Ethical dilemmas in Marketing

The main objective of any business is said to be shareholders wealth maximization. In order to achieve this objective, the organization has to perform better than its competitors and create a competitive advantage for itself. This competitive advantage is mainly dependent upon the perception the customers hold of the products or services of the organization. An organization can create a competitive advantage by means of its marketing decisions, behavior, and practices. This includes aligning its marketing mix as per the customers’ requirements. The organization will gain a competitive advantage only when the customer will perceive the marketing mix i.e. product, price, place, and promotion to be of value.

The focus has increased towards being ethical in marketing practices mainly due to two reasons. First, when an organization works ethically, the customers tend to develop more positive perceptions and attitudes towards its products and services and the organization as a whole. This leads to a long-term positive relationship with the customers. When the marketing practices of an organization depart from being ethical and the standards that are considered to be acceptable by society are not followed, the organization taints its own image. It may lead to bad publicity for the firm, dissatisfied customers, lost business, lack of trust, and in some cases even legal action.

Second, ethical abuses lead to pressure from either the society or the government for the firms to be more responsible. Since such ethical abuses do occur, people tend to believe that such marketing practices abound. As a result of this, consumer interest groups and some professional associations exert influence on marketing practices and keep them checked. An indicator of this is several regulations that have been designed just to protect the consumers rights.

Unethical practices to avoid:

False Advertising

You should be careful to avoid overstating the benefits that a product or service offers in your marketing and advertising communications, so as to steer clear of accusations of false advertising. Advertising is considered to be misleading if it misrepresents the value, uses, or outcomes of a product, utilising inaccurate information in its content to gain buyers’ interest. Although false advertising may be successful in drawing customers into the early stages of a sales funnel, it ultimately proves extremely harmful to consumer trust and influences long-term negative brand perception when shoppers inevitably feel disappointed and deceived.

Deceptive Marketing Practices:

Deception is making the customer believe in the value provided by the product/service which it actually doesn’t provide. It may take the form of misrepresentation or omission of key facts or misleading practices. This may also involve the omission of important terms and conditions of sale and bait-and-switch selling techniques in which a product/service is offered usually at a lower price and the customers are then encouraged to buy more expensive items. Selling potentially hazardous products without disclosing the dangers is also considered a deceptive and unethical marketing practice. There may also be packaging deception which is mislabeling regarding the content, weight, size, or use of the information of the product.

Unethical Product and Distribution Practices:

Several product-related issues, especially regarding the quality of products and services raise questions about ethical conduct in marketing. The most frequent complaints are voiced regarding the products which are of unsafe nature. Other than this, the problems are regarding the poor quality of product or service, product/service not containing what is promoted or the product/service becoming obsolete or going out of style before they are used. The company which is making products that are of poor quality or is potentially unsafe for its consumers may jeopardize its image and develop a reputation for poor quality products or services. It may also put itself in the situation of product claims or legal actions. Sometimes, however, the changes in the industry itself occur and the products become obsolete so fast that the consumers may misinterpret it as planned obsolescence e.g. in the computer industry.

Anti-Competitive Practices

There are various methods that are anti-competitive. For example, bait and switch is a type of fraud where customers are “baited” through the advertisements for some products or services that have a low price; however, the customers find in reality that the advertised good is unavailable and they are “switched” towards a product that is costlier and was not intended in the advertisements.

Another type of anti-competitive policy is planned obsolescence. It is a method of designing a particular product having a limited useful life. It will become non-functional or out of fashion after a certain period and thereby lets the consumer to purchase another product again.

Marketing Research and Benchmarking:

This is another area in which ethical questions may arise. Consumers and entities being benchmarked may consider it an invasion of their privacy. They are usually resistant to giving out personal information. However, in order to obtain correct and better data, researchers may act by unfair means. The same may happen in the case of benchmarking. In some cases, the questions may be modified in a way to gain information which the respondent would not be willing to share otherwise. Organizations have to impose ethical standards for themselves in such instances.

Pricing Ethics

There are various forms of unethical business practices related to pricing the products and services.

Bid rigging is a type of fraud in which a commercial contract is promised to one party, however, for the sake of appearance several other parties also present a bid.

Predatory pricing is the practice of sale of a product or service at a negligible price, intending to throw competitors out of the market, or to create barriers to entry.