untruthful or Deceptive
One of the major complaints against advertising is that many ads are misleading or untruthful
and deceive consumers. A number of studies have shown a general mistrust of advertising
among consumers. Advertisers should have a reasonable basis for making a claim about product
performance and may be required to provide evidence to support their claims. However,
deception can occur more subtly as a result of how consumers perceive the ad and its impact on
their beliefs. The difficulty of determining just what constitutes deception, along with the fact
that advertisers have the right to use puffery (exaggerated) and make subjective claims about
their products, tends to complicate the issue. But a concern of many critics is the extent to which
advertisers are deliberately untruthful or misleading.
If an advertisement (or advertising campaign) leaves the consumer with an impression(s) and/or
belief(s) different from what would normally be expected if the consumer had reasonable
knowledge, and that impression(s) and/or belief(s) is factually untrue or potentially misleading,
then deception is said to exist.
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Sometimes advertisers have made overtly false or misleading claims or failed to award prizes
promoted in a contest or sweepstakes. However, these cases usually involve smaller companies
and a tiny portion of the hundreds of billions of dollars spent on advertising and promotion each
year. Most advertisers do not design their messages with the intention to mislead or deceive
consumers or run sweepstakes with no intention of awarding prizes. Not only are such practices
unethical, but the culprits (wrong doings) would damage their reputation and risk prosecution by
regulatory groups or government agencies. National advertisers in particular invest large sums of
money to develop loyalty to, and enhance the image of, their brands. These companies are not
likely to risk hard-won consumer trust and confidence by intentionally deceiving consumers. The
problem of untruthful or fraudulent advertising and promotion exists more at the local level and
in specific areas such as mail order, telemarketing, and other forms of direct marketing. Yet there
have been many cases where large companies were accused of misleading consumers with their
ads or promotions. Some companies test the limits of industry and government rules and
regulations to make claims that will give their brands an advantage in highly competitive
markets.
While many critics of advertising would probably agree that most advertisers are not out to
deceive consumers deliberately, they are still concerned that consumers may not be receiving
enough information to make an informed choice. They say advertisers usually present only
information that is favorable to their position and do not always tell consumers the whole truth
about a product or service.
Many believe advertising should be primarily informative in nature and should not be permitted
to use puffery or embellished messages. Others argue that advertisers have the right to present
the most favorable case for their products and services and should not be restricted to just
objective, verifiable information. They note that consumers can protect themselves from being
persuaded against their will and that the various industry and government regulations suffice to
keep advertisers from misleading consumers.
Advertising as Offensive or in Bad Taste
Another common criticism of advertising, particularly by consumers, is that ads are offensive,
tasteless, irritating, boring, obnoxious, and so on. In the recent study by Shavitt and her
colleagues, about half of the respondents reported feeling offended by advertising at least
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sometimes. A number of other studies have found that consumers feel most advertising insults
their intelligence and that many ads are in poor taste.
Subliminal ads?
Subliminal advertising is manipulative because it acts on us without our knowledge, and hence
without our consent. If an ad appears on TV, we can tune it out or change stations if we do not
want to be subject to it. In either case, if we do choose to look and listen, we can consciously
evaluate what we see and hear. We can, if we wish, take a critical stance toward the
advertisement. All of this is impossible with subliminal advertising, because we are unaware that
we are being subjected to the message. The advertiser is imposing his message on us without our
knowledge and consent.
A similar argument can be made against product placement. Because moviegoers are unaware
that advertising is being directed at them, they may not be prepared to evaluate it critically. Ads
in newspapers and magazines and on television are clearly identified as such, so that we can
separate them from news, entertainment, and other elements and treat them accordingly. Plugs in
movies, under the guise of entertainment, catch us unawares, without our critical faculties
(senses) at work, so to speak. We are not able to subject them to the same scrutiny as other ads
because we do not recognize them for what they are.
Sexual Appeals The advertising appeals that have received the most criticism for being in poor
taste are those using sexual appeals and/or nudity. These techniques are often used to gain
consumers’ attention and may not even be appropriate to the product being advertised. Even if
the sexual appeal relates to the product, people may be offended by it. Many people object to
both nudity in advertising and sexually suggestive ads.
A common criticism of sexual appeals is that they can demean (humiliate) women (or men) by
depicting them as sex objects. Ads for cosmetics and lingerie are among the most criticized for
their portrayal of women as sex objects. Some ads have even been criticized for being implicitly
suggestive. Critics have been particularly concerned about the use of sexual appeals in the
advertising of products such as cigarette, liquor, and beer. Sexual appeals and risqué images have
long been used in advertising for alcoholic beverages.

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Shock Advertising With the increasing clutter in the advertising environment, advertisers
continue to use sexual appeals and other techniques that offend many people but catch the
attention of consumers and may even generate publicity for their companies. In recent years
there has been an increase in what is often referred to as shock advertising, in which marketers
use nudity (nakedness), sexual suggestiveness, or other startling (surprising) images to get
consumers’ attention. A number of other marketers have been criticized for using shock
techniques in their ads as well as in other promotional materials.
7.2.1 Advertising and Children
One of the most controversial topics advertisers must deal with is the issue of advertising to
children. TV is a vehicle through which advertisers can reach children easily. Studies show that
television is an important source of information for children about products. Concern has also
been expressed about marketers’ use of other promotional vehicles and techniques such as radio
ads, point-of-purchase displays, premiums in packages, and the use of commercial characters as
the basis for TV shows. Critics argue that children, particularly young ones, are especially
vulnerable to advertising because they lack the experience and knowledge to understand and
evaluate critically the purpose of persuasive advertising appeals. Research has shown that
preschool children cannot differentiate between commercials and programs, do not perceive the
selling intent of commercials, and cannot distinguish between reality and fantasy(dream).
Research has also shown that children need more than a skeptical attitude toward advertising;
they must understand how advertising works in order to use their cognitive defenses against it
effectively. Because of children’s limited ability to interpret the selling intent of a message or
identify a commercial, critics charge that advertising to them is inherently unfair and deceptive
and should be banned or severely restricted.
Advertising to children will remain a controversial topic. Some groups feel that the government
is responsible for protecting children from the potentially harmful effects of advertising and
other forms of promotion, while others argue that parents are ultimately responsible for doing so.
Various consumer groups have also urged the media, particularly television broadcasters, as well
as marketers to assume responsibility for the programs and advertising and promotional
messages they offer to children.

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Five basic principles underlie guidelines for advertising directed to children:
1. Advertisers should always take into account the level of knowledge, sophistication, and
maturity of the audience to which their message is primarily directed. Younger children have a
limited capability for evaluating the credibility of what they watch. Advertisers, therefore, have a
special responsibility to protect children from their own susceptibilities.
2. Realizing that children are imaginative and that make-believe play constitutes an important
part of the growing-up process, advertisers should exercise care not to exploit that imaginative
quality of children. Unreasonable expectations of product quality or performance should not be
stimulated either directly or indirectly by advertising.
3. Recognizing that advertising may play an important part in educating the child, information
should be communicated in a truthful and accurate manner with full recognition by the advertiser
that the child may learn practices from advertising that can affect his or her health and well
being.
4. Advertisers are urged to capitalize on the potential of advertising to influence social behavior
by developing advertising that, wherever possible, addresses itself to social standards generally
regarded as positive and beneficial, such as friendship, kindness, honesty, justice, generosity, and
respect for others.
5. Although many influences affect a child’s personal and social development, it remains the
prime responsibility of the parents to provide guidance for children. Advertisers should
contribute to this parent-child relationship in a constructive manner.
7.2.2 Comparative Advertising
Comparative advertising is the practice of either directly or indirectly naming competitors in an
ad or comparing one or more specific attributes. Comparative advertising, or advertising that
identifies a competing product or service, is characterized by three distinct features:
• It should be factual and informative.
• It should explicitly or by implication make clear what comparison is being made.
• It should not mislead the consumer about other products or services with which comparisons
might be made.
Advertisements should not unfairly attack or discredit other products, advertisers or
advertisements directly or by implication.
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Guidelines
(a) Comparative advertising should be factual and informative and should offer a product or
service on its positive merits. The intent and connotation of the advertisement should be to
inform and not to discredit, disparage or attack competitors, competing products or services
directly or by implication.
(b) Comparative claims should be unambiguous and clearly understandable so that there is no
likelihood of the consumer being misled as a result of the comparison.
(c) Where an advertisement makes a comparison, whether explicitly or implicitly, it should be
clear with what the comparison is being made, i.e. price to price, dimension to dimension, feature
to feature.
(d) The competition should be fairly and properly identified but never in a manner or tone of
voice that degrades the competitive product or service.
(e) The identification should be for honest comparison purposes and not simply to upgrade by
association.
(f) The subject matter of a comparison should not be chosen in such a way as to confer an
artificial advantage upon the advertiser or so as to suggest that a better bargain is offered than is
actually the case.
(g) Where appropriate, comparative advertising claims must be supported by documentary
evidence which is easily understood. Where technical data is submitted it should be accompanied
by a summary of the relative comparative points, written in layman’s language.
(h) If the advertisement refers to a competitive test, such tests should have been conducted by an
independent and objective body so that there will be no doubt as to the veracity of the test. In all
cases the test must be supportive of all claims made in the advertising that are based on the test.
(i) The advertising should never use partial results or stress insignificant differences to cause the
consumer to draw an improper conclusion.

The following are advertising principles suggested by the American Advertising Federation

1. Truth. Advertising shall reveal the truth, and shall reveal significant facts, the omission of
which would mislead the public.
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2. Substantiation. Advertising claims shall be substantiated by evidence in possession of the
advertiser and the advertising agency prior to making such claims.
3. Comparisons. Advertising shall refrain from making false, misleading, or unsubstantiated
statements or claims about a competitor or his products or service.
4. Bait advertising. Advertising shall not offer products or services for sale unless such offer
constitutes a bona fide effort to sell the advertised products or services and is not a device to
switch consumers to other goods or services, usually higher priced.
5. Guarantees and warranties. Advertising of guarantees and warranties shall be explicit, with
sufficient information to apprise consumers of their principal terms and limitations or, when
space or time restrictions preclude such disclosures, the advertisement shall clearly reveal where
the full text of the guarantee or warranty can be examined before purchase.
6. Price claims. Advertising shall avoid price claims that are false or misleading, or savings
claims that do not offer provable savings.
7. Testimonials. Advertising containing testimonials shall be limited to those of competent
witnesses who are reflecting a real and honest opinion or experience.
8. Taste and decency. Advertising shall be free of statements, illustrations, or implications that
are offensive to good taste or public decency.

7.3 Packaging and Labeling

Some problems of the right to be informed are revealed by a closer look at the law on packaging
and labeling. Consumers need a certain amount of information to make rational choices, and
often this information is not easily obtained. A consumer buying apples, for example, can easily
check their condition and compare them with other fruit on display. But consider the plight of a
consumer comparing two brands of canned apple pie filling or attempting to determine the value
of a frozen apple pie in a sealed, opaque cardboard box. Without information on the label,
consumers have no practical means for determining the quantity of apples in the filling or the
size of the frozen pie. They also cannot easily determine the ingredients used, the nutritional
content, or the length of time the product has been sitting on the grocer’s shelf or in the freezer
case. Health-conscious consumers are especially disadvantaged by the welter of claims about

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low fat and salt content and the unregulated use of words like light and healthy. Certainly, the
more information consumers have, the better they can protect themselves in the market place.

7.4 Pricing

The question of how much information sellers are obligated to provide arises not only in
packaging and labeling but also in pricing. The proliferation of products at different prices makes
it difficult for consumers to compare even those from the same manufacturer. Price codes that
can be understood only by sales personnel put consumers at a disadvantage. The use of a
universal product code (UPC) that can be machine read has raised concern about the accuracy of
posted prices, and some retailers attempt to reduce costs by not marking prices on individual
packages. As a result, some local and state governments now require retailers to mark the price
on each product.

Also, some products have hidden costs. The price of tires, for example, often excludes mounting,
balancing, extended warranties, and other extras, which are often mentioned to consumers after a
decision has been made to buy (a sales technique known as “low balling”). Consumers cannot
compare two air conditioners without knowing the cost of operating them, since a cheaper but
less efficient air conditioner can cost more in the long run. Manufacturers of electrical household
appliances are now required by law, therefore, to disclose the amount of energy used in a year
and the range of energy consumption for products of the same kind. Similarly, light bulbs must
list the average life and the amount of light produced. Comparisons are facilitated by standard
units for measuring the relevant factors.

Deceptive and Manipulative Marketing Practices

Marketing practices are deceptive when consumers are led to hold false beliefs about a product.
Examples of some common deceptive pricing and sales practices are markdowns from a
“suggested retail price” for products that are seldom if ever sold at that price, “cents off” labeling
and “introductory offers” that incorrectly purport to offer a savings, and bogus clearance sales in
which inferior goods are brought in especially for the sale. In these cases, consumers are led to
believe that the prices represent a substantial reduction when, in fact, they do not. Packaging and
labeling are deceptive when the size or shape of a container, a picture deception, or the use of
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terms such as economy size and new and improved mislead consumers in some significant way.
Warranties that cannot be easily understood by the average consumer are also deceptive. And, of
course, advertising provides fertile ground for deceiving consumers.

Manipulation is generally distinguished from deception, in that it typically involves no false or

misleading claims. Instead, it consists of taking advantage of consumer psychology to make a
sale. More precisely, manipulation is noncoercively shaping the alternatives open to people or
their perception of those alternatives so that they are effectively deprived of a choice. Examples
of harmless forms of manipulation with full disclosure (and hence no deception) include multiple
pricing, such as “3 for $1” and “buy two, get one free,” and odd-even pricing, $2.99 instead of
$3.00. When customers are accustomed to paying a certain price for a product, manufacturers
often reduce the amount in order to maintain the same price, a practice known as customary
pricing. Customary pricing can also be deceptive, however, when consumers fail to notice the
change.

A more objectionable form of manipulation is “Bait and switch,” a generally illegal practice in
which a customer is lured into a store by an advertisement for a low-cost item and then sold a
higher priced version. If the low-cost item is not available, then deception has been used, but
often the “Bait” is available but of such low quality that customers are easily “switched” to a
higher priced product. “Bait and switch” is manipulative not only because consumers are tricked
into entering the store but because they enter in a frame of mind to buy as a result of the apparent
bargain in the “bait.” Having already decided to buy and not merely look, they are more
receptive to a sales pitch for a different product.

7.5 Anticompetitive Marketing Practices

Most of the unethical marketing practices that come under the heading of being anticompetiive
are also illegal as a result of the major antitrust statutes. The major anticompetitive marketing
practices are
1. Price-fixing. Price-fixing is an agreement among two or more companies operating in the
same market to sell goods at a set price. Such an agreement is contrary to the usual
practice, whereby prices are set in a free market by arm’s length transactions. Most

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 commonly, price-fixing is horizontal, among different sellers at the same level of
distribution, but price-fixing can also be vertical, when it occurs between buyers and
sellers at different levels. An agreement between the manufacturer, a wholesaler, and
retailers in transactions involving the same goods is an example. Price-fixing occurs not
only when there is an explicit agreement among competitors to charge similar prices but
also when the same result is achieved by other means. Among these are the exchange of
price information among competitors, a tacit agreement to follow an industry standard
(parallel-fixing) or the lead of a dominant seller (price leadership), and a situation in
which one company effectively controls the prices of competitors (administered price).
Market allocation, in which competitors agree not to compete in certain geographical
areas or to seek the business of certain buyers or agree to limit their volume, is also a
form of price fixing.
2. Resale price maintenance. This is a practice whereby products are sold on the condition
that they be resold at a price fixed by the manufacturer or distributor. Resale price
maintenance is thus a form of vertical price-fixing, as described above. There are various
reasons for imposing resale price maintenance on retailers, including fostering a prestige
image, enabling a larger number of retailers to carry a product, and providing an adequate
margin for promotion or service. As a form of price-fixing, resale price maintenance
prevents prices from being set by the forces of a competitive market.
3. Price discrimination. Sellers engage in price discrimination when they charge different
prices or offer different terms of sale for goods of the same kind to different buyers.
Often this occurs when buyers are located in different geographical regions or vary in
size or their access to other sellers. Thus, a seller who gives a discount to large buyers
solely by virtue of their size is guilty of discriminating against small buyers.
4. Reciprocal dealing, tying arrangements, and exclusive dealing. Reciprocal dealing
involves a sale in which the seller is required to buy something in return, as when an
office supply firm agrees to buy a computer system only on the condition that the
computer firm agrees to purchase supplies from the office supply firm. A tying
arrangement exists when one product is sold on the condition that the buyer purchase
another product as well. An example of a tying arrangement is an automotive supply firm
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 that requires as a condition for selling tires to a service station that the buyer also
purchase batteries from the seller. In an exclusive dealing agreement, a seller provides a
product-a brand of sportswear, for example- on the condition that the buyer not handle
competing brands.

7.6 Marketing Research

Corporations engage in a great amount of systematic information gathering about consumers to
aid them in developing new products and planning marketing strategies. One set of problems for
marketing research conducted by outside agencies concerns the relation between researchers and
clients, including integrity in undertaking research assignments and honesty in interpreting data
and presenting results. Another set concerns the treatment of research subjects or respondents.
These include manipulating persons into participating in research projects, deceiving them about
the purpose of a study, and invading their privacy by the use, for example, of one-way mirrors
during interviews. An especially blatant form of misconduct in marketing research is the use of
surveys and other research tools to make a sales pitch or to generate a list of sales prospects. This
is a practice known as sugging, from the acronym for selling under the guise of marketing
research.
A further threat to privacy comes from the use of research data in the growing field of database
marketing, in which retailers, through credit card records and information derived from universal
product codes, are able to construct detailed profiles of individual customers and develop tailor-
made products or marketing offers.

Guideline for your work

 First state what your objective is

 Identify the variables

 All group members should have a thorough discussion

 You can widen your respective topic through reference in the library

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