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

Lecture 7 Marketing, Advertising and Product SafetyBBA361 Business Ethics and Corporate Governance Charmaine Chan, Department of Business Administration Chapter 6, “Ethics and the Conduct of Business”,John R. Boatright

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 choice that includes the products that consumers truly want.

2. Marketing Ethics in Hong Kong I Consumer rights in Hong Kong: The right to satisfaction of basic needs; The right to safety The right to be informed The right to choose The right to be heard The right to redress The right to consumer education The right to a healthy and sustainable environment

2. Marketing Ethics in Hong Kong II http://www.consumer.org.hk/website/ws_en/competition_issues/model_code/2006100401.pdf Trade Practice Rules Complaint Handling Rules Fair Competition Rules

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

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

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

3. Ethics in Sales Practice, Labeling Pricing I ) Sales Practice Salesperson’s 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;

3. Ethics in Sales Practice, Labeling Pricing II ) Labeling Correct and adequate information on the label (Ethical question: how much information is a manufacturer obligated to provide?) Fair packaging: Package list the identity of product, name and location of manufacturer packer, net quantity, the number of per serving, etc;

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 Unfair Pricing: Such as unconscionably high prices, misleading prices (which happens in herbal shops in HK) Hidden costs

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 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 sodium which increases some form of heart disease.=> Consumers who try to avoid heart disease end up easily get heart disease.

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

4. Product Safety “ The right of consumers to be protected from harmful products”

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 Notification

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