Module 2

The greatest challenge of marketing is to persuade and influence the target customers' behavior without:

acting unethically or violating a customer's trust

The greatest challenge of marketing is to persuade and influence the target customers' behavior without:

advertising honestly of correctly representing the product or service//INCORRECT * acting unethically or violating a customer's trust

These two groups are not the only ones affected

either. Retailers, franchises, wholesalers, sellers of mass-produced homes, and building-site developers and engineers are all subject to liability legislation.

With the advent of the digital age marketers have more avenues to contact potential markets. What are the main digital areas marketers use that could encroach on privacy laws?

email spam and managing customer data

Fraud

is the deliberate deception of someone else with the intent of causing damage. The damage need not be physical damage—in fact, it is often financial

Ethics

is the set of moral principles or values that guides behavior. There is a general recognition that many, if not most, business decisions involve some ethical judgment.

Social media has raised new areas for ethical challenges in marketing. What should a company ask itself before posting a piece on social media?

is what is being posted transparent, hones and ethical?

In considering appropriate business gifts

it is helpful to think about the content of the gift, the context of the gift, and the culture in which it will be received. Let's examine one of Microsoft's promotions that included a gift.

The American Marketing Association commits

itself to promoting the highest standard of professional ethical norms and values for its members (practitioners, academics, and students).

Greg has just landed a complex and large sale of goods to his new client. His personalization to reach this deal touched all of the areas of the marketing mix for the new client. This is an example of what type of sales transaction?

business-to-business

If a company's sales process generally has fewer controls, it probably uses what type of sale?

business-to-business

If your sale is for a large-ticket or higher-priced item and the marketing mix must be customized to meet the client's needs, you are working in what type of environment?

business-to-business

What type of business would publish a new product marketing promotion in the local newspaper, online, and in stores?

business-to-consumer

Clearly, Walmart has significant work ahead,

but independent evaluations have been positive. Joel Makower of Green Biz reports that Walmart's sustainability initiatives are having a real impact, both on its operations and those of the companies in its supply chain. He also notes that some of that progress is offset by the company's rapid growth.[5]

New marketing channels create opportunities for new tactics,

but sometimes these developments bring new ethical challenges. Eventually society may establish what is acceptable behavior and what is not, but that process takes time.

These policies are an important tool in building a culture of accountability and ethical behavior in a company,

but the policies must be upheld by all the employees, and senior leaders play a significant role in reinforcing their importance.

It might seem that manufacturing defects occur only in product sales and not in the service industry,

but there's a very well-known case in this category: the McDonald's coffee case.

How does a marketer demonstrate respect for target customers?

by being available to customers to hear their praise and their complaints

How does a marketer demonstrate respect for target customers?

by demonstrating high personal standards in business relationships ///INCORRECT

One of the main tools a company uses to identify appropriate behaviors and make this understanding accessible throughout the company is a:

policy called the Standards for Business Conduct

The CFPB believes the Corinthian colleges deliberately inflated tuition prices to be higher than federal loan limits

so that most students were forced to rely on additional sources of funding. The Corinthian schools then relied on deceptive statements regarding its education program to induce students into taking out its high-cost private student loans, known as "Genesis loans." Today's lawsuit alleges that under the Genesis loan program:

If a company or organization encourages employees but not the executives to participate in its social responsibility objectives and strategies, what is the probable effect?

the objectives are seen by the employees as a public relations move and the are uninspired

Notice that many of the responses include watchwords like

"questionable," "exaggerated," "distortion," and "crossing the line." In marketing, the greatest challenge is to influence the behavior of the target customer (by getting them to buy) without violating the customer's trust or acting unethically.

The car company Volkswagen (which is part of the larger Volkswagen Group) does not have a formal mission statement, but its goal is

"to offer attractive, safe, and environmentally sound vehicles that can compete in an increasingly tough market and set world standards in their respective class."[4]

Generally speaking, students believe that there are two primary reasons to act ethically:

*Acting ethically is the right thing to do from a moral perspective; *If you act unethically, then you might get caught and be punished.

Many of these policies do the following:

*Define the threshold for behavior: While it should go without saying that employees are expected to be law abiding, companies choose to be quite explicit about stating that they require their employees to follow the law. *Create expectations for behavior: The policies identify common issues that employees may encounter—such as accepting gifts from suppliers—and explain how they should be handled. *Set policy: establish company protocols for handling confidential information, including customer data, etc. **Give guidance on making judgment calls: Companies often define how they would like employees to make decisions when guidelines do not adequately cover them. *Describe reporting and enforcement procedures: There is generally a process for reporting and addressing issues, as well as information about how the company will protect those reporting concerns.

The specific things you'll learn in this section include:

*Explain product liability and its impact on marketing *Explain privacy law and its impact on marketing *Explain fraud in the marketing process and its impact

In 2013, Coca-Cola announced its four global well-being commitments to help fight obesity, each of which has a direct impact on the marketing mix:

*Offer low- or no-calorie beverage options in every market. (Product) *Provide transparent nutrition information, featuring calories on the front of all of our packages. (Product) *Help get people moving by supporting physical activity programs in every country where we do business. (Promotion) *Market responsibly, including no advertising to children under 12 anywhere in the world. (Promotion)[2]

B2B sales processes generally have fewer controls than B2C processes for a number of reasons:

*Personal sales are relationship based, requiring the seller to tailor the process according to the buyer's personality and approach *B2B sales are often large and complex, which necessitates personalizing the marketing mix to the individual buyer *Pricing is negotiated between the buyer and seller, rather than being set and uniform across all customers *Communication about the product and pricing takes place mainly through informal or formal verbal presentations and discussions

A number of governments agencies are charged with protecting consumers. The U.S. Federal Trade Commission (FTC) was created in 1914 and is charged with protecting America's consumers and promoting competition. The commission includes individual divisions that oversee a range of activities that are of importance to marketers, including the following:

*Privacy and identity protection *Advertising practices *Marketing practices *Financial practices

First, let's return for a moment to the marketing planning process. Where does social responsibility fit in? It generally comes into the planning process in one of two ways:

*Social responsibility may be a corporate-level strategy with specific objectives. *Social responsibility may be part of the marketing mix based on the situation analysis

If you're thinking about ways of boosting or ensuring ethical behavior in an organization, this is an interesting and alarming finding. In a supplemental report on Ethical Leadership, ECI reports that employees at all sizes of companies draw conclusions about their leaders' character primarily on the basis of the following:

*The overall character of their leaders as experienced through personal interactions; *How senior managers handle crises; and *The policies and procedures adopted by senior leaders to manage the company.

Finally, while all marketers are required to be aware of state and federal laws that impact their work, B2B marketers must also understand the procurement policies of the organizations to which they sell. The policies and guidelines can vary significantly. Company policies will generally define:

*The total purchase authority of a single individual or department *The threshold at which a purchase decision must go out for competitive bid *The circumstances under which the company's status as a customer can be disclosed *A dollar threshold for gifts from vendors

As you review the following press release from the Consumer Financial Protection Bureau, consider the following questions:

*Where was the Corinthian Colleges chain deliberately deceptive in presenting its offering to students? *Where was Corinthian deliberately deceptive in the way it represented pricing? *Where was the company's promotion of its offering deceptive?

The Federal Trade Commission has determined that a representation, omission, or practice is deceptive if it is likely to:

*mislead consumers and *affect consumers' behavior or decisions about the product or service.

Start with security:

*only collect customer data when necessary; be transparent; and treat the data with extreme care. *Control and restrict access to sensitive data. *Require strong, secure passwords and authentication; protect access to sensitive data *Store sensitive personal information securely and protect it during transmission: use best-in-class security technology. *Segment your network and monitor who's trying to get in and out *Secure remote access to your network: put sensible access limits in place. *Apply sound security practices when developing new products; train engineers in security and test for common vulnerabilities. *Make sure your service providers implement reasonable security measures: write security into contracts and verify compliance. *Establish procedures to keep your security current and address vulnerabilities that may arise; heed credible security warnings. *Secure paper, physical media, and devices—not all data are stored digitally.

A gift or favor should not be accepted or given if it might create a sense of obligation, compromise your professional judgment or create the appearance of doing so. In deciding whether a gift is appropriate, you should consider its value and whether public disclosure of the gift would embarrass you or Starbucks.

A gift of money should never be given or accepted. (Some retail partners, however, may accept customary tips for service well done.) As a general rule, partners should limit gifts to or from any one vendor or business associate to US $75 per year. A gift of nominal value may be given or accepted if it is a common business courtesy, such as coffee samples, a coffee cup, pens or a similar token. However, during traditional gift-giving seasons in areas where it is customary to exchange gifts of money, such as China, Japan, Malaysia, Singapore and Thailand, partners should not solicit but may exchange cash with nongovernmental business associates in nominal amounts up to the equivalent of US $20.

The ad plays on romance and nostalgia to remind viewers of the brand's history (and to sell more beer).

According to the U.S. Department of Transportation, drunk-driving fatalities have decreased 53 percent since 1982 to record lows, but we recognize there is still work to be done. As part of our effort to prevent drunk driving, we have key initiatives like the Budweiser Designate a Driver campaign and Bud Light safe ride home programs, including Bud Light Alert Cab and Bud Light Tow to Go.

Withholding diplomas:

According to the CFPB investigation, Corinthian schools informed students that they could not participate in the graduation ceremony or would have their certificate withheld if they were not current on their Genesis loan in-school payments. In many cases, financial aid staff threatened that if students did not become current on their loans, they could not graduate or start their externships. Some former students stated that Corinthian schools continue to withhold their certificates because they are unable to make payments on their Genesis loans.

One-day long "career"

According to the CFPB's investigation, Corinthian schools told students they would have promising career options with an Everest, Heald, or WyoTech degree. But Corinthian counted a "career" as a job that merely lasted one day, with the promise of a second day.

Putting education in jeopardy:

According to the CFPB's investigation, the Corinthian colleges jeopardized students' academic experience by denying them education until they paid up. They blocked students' access to school computer terminals and other academic resources. The Corinthian schools also prevented students from attending and registering for class, and from receiving their books for their next classes.

Craigslist career counseling:

According to the CFPB's investigation, the Corinthian schools promised students extensive and lasting career services that were not delivered. Students often had trouble contacting anyone in the career services office or getting any meaningful support. The limited career services included distributing generally available job postings from websites like Craigslist.

Poor Execution from All Players

Almost immediately after the district announced the deal, Apple unveiled new, updated iPads—in other words, from the get-go, students in the district would be receiving out-of-date devices. The cost the district was paying per iPad was actually higher than the regular consumer price. Many schools did not have the Wi-Fi infrastructure needed to support devices for all students. The district hadn't created policies or plans for loss or theft. Students bypassed security protocols so they could install music and video apps. The iPads were supposed to come preloaded with Common Core-aligned curriculum, designed by the education behemoth Pearson. But the curriculum was incomplete. A report[5] on the district's iPad program revealed that only one teacher actually used the Pearson materials

Let's look at an example of a commission plan and consider how it might impact ethical judgment calls during the sales process.

Amount Sold Sales Quota Commission Percent Commission Paid $500,000 $1 million 0% $0 $1 million $1 million 10% $100,000 $1.5 million $1 million 15% $225,000

In the months following the discovery of the deceptive devices, investigators identified a team of Volkswagen employees who had hatched the plan and implemented it over a number of years.

An internal evaluation identified a "culture of tolerance" for rule breaking at the company. It also came to light that Volkswagen's emphasis on "results at any cost" had contributed to the breach in ethical standards. Industry experts believe that the company's violation of consumers' trust will be will be exceedingly difficult to repair and that it may take years to rebuild the Volkswagen brand.

Before you click "submit" to your next social media post, don't simply ask whether it will achieve its goal, fit best practices, or suit the brand.

Ask yourself if it is honest, transparent, and ethical. That is a much higher standard, but higher standards are what consumers want and what brands increasingly wish to deliver, aren't they?

A Culture of Accountability

At the beginning of this module we discussed the 2015 revelation that Volkswagen installed emissions-altering software in eleven million diesel vehicles worldwide, which caused the cars to pass emissions tests they should have failed. Consider, for a moment, how many employees would have to be involved in order to achieve this level of fraud? This was not the handiwork of a single employee but the result of a pattern of unethical behavior in the company. When the Ethics & Compliance Initiative (ECI) released the results of its 2013 National Business Ethics Survey, it noted that these types of broad, organizational breaches are fairly common.

The Challenge of Monitoring Ethics in B2B Marketing

Banana Republic sells to consumers, which makes it a B2C company. Before the promotion is announced, the corporate marketing team will analyze the pricing discount. The Web site design for the promotion will be throughly reviewed. If this is a new promotion, the legal team will evaluate and approve the official language. The display materials that are sent to stores go through the same review. The marketing team will craft communications for the sales associates in stores around the country, explaining the promotion and scripting how it should be presented to shoppers. It is possible that the marketing team at Gap Inc., Banana Republic's parent company, will also review the promotion—or they may have provided a "promotion template" that's been reviewed and approved

promotion

Can claims made to consumers be substantiated? Are disclaimers clear and conspicuous? For products marketed to children, is extra care taken to accurately represent the product?

Loans were likely to fail:

Corinthian expected that most of its students would ultimately default on their Genesis loans. In fact, more than 60 percent of Corinthian school students defaulted on their loans within three years. The Everest, Heald, and WyoTech schools did not tell students about these high default rates. Defaulting on private student loans can have grave consequences for consumers, including affecting a borrower's job prospects and making it difficult to get any kind of loan for years.

For example, fabric used in children's sleepwear must meet certain flammability requirements to prevent the risk of injury from fires.

Certain comfortable children's clothing that does not meet the flammability requirement can be confused with sleepwear. For this reason, such clothing will often contain a warning label that reads, "Not intended for sleepwear."

Interest rates were more than twice as expensive:

Corinthian sold its students predatory loans that typically had substantially higher interest rates than federal loans. In July 2011, the Genesis loan interest rate was about 15 percent with an origination fee of 6 percent. Meanwhile, the interest rate for federal student loans during that time was about 3 percent to 7 percent, with low or no origination fees.

Choice

Choice and consent in an online information-gathering sense means giving consumers options to control how their data is used. Specifically, choice relates to secondary uses of information beyond the immediate needs of the information collector to complete the consumer's transaction

Marketing Strategies to Address Childhood Obesity

Coca-Cola doesn't specifically call out customer health in its roadmap, but that concern has become a significant component of its marketing strategy, and the company has developed a specific set of marketing programs to address childhood obesity. Childhood obesity is a challenging issue for the company. If you were to conduct a SWOT analysis of Coca-Cola, you could imagine that this issue would appear under "external threats" and have a negative impact on its market. In most K-12 schools in the United States, the sale of soft drinks has been steadily eliminated. Rather than wait to find out how this trend might play out, marketing decided to take a proactive role

Play Nicely in the Competitive Environment

Companies in a competitive market shift positions and introduce innovations to give them new competitive advantage. This is the very nature of a competitive marketplace. Treat competitors with respect and learn from their approaches. Do thorough competitive research to understand them better. Do not seek to gain confidential information about competitors or their products.

Over time, product liability has shifted more to the side of the injured product user.

Consumer advocates like Ralph Nader argue that, for too long, product liability favored producers at the expense of the product user. They assert that it's the threat of lawsuits and huge settlements and restitutions that force companies to make safe products. While a discussion of all aspects of product liability is beyond the scope of this course, it is clear that liability has and will continue to have a tremendous impact on consumers and manufacturers alike.

Notice

Consumers should be given notice of an entity's information practices before any personal information is collected from them, including, at a minimum, identification of the entity collecting the data, the uses to which the data will be put, and any potential recipients of the data.

The specific things you'll learn in this section include:

Define ethics in the context of marketing Identify common ethical issues and their impact on individuals and organizations Identify ethical issues introduced through new marketing channels Explain the role of social responsibility in marketing

he specific things you'll learn in this section include

Define social responsibility Identify examples of social responsibility that create value for customers Explain the impact of social responsibility on marketing results

Learning Outcomes

Describe the types of ethical and social responsibility issues that marketing must address Explain the laws that regulate marketing Explain how ethical dilemmas in business-to-business marketing differ from those in consumer marketing Outline measures companies take to encourage ethical behavior Explain how demonstrating corporate social responsibility can impact marketing

place

Distribution): Does the distribution channel deliver the product at the price and quality promised? Do other companies in the distribution channel (wholesalers, retailers) perform as promised and deliver on expectations set for product, price, and promotions?

explain how demonstrating corporate social responsibility can impact marketing

Earlier in this module we discussed what corporate social responsibility is and how social responsibility programs impact many different stakeholders in a business. In this section we focus on the role of corporate social responsibility in marketing. We will look at the marketing mix—product, price, promotion, and distribution—and see how companies are changing their marketing strategies to visibly contribute to their communities.

The survey shows that a significant amount of misconduct involves continuous, ongoing behavior rather than one-time incidents:

Employees say that more than a quarter (26 percent) of observed misconduct represents an ongoing pattern of behavior. Another 41 percent said the behavior has been repeated at least a second time. Only one-third (33 percent) of rule breaking represents a one-time incident.[1]

What you'll learn to do: describe measures companies take to encourage ethical behavior

Ethical issues arise at both an organizational level and an individual level. A single individual can engage in unethical behavior, but most ethical breaches that have significant impact on a business occur when many individuals come together to act unethically. This section will review the steps that businesses take at each level to define ethical behavior and create a culture that encourages employees to do the right thing.

The specific things you'll learn in this section include

Explain how B2B marketing creates unique ethical risks and challenges Describe the risks associated with customer gifts and bribes

The specific things you'll learn in this section include:

Explain the importance of ethics policies and a culture of accountability for all employees Identify the unique ethical considerations and roles for company executives Describe how companies manage ethical behavior of marketing employees

Historically, consumer protection laws in the United States have been specific formal legal responses to address public outrage over the disclosure of industry abuses and crises.

For example, in 1905 a man named Upton Sinclair exposed the terrible worker conditions in the American meat-packing industry. His work sparked public outrage and, in turn, led to the creation of the Food & Drug Administration and the first comprehensive inspection and regulation of food safety in the United States.

Take a look at their "top eight" list of ethical concerns, below:

Gifts, gratuities, bribes (marketing and sales) Price discrimination and unfair pricing (marketing and sales) Dishonest advertising (marketing and sales) Miscellaneous unfair competitive practices Cheating customers, unfair credit practices, and overselling (marketing and sales) Price collusion by competitors or price fixing (marketing and sales) Dishonesty in making or keeping a contract Unfairness to employees and prejudice in hiring

Email Spam

Have you received email messages without giving permission to the sender? The Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act, passed in 2003, establishes federal standards for commercial email. Consumers must be given the opportunity to opt out of receiving future solicitations, as in this opt-out notice provided by the clothing company Abercrombie & Fitch:

You must, at all times, obey the laws of the jurisdictions where we conduct business. Starwood conducts business all around the world. Our associates are citizens of many countries. As a result, our operations are subject to the laws of many jurisdictions. It is often challenging for us to understand how those various laws apply to our businesses

However, whether you are a Starwood associate or member of the Board of Directors, you are expected to conduct yourself in accordance with applicable law. Starwood is a company organized under the laws of the United States and is generally subject to U.S. federal law. From time to time, the laws of the United States conflict with laws of a city, town, country or other jurisdiction where we conduct business. If there is a conflict between the applicable laws, seek guidance from the Office of the General Counsel (Legal). [2]

Deputy Superintendent Jaime Aquino was tasked to work with Pearson on the project in advance of the bid process. His email messages indicate that he was attempting to influence the bid process in Pearson's favor. His email messages to Pearson executives include the following statements:

I am not sure if legally we can enter into an agreement when we have not reviewed the final product for each grade and if the materials have not been approved by the state. I believe we would have to make sure that your bid is the lowest one.[2]

Circumventing the Public Bid Process California law requires that such large projects to go to public bid, which this project did, but well before the bid process, the email record between LAUSD Superintendent John Deasy and then CEO of Pearson Marjorie Scardino suggested that deals were made to purchase Pearson curriculum and Apple hardware. In fact, Superintendent Deasy made the inital introduction between Scardino and Apple CEO. In an email to Scardino, Deasy writes:

I wanted to let you know I have [sic] an excellent meeting with Tim at Apple last Friday. The meeting went very well and he was fully committed to being a partner. He said he and his team will take 5 days to present a price plan and scope of partnership. He was very excited about being a partner with Pearson. I think it would be good for you to loop back with him at this point. I will reach out to you again in a week.[1]

In describing a Winterkorn's leadership style, a former VW executive confidentially told Reuters New Agency, "There was always a distance, a fear and a respect . . .

If he would come and visit or you had to go to him, your pulse would go up. If you presented bad news, those were the moments that it could become quite unpleasant and loud and quite demeaning."

Prepare the Sales Team to Sell Effectively and Ethically

If personal sales are a part of the business plan, then marketers have an important responsibility to prepare the sales team for success. Often marketers are asked to create the message, and sales reps are asked to deliver it. When the sales rep is prepared with a strong value proposition, effective communication materials and presentations, and thorough market research, the sales rep can do her best work. When the marketing mix is not hitting the mark, the sales rep's is much more difficult, and there is a greater risk of ethical issues. It is the marketer's responsibility to prepare sales reps to be successful without compromising their integrity.

Ethics for Marketing Employees

If you are hired to work in marketing at a typical company, there will likely be clear ethical standards defined in a company policy and some level of compliance among employees at all levels in the company. You will witness ethical breaches and need to decide whether to report them or not. You will see examples of outstanding ethics and have the opportunity to participate in debates about ethical disagreements and issues. No company is perfect, but most are trying to be ethical.

The goals of the index are to:

Improve the sustainability of the products customers love Integrate sustainability into the business of buying and selling merchandise Reduce cost, improve product quality and create a more resilient supply chain Strengthen customers' trust in retailers and the brands we carry

Similarly, in the 1960s consumer advocate Ralph Nadar took on automobile safety, highlighting the immense profits made by auto companies relative to their investment in customer safety

In 1966 Congress unanimously passed the National Traffic and Motor Vehicle Safety Act, and the National Highway Traffic Safety Administration gained consumer protection powers. The number of vehicular deaths in the U.S. reached a high of 50,000 in 1960 and have continued to fall despite a larger number of drivers on the road.

Xerox is one of many companies that creates opportunities for its employees to contribute to their local communities.

In 1974 Xerox launched the Community Involvement Program, which supports employee involvement in community-focused causes. Since that time more than half a million Xerox employees have participated in the program. , as the name suggests, . In its most current reporting on the impact of the program Xerox has announced spending $1.3 million for 13,000 of its employees to participate in 800 community projects. Xerox benefits from the program through community recognition, but also in supporting its employees make contributions that are important to them increasing their loyalty to their employer.

explain how ethical dilemmas in business-to-business marketing differ from those in consumer marketing

In June 2013, Los Angeles United School District (LAUSD), the second largest school district in the U.S., announced that it had signed a $30 million contract with Apple to provide students with iPads that were preloaded with educational software from Pearson PLC. It was an ambitious education technology initiative that promised to give students new learning tools and technology literacy.

In June 1998, the FTC issued a report to Congress noting that while more than 85 percent of all Web sites collected personal information from consumers, only 14 percent of the sites in the FTC's random sample of commercial Web sites provided any notice to consumers of the personal information they collect or how they use it.

In May 2000, the FTC issued a follow-up report that showed significant improvement in the percent of Web sites that post at least some privacy disclosures; still, only 20 percent of the random sample sites were found to have implemented all four fair information practices: notice, choice, access, and security.

Gift giving in business is commonplace and contentious at the same time. Business gifts are usually seen as an advertising, sales-promotion, and marketing-communication medium.[1] Such gifting is usually practiced for the following reasons:

In appreciation for past client relationships, placing a new order, referrals to other clients, etc. In the hopes of creating a positive first impression that might help to establish an initial business relationship As a quid pro quo—returning a favor or expecting a favor in return for something [2]

The question becomes more challenging when the customer relationship is more complicated

In every case—even the simplest—it's a judgment call. Suppose your company compensates customers for providing references.

Is that ethical? Is it fair and honest to cherry-pick the customer references, selecting only the ones that are unlikely to share negative experiences about your product? To be sure, there's a range of customer feedback, and not all of it is positive. Are you expected to give a full picture of customers' experience—warts and all—so the restaurant chain will know exactly what it's buying?

In general, when prospective customers request customer references, they expect to receive favorable ones, and doing so is not a violation of their trust. It's a lot like a prospective employer's request for a job candidate's work references. When you're marketing yourself for a new job, you name the references who are most likely to report your talents and strengths—you don't include a crabby boss who never had good things to say about anyone.

Making good decisions about when business gifts are appropriate is extremely complex in the United States.

In global marketing it becomes one of the most challenging ethical issues, since the cultural norms in other countries can be at odds with standard ethical practices in the United States. For this reason, gifts and bribes warrant a deeper discussion, especially with regard to B2B marketing.

The Pearson Foundation came under fire for another tactic.

In recent years, the Pearson Foundation has paid to send state education commissioners to meet with their international counterparts in London, Helsinki, Singapore and, just last week, Rio de Janeiro. The commissioners stay in expensive hotels, like the Mandarin Oriental in Singapore. They spend several days meeting with educators in these places. They also meet with top executives from the commercial side of Pearson, which is one of the biggest education companies in the world, selling standardized tests, packaged curriculums and Prentice Hall textbooks.

Creating Expectations for Behavior

In the course of a normal business day, many service employees receive tips. Where is the line between an appropriate tip and a gift? Starbucks has defined this for employees in its Standards of Business Conduct:

Executives Create Company Policy

In the previous reading we reviewed a number of company policies that address ethical conduct. Executives play an important role in creating those policies—and by visibly following and upholding them. As the survey data cited above suggest, employees look to executives to decide whether standards-of-business-conduct policies should be observed and respected. When executives bend the rules or turn a blind eye to bad behavior, the policies lose value and executives lose the respect of employees. This opens the door to a range of unanticipated issues, as employees look to ethical norms outside stated policy and beyond the executives' control.

Security

Information collectors should ensure that the data they collect is accurate and secure. They can improve the integrity of data by cross-referencing it with only reputable databases and by providing access for the consumer to verify it. Information collectors can keep their data secure by protecting against both internal and external security threats. They can limit access within their company to only necessary employees to protect against internal threats, and they can use encryption and other computer-based security systems to stop outside threats.

Executives Hire and Promote Company Managers

Internal promotions send very strong signals about what is important to a company. When the company hires an employee from a different company, she is likely not well known by most employees. If the company promotes an employee who is already working at the company, others know him and understand what he has done to deserve the promotion. If the company promotes individuals to management positions when they have displayed questionable ethics in the workplace, it creates two issues. First, it creates a level of managers who are more likely to encourage their employees to achieve business results at any cost, even when ethics are compromised. Second, it sends a message to all employees that business results are more important than ethics.

Remember, your best resource about what's right or wrong is your own conscience. So if you find yourself in a difficult situation, think before you act. And ask yourself the following questions:

Is it legal? If it's not legal, don't do it. Is it ethical? If it feels wrong, it probably is wrong. How would it look in the newspaper? If you wouldn't feel comfortable if your friends and family knew about your actions, you probably shouldn't do it.

Product:

Is the product designed and manufactured as the customer would expect, given the other elements of the marketing mix? Is the customer warned about the product's limitations or uses that are not recommended?

price

Is the total price of the product fairly presented to the customer? Is the price charged for the product the same as the price posted or advertised? Has something been marketed as "free" and, if so, does it meet FTC guidelines for the definition of free? Does the company disclose information about finance charges?

Despite its name, the CAN-SPAM Act doesn't apply just to bulk email.

It covers all commercial messages, which the law defines as "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service," including email that promotes content on commercial Web sites. The law makes no exception for business-to-business email. That means that all email—even, for example, a message to former customers announcing a new product line—must comply with the law. Each separate email in violation of the CAN-SPAM Act is subject to penalties of up to $16,000, so non-compliance can be very costly. The good news is that following the law isn't complicated.

As the world's largest retailer, Wal-Mart faces unique challenges in product sustainability.

It must not only focus on its stores, but on the products provided and transported by a board network of suppliers. To address this, Wal-Mart has partnered with The Sustainability Consortium to create a sustainability index that can be used to set standards and measure progress across its value chain.

In Fortune magazine, Dr. Paul Argenti suggested, "Rather than playing the blame game, executives should ask if pressures to grow at all costs might have created dishonest employees."[5]

It seems likely that aggressive corporate objectives (and more specifically marketing objectives related to market share) played a contributing role in the Volkswagen ethics scandal. Moreover, when executives set aggressive goals, it becomes more important to cultivate communication channels to openly address issues. This was obviously not the case at Volkswagon.

Consider the following observation by the ECI on the results of the National Business Ethics survey:

Managers-those expected to act as role models or enforce discipline-are responsible for a large share of workplace misconduct (60 percent) and senior managers are more likely than lower-level managers to break rules. Surveyed employees said that members of management are responsible for six of every ten instances of misconduct and they pointed the finger at senior managers in 24 percent of observed rule breaking. Middle managers were identified as the culprit 19 percent of the time and first-line supervisors were identified as bad actors 17 percent of the time.[1]

Policies That Encourage Ethical Behavior

Many companies have a specific policy that defines appropriate behavior. The policy is often called the Standards for Business Conduct. As the name suggests, the policy is intended to set the standards for acceptable behavior; it's not meant to be an exhaustive list of every type of ethical behavior.

Provide Fair Value to the Target Customer

Many ethical issues result from some level of deception involving misstatement of value to the customer. Be accurate in communications to customers about the value that a product provides. Be clear in pricing and contracts. Pricing strategies that confuse customers and cost more than the customer initially believed are never a good long-term strategy.

Demonstrate High Personal Standards in Business Relationships

Marketers often entertain and give gifts. It is not unusual for the marketing team to create the gift list for all customers. Marketers cultivate business relationships and distributor relationships, too. If marketing demonstrates a high standard for professionalism and ethics in these relationships, it sends a strong message and increases the expectation that others will, as well.

Demonstrate Respect for Your Target Customer

Marketing is not a game of manipulation. Good marketing provides compelling solutions and informs customers to help them make good selections and realize value. Recognize the customer's need for an offering that is easy to use and includes clear instructions and appropriate warnings. Remain available to customers to hear complaints. Be humble enough to recognize that not everyone wants to hear your messages. If you demonstrate respect for the consumer, you will find new opportunities to provide value. If you treat consumers like a commodity to be manipulated, a host of ethical issues will clutter your path.

Liebeck's lawyers conducted a study of coffee temperatures. They discovered that coffee brewed at home is usually served at 135-145°F and coffee served at most fast-food restaurants is in the 160-175°F range.

McDonald's, however, served its coffee at 190°F, which can cause third-degree burns on human skin after two to seven seconds of contact. No safety study of any kind was undertaken by either McDonald's or the consultant who recommended the hotter temperature.

Below is a table that shows how marketing professionals responded to a survey on the most difficult ethical issues they face.[1]

Most Difficult Issue Percent of Marketing Professionals Responding Bribery Gifts from outside vendors, payment of questionable commissions, "money under the table" 15% Fairness Unfairly placing company interests over family obligations, taking credit for the work of others, inducing customers to use services not needed, manipulation of others 14% Honesty Lying to customers to obtain orders, misrepresenting services and capabilities 12% Price Differential pricing, charging higher prices than firms with similar products while claiming superiority 12% Product Product safety, product and brand infringement, exaggerated performance claims, products that do not benefit consumers 11% Personnel Firing, hiring, employee evaluation 10% Confidentiality Temptations to use or obtain classified, secret, or competitive information 5% Advertising Crossing the line between exaggeration and misrepresentation, misleading customers 4% Manipulation of Data Falsifying figures or misusing statistics or information, distortion

Judgment Calls

No policy will address every issue, nor should it try. Most policies try to guide employees in the way they should make judgment calls. In its Standards of Business Conduct, American Airlines addresses this issue specifically:

Ford, a brand I praised for authenticity in my last blog post, waded into dubious water with a Facebook status update following the capture of the second bombing suspect. The brand said, "To the first responders of Boston: Thank you. You are true American heroes."

Nothing wrong with that—in fact, I love that a brand like Ford feels it can express sincere appreciation for the sacrifices of those who serve. The problem was that Ford didn't post that as text but included it within a beauty shot of their products, complete with the Ford logo and tagline.

Also, the marketing processes used by B2B marketers are different

One important difference is the tactic of more "personal" selling, in which a sales force builds personal relationships with individuals in decision-making roles in order to facilitate sales within the organizations they're targeting. Also, because B2B sales tend to be higher-priced, larger-ticket items, marketing tactics often include extensive adjustments in factors such as the selling price, product features, terms of delivery, and so forth.

Violating the Restriction on Nonprofit Philanthropy

Pearson's non-profit philanthropy foundation was also involved in securing the deal, which violated certain federal restrictions. A Pearson Foundation vice president, Sherry King, was deeply involved in discussions with top officials at the Los Angeles Unified School District about selling the district the new Common Core digital curriculum in 2012 and 2013, well in advance of the formal bid process. The Pearson Foundation was providing education leadership grants to LAUSD as early as 2007.[

In support of the vision, the company has created what it calls a "roadmap" that defines the focus areas for company strategies and tactics. These include:

People: Be a great place to work where people are inspired to be the best they can be. Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities. Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities. Productivity: Be a highly effective, lean, and fast-moving organization.[1]

Which of the roadmap areas focus on social responsibility?

Planet" is clearly a social responsibility focus, as it acknowledges a responsibility to improve the world beyond the sale of Coca-Cola's products. "People" also suggests a note of social responsibility; Coca-Cola strives to be a place where employees are not only doing a good job for the company but are inspired to be their best as people.

The learning activities for this section include the following:

Reading: Product Liability Reading: Privacy Laws Reading: Fraud in Marketing Self Check: Regulatory Laws

The Business Case for Social Responsibility

Regardless of broader benefits, there is a strong business case for social responsibility. Public companies' stock prices benefit from strong social responsibility initiatives. In 2013, more than $6.57 trillion were invested based on socially responsible investment strategies.

Marketing Fraud in Education

Sadly, it is easy enough to find a case of pervasive marketing fraud that any student can understand: Corinthian Colleges.

Be Truthful

Seek to create a relationship of trust with your target customer through honest, helpful communication. This is such a simple but important recommendation for all marketers. If customers trust the product, the company, and the brand, business results improve, and the company has greater flexibility to introduce new products or make market adjustments.

Corporate Social Responsibility

So far we have focused on ethical dilemmas in terms of risk. If a company acts unethically, it risks damaging its reputation and its customers' trust—worse, it can face lawsuits and criminal prosecution. In this section we'll discuss one of the ways in which companies attempt to get out in front of such risks by taking a proactive stance on ethics, instead.

In the following blog post, marketer Augie Ray explains growing sensitivities around the appropriate uses of social media, and shares his guidance to marketers who are seeking to create a trusted relationship with their customers and prospects.

Social Media Ethics on Display (or Not) During Week of Boston Marathon Tragedy

Tesla and Volkswagen both compete in the same global market but have seen very different patterns in their stock prices (years 2011-2015 shown below).

Some of these differences can be attributed to important differences in their approach to ethics and social responsibility.

Managing Customer Data

Sometimes companies and organization possess personal data about their customers that is collected during the course of doing business. The most obvious examples are medical organizations that keep confidential patient records, financial institutions that capture your financial data, and educational institutions that record student test scores and grades. Other companies might know your contact information, your purchase patterns, and your Internet-shopping or search history. These organization all have important legal responsibilities to protect your data.

The intent of a sustainable product strategy is that the company is identifying the impact of its products on society at every phase of the product lifecycle, and minimizing the negative impacts.

Sustainable product initiatives are so broad in scope that they often encompass all of the social responsibility initiatives. This broad scope also requires companies to be focused and realistic about what they can achieve, setting appropriate objectives that demonstrate progress and identify where more work is needed.

Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual-property land mines behind us to inhibit others, we are acting in a manner contrary to that goal.

Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology."[2]

A sustainable product is constantly environmental-friendly during its entire life.

That is, from the moment the raw materials are extracted to the moment the final product is disposed of, there must be no permanent damage to the environment.[3]

Sham job placement rates

The CFPB alleges that Corinthian's school representatives led students to think that when they graduated they were likely to land good jobs and sufficient salaries to repay their private student loans. But the CFPB believes that Corinthian inflated the job placement rates at its schools. Based on its investigation, the CFPB alleges that this included creating fictitious employers and reporting students as being placed at those fake employers.

Pay for placement

The CFPB also alleges that the Corinthian schools further inflated advertised job placement rates by paying employers to temporarily hire graduates. The schools did not inform students about these payments or that these jobs were temporary.

These are settlements

The Federal Trade Commission (FTC) gives access to an important source of information about the necessity of securing sensitive data: the lessons contained in the more than fifty law enforcement actions taken by the FTC so far. These are settlements—no findings have been made by a court—and the details of the orders apply just to the companies involved, but learning about alleged lapses that have led to law enforcement actions can help your company improve its practices. Most of these alleged practices involve basic, fundamental security missteps or oversights. Without getting into the details of those cases, below are ten practical tips that we can learn from them. Distilling the facts of those cases down to their essence, here are ten lessons to learn that touch on vulnerabilities that could affect your company, along with practical guidance on how to reduce the risks they pose.

Protecting Privacy Online

The Internet provides unprecedented opportunities for the collection and sharing of information from and about consumers. But studies show that consumers have very strong concerns about the security and confidentiality of their personal information in the online marketplace. Many consumers also report reluctance to engage in online commerce, partly because they fear that their personal information can be misused. These consumer concerns present an opportunity for marketers to build consumer trust by implementing sound practices for protecting consumers' information privacy.

Three Dimensions of Evaluating Gifts

The Microsoft example provides a three-dimensional framework by which to evaluate whether a gift crosses the line into bribery. (Remember that a bribe is something given to induce someone to alter their behavior—in this case, to write a favorable product review.) The framework helps establish guidelines for keeping business gifting aboveboard.

The New York Times reported that Gavin Payne of California participated in an expense-paid trip to Singapore.

The Pearson Foundation was also fighting battles over its tactics in New York state, where the New York state attorney general won a $7.7 million judgment against the foundation. His written statement read:

The courts are increasingly holding sellers responsible for the safety of their products

The U.S. courts generally maintain that the producer of a product is liable for any product defect that causes injury in the course of normal use. Liability can even result if a court or a jury decides that a product's design, construction, or operating instructions and safety warnings make the product unreasonably dangerous to use.

In January 2014, Anheuser-Busch ran the following Super Bowl ad featuring a cute puppy and the famous Budweiser Clydesdale horses.

The ad plays on romance and nostalgia to remind viewers of the brand's history (and to sell more beer).

Content

The chief problem with Microsoft's gift was the content. Content refers to the nature of the gift itself (a shiny, new, top-of-the-line laptop) and the price ($2,000 or more). The company claimed that such a high-end machine was necessary to showcase the full capability of the Windows Vista operating system. And, they asserted, since the bloggers were given the option of returning the laptops (or giving them away), the issue of bribery didn't come into play and the onus of acting ethically fell to the recipients.

Leadership, Innovation, and Reputation

The companies that make Ethisphere's list of honorees are visibly presenting themselves in an ethical context, which supports their reputation among all stakeholders. This category evaluates the company's ethical reputation in the marketplace and among key stakeholders such as employees and customers

Target shows that it is committed to protecting the environment by increasing the number of organic foods it offers and by putting in place measures to reduce waste and greenhouse gasses.

The company also makes significant contributions to education by paying for employees' education, and by contributing to schools in its local communities. In 2014 Target donated $31,722,837 to more than 84,000 schools in all fifty states and the District of Columbia.

Liebeck wrote a letter to McDonald's asking them to pay her medical bills, which totaled around $10,500 in 1992 (approximately $16,110 today).

The company offered her $800. Liebeck and McDonald's exchanged several more letters, but the company refused to increase their $800 offer, so Liebeck hired a law firm.

The Legal Threshold

The ethics policy generally begins by reminding employees that they are required to act in accordance with the law. For companies that engage in business across the globe this can be complex. Starwood Hotels and Resorts addresses this issue in their Code of Business Conduct and Ethics:

Governance

The process of governing. We discussed the importance of executive leadership when it comes to monitoring and promoting a quality company culture. This category of the Ethisphere review examines the availability and quality of systems designed to ensure strong corporate governance, which not only includes executive managers, but also the company's board of directors.

Context

The other objection to the Microsoft gifts was the company's motives for giving them. People argued that Microsoft sent the expensive laptops to bloggers as a quid pro quo. Though the accompanying email said "you don't have to write about Vista," that was mainly a legal disclaimer meant to protect Microsoft against formal bribery charges (U.S. corruption law prohibits corporate gifts designed to induce action by the recipient). The company may have kept itself out of legal hot water, but it remained vulnerable to the charge that it tried to exert psychological pressure on the bloggers to write about their "pleasurable" experiences with Vista.

Let's look at a current example of a product design going awry. One of the hottest holiday gift items in 2015 is the hoverboard self-balancing scooter.

The premium models often cost more than $1,000, but several companies have created less expensive versions by using lower-cost board components. One expensive component that has been downgraded in the cheaper models is the rechargeable lithium-ion battery. Many less expensive boards use a lower-quality (and lower-priced) mass-produced battery cell. These cheaper batteries are more likely to have quality issues that might cause them to break and burst into flame when they are repeatedly bumped, which is a regular occurrence during the normal use of the scooter.

In September 2015, the Environmental Protection Agency announced that Volkswagen had installed special software in its cars to manipulate emissions levels (making it appear that the cars are less polluting than they are). A week later Volkswagen disclosed that 11 million diesel vehicles contained the devices, and CEO Martin Winterkorn resigned.

The price of Volkswagen stock plunged—losing 30 percent of its value overnight—and the company scrambled to understand what had happened and control the damage to its reputation.

Types of Product Defects

There are three types of product defects that incur product liability: design defects, manufacturing defects, and defects in marketing.

Product liability is the legal liability a manufacturer or trader incurs for producing or selling a faulty product

There is not a single federal law or code that covers all product liability. Fourteen states have adopted the Uniform Commercial Code, which governs business transactions between states. Specifically, Article 2 of the code includes the requirements for contract formation and breach, which are important in many product liability cases. In general, product liability laws come about as a result of civil court cases being prosecuted at the state level.

Consider the following business situation: You're a member of the marketing team for a B2B company that sells software to restaurants. Your product is a point-of-sale system that manages orders, menus, and staff scheduling. While it generally works well, there are sometimes glitches that cause it to drop orders, and the system goes down more often than you would like. You are marketing the system to a major restaurant chain, and they've asked for a list of references from current customers. The marketing and sales teams sit around a table reviewing the current customer list trying to decide which references to provide. First, the team screens out those who have complained most vocally about the glitches with the product.

There is one customer who told his account manager, "These thing happen with all systems," so the team thinks he would be a good reference. There's also a new customer who started using the system recently and hasn't yet experienced the system down time that other customers have. The team selects that restaurant, as well, and prepares to send the two names to the sales prospect.

What follows is an overview of important privacy laws that have a particular impact on marketers.

These are areas in which marketers need to be thinking ahead of the law. While there are plenty of perfectly legal marketing tactics that utilize personal information, if they are a nuisance to prospective customers, they are probably not good marketing and may be affected by future legislation when the public decides it has had enough.

The FTC recommends four Fair Information Practice Principles.

These are guidelines that represent widely accepted concepts concerning fair information practice in an electronic marketplace.

It is very common for company's to set a threshold for giving and receiving gifts.

These specific guidelines help employees navigate what would otherwise be a judgment call and make it easier to identify an ethical breach and initiate corrective action.

The jury found in Liebeck's favor

They awarded her $200,000 in compensatory damages, but that amount was later reduced to $160,000 because they felt that the spill was 20 percent Liebeck's fault. The jury made headlines when it came to the punitive damages, however, which they settled at $2.7 million. The jurors defended the amount, saying that it was to punish the company for its callous attitude toward Ms. Liebeck and the 700+ other McDonald's customers who had suffered burns. Although it sounds like a lot, $2.7 million represented only two days' worth of McDonald's coffee sales, and the jurors felt that was fair.

Issues of ethics are difficult to discuss.

They often are not clear cut, and while it is easy to see when a company crosses the line with both feet (as did NBC Bay Area), it can tough to discern as brands toe the gray line (as did Ford, in my opinion).

Employees want to know, for example, whether leaders treat lower level employees with dignity and respect, share credit when good things happen, and uphold standards even when it reduces revenues and profits.

They watch to see whether leaders are steady in crisis, hold themselves accountable or, alternatively, shift blame to others. Workers also look at day-to-day management decisions to gauge whether ethical behavior is recognized and rewarded, or whether praise and promotions go to workers who bend the rules.[2]

NBC Bay Area posted a photo of a young bombing victim and implored people to "'Like' this to wish him a continued speedy recovery."

This desperate attempt to trade on people's feelings for a young victim of the bombing in order to receive a bit of EdgeRank-building engagement is horrifyingly unethical, in my book. (And if you do not agree, then please tell me how "liking" an NBC post lends support to or otherwise helps this poor hospitalized child.)

Culture

Thus, culture is clearly the third very important aspect of gift giving. It's crucial to establish clear boundaries and protocols so that gifts are truly received as gifts—not as attempts to influence. To do that means factoring in the recipient's mindset and culture, since what may be perceived as a gift in one group may seem like a bribe in another. The "cultural" dimension is easily understood in personal gift giving (a toy truck might be an excellent present for your six-year-old nephew, but it wouldn't be appropriate for your boss or grandparent). Yet, somehow the idea of discretionary gift giving hasn't gained much ground in business. However, understanding the cultural preferences of the receiver is obviously an important issue in international business—and was a key failure.

Coca-Cola's mission is:

To refresh the world . . . To inspire moments of optimism and happiness . . . To create value and make a difference.

Bureau Seeks More than $500 Million In Relief For Borrowers of Corinthian's Private Student Loans

Today, the Consumer Financial Protection Bureau (CFPB) sued for-profit college chain Corinthian Colleges, Inc. for its illegal predatory lending scheme. The Bureau alleges that Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school. To protect current and past students of the Corinthian schools, the Bureau is seeking to halt these practices and is requesting the court to grant relief to the students who collectively have taken out more than $500 million in private student loans.

Predatory Loans

Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges. In 2013, the Corinthian tuition and fees for an associate's degree was $33,000 to $43,000. The tuition and fees for a bachelor's degree at Corinthian cost $60,000 to $75,000

UPS is committed to a safe work environment that is free of threats, intimidation, and physical harm. Everyone has a right to work in a safe environment and everyone shares the responsibility for ensuring the safety of others. We have zero tolerance for workplace violence, and we will investigate and take appropriate action up to and including dismissal regarding any threats to a safe workplace.

UPS prohibits violent behavior in the workplace including, but not limited to, physical assaults, fighting, threatening comments, intimidation, threats through electronic communications including social media, and the intentional or reckless destruction of property of the company, employee, UPS representative, or customer. Comments or behavior that reasonably could be interpreted as intent to do harm to people or property will be considered a threat. We also prohibit the unauthorized possession and/or use of weapons by any employee or UPS representative while at work, on company property, or while on company business.[4]

Strong-Armed by Illegal Debt Collection Tactics

Under the Genesis loan program, nearly all student borrowers were required to make monthly loan payments while attending school. This is unusual; federal loans and almost all other sources of private student loans do not require repayment until after graduation. This put pressure on Everest, Heald, and WyoTech students to come up with funding while attending school. Today's lawsuit alleges that Corinthian took advantage of this position of power to engage in aggressive debt collection tactics. The CFPB alleges that Corinthian's campus staff members received bonuses based in part on their success in collecting payments from students. The debt collection tactics included:

Setting Policy

United Parcel Service (UPS) groups the sections of its Code of Business Conduct into stakeholder groups: our company, our people, our customers, our shareholders, and our communities. This enables the company to address a range of workforce expectations, such as workplace safety:

A sustainable product focus may include:

Use of organic raw materials Sustainably harvesting of raw materials Emphasizing human rights and labor conditions in sourcing decisions Use of renewable energy in the production process Ensuring that use of the product creates a positive impact on the community Creating product recycling and reuse options Improving the impact of the product's use on human and environmental health

Starwood has established a clear expectation to follow the law

acknowledged the complexity of their business environment, and provided direction when employees need help.

Culture of Ethics

We also discussed the importance of building a culture of accountability within an organization. In this area the Ethisphere evaluation measures an organization's efforts and success at establishing an ethical tone throughout every level of the company.

Ethics and Compliance Program

We discussed this topic in our focus on company policy, along with the important role of executive leadership in supporting and following the policy. This category reviews the ethics program structure, responsibility, and resources, and evaluates the program oversight and tone among top management in the company.

Corporate Citizenship and Responsibility

We've looked at a number of ways in which companies can be good corporate citizens and "give back" to society and stakeholders. In this category, Ethisphere evaluates a wide range of a company's performance indicators associated with sustainability, citizenship, and social responsibility, with special attention to areas such as environmental stewardship, community involvement, corporate philanthropy, workplace impact and well-being, and supply chain engagement and oversight.

Privacy Laws

What does privacy mean in today's world? Privacy is the ability of an individual or group to seclude themselves, or information about themselves, and thereby express themselves selectively. Most of us expect some level of privacy, but the boundaries around privacy can differ depending on the individual and the situation.

The Fallout

When businesses engage in selling to other businesses or to government entities, the laws, policies, norms, and ethics change. Some challenges involved in marketing to consumers are minimized, or go away altogether, but other ones arise. In this module we will explore the unique ethical challenges and opportunities in business-to-business marketing.

Executives Set Company Objectives

When executives establish specific, measurable objectives for the company, those objectives determine where people will focus their time and effort. When the objectives cannot be met and there are dire personal consequences for failure, such conditions can lead to the compromise of ethics and standards. In the National Business Ethics Survey, 70 percent of employees identified pressure to meet unrealistic business objectives as most likely to cause them to compromise their ethical standards, and 75 percent identified either their senior or middle management as the primary source of pressure they feel to compromise the standards of their organizations.

In the Volkswagen case, internal investigations have questioned how both the company culture and the behavior of former CEO Martin Winterkorn contributed to a systemic ethical breach. Like many chief executives, Martin Winterkorn was a demanding boss who didn't like failure, but critics say the pressure on managers at Volkswagen was unusual, which may go some way toward explaining the carmaker's crisis.

When he became CEO in 2007, Winterkorn set an objective to make VW the world's biggest carmaker, which would require tremendous growth in the highly competitive U.S. car market. In the years since, VW has nearly doubled it global annual sales to 10 million cars and its revenue to $225 billion. In early 2015, VW finally approached its goal, selling marginally more vehicles than the world's number-one automaker, Toyota of Japan. One former sales executive said that the pressure soared under the target."If you didn't like it, you moved of your own accord or you were performance-managed out of the business," he said.[3]

On February 27, 1992, a seventy-nine-year-old woman named Stella Liebeck went to McDonald's with her grandson, Chris. They got the coffee, and Chris pulled into a parking space so that Stella could add cream and sugar. Since the car had a curved dash and lacked cup holders, Stella put the cup between her knees and removed the lid.

When she did, the cup fell backward, burning her groin, thighs, genitalia, and buttocks. Liebeck was taken to the hospital, where it was discovered that she had third-degree burns on 6 percent of her body and other burns on 16 percent of her body. She required multiple skin grafts and was in the hospital for eight days. Liebeck spent two years recovering from the injury, lost 20 percent of her bodyweight after the accident, and was left permanently scarred by the ordeal.

In a B2B sales environment this process is very different. Imagine that a sales representative from Microsoft comes to your college campus to meet with technology leaders about a new software package for student communications. She might meet with the college's chief information officer over lunch and discuss the college's current products, as well as the new software package she is hoping to sell.

When the discussion turns to price, the sales rep will try to present the right price to close the sale. She will be thinking about what the college has already purchased, what else she hopes to sell to the college, and how she might "bundle" this product to drive the largest total sale. She will also care about the timing of the sale. Does she want the college to buy the product this year or this quarter in order to maximize her commission? That will make a difference in whether she presents more aggressive pricing now or tries to create a larger deal that may take longer to close. The individual sales rep has significant discretion in crafting the right deal. Often the company's sales leadership will not have visibility into the details of this deal until she is well into the sales process, and the legal team will not review it until it is in a formal contract that the company is preparing to sign.

Not everyone will agree, but I feel that Ford's use of brand imagery not only reduced the sincerity of the message but demonstrated questionable ethics. Before you disagree, I would ask you to view the two status updates below—one Ford could have posted and the other it actually did—and consider three questions:

Which is a more authentic expression of appreciation to people who sacrificed their safety to protect us? What does the product and brand imagery of the post on the right add (if anything) to the sincerity of the gratitude compared to the simple text version? Which version more clearly puts the focus on the heroes in Boston?

explain the laws that regulate marketing

While there are situations in which we expect individuals to act according to higher moral laws, at a basic level we always expect business professionals to follow the law. Most of the laws that impact marketers fall into a category called consumer protection.

The Bloggers Should Disclose the Gift in Their Reviews

While there was not a clear consensus on the ethics of this promotion, the debate drowned out whatever little positive opinion Windows Vista had generated in the blogs. The Microsoft case stands as a good example of a business gift program gone wrong. The company not only wasted the money spent on the gifts (none of the bloggers reported to have returned the laptops) but suffered weeks of bad press—and soured the commercial launch of the product.

Social Responsibility in the Marketing Strategy

You'll recall that we defined corporate social responsibility as the ethical behavior of a company toward society. It means acting responsibly toward the stakeholders—not just the shareholders—who have a legitimate interest in the business. Let's focus on how marketers use corporate social responsibility to achieve marketing objectives

3M makes a sponge where 50% of the scrubbing fibers are made from agave plant. The sponge is made from 100% plant-based fibers and 23% recycled materials. The sponge can outlast 30 rolls of paper towels, can be sanitized in the dishwasher, and is biodegradable at the end of its life. 3M's sponge is a step in the direction of social responsibility to the environment by making a:

a sustainable product

We are roughly five years into the social media era,

and I think perhaps it is time to reset our moral compasses, not to save our souls but to improve business results

Which is an example of an ethical issue that marketing professionals address?

amending a company's legal contracts// INCORRECT

In the case of Volkswagen,

an early internal investigation pointed to a "culture of tolerance" for ethical compromises. Employees were pushed to do what was needed to meet corporate objectives at any cost. The organizational culture is comprised of the values and beliefs that an organization shares, which create its social environment. The culture of a large organization can be difficult to understand since it is influenced by many different factors. Still, many research studies point to leadership and policies as being instrumental in building an ethical organizational culture.

The key lesson is that what is being given defines the nature of gifting,

and extreme care must be taken to determine whether that gift is appropriate. While the market price of a gift item can be used as a benchmark, the type of gift is as important as its price. If Microsoft had given out $2,000 worth of software, it wouldn't have been so controversial. Another point, which Microsoft surely knew, is that items sent around Christmastime are more apt to be perceived as gifts.

The fact is that Pearson is a for-profit corporation,

and they are prohibited by law from using charitable funds to promote and develop for-profit products. I'm pleased that this settlement will direct millions of dollars back to where they belong.

The two typical types of choice models

are "opt-in" or "opt-out."

Consumer protection laws

are created to ensure the rights of consumers and to create a fair marketplace for consumers.

Norms

are established standards of conduct that are expected and maintained by society and/or professional organizations.

Access

as defined in the Fair Information Practice Principles, includes not only a consumer's ability to view the data collected but also to verify and contest its accuracy. This access must be inexpensive and timely in order to be useful to the consumer.

For most companies and organizations, integrity and ethics start or fail:

at executive level

What potential ethical issues arise with a B2B transaction as opposed to a B2C transaction?

because B2B transaction is conducted more on a personal, relationship-based sales basis than a B2C sale, issues surrounding bribery or fairness are harder to discover

In defining social responsibility programs and goals

companies are acknowledging a commitment to creating a better world. How do they determine where to focus these efforts and what are they trying to achieve? Generally, companies are expanding on unique market strengths that benefit society and trying to reduce the negative impact of their products on society. As with any other business strategy, an approach that is customized to the company and its market is likelier to have greater impact. For example, Coca-Cola's emphasis on preventing childhood obesity acknowledges and addresses a risk that the company brings to its market. If Exxon Mobile launched a childhood obesity initiative, it wouldn't have the same impact.

What types of company policies are typically included in corporate standards policies?

company legal thresholds

In addition to government-based agencies,

consumer associations and other nonprofit entities also play an important role in protecting the consumer.

Depending on the company, social responsibility fits most comfortably in what area of the marketing planning process?

corporate mission or marketing strategy

Study after study

demonstrate that consumers want something more from brands than silly images and memes; they want ethical behaviors and communications. The 2012 Edelman Trust Barometer Study found that customers increasingly expect brands to "place customers ahead of profits and have ethical business practices," and Interbrand's 2012 brand study noted that "Consumers... want to feel that the brands they love are, in fact, worthy of that love."

The FTC's Bureau of Consumer Protection stops unfair, deceptive, and fraudulent business practices by collecting complaints and conducting investigations, suing companies and people who break the law,

developing rules to maintain a fair marketplace, and educating consumers and businesses about their rights and responsibilities.

You will recall that business-to-business (B2B) marketing

differs from business-to-consumer (B2C) marketing in key ways. B2B marketers sell to other businesses or institutions, which then consume the product as part of their business operations or use the product in the assembly of the final product they sell to consumers. B2C marketers focus their efforts on consumers—the individuals who consume finished products.

A large dairy has decided to focus its efforts on becoming a sustainable company. It needs to redesign the packages it uses for its products, work with distributors to find more sustainable solutions of transport, and treat their 10,000 cows more sustainably. All of this requires the dairy to be:

ethical, focused, and realistic about attainable achievements

Design defects

exist before the product is manufactured. There is something in the design of the product that is inherently unsafe, regardless of how well it is manufactured. Since "product" is one of the primary elements of the marketing mix, the marketer bears responsibility for ensuring that the design results in a product that is safe and that the product will fulfill the promises of the other aspects of the marketing mix such as promotional commitments.

The SeeShell corporation published its annual update for its Standards for Business Conduct policies. This policy book probably contains an area for:

expectations for behavior; the policies identifying common issues employees may encounter

The right-to-privacy issue has gotten more complicated as our culture has come to rely so heavily on digital communication

for everything from social networking to education to conducting business. Marketers have been quick to capitalize on the potential of digital technology to yield creative, aggressive techniques for reaching their target buyers. Sometimes these aggressive tactics cause a public backlash that results in new laws.

The Federal Trade Commission (FTC)

gives access to an important source of information about the necessity of securing sensitive data: the lessons contained in the more than fifty law enforcement actions taken by the FTC so far.

Your perspective may change, however, if you put yourself on the other side of this equation

if you do not want to see your friends becoming shills for brands in return for freebies and giveaways, then your brand should not follow this path. It is unethical to treat your own customers in a way you would not appreciate from the brands you buy or the people you know. (Fifty years ago, David Ogilvy, the father of modern advertising, expressed the same sentiment when he said, "Never write an advertisement which you wouldn't want your family to read. You wouldn't tell lies to your own wife. Don't tell them to mine.")

The B2B sales process

is difficult to monitor and control. It is also very high stakes. There are approximately 320 million potential consumers in the United States. There are just over 5.7 million firms doing business in the United States.[1] B2B firms market to a much smaller number of customers and are often selling products with a higher total cost.

Bob just finished closing a large-ticket item sale with a large management company of ten football stadiums. To close the deal he made assurances that he wasn't sure he could fulfill and exaggerated the benefits and features of the large-ticket item. Bob's behavior could be construed as:

large unethical behavior

If a company created a product marketing campaign which exaggerated the actual benefits and features of a product and misrepresented the quality of the item, what could be the market's reaction?

loss of customers and violation of the customer's trust

In 2014 Target had a security breach and hackers were able to steal 110 million customers' information from Target's system. If you are a marketer it is part of your job to protect the privacy of your customers and their information by vigilantly and securely:

managing customers' data

Moreover, Liebeck's lawyers also discovered more than seven hundred other burn claims—

many of them for third-degree burns—from McDonald's customers between February 1983 and March 1992. In court, McDonald's quality-control manager, Christopher Appleton, testified that McDonald's served around 20 million cups of coffee a year and that seven hundred incidents during nine years was statistically insignificant. While this was factually accurate, the jury did not like to hear that McDonald's considered seven hundred burned customer to be insignificant.

A company that makes clothes irons was taken to court because of the severe burns sustained by an iron user who was trying to cook a steak with the clothes iron. The court concluded that the manufacturer had failed to warn customers not to use the iron on anything other than fabrics. This is an example of a company being taken to court for:

marketing defects

The privacy disclosure guidelines should be followed when conducting online marketing and should be transparent to the customer or potential market. The guidelines that say that customers should be given

notice,choice, security, and access

Manufacturing Defects

occur while a product is being constructed, produced, or assembled. Specifically, when a product departs from its intended design, even though all possible care was exercised in the preparation and marketing of the product[1], it is a manufacturing defect.

The judge agreed, accusing McDonald's

of "willful, wanton, and reckless behavior" for ignoring all the customer complaints. McDonald's process for making coffee constituted a manufacturing defect, which resulted in many customer injuries and generated significant product liability for the company.

While most businesses define what is a bribe and what isn't in terms of the content

of the gift, in most countries the matter is decided on the basis of context. So, regardless of the size, type, and value of the gift, if it can be established that the gift was given with the intent to induce an action, it will be regarded as a bribe. The lesson here is that it isn't enough for businesses to set clear value/type limits on corporate gifts; it's also necessary to scrutinize the motives behind the gift giving, think carefully about how the gift will be received, and stop short of anything that induces the recipient to crosses the line of ethical behavior.

The exchange process between an organization and a customer is based

on a relationship of trust. The Statement of Ethics aims to protect that trust.

The challenges of creating appropriate controls in the B2B sales process places special pressure

on the individual sales representatives to make good judgment calls in a very flexible environment. In addition, personal selling almost always uses an incentive structure, which puts immense pressure on the sales rep to close large deals.

Lured into Loans by Lies

ost students who attend Everest, Heald, and WyoTech schools come from economically disadvantaged backgrounds and many are the first in their families to seek an education beyond a high school diploma. According to internal Corinthian documents, most students lived in households with very low income. Today's lawsuit alleges that the schools owned by Corinthian Colleges, Inc. advertised their education as a gateway to good jobs and better careers. It alleges that throughout the Corinthian schools, consumers were lured into loans by lies, including:

For a B2C company selling to a large consumer audience,

pricing is fairly uniform for all buyers, and the marketing and legal teams typically review the pricing strategies and communications.

The legal liability a manufacturer or trader incurs for producing or selling a faulty product is known as:

product liability

In what areas do marketing professionals most often address ethical issues?

product, price, bribery, fairness

When we consider the elements of the marketing mix

product, price, promotion, and distribution—there are opportunities for deception in each area.

Values

represent the collective conception of what communities find desirable, important, and morally proper. Values also serve as the criteria for evaluating our own personal actions and the actions of others. As marketers, we recognize that we not only serve our organizations but also act as stewards of society in creating, facilitating, and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stakeholders (e.g., customers, employees, investors, peers, channel members, regulators and the host community)

The opt-out method

requires consumers to affirmatively decline permission for other uses. Without the consumer taking these affirmative steps in an opt-out system, the information gatherer assumes that it can use the consumer's information for other purposes.

The opt-in method

requires that consumers give permission for their information to be used for other purposes. Without the consumer taking these affirmative steps in an opt-in system, the information gatherer assumes that it cannot use the information for any other purpose.

Marketing Defects

result from flaws in the way a product is marketed. Examples include improper labeling, poor or incomplete instructions, or inadequate safety warnings. Often marketing defects are referred to as a "failure to warn." It is important for the marketer to think not only about the warnings that the user might need when using the product as intended but also about other, potentially dangerous uses for which the product was not intended.

Besides the financial incentive they face,

sales reps are also motivated to meet (and exceed) sales quotas because they don't want to get fired (which is a pretty common, legitimate worry).

It is the responsibility of the employees within the company to follow the policies

so why does this matter to the marketer? Let's return to the example of a software rep selling a product to your college or university. The chief information officer is responsible for understanding and following the college's policies. Still, the software company and its sales rep are in a position to conduct sales and marketing efforts that either respect and support the college's policies or push against them. Even when issues arise from the vendor's ignorance about the college's policies, such lapses can create a tone in which the vendor is seen to be undercutting the college's requirements instead of understanding and supporting ethical behavior.

Tesla has a mission with an emphasis on social responsibility;

t strives to develop products that have both a societal and economic benefit. Industry analysts and consumers alike see this as a distinct advantage in the marketplace.

Each salesperson has an annual sales quota

that he is expected to meet—in this case, $1 million in annual sales. On top of a base salary, sales representatives are paid a commission on their sales. Often, either no commission is paid (as in this example) or a very low commission is paid until the sales quota is met. Once the sales quota is met, the sales rep earns a percentage of all sales. In this example, if the rep sells a $1 million deal, then he will meet his quota and be paid a $100,000 sales commission. There is also an accelerator: If the sales rep sells more, he will earn a higher-percent commission. B2B sales representatives have a personal financial stake in closing deals.

Pulling students out of class:

the CFPB's investigation revealed that Corinthian's efforts to collect payments included shaming students by pulling them out of class. Financial aid officers would inform instructors and other staff that students were past due on their Genesis loans. Corinthian schools also required students to meet with campus presidents to discuss the seriousness of the overdue loans. At one Corinthian campus, students and employees referred to one financial aid staff member as the "Grim Reaper" because the staff member so frequently pulled students out of class to collect debts.

Target places an emphasis on being a "good corporate citizen"

the communities it serves. Each year the company publishes a corporate responsibility report that shares its goals and progress in a number of areas including the environment, team member well-being, education, and volunteerism.

I'd like to believe this is always the case in every business situation, but when it comes to social media marketing

the ethical path also happens to be the best one for enhancing brands and business results.

Each party in a marketing transaction brings a set of expectations regarding how the business relationship will exist and how transactions should be conducted

the following expectations about the transaction: (a) you want to be treated fairly by the salesperson, (b) you want to pay a reasonable price, (c) you want the product to be available as advertised and in the indicated condition, and (d) you want it to perform as promised. Unfortunately, your expectations might not be in agreement with those of the retailer. The retail salesperson may not "have time for you," or the retailer's notion of a "reasonable" price may be higher than yours, or the advertising for the product may be misleading. These differences in expectations can lead to ethical questions that are sometimes difficult to analyze.

For our purposes, though, it is more useful to begin outside the courtroom with the basic starting point of marketing:

the goal of marketing is not to deceive the customer; it is, in fact, to build trust.

The manufacturer may be very careful with the design

the material selection, the development of the manufacturing process, and the quality-assurance guidelines. Nevertheless, if a poorly manufactured product leaves the manufacturers facility and causes injury when used for any of its intended purposes, then there is a defect in manufacturing.

From a marketer's point of view

the story demonstrates a number of different types of fraud, which had devastating consequences for both shareholders and stakeholders. Deliberate deception was part of the company's strategy, and it played a dominant role in all aspects of marketing.

When it comes to marketing fraud

the two key words are deliberate deception. In a legal setting, a judge asked to rule on a marketing fraud case would need to evaluate the extent of the deception and the impact of the deception on the consumer.

The marketplace in general and consumers are changing their attitude toward products and companies. What is the marketplace starting to tell companies about what they want from them?

there is a growing market for sustainable and companies who are socially responsible citizens

Martin Shkreli, the CEO of Turing Pharmaceuticals, purchased the drug Daraprim and then promptly increased the price by more than 5,000 percent from $13.50 to $750 per pill. Besides this price-gouging move, he was recently arrested for securities fraud. As the investigation digs deeper, it is quite possible that:

this CEO's unethical actions influenced other company employees to take unethical actions

The founders pledged that each new generation of cars would be increasingly affordable, helping the company work toward its mission:

to accelerate the world's transition to sustainable transport.[1]

These may seem like overly technical considerations that aren't important

to someone working in a marketing organization, but in the same way that it is important for a marketer to protect its company from product liability suits, it is important to protect customers from security breaches related to the company's products, services, and marketing activities.

Halting Illegal Conduct and Obtaining Relief for Private Student Loan Borrowers

today's lawsuit seeks, among other things, compensation for the tens of thousands of students who took out Genesis loans. The CFPB estimates that from July 2011 through March 2014, students took out approximately 130,000 private student loans to pay tuition and fees at Everest, Heald, or WyoTech colleges. Some of these loans have been paid back in part or in full; the total outstanding balance of these loans is in excess of $569 million.

Recently, the ice-cream company Haagen-Daz initiated a campaign to raise awareness about the threats to honey bees

which are rapidly disappearing and are vital to the global food chain (and many of the ingredients in flavored ice cream). The company started a honeybee microsite and is donating a portion of the proceeds from its honeybee brand to bee research. In November 2014, it raised an additional $7,000 for research during a two-day Twitter campaign (#HelpHoneyBees hashtag).[3]

intrusive telephone marketing activities led to the passage of the the Do-Not-Call Implementation Act of 2003

which permits individuals to register their phone number to prevent marketing calls from organizations with which they don't have an existing relationship. The act was intended to protect consumers from a violation of privacy (incessant sales phone calls particularly during the evening hours), and it closed down many businesses that had used telephone solicitation as their primary sales channel.

Companies understand and expect that the sales compensation structure

will influence behavior, but they try make adjustments that lead to smaller ethical issues (slowing down a sales process, e.g.,) rather than larger ethical issues (promising value that the product cannot deliver, e.g.). B2B marketers must carefully consider the sales-compensation and incentives structure and identify where it creates unnecessary ethical risks or puts sales reps in an ethical bind.