Ethical Issues In Marketing And Formulating Marketing Essay

Marketing ethics is the study of right and wrong with respect to marketing policies, practices, and systems. Marketing ethics consist of principles and standards that guide appropriate conduct in organizations. The importance of ethics in marketing practices is a major consideration in whether markets achieve their promise relative to previous arrangements.

An ethical issue is an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical, while social responsibility is a business’s obligation to maximize its positive impact and minimize its negative impact on society. Attention to business ethics is on the rise across the world and many companies realize that in order to succeed, they must earn the respect and confidence of their customers. Like never before, corporations are being asked, encouraged and prodded to improve their business practices to emphasize legal and ethical behavior.

Companies, professional firms and individuals alike are being held increasingly accountable for their actions, as demand grows for higher standards of corporate social responsibility. Social responsibility and business ethics are often regarding as the same concepts. However, social responsibility is but one aspect of the overall discipline of business ethics. Social responsibility arose particularly during the 1960s with increased public consciousness about the role of business in helping to cultivate and maintain highly ethical practices in society and particularly in the natural environment.

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Responses to Ethics by Coca-Cola:

Coca-Cola has faced environmental issues in the past. An example is the Peat’s Ridge Aquifer incident, where it was claimed that Coca-Cola was pumping too much of the water out for selling. Coca-Cola promptly defended its actions to avoid the backlash of bad PR.

Coca-Cola relies heavily on marketing its products for sales or Coke, as taste tests show consumers actually prefer other brands of Coca-Cola. The brand’s trademarks, copyrights and logos are seen as ‘real estate’ in the mind of the consumer. People buy Coke for the recognition of these features, even though cheaper brands might taste better.

Coca-Cola claims it does not specifically market its products at children less than 12 years of age, possibly to avoid such ethical issues.

Coca-Cola meets with its retailers to discuss a suitable price, although technically does not force the retailer to charge that price.

Responses to Ethics by Microsoft:

Identifying Ethical Issues in Marketing that Organizations Faces

Introduction

Marketing professionals have a duty to act honestly and ethically in their dealings with consumers and the environment. With the growing importance placed on “environmentally friendly” behavior, businesses are encouraged to act “green”. Consumer Protection laws such as the 1974 Trade Practices Act (TPA) present obligations to businesses to act ethically. Issues relating to the ethics of marketing include the ‘creation of needs’ rather than responding to consumer demands and using the guise of research as a means to sell, known as ‘sugging’.

It is very important for businesses to not promote their products in a misleading or deceptive manner. While making marketing strategies, it is necessary to consider the age of the target market. Price Discrimination is prohibited under the TPA, and only under certain conditions may businesses sell their products or services at different prices to different customers. Manufacturers cannot set a price for their product. This is known as Retail Price Maintenance (RPM) which is illegal.

A product or service must meet its implied conditions, written or otherwise. It is recommended that businesses abide by all the relevant government legislations and avoid any activity that is misleading to the consumer. It could be viable to establish committees within the business to monitor ethical behavior of the management and the subordinates.

Environmentally Responsible Products

Since the 1960s, there has been a growing concern about the damage that industrial activity has been causing to the natural environment. Businesses have been forced to change, either by the demands of customers or government legislation. For example, environmental groups successfully lobbied for the removal of CFCs used in aerosol cans and car air-conditioning because they damaged the ozone layer. As a result, there have been major changes in the way goods and services are marketed to make them appear “environmentally friendly”, for example, changes in product packaging, to include the use of recyclable materials such as paper and cardboard.

Manufacturers now market biodegradable products and advise consumers how to dispose of non-biodegradable or toxic products.

Critics claim that marketing activities create higher prices to consumers because of high levels of advertising and promotions, unnecessary packaging and continual development of new products. It can be argued that these activities do not add any real value to the product and only work on the psychological benefits of the product to consumers.

Research has shown that people are prepared to pay more for products that they feel have better quality and that are well known. Consumers buy more than the product itself. They buy the brand name, the product image and other intangible features. The ethical issue involved is whether marketing responds to consumer demands, or drives consumer demand.

Sugging: Sugging is the practice of using research as a disguise for selling. For example, businesses could use ‘surveys ‘as a means of ‘guiding’ customers to their products. This makes the job of legitimate market research difficult as people become suspicious of other research callers on the phone. Studies that are commissioned buy businesses with a vested interest in the results may ask questions designed to get a favorable response. These results can be used in advertising campaigns, which can be misleading.

Deceptive and Misleading Advertising: Under the TPA, advertising must be truthful and avoid any false, misleading or potentially misleading claims. This includes:

Also illegal is misleading or deceptive advertising of prices. Price reductions, price comparisons, specials and free gift offers must be true. Specific activities prohibited include:

Making false/misleading claims about the prices of goods or services,

Falsely representing that goods are new when they are in fact used,

Claiming goods or services have features or properties that they don’t,

Falsely representing that goods or services possess a particular quality, standard or value when they do not.

Bair and Switch: Businesses must also avoid bait and switch advertising. This approach attracts customers with the promises of low prices, when in fact there are very limited products at these low prices. Once in the store, customers are drawn to other products that are more expensive.

Underage Markets: There are ethical issues related to whom a product is aimed at. Recently it has been considered unethical that some brands of alcohol have aimed its products at a teenage female audience, which consists of girls who are too young to drink alcohol and may be influenced to do so because of the advertising. There are also issues related to selling to children. It is wrong to take advantage of children’s highly impressionable minds in order to sell products. With today’s high levels of children’s obesity, it could be considered unethical for ‘junk food’ advertisements to air on TV during children’s programs.

Price Discriminating: The TPA tries to ensure that sellers offer products at the same price to a given level of trade. It would be unfair to sell products at different prices to different people for discriminatory reasons. This practice is only allowed if:

The seller can prove its costs are different when selling to different retailers (e.g. per unit costs fall when delivering a bulk order),

The seller makes different qualities of the same product for different retailers,

The retailer is trying to temporarily meet local competitors’ prices.

Implied Conditions and Warranties: Manufacturers and retailers are responsible for product safety and performance. The TPA ensures that all products have certain conditions that are implied, regardless of whether there is a written warranty or not.

Implied conditions are unwritten guarantees that the product or service will do the job it is intended to do. A warranty states that a product will last a certain amount of time without malfunctioning, under certain conditions. If the product becomes faulty, it may be replaced or repaired free of charge. Not adhering to these conditions is unethical. For example, Apple has received bad PR, particularly relating to its iPod. Many customers report malfunctions and Apple has refused to replace the product as stated under the warranty, claiming it is the customer’s fault it broke.

Retail Price Maintenance: Retail Price Maintenance (RPM) is a pricing policy where the manufacturer sets the retail price for a product. Many prices displayed in shops as the Recommended Retail Price (RRP). The Trade Practices Act forbids manufacturers from forcing retailers to charge a specific price, refuse to supply a retailer who decides to sell at the recommended price. The law is designed to allow price competition between retailers of similar goods.

Businesses have a duty to act honestly and ethically with their customers. They must abide by relevant laws, including the Trade Practices Act, at all times. Ethical behavior will present a good image to the public, which can raise market share and profit. Businesses should:

Be “environmentally friendly”. This includes marketing products and services that are environmentally sustainable, as well as using recyclable or biodegradable products where possible.

Avoid the “creation of needs” and respond to customer needs and wants rather than creating the illusion that customers “need” their product.

Avoid the practice of ‘sugging’ in order to fool customers into buying goods or services.

Using unnecessary packaging and extensive advertising that may make the price of a product higher, when the consumer receives no benefit.

Be truthful when marketing goods or services. Deceptive or misleading advertising is illegal.

Aim products or services at an appropriate audience.

Avoid price discrimination except where appropriate and fair.

Abide by the implied conditions or warranties of a product. Customers deserve safe products that function in the way stated or implied.

Avoid retail price maintenance of its product.

Describe the implications of ethical issues on the marketing mix for organization:

Ethical behavior is important when facing the challenge of balancing the best interests of consumers. This is because consumers are informed buyers who base moral principals in transactions revolving around an organization’s marketing mix of pricing, product, promotion and place. Marketing executives face the challenge of balancing the best interests of consumers, the organization and society by distinguishing what is ethical as what constitutes ethical behavior is unclear. An organization will practice ethical behavior because it is morally correct but although it is simple in theory it is difficult to put into operation.

When it comes to pricing, in some instances it is economically viable to be unethical in-order for the organization to use a skimming strategy to obtain the maximum amount of revenue from various segments of the market. For example, a pharmaceutical company developing specialized drugs to prolong the life for AIDS sufferers would typically adopt a skimming strategy to extract the maximum unit prices for the product. As a result supply is reduced and potential users do not get access to needed drugs. In other instances it may be economically viable or ethical to set a low price to attract a larger segment of the market however, it comes down to maximizing revenue.

In determining the distribution of final products, marketing ethics should include guidelines for defining an organization’s relationship with distributors or intermediaries. In many instances, organizations will try to establish intermediaries to build their business in overseas markets. When the market has been developed to a point where costs can be supported, the intermediary is dropped. Product development may be influenced by ethical behavior with consumers seeking more desirable products or changes in existing products to make them more desirable. Examples may include animal testing on products or environmental pressures from consumers to reduce the impact of an organization’s products and processes on the environment.

Advertising may produce negative attention by consumers in an ethical sense and may damage an organization’s reputation. This can be seen as an example of cultural pollution where-by commercials on television for example, may be ignored by those not in the target market. As a result, this can be seen as intrusive direct marketing or invasion of privacy.

Government influence in marketing through legislation is helping the consumer through legal and ethical dilemmas, as the government itself is a major buyer of products and services. Although sometimes it may be economically viable to act immorally, organizations should adopt their own code of ethics and legal compliance programs. This can prevent legal and ethical dilemmas as well as uncover business practices that may expose the company to criticism, as the wellbeing of consumers is the life of the business.

Analyzing the Reasons Why Companies Create New Products? What Do We Mean By “New Product”?

Product is anything that is capable of satisfying customer’s needs. Anything that has the ability to satisfy the customer needs is known as a Product. Product is about how it changed and how it will change over time in the future. Every product changes a lot during its life cycle since its first introduction. For example Sony DVD players have changed a lot since they first were made. They started off as very basic DVD players with not that many features on. Then they got things like JPEG still shots, multi-disc resume for 40 discs and they come in different colors and can be portable. They are also now able to record. New products are launched or updated in order to add new features to the product so it stays ahead of the competition in the market.

Product are required to change over time because the market is continually changing and so if companies do not change and update their products, then their competitors will make newer and better models and they will take over. For example if Sony doesn’t keep improving their DVD players, then other companies like Panasonic or Samsung will take over as the best DVD player make. Companies launching new products will tell customers that they should have the new or the updated version of the product. Just responding to the customers needs does not work in the modern day product development. The market research elucidates the companies how they need to update or change their product. This will help them develop their marketing strategy. From what companies are told in the market research, they can devise ways to improve their existing product and to create new ones.

A product is defined in three levels; core, actual, and augmented. The core of the product is the benefit it offers the consumer. For the example of Coca-Cola, it could be refreshment, energy (sugar and caffeine), alertness, or just pleasure. The soda itself is the actual product. The augmented product for a cola could be the recognition and status gains perceived by drinking that particular brand. Or it could even be the weight loss from sticking to diet colas.

For the development of new products, we first need to identify what consists of a new product. There are six categories of new products:

New-To-The-World: This is a product that has no like product offered elsewhere. For example, when the first personal computer was offered to the public, this would be a new product.

New Product Lines: This is when similar products exist, possibly even under the same brand, but a new line of the product offers some tangible difference to those products already offered. For example, offering diet colas in addition to regular colas under the same brand.

Product Line Additions: This is the addition of a product that is directly related to one offered. For example, offering Vanilla Coke for sale alongside Coke.

Improvements/Revisions: This is a product which has already been offered, but some change or revision has been made to the products properties. For example: New Coke or anything labeled new and improved.

Repositioned Products: The same product offered in a new market or directed towards a new target market. For example Pepsi bringing Sabritas chips into the US to target the Hispanic market.

Lower-Priced Products: This is simply reducing the price of an existing product to stimulate sales.

Analytical Process of New Product Development

Recommendations for Pricing, Distributing and Communicating a New Product of my Choice

Marketing Plan for ACME Publishing (A Leading Global Technology Company)

Introduction

Founded in 1901, Gillette’s product range now includes personal grooming products for men (blades, razors and shaving creams), personal grooming products for women (wet shaving products and hair epilation devices), alkaline batteries, toothbrushes and oral care products. Over the years, Gillette has established a reputation for combining sophisticated technology and savvy advertising to launch premium products. Being the leading manufacturer and marketer of shaving supplies, Gillette in Singapore – Gillette(S), has introduced two most (thus far) successful products from the Blades & Razors division – Sensor and Mach-3 series. Mach3 series include Mach3, Mach3 Turbo and Mach3 Power.

Market Analysis

Force Strength Comments:

Buyer strength (Medium – High): The strength of the various buyer channels is relatively high. Gillette’s established linkages with the supermarket / retail channel provides ease of reach for consumers to purchase the items. Products are targeted at Singaporean male age 16 years and above.

Supplier Strength (High): Gillette manufactures and supplies her own razors and blade. Thus, strength is high. However, strength could vary if resources to manufacture the product are scarce or controlled.

Product substitution (Medium): Substitutes on a type of products could occur, such as replacing non-disposable shavers with either disposable shavers or electric shavers. Advertising efforts are being done to foster the benefits of using non-disposable shavers.

Barriers to entry (Low – Medium): Barriers of entry are low to medium as shaving products have already been in the market for years and have gained loyal customers.

Industry rivalry (Medium – High): Well-known brand such as Schick have continued to rival for market segment.

Macro Analysis

Economic Factors: Being the 2nd freest economy, maintaining a competitive tax regime is a cornerstone of Singapore’s fiscal strategy. The well-being of the economy impact the retailers as consumers spend prudently during the downturn.

Political: Singapore has a stable and well-reputed government maintaining harmonious relationships with the world through memberships in ASEAN, WTO and forging strategic alliances with Japan and US. Government policies are made transparent through inter-linked government websites with the vision of cutting red-tapes.

Informatics: Singapore has excellent telecommunications infrastructure where accessibility of information is fast and easy. Easy access to information through the website and media such as TV news provide live telecasts on world events.

Social & Cultural: Late marriage and low fertility rate, coupled with an ageing population are current issues that worry the government.

Technological: In Singapore, technology and innovation are readily pursued by the population. For the young and savvy, electronic gadgets are part and parcel of their daily lives.

Legal & Regulatory: Singapore has a well-structured legal system and is reputed for it stringent rules and fines. Boosting low crime rates, the nation is a safe place to work and live in.

Ecological: A country with limited resources and increased awareness on global issues, manufacturers are facing regulations on waste disposal and recycling as emphasis is placed on “Green” movement.

SWOT Analysis

Using SWOT analysis, the competitive strengths, competitive weaknesses, opportunities and threats of Gillette(S) are identified:

Strengths: The strength and quality image of Gillette allows the company to charge higher prices and achieve higher profit margin. It eases the introduction of new products, as consumers are already well acquainted with the names and more receptive to promises of improved user experiences. The company’s products have been well-known for its quality. The Gillette blade and razor portfolio has gained market supremacy in Singapore.

Weaknesses: Gillette’s profitability is highly reliant on the performance of its razors and blades business. Any downturn in the sector or in Gillette’s competitive position within could have a serious negative effect on the company.

Opportunities: Gillette is known for constantly introducing new products in the market with better technology and performance. The growth in demand for premium shaving systems and consumer trade-up are expected in year 2005. This allows Gillette to continue increasing the price of its razors and blades.

Threats: Gillette’s three-blade offering is being commoditized by competitive disposable and system launches. Gillette’s ability to sustain price premium and earn attractive returns on its extensive investment three-blade platform is threatened by the numerous imitators of the MACH3/MACH3 Turbo franchise. Gillette’s pricing power is being further eroded by channel migration and increasing resistance to paying significantly higher prices for innovation. Its products compete with widely advertised, well-known products, as well as private labels, which typically sell at lower prices.

Indentifying Strategy from the Ansoff matrix:

Ansoff Growth Matrix suggests that there are four main ways in which growth can be achieved through a product strategy:

Market penetration: Increase sales of an existing product in an existing market

Product development: Improve present products and/or develop new products for the current market

Market development: Sell existing products into new markets (e.g. developing export sales)

Diversification: Develop new products for new markets

One thing should be pointed out is how a product appears in relation to other products in the market, or how importance the brand of a product is. Brand is a mixture of tangible and intangible attributes symbolized in a trademark, which, if properly managed, permits a business to differentiate its products and services from those of its competitors, add extra value for consumers who value the brand and improve profitability.

Using the above Ansoff Matrix to analyze Gillette’s growth strategy, it is recommended that Gillette continue its growth using the product development strategies, whereby the firm creates new offerings for existing market (product innovation) to enhance the value to customers of existing offerings (product augmentation), or to broaden the existing line of offerings by adding different sizes, forms (product line extension). For example, Gillette primarily uses product development strategies to come up with new line extensions as clearly seen from the spin off from the many other models after its Mach3 blade.

Monitoring and Reviewing Marketing Performance:

Marketing performance measurement and management (MPM) is a term used by marketing professionals to describe the analysis and improvement of the efficiency and effectiveness of marketing.[1] This is accomplished by focus on the alignment of marketing activities, strategies, and metrics with business goals.[2] It involves the creation of a metrics framework to monitor marketing performance, and then develop and utilize marketing dashboards to manage marketing performance

In monitoring Marketing progress, one should establish targets. The establishment of the targets is the final stage of any marketing plan. Putting both quantities and timescales in to the marketing objectives and in to the corresponding strategies is the next step which is very important. An example of this is to capture 20% of the market within the period of about two years. Environmental change shows that the forecasts are supposed to be changed. The majority significant aspect of this is represented by the constant supervising of performance against predetermined objectives. Enforcement of discipline of a regular formal review is the next step which is very vital. In most cases the more realistic planning cycle revolves around a quarterly review. This is as with forecasts. The best of all in terms of the quantifiable aspects of plans is the planning of one full year which is done ahead of each quarter (Cooper & Edgett, 2008, pp. 56-60). More planning resource is absorbed by this but also it makes sure that the plans represent the recent information. Both plans and their implementation are being forced to be realistic. Plans are valuable only if they are being used in controlling the progress of a company. Their implementation of the plans leads to their success but not the writing of the plans.