Lecture

7
Marketing, Advertising and
Product Safety
BBA361
Business Ethics and Corporate Governance

Chapter 6, Ethics and the Conduct of Business,John R.

Boatright

Charmaine Chan,
Department of Business Administration
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1. Marketing Ethics

Ethical framework for marketing in American

society (bill of rights for consumer):
Fairness: The right to be provided with adequate
information about products

Freedom: The right to have a voice in the

marketing of
major marketing decision;

Well-being:The right to be protected from harmful

products

Freedom & well-being: The right to be offered a 2

choice that includes the products that consumers truly
2. Marketing Ethics in Hong Kong I

Consumer rights in Hong Kong:

1. The right to satisfaction of basic needs;

2. The right to safety
3. The right to be informed
4. The right to choose
5. The right to be heard
6. The right to redress
7. The right to consumer education
8. The right to a healthy and sustainable environment
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2. Marketing Ethics in Hong Kong II
http://www.consumer.org.hk/website/ws_en/competition_issues/model_co
de/2006100401.pdf

Trade Practice Rules

Complaint Handling Rules

Fair Competition Rules

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2. Marketing Ethics in Hong Kong II

I) Trade Practice Rules

Misleading or Deceptive Conduct

False or Misleading Representations
Unconscionable Conducts
Undesirable Advertising and Selling Techniques
Unfair Selling Practices
Conditions and Warranties in Consumer
Transaction

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2. Marketing Ethics in Hong Kong II

II ) Handling Consumer Complaints

Independency and Impartiality

Transparency
Visibility
Affordability
Speed and Timeless
Competence of Appropriate Officers
Accessibility/ Ease of use
Security
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2. Marketing Ethics in Hong Kong II

III ) Fair Competition Rules

Conduct substantially lessening Competition

Abuse of Dominant Position
Public Benefits that Outweight Market Competition

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 3. Ethics in Sales Practice, Labeling
IPricing
) Sales Practice
Salespersons moral obligation is to facilitate the
conditions for a fair transaction where consumers
act freely and with adequate knowledge;
Deceptive statement: E.g.suggested retail price
which never charged; last day for the sale but
everyday is the last day;
Manipulation: Taking advantage of consumer
psychology to make a sale. E.g. bait and switch
Consumers lured into a store by an ad for a low-
cost good but sold a higher priced version.
High-pressure tactics, particularly to students,
elderly and the poor; 8
 3. Ethics in Sales Practice, Labeling
IIPricing
) Labeling
Correct and adequate information on the label
(Ethical question: how much information is a
manufacturer obligated to provide?)

2. Fair packaging: Package list the identity of product,

name and location of manufacturer packer, net
quantity, the number of per serving, etc;

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 3. Ethics in Sales Practice, Labeling
Pricing
III ) Pricing
Predatory Pricing: Reducing prices to unreasonable
low to drive competitors out of business, e.g. to
become monopoly position

2. Unfair Pricing: Such as unconscionably high prices,

misleading prices (which happens in herbal shops
in HK)
3. Hidden costs

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3. Ethical problems in Advertising

Criticism on Advertising
Exaggerated claims and outright
falsehoods
Lack of taste, irritating repetition
Offensive character
Morality of ad such as alcohol/tobacco;
excessive sex/ violence, negative
stereotypes of certain groups
Role of advertising on creating culture of
consumerism, potentiality of behavior 11
control;
3. Ethical problems in Advertising
1.Deceptive Advertising
Deceptiveness of an ad not only depends
on the truth of the claims it makes, but
also on the impact on people who
see/hear it. E.g. Tire: the smoothest,
safest ride; Pain reliever: the quickest,
gentlest relief;
E.g. 1991, Campbell Soup was charged by
Federal Trade Commission for ads stressing low
fat, low cholesterol content which made
consumers associated with reduced risk of heart
disease; The ads failed to mention the high in 12
sodium which increases some form of heart
3. Ethical problems in Advertising
2. Irrational Persuasion
Techniques of advertising and its
influence on human desires for security,
acceptance, self-esteem
E.g. inducing fear
Laudable, sinister, exploits deep seated
emotions

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4. Product Safety

The right of consumers to be

protected from harmful products

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4. Product Safety
Due Care Theory:
manufacturers have an obligation to
exercise due care -- they should take all
reasonable precautions to ensure products
on market are free of defects.
Design
Materials
Production
Quality Control
Packaging
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Notification