Download - MM Lecture 1 Notes
-
7/29/2019 MM Lecture 1 Notes
1/25
LECTURE NO. 1
THE MARKETING CONCEPT
MBA-09
NATIONAL UNIVERSITY, ISB
Mon 10th & Wed 12th Aug 2009
MARKETINGMARKETING
MANAGEMENTMANAGEMENT
-
7/29/2019 MM Lecture 1 Notes
2/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
How did you start your day today?
(a) How did you wake up? By the sound of your cel-phone alarm?
(b) You brushed your teeth. Which toothpaste and which toothbrush did you use?(c) What is the brand of your pair of jeans, your shoes, your wristwatch?
(d) Did you have Nestle milk for breakfast? Nurpur butter, Mitchells jam, Lipton
tea?
Marketing is a part of the daily life of each one of us!! You are seeing and using
one brand of something, one brand of another thing. So at the very beginning of
your day, you had an encounter with Marketing, without even realizing it. You will
have many more encounters today, as you drive in a car that you bought, buy
cigarettes or make-up, and watch TV. There will never be a day in your life that
you will not encounter Marketing.
DIFFERENCE BETWEEN MARKETING & SELLING
What comes to your mind when you think of the term MARKETING?
Selling? Advertising? Salespersons? Retail outlets?
Most peoples, including some very experienced business managers answer to
the question What is Marketing will be that Marketing means Selling or
Advertising. Actually, selling and advertising are part of Marketing, but the true
essence of Marketing goes way beyond these two terms.
SELLING:-
Making a product, then finding a market for it, and developing marketing
techniques like advertising etc. to attract customers to buy the product. The focus
of the SELLING process is the PRODUCT.
Page 2 of 25
-
7/29/2019 MM Lecture 1 Notes
3/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
For example, a company manufactures a 1300 cc car, in 10 colors, with
automatic gears, with powered steering, powered windows, cruise control, etc.
Now it starts looking for customers. It designs advertising campaigns to promote
the product. But its focus is the product all along.
MARKETING:-
Starts with the CUSTOMER, what the customerneeds, what the customerwants,
and how he wants it. And the product is made to suit the customer, to meet
customer expectations. So we can say that the focus of the Marketing process
is the customer, whereas the focus of the Selling process is the product.
Broadly speaking,
Marketing is the set of activities undertaken to facilitate and generate an
exchange process that satisfies human or organizational needs and wants.
NEEDS, WANTS, DEMANDS & EXCHANGE
Now we need to discuss some key concepts before we move further:
NEEDS & WANTS: -
Need is something that is a necessity, absolutely essential. Without it one feels
deprived. For example, you needfood and water to live, to survive.
Want is not essential, but a preference. For example, you need food, but you
want a burger, or rice, or chicken. So want is shaped by your desire, and this
desire is shaped by several influences in the external environment (society,
culture, reference groups, companys activities) as well as internal influences
(personality, motivation, learning, perception, lifestyle). Need is basic, Want
Page 3 of 25
-
7/29/2019 MM Lecture 1 Notes
4/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
varies. Everyone needs food, whether they live in USA or Pakistan or China. But
to satisfy theirneedof food, a person living in USA wants a pizza, a person in
Pakistan wants roti and daal, and a person in China wants frogs legs.
DEMAND: -
Want becomes Demand when the person wanting something has the
purchasing power to acquire it. So a demandis a wantbacked by buying power.
People expect their demand to fulfil their expectations, to give them value
and satisfaction.
For example, you have to go from one place to another.
Need: To be transported
Options to satisfy need: Walk, bicycle, public transport, motor cycle,
small car, luxury car, plane
Want: Luxury car
When you have the money to buy a luxury car, it becomes your Demand. And
you want that car to satisfy all your expectations, to give you value and
satisfaction. You want speed, comfort, snob-value.
A good and successful marketing effort is one that takes into consideration the
needs, wants and demands of the consumers, and has the capability to make
consumers feel needs earlier unfelt, and convert them into wants. Later on we
will study the issue of Ethics in Marketing, where Marketing and marketers face
severe criticism for misleading and exploiting consumers.
EXCHANGE: -
There are 3 ways to satisfy a need for something: you can make it yourself, or
you can steal it, or you can offer to give something in return for it. This is an
exchange. This something that you are willing to give in return will be something
of value to the other party. This third option is the one involves Marketing.
Page 4 of 25
-
7/29/2019 MM Lecture 1 Notes
5/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
Conditions for Exchange:
1. More than one party must be involved (Marketer, Customer)2. Both parties have to be willing to indulge in the exchange
3. Both parties must have something to offer, that is of value to the other
party (Money, barter, product)
4. Both parties must communicate with each other (Promotion or Advertising)
In the exchange process, we use needs and wants interchangeably.
MARKETING:-
According to the American Marketing Association
Marketing is the total system of business activities designed to plan, price,
promote and distribute want-satisfying products to target markets in order
to achieve organizational objectives.
THE EVOLUTION OF MARKETING
The development of Marketing went through 5 stages or eras:
Page 5 of 25
-
7/29/2019 MM Lecture 1 Notes
6/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
In some parts of the world, Marketing practices have evolved after passing
through all the above eras and are now well-established with a good consumer-
orientation. In other parts of the world, Marketing is still at one of these stages, or
in its infancy.
Page 6 of 25
Figure 1
Simple TradeEra / Barter Era
ProductionEra
- Demandexceeds supply- No focus oncustomers
SalesEra
- Demandmatches supply- Sales forceacquired
- Emphasis onproduct features
MarketingDepartment Era
- Supply exceedsdemand- Marketing deptsestablished tomanage allactivities
- Advisory role ofMarketingDepartment withisolated goals
MarketingCompany Era
- Supply exceedsdemand- Intensecompetition- Comprehensive,front-line &
decision-makingrole of Marketing- Integrated effortof all departmentsto meet customerrequirements
EVOLUTION OF MARKETING
-
7/29/2019 MM Lecture 1 Notes
7/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
SIMPLE TRADE OR BARTER ERA :-
The simplest and the most primitive form of exchange; you get something you
want and in return, you give something that is of value to the other person. Thissomething is other than money. Families used to grow their own food, e.g.
vegetables, wheat etc. The surplus output was offered to merchants and local
middlemen in return for items of clothing, essential furniture etc. This practice is
still on in some parts of the world.
PRODUCTION ERA :-
In the late 1800s, countries began to be industrialized. Thus began what is
known as the Industrial Revolution. In this era, industries started making
products, just a few products. This era continued till about the 1920s. In this era,
the demand was greater than the supply, hence no serious marketing or sales
effort was needed, no research on consumer needs and wants was conducted,
and no adaptation to any consumer needs was required. The concept was if we
can make it, we can sell it.
SALES ERA :-
By about 1930, the industrialized nations had surplus production capacity. Many
nations were industrialized, so the supply of products increased. Supply equalled
demand. So the issue was not only to produce, but to beat the competitionand
sell. This marked the beginning of the Sales Era. Companies started hiring
salespersons and used some advertising to highlight their product in relation to
their competitors. However, consumer needs, wants, expectations are still not
given much consideration. The focus was still on the product, and the advertising
effort was meant to fit customers expectations to the product.
Page 7 of 25
-
7/29/2019 MM Lecture 1 Notes
8/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
MARKETING DEPARTMENT ERA :-
As competition grew, more and more countries and companies started producing
products, so the supply exceeded the demand for the product. So now theproblem was not just selling your product, but it was to steal customers from your
competitor, to convince customers to stop using the competing products and
switch to your product. To achieve this, it became important to promote the idea
that the product will satisfy some need of the customer that the competitors
product is not doing. So now the customer needs get attention. The promotion
was redesigned to feature the attributes that customers miss in the competitors
product, and those features were highlighted in the promotion. So some research
had to be done. But the outcome or impact of this research was limited to
shaping the promotion as per consumer expectations, not shaping the product as
per consumer expectations. Other activities like distribution and shipping had to
be undertaken. So the Sales era was replaced by the Marketing Department era.
Marketing departments were established in companies, and all activities of
research, promotion, distribution, etc. were brought under the control of one
department. However, this department was conducting short-run planning. More
importantly, the role of the Marketing department was only advisory; it could give
suggestions to the top management for product innovation, price change, product
repositioning etc., but the company policies were not driven by the Marketing
function. Also, each department had isolated goals; each department was
pursuing its own objectives. The objectives of one department clashed with those
of another department. This was mainly because the departmental goals were
not integrated toward one objective.customer satisfaction. Production
department was told to reduce production costs, finance department was told to
improve cash-flows, and so on. When the Marketing department wanted a
product innovation, this suggestion was at once rejected by the other
departments, as it was seen to clash with their own objectives.
Page 8 of 25
-
7/29/2019 MM Lecture 1 Notes
9/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
MARKETING COMPANY ERA :-
By 1960s, most developed industrialized nations started understanding theimportance of an integrated, long-run marketing planning. The Marketing people
got involved in all aspects of company strategies, from R&D to production to
sales to after sales support. The Marketing era started when the Marketing
people started long-run planning (10 years or more). The entire company effort
was guided by Marketing. It was given the front seat. The top management was
committed to being a customer-oriented company, i.e. to put the customer at the
top. All decisions were dependant upon what the customer wants. The Marketing
Company is one that understands that it is the customer who defines company
policies. Company objectives can only be met if the customers are satisfied. In
order to achieve this, Marketing companies ensure that the role of the Marketing
department is not advisory but decision-making. The top management does not
give isolated goals to various departments; instead, departmental goals are all
derived from the long-term strategic goals of the company, and the strategic
objectives are determined keeping the customer on top. In a Marketing company,
all the departments are partners, not adversaries, and their goal is one: to satisfy
the customer.
Page 9 of 25
-
7/29/2019 MM Lecture 1 Notes
10/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
THE MARKETING CONCEPT
The Marketing concept is a consumer-oriented, market-driven, value-based,
integrated, goal-oriented philosophy for a person or an organization.
A company is adhering to the Marketing Concept if it is studying customer needs
and expectations, it is conscious to them, and it responds to them. Unfortunatelyin many countries including Pakistan, most companies and managers are still
stuck in the production era, or at best, the sales era. They think of the consumers
as being there to buy the companys products, rather than the company being
there to give the consumers what they want. Some firms are following the
Marketing Concept. Their efforts are directed towards knowing the customer and
Page 10 of 25
Figure 2
MARKETINGCONCEPT
MARKETINGCONCEPT
ConsumerOrientation
ConsumerOrientation
MarketDriven
Approach
MarketDriven
ApproachIntegratedMarketing
IntegratedMarketing
GoalOrientation
GoalOrientation
ValueBased
Philosophy
ValueBased
Philosophy
THE MARKETING CONCEPT
-
7/29/2019 MM Lecture 1 Notes
11/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
satisfying the customer. Any change in customer expectations is at once noted
and required changes in marketing strategy are made. For example, Pakistan
Tobacco Company has a separate Marketing Research Department, headed bya senior executive. It is constantly in touch with the consumers. Similarly, Lever
Brothers has a huge Marketing Research department.
B ASIC IDEAS IN THE MARKETING CONCEPT:-
Consumer Orientation
Focus is on customers. Objective is to satisfy consumer needs, and your
products are the means by which you are going to do that. Whereas in the
Marketing concept, Customer satisfaction guides the whole system. Again, the
consumers are not there for your products, rather your products are there to
satisfy the consumers. You must think in terms ofgiving the consumers what
they need.
Market-Driven Approach
Know the structure of your market, the competitors, the distribution channels.
Value-based Philosophy
The consumers must perceive your product to give them superior value for their
money,` and superior value in relation to the competitors product, e.g. sales
promotion tactics like 20% extra. The customer must be convinced that if he
wants the same benefits from the competitors product, he will have to entail a
greater cost. If he wants 20% extra shampoo of brand X, he will have to pay Rs.
100 more. But with your brand of shampoo, he gets 20% extra for free.
Value is also perceived in terms of what benefits the product gives to the
consumer and how much superior these benefits are to those given by
Page 11 of 25
MarkDrive
-
7/29/2019 MM Lecture 1 Notes
12/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
competing products. For example, the reliability & consistent performance of an
electronic appliance (SONYversus SAMSUNG), the durability of a pair of leather
shoes (HUSH PUPPIES versus BATA), the comfort given by a piece of furniture,and so on. It is important for a marketer to convince the consumer that his
product gives the consumer superior value in relation to the competitors product.
Integrated Marketing Focus
All departments and activities of a company are integrated and coordinated;
finance, production, sales, R&D. We normally see that each department is
isolated, concerned with its own activity; production managers are concerned
with getting products made, accounts managers want to balance the books,
financial managers want the companys cash position to be stable. No one is
concerned with the whole picture, the whole system. Every department, every
activity, every service is integrated to achieve the main objective customer
satisfaction.
Goal Orientation
In addition to customer satisfaction, the other equally important goal of an
organization is to earn a profit. Profit-oriented organizations must remember that
goal. Obviously customers would love it if you give them what they need for free.
But no profit-oriented company does that. So the profit goal has to be kept in
mind. For a non-profit company, the goal will be different, e.g. finding a cure for a
disease, or getting votes for a candidate in an election, or getting education to a
village.
Now we can go back to the definition of Marketing:
The total system of business activities designed to plan, price, promote
and distribute want-satisfying products to target markets in order to
achieve organizational objectives
Page 12 of 25
-
7/29/2019 MM Lecture 1 Notes
13/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
So we see that consumer-orientation and organizational objectives have equal
weightage.
HANDOUT
1. 15 points marketing managers must remember to ensure they are
adhering to the Marketing Concept.
The leaders in accepting the Marketing Concept were GENERAL ELECTRICand
the Fast-Moving-Consumer-Goods (FMCG) company PROCTeR & GAMBLE.
Now many service companies have also embraced the marketing concept. For
example:
24-hour banking, ATM machines, internet banking.
Mobile phone companies introducing several Value-Added Services,
facilitating bill payment online, introducing Customer Loyalty programs.
Airline industry & tourism industry; online booking of seats and hotels, adding
superior services and features to their services to ensure customer comfort,
satisfaction, and entertainment.
HANDOUT
2. Adopters of the Marketing Concept versus Production- or Sales-
oriented managers
Page 13 of 25
-
7/29/2019 MM Lecture 1 Notes
14/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
MARKETING CONCEPT & NON-PROFIT ORGANIZATIONS
The Marketing Concept is now recognized and adopted by non-profit
organizations as well. For example, lets take the World Wildlife Fund (WWF),whose job is to protect animals. The customers of this company are the people
who support it, who give donations. WWF must keep its customers satisfied,
otherwise the customers will stop supporting its cause.
Non-profit organizations also need to attract their customers, due to increase in
competition.
Page 14 of 25
-
7/29/2019 MM Lecture 1 Notes
15/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
THE SOCIETAL MARKETING CONCEPT
CONSUMERISM :-
In Western societies, the shift to industrialization in the late 19 th century brought
about the start of Consumerism. As more and more people moved from rural
areas to cities to work in factories, many workforce-related problems surfaced,
including child labor, unsafe and unhealthy working conditions, low minimum
wages, and so on. For this, the huge industries came under heavy criticism.
As the Sales, then Marketing eras came, the criticism expanded to include
marketing and other activities of companies (including HR policies, waste
disposal practices, manufacturing practices, advertising practices, and so on).
Firms were accused of ignoring the impacts of their activities on society. For
example, there are several industries and companies that are posing serious
threats to the environment and health hazards to the consumers:-
Automobile manufacturers
Sugar mills (waste)
Cigarette industry
Plastic industry
Apart from company activities harming the environment or depleting natural
resources, another major criticism on companies is that of Planned
Obsolescence. This is when firms choose materials and components that dont
last very long. For example, stockings, disposable razors, disposable lighters etc.
The positive aspect of this practice is that consumers get inexpensive,
convenient products. And this is how marketers respond to critics. They argue
that planned obsolescence gives consumers convenience, savings and flexibility.
Items that go out of fashion quickly are better off being short-lived. However, the
Page 15 of 25
-
7/29/2019 MM Lecture 1 Notes
16/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
criticism on planned obsolescence has increased in the past few years,
especially since it is seen to be a big burden on natural resources.
All these criticism became so harsh that company images were being seriously
damaged. Ultimately, sales were affected as consumers developed negative
feelings towards companies engaging in above-mentioned practices.
Today, the public is very aware and conscious; it rebels against businesses that
sell unsafe products (hazardous to the environment or human health),
purposefully mislead consumers, or offer a restricted choice of alternatives. This
trend is known as the Consumer MovementorConsumerism.
Consumerism is the set of activities undertaken by individuals,
independent organizations, government agencies and business
organizations designed to protect the consumer from unethical marketing
practices and conditions.
The term Consumer Movementis somewhat misleading since there is no actual
organization of consumers; instead there are various groups with separate
concerns. As a result, the activities of these groups in the consumer interest are
better referred to as Consumerism.
The primary concern of Consumerism is to ensure the consumers rights in the
process of exchange. These rights include
1. The right to be informed
2. The right to be told the truth
3. The right to be given adequate number of alternatives
4. The right to be assured of safety in the process of consumption
Three types of organizations make up the consumer movement.
Page 16 of 25
-
7/29/2019 MM Lecture 1 Notes
17/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
1. Consumer-oriented groups
2. Government agencies
3. Business organizations
1. Consumer-oriented groups: concerned primarily with increasing consumer
consciousness and providing consumers with information to improve their
basis for choice.
2. Government agencies: their responsibility is to protect consumer interests
through legislation and the actions of regulatory agencies.
a. In the USA, the Congress has prohibited deceptive packaging. It also
requires warning labels on cigarettes and plastic packaging. It prohibits
the sale of unsafe products to children, and requires full disclosure of
health claims and ingredients on food products.
HANDOUT
3. Important consumer protection laws passed in the USA since 1966.
HANDOUT
4. Key US legislation affecting marketers
b. Regulatory agencies play a critical role in ensuring consumer rights.
The two most widely known the world over are the Federal Trade
Commission (FTC) and the Food and Drug Administration (FDA),
both in the USA, established in the first decade of the 20th century. The
FTCis meant to curb monopolistic activities and unfair trade practices.
It also acts as a watchdog over deceptive advertising. The FDA sets
Page 17 of 25
-
7/29/2019 MM Lecture 1 Notes
18/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
product standards for the food industry and requires disclosure of
product contents. Other regulatory agencies include (i) the Federal
Communications Commission (FCC), which oversees advertisingdirected at children, (ii) the Consumer Product Safety Commission
(CPSC), which sets product safety standards to protect consumers
from risk or injury, and (iii) the Environmental Protection Agency
(EPA), which sets controls on industry emissions, toxic wastes and
automobile pollution. CPSCand EPA were established in the 1970s.
3. Business organizations: companies are both reactive and proactive in
protecting consumer rights.
a. In reacting to government regulation, businesses must conform to a
variety of laws dealing with areas such as product safety, product
labeling, truth in advertising, controls over pricing and monopolistic
activities, and pollution controls. Companies must also conform to
guidelines established by regulatory agencies, e.g. the FTCin the USA
has put restrictions on deceptive advertising. The Food and Drug
Administration (FDA) requires companies to provide nutritional labeling
on food products.
b. A more proactive response from business organizations is self-
regulation. Many companies today have adopted sophisticated anti-
pollution policies, forthright labeling practices, etc.
This proactive approach is actually a result of the consumer movement. This
means that had the companies been left to decide on their own, most of them
would have quietly gone on with their unfair trade practices, exploitation of
consumers and activities detrimental to consumer health and environment. But it
is the level of awareness of the consumer which scares the business
Page 18 of 25
-
7/29/2019 MM Lecture 1 Notes
19/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
organizations. Wise companies decide to make amends BEFORE consumers
raise their voice against that particular company.
Over the past 40 years or so, in response to Consumerism, companies have
adopted what is called the Societal Marketing Concept: in addition to satisfying
consumers and achieving organizational objectives, companies are conscious of
their social responsibility. For example:-
TOYOTA has started investing heavily on environment-friendly cars;
technologies like fuel cell. Fuel-efficient and clean-cars will need years of
R&D, heavy investment, but they are doing it.
Many companies are committed to using recycled packaging materials only,
like MARKS & SPENCER, a garments chain in the UK.
Companies have started responding to criticism about planned obsolescence.
KODAK started making disposable cameras some years back; now it has
started recycling those disposable cameras. Companies that sell bottled
beverages have started recycling their bottles. Companies like CANONand
HP that sell toner cartridges have started refilling the cartridges. So the
burden on natural resources because of planned obsolescence has been
greatly reduced.
PAKISTAN TOBACCO COMPANYundertakes tree plantation and forestation
on a mass scale every year. It has its own nurseries that grow saplings.
P&G and other FMCG companies frequently launch CSR activities like getting
poor sick children treated, opening schools for girls in rural areas, and so on.
Page 19 of 25
-
7/29/2019 MM Lecture 1 Notes
20/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
Baby foodcompanies all over the world have started using natural foods and
ingredients. Earlier on they used synthetic ingredients. In general food
companies have started emphasizing use of healthier ingredients.
Companies have to practice social responsibility not only toward their buyers and
extended customers as discussed above, but also toward their employees,
distribution channel members, and even competitors
HANDOUT
5. Socially responsible marketing practices towards various sections of
society.
WHY THE SOCIETAL MARKETING CONCEPT MAKES COMMON &
BUSINESS SENSE:-
There are three reasons why companies have adopted this concept:-
1. Up till the 1960s, natural resources like water, air, oil, etc. were seen as
limitless. But now firms understand that these resources are being
depleted fast. Air is being polluted, energy sources are becoming scarce.
This scarcity of resources has been brought about by the actions of the
general public as well as by firms. According to Business Week
Out of the worlds natural resources that are being used annually,
70% are being used by 25% of the people in industrialized
nations.
Obviously as industrial and economic growth increases, natural resources
will deplete even more, and faster. As this reality has set in, companies
have become more responsible regarding the usage of these resources.
Page 20 of 25
-
7/29/2019 MM Lecture 1 Notes
21/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
2. They have recognized that their market is not only people who buy their
products, but also people who are directly affected by its operations. Sothey have broadened their customer base to include their consumers as
well as afectees.
3. They have also understood that satisfying this broader customer base will
require more time, investment and skill than those required for meeting
the needs of the buyers. However, doing so will mean long-term customer
satisfaction. Socially responsible behavior leads to positive customer
response.
ETHICS IN MARKETING
The Societal Marketing Concept guides Ethical Behavior in Marketing. Ethical
Behavior is defined as honest & proper conduct.
Two Important Questions in the Study of Ethics:-
1. How do people decided what is ethical and what is non-ethical?
People learn the difference between right and wrong through their upbringing,
education, job environment, life-long experiences, and religion. They also use
their own moral skills to decide.
2. Why do people act ethically or unethically?
People act ethically or unethically based on their expectations of the reward or
punishment, both the
Magnitude of the reward or punishment, e.g. the size of the raise in salary or
bonus, or size of the penalty or fine.
Page 21 of 25
-
7/29/2019 MM Lecture 1 Notes
22/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
Likelihood of occurrence of the reward or punishment
ETHICAL THEORIES :-Various ethical theories have been formulated to try and explain why people and
organizations act in particular ways. Four of these theories are:
1. Egoism
2. Utilitarianism
3. Duty-based
4. Virtue Ethics
1. Egoism
Individuals always act in their own interests, e.g. a production manager who is
due for a transfer in 6 months postpones the much needed product innovation,
because he wants to maximize short-term profit.
2. Utilitarianism
Actions of individuals and organizations are good if they bring maximum benefit
for maximum number of people, e.g. a drug is approved by the FDA if the
number of people it helps is far greater than the number of people who will have
damaging side-effects from using that drug.
3. Duty-based
The rightness or wrongness of actions is not judged on the basis of their
consequences, but actions are right if they stem from some basic obligation or
duty. For example, a supermarket keeps low prices in an area where peoplehave low incomes, even though it reduces the profit.
4. Virtue Ethics
Page 22 of 25
-
7/29/2019 MM Lecture 1 Notes
23/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
Actions should be guided by a persons or organizations desire to seek
goodness and virtue. For example, a company is totally truthful in its advertising,
it does not make any manipulative claims or appeals.
CRITICISMS ON MARKETING :-
Marketing comes under a lot of fire for unethical practices, e.g.
Advertising is misleading
Products are not long-lasting (planned obsolescence)
Marketing encourages people to be materialistic
Advertising presents unreal views on life, & forms unrealistic expectations
Marketing encourages organizational managers to be unethical, to get their
customer by hook or by crook
Marketing using a lot of manipulative techniques to lure customers, e.g. credit
options
Pollution of the environment
Depletion of natural resources
DIVISION OF ETHICAL ISSUES :-
1. Product-related Ethical Issues
Whether certain products should be marketed or not, e.g. cigarettes, alcohol,
plastics, polythene
2. Process-related Ethical Issues
Whether certain marketing practices should be used, e.g. certain products that
have been banned in your own country, so you try to sell them overseas. This
Page 23 of 25
-
7/29/2019 MM Lecture 1 Notes
24/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
practice is being adopted by many pharmaceutical companies. Also for example,
certain advertising techniques.
ETHICAL ISSUES IN INTERNATIONAL MARKETING :-
Definitions of what is ethical and what is not takes on very different meaning in
different markets.
1. Each society has its own norms and views of what is acceptable behavior
and what is not.
2. Due to different languages, misunderstandings arise
3. In less developed nations, social and environmental issues are not such a
big deal, e.g. in Pakistan
4. Governments in some countries may devise rules to protect domestic
companies, even though the rules promote unethical behaviour. For
example the cigarette industry in the USA
5. International ethical disputes are very difficult to settle. Where will the
arbitration take place? Which countrys law will be applicable?
Examples:
In Japan, giving gifts is part of their culture. It is the same in Pakistan. In
some countries this will be viewed as a bribe.
In some countries, certain phrases are taboo. For example, in the UK and
USA, colleagues often address members of the opposite sex as my dear,
sweetheart etc. But in a country like Pakistan, this would be considered
harassment. Even shaking hands is a socially unacceptable practice in
Page 24 of 25
-
7/29/2019 MM Lecture 1 Notes
25/25
MARKETING MANAGEMENTLec no. 1 The Marketing Concept
10th & 12th Aug 2009MBA-09NU, Isb
Pakistan, whereas it is a common way of greeting someone. In fact, not
shaking hands is considered rude.
CODE OF ETHICS TEACHING ETHICS IN THE WORKPLACE :-
Marketing Ethics is a real issue; it is not just a philosophy. Companies have to
set certain standards of ethics. They have to curb unethical practices by their
employees, and by the company overall. Many companies have their codes of
conduct that are printed and circulated among employees. Employees are
expected to adhere to them. To give you a general idea, I am circulating the
CODE OF ETHICS of the AMERICAN MARKETING ASSOCIATION.
HANDOUT
6. Code of Ethics of the American Marketing Association.
In addition to Code of Ethics, management can do the following:
Present role models of ethical behavior
Give wide-ranging examples of ethical and unethical behavior
Specify punishments for different unethical practices