MODULE MKT 2013 MQF 2.0 VERSION

Principles of Marketing (MKT 2013)

Deceptive Packaging
▪ In deceptive packaging the product is so packed that it misleads the customer on various
fronts (in terms of quantity, size, shapes, content etc.).
▪ It is generally used by the companies to attract the consumers and make them buy their
products by giving them a feeling which is opposed to the real packaging of the products.
▪ Deceptive packaging can be done by companies for many reasons.
▪ One of the reasons is that because of rising costs the company incurs, it would have to
reduce the quantity of product sold per pack. Hence, it may indulge in deceptive packing
wherein packing is carried out in such a manner that the loss of quantity is not evident in
the product so sold.
▪ Another reason would be regarding the shape of the product by the virtue of which the
products usage may increase. For instance, a toothpaste may have a bigger opening
than their previous packing so that the amount of toothpaste used every time increases.

(MBA Skool Team, 2018)

Image source: aditisar Image source: eva_white

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2) Ethical Issues in Pricing

Price Fixing
▪ Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors

that raises, lowers, or stabilizes prices or competitive terms.
▪ Generally, the antitrust laws require that each company establish prices and other terms on

its own, without agreeing with a competitor.
▪ When consumers make choices about what products and services to buy, they expect that

the price has been determined freely based on supply and demand, not by an agreement
among competitors.
▪ When competitors agree to restrict competition, the result is often higher prices.
Accordingly, price fixing is a major concern of government antitrust enforcement.
▪ Example: A group of competing optometrists agreed not to participate in a vision care
network unless the network raised reimbursement rates for patients covered by its plan. The
optometrists refused to treat patients covered by the network plan, and, eventually, the
company raised reimbursement rates. The FTC said that the optometrists' agreement was
illegal price fixing, and that its leaders had organized an effort to make sure other
optometrists knew about and complied with the agreement.

(Federal Trade Commission, 2021)
▪ For example in Malaysia, seven tuition and daycare centres in SS19 Subang Jaya have

been fined a total of RM33,068.85 after they were found guilty of engaging in price
fixing. The centres have also been required to undergo and complete an online
course on competition compliance for small and medium enterprises. Price fixing has
been described by the Malaysia Competition Commission (MyCC) as a hardcore
cartel. (Ahmad, 2018).

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High Prices
▪ Such high prices are hard to swallow, especially when the economy gets tight.
▪ Critics point to three factors – high costs distribution, high advertising and promotion costs,

and excessive markups.
▪ A long-standing charge is that greedy marketing channel members mark up prices beyond

the value of their services.
▪ As a result, distribution costs too much and consumers pay for these excessive costs in the

form of higher prices.
▪ Their prices reflect services that consumers want- more convenience, larger stores and

assortments, more service, longer store hours, return privileges and others.

Price Discrimination
▪ Price discrimination is the strategy of selling the same product at different prices to different

groups of consumers, usually based on the maximum they are willing to pay.
▪ The practice also surfaces in hiding lower priced items from customers who have a higher

willingness to pay.
▪ This one is a little tricky, because it is socially accepted in some cases, yet rejected in others.
▪ For example, very few people would complain that the 80 year old man and his 2 year old

great-granddaughter pay $10 less to enter the carnival. Yet, only showing the more expensive
hotels to more affluent customers caused an enormous amount of PR backlash for travel site
Orbitz.

Predatory Pricing
▪ Predatory pricing is the practice of using below-cost pricing to undercut competitors and

establish an unfair market advantage.

▪ Predatory pricing is a method in which a seller sets a price so low that other suppliers cannot

compete and are forced to exit the market.
▪ The predator is willing to sell at a loss – below cost – for a period, in the hope that its rivals

either go bust or decide stop selling that product. When competing companies have left the
market, the predator pushes prices back up.
▪ Predatory pricing, when successful, can help the predator establish or re-establish a
monopoly.
▪ Dumping is an exporting goods at a lower price than at home or lower than the cost of
production and this is a type of predatory pricing.

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▪ It is a method used to deal with new companies that enter a market. If a monopoly is enjoying
mega-profits, it is bound to attract new players into the scene.

▪ If the predator’s competitors survive its predatory pricing strategy, the authorities in most
countries will not intervene, because lower prices, more choice and a competitive market is
good for consumers. They will only intervene if the competitors are killed off and the predator
becomes a monopoly.
(Market Business News, n.d.)

Deceptive Pricing
▪ Deceptive pricing includes practices such as falsely advertising “factory” or “wholesale”

prices or a large price reduction from a phony retail “list price”.
▪ Deceptive pricing practices cause customers to believe that the price they pay for some

unit of value in a product or service is lower than it really is.
▪ The deception might take the form of making false price comparisons, providing misleading

suggested selling prices, omitting important conditions of the sale, or making very low price
offers available only when other items are purchased as well.
▪ For example, retailers the likes of JCPenney and Kohl’s were hit with lawsuit last year alleging
that they used inflated original prices.

3) Ethical Issues in Promotion

Deceptive Promotion
▪ Advertisements or promotional messages are deceptive if they convey to consumers

expressly or by implication that they're independent, impartial, or from a source other than
the sponsoring advertiser – in other words, that they're something other than ads.
▪ Deceptive ads harm consumers by causing them to have false beliefs about the nature of
the products being advertised and thereby causing them to make different purchasing
decisions than they would
have made otherwise
(and purchase things
unsuitable for their needs)

Source : Google image
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Issues with Violence, Sex, and Profanity
▪ Sexual innuendo is a mainstay of advertising

content, and yet is also regarded as a form of
sexual harassment.
▪ Violence is an issue especially for children's
advertising and advertising likely to be seen by
children.
▪ The picture shows an advertisement “One child is
holding something that’s been banned in
America to protect them. Guess which one?”.
▪ A lot of ads are showing fearful scenarios and provocative images.

Taste and Controversy

▪ The advertising of certain products may strongly offend some people while being in the

interests of others.

▪ Examples include: feminine hygiene products, hemorrhoid and

constipation medication.

▪ The advertising of condoms has become acceptable in the

interests of AIDS-prevention, but is nevertheless seen by some

as promoting promiscuity.

▪ Some companies have actually marketed themselves on the

basis of controversial advertising - see Benetton.

▪ The ad is attempting to be humorous by employing an absurd

image, a baby shaving itself. The ad is also trying to make the

point that the new Gillette safety razor is so safe that even a

baby could use it without harm. There also may have been an intention to create an

association between the smoothness of a baby’s skin and the closeness of the shave provided

by the razor. By today’s standards, however, the advertisement appears reckless. While it is not

possible that a baby would be influenced by an advertisement, it is not inconceivable that a

small child of five or six years of age might be encouraged by this advertisement to play with

a razor: The baby seems to be having such fun, and the small child might have seen his or her

father shaving. Regardless of the likelihood that the advertisement could cause harm, today’s

advertisers have become increasingly wary of using advertising that features children engaged

in dangerous activities. (Source from https://courses.lumenlearning.com/).

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Comparative Advertising
▪ Comparative advertising is a marketing

strategy in which a company's product or
service is presented as superior when
compared to a competitors.
▪ A comparative advertising campaign may
involve printing a side-by-side comparison
of the features of a company's products
next to those of its competitor.
▪ The goal of comparative advertising is to
communicate the value of whatever
product or service you’re promoting.
▪ Though it may seem as if some big-name brands use comparative advertising strictly to
entertain people (e.g., Wendy’s repeatedly tweeting about McDonald’s use of frozen
patties), the true purpose of the strategy is to communicate value. Wendy’s wants you to
laugh, but they also want you to associate their food with freshness.

4) Ethical Issues in Place (Distribution)

Bribes
▪ A bribe is a form of corruption which involves the promise of money or a favor to someone in

a position of power, with the hope of influencing that person’s behaviour.
▪ Bribery is viewed as a crime in many regions of the world and people who are caught

offering or receiving bribes may face hefty penalties.
▪ Bribery distorts the operation of fair bargaining and salespeople should resist efforts for bribes

from occasional member of the business buying center who might want to engage in such
activity.

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Poor Service to Disadvantage Consumers
▪ Ethical concerns are also linked with the segmenting, targeting, and positioning process.
▪ Efforts to target consumer populations can be subject to unethical attitudes (e.g.:

particularly vulnerable consumer populations, such as children, the poorest minorities, and
the uneducated).
▪ For example, the issue of higher insurance premiums to people with poor credit ratings is
morally questionable.
▪ Critics claim that the urban poor often have to shop in smaller stores that carry inferior
goods and charge higher prices.
▪ The presence of large national chain stores in low-income neighborhoods would help to
keep prices down.
▪ However, the critics accuse major chain retailers of redlining, drawing a red line around
disadvantaged neighborhoods and avoiding placing stores there.

High Pressure Selling
▪ Salespeople are sometimes accused of high-pressure selling that persuades people to buy
goods they had no thought of buying.
▪ It is often said that insurance, real estate and used cars are sold, not bought.
▪ Salespeople are trained to deliver smooth, canned talks to entice purchases.
▪ They sell hard because sales contests promise big prizes to those who sell the most.
▪ Similarly, TV infomercial pitchman use “yell and sell” presentations that create a sense of
consumer urgency that only those with strong willpower can resist. Most selling involves
building long-term relationships with valued customers.
▪ High -pressure or deceptive selling can seriously damage such relationship.
▪ For example, imagine a P&G account manager trying to pressure a Walmart buyer or an
IBM salesperson trying to browbeat an information technology manager at GE. It simply
would not work.
▪ Because sales performance is the most common way in which marketing representatives
and sales personnel are evaluated, performance pressures exist that may lead to ethical
dilemmas.
▪ For example, pressuring vendors to buy more than they need and pushing items that will
result in higher commissions are temptations.

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SOLUTIONS TO OVERCOME ETHICAL ISSUES IN MARKETING

1) Ethical Code
▪ Because regulation cannot be developed to cover every possible abuse, organizations and

industry groups often develop codes of ethical conduct or rules for behavior to serve as a
guide in decision making.
▪ The American Marketing Association, for example, has developed a code of ethics.
▪ The American Marketing Association commits itself to promoting the highest standard of
professional ethical norms and values for its members (practitioners, academics, and
students).
▪ Norms are established standards of conduct that are expected and maintained by society
and/or professional organizations.
▪ 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.

(Source from https://www.ama.org/codes-of-conduct/)

▪ Most large companies and thousands of smaller ones have created, printed, and distributed
codes of ethics.

▪ In general, a code of ethics provides employees with the knowledge of what their firm
expects in terms of their responsibilities and behavior toward fellow employees, customers,
and suppliers. Some ethical codes offer a lengthy and detailed set of guidelines for
employees.

▪ Examples of company codes of ethics:
a) Costco http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-govhighlights
b) Starbucks https://www.starbucks.com/about-us/company-information/business-
ethics-and-compliance
c) AT&T https://www.att.com/gen/investor-relations?pid=5595

(Source from https://opentextbc.ca/)

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2) Ethical Audit
▪ An investigation into how well (or poorly) a company conforms to the ethical standards of

its industry or society generally.
▪ Some companies may formally adopt a code of ethics and conduct periodic ethics audits

to see how closely they follow their own rules.
▪ Ethics audit refers to an audit conducted in order to adjudge whether the organization is

following the code of conduct goals and values that it has set for itself in the social sphere.
▪ It measures the culture and behaviour of an organization, and determines the extent to

which its values are embedded across its people and processes.
▪ Common parameters which may be evaluated in an ethics audit include job satisfaction,

awareness of the organization’s policy on equality and diversity, contribution towards the
society, whether the processes of the organization follow ethical standards set by the society
etc.
▪ Assessing the outcomes and achievements of corporate social responsibility to improve
future outcomes is an example of ethics audit. Another example is performance related to
company’s policies on whistleblowers and grievance redress.

(Sources from https://www.researchgate.net/publication/)

3) Regulation and Enforcement
▪ Relevant areas of law include consumer law which protects consumers and antitrust law

which protects competitors - in both cases, against unethical marketing practices.
▪ Regulation extends beyond the law to lobbies, watchdog bodies and self-regulatory

industry bodies.
▪ The Federal Trade Commission (FTC) and other federal and state government agencies

are charged both with enforcing the laws and creating policies to limit unfair marketing
practices.
▪ The principal law for consumer protection in Malaysia is the Consumer Protection Act
(CPA) 1999. The CPA is said to drive the establishment of various consumer protection
mechanisms in Malaysia, and to bridge gaps that may occur in other major laws, which
may be inadequate in protecting consumers.
▪ Consumer Protection Act (CPA) 1999 (or Act 599) came into force on the 15th of
November 1999 to provide legislative provisions for consumer protection.
▪ The Competition Act 2010 prohibits anti-competitive agreements and the abuse of

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dominant position in the market. The Act has been in force since 1 January 2012 in
Malaysia. (Malaysia Competition Commission (MyCC), 2021).

(Source from https://aseanconsumer.org/)

4) Corporate Social Responsibility (CSR)
▪ Corporate Social Responsibility can be defined as "a commitment to improve community

well-being through discretionary business practices and contributions of corporate
resources".
▪ Few benefits of being socially responsible include:
(a) Improvement company and brand image
(b) Easiness to attract and retain employees
(c) Increase in market share
(d) Less operating costs
(e) Helps to attract investors.
▪ A socially responsible firm cares about customers, employees, suppliers, the local
community, society, and the environment.
▪ CSR is an approach by which a company:
(a) Finds that its activities have a wide impact on the society and development
(b) Actively manage the economic, social, environmental and human rights.

5) Training and Motivation Programme
▪ In addition to providing a system to resolve ethical dilemmas, organizations also provide

formal training to develop an awareness of questionable business activities and
practice appropriate responses.
▪ Many companies have some type of ethics training program.
▪ The ones that are most effective, like those created by Levi Strauss, American Express,
and Campbell Soup Company, begin with techniques for solving ethical dilemmas.
▪ Next, employees are presented with a series of situations and asked to come up with
the “best” ethical solution.
▪ According to a recent survey by the Ethics Resource Center, more than 80 percent of
U.S. companies provide some sort of ethics training for employees, which may include
online activities, videos, and even games.

(Source from https://opentextbc.ca/)
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REFERENCES

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