Ethical Selling, Marketing, & AdvertisingLesson 2 Business Ethics

Objectives

• Identify and explain common ethical problems in advertising.• Identify and explain key ethical problems and

principles of honest and ethical selling.

Key Terms• False advertising• Puffery• Bait and switch• Telemarketing• Price gouging• Commission• Straight commission

• Code of ethics• Substantiation• Guarantee• Warranty• Testimonial• False prizes

Propaganda & Advertising

Advertising• Advertising – practice of attracting public attention to a

product or business for the purpose of increasing sales.• How can people purchase a product if they don’t know about

it?• Fine line between encouraging people to purchase a product

and manipulating or deceiving people into purchasing a product.

Unethical Ads in History

• Lucky Cigarettes• Lyndon Johnson Presidential Campaign Ad• Pepsi and Immersive Games

Ethical Problems in Advertising • False Advertising•Puffery•Bait and Switch•Advertising to Children• Telemarketing

False Advertising

• False advertising – practice of making statements about a product that the advertiser knows are not true.• May be about how product works, how it is made, or

how it will affect people who buy or use it.• Unethical and dishonest• Public reaction can be severe• Example: Tobacco Industry

False Advertising

False Advertising

Advertisement

Real Product

False Advertising

Advertisement

Real Product

False Advertising

False Advertising

Puffery• Puffery – term used to describe statements that are not

outright lies, but merely exaggerations.• Example: Amusement park claiming to be “the best time

you’ll ever have in one day”.• Unethical? Illegal?• Federal Trade Commission (FTC) regulates advertising and

advertisers.• FTC allows puffery, defining it as “exaggerations reasonably to

be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be determined.”

Puffery

Puffery?

Puffery?

Puffery?

Bait and Switch• Bait and switch – the practice of advertising product at a low

price while intentionally stocking only a limited number in hopes of luring shoppers to buy more expensive items.

• Illegal, but sometimes hard to prove.• No legally mandated minimum number of products that must

be kept in stock.• Businesses must do the following:• Clearly state the number of products in stock• Offer rain checks to customers who request them.• Rain check – written guarantee that customers can have the

product at the discounted price when more are delivered to the store.

Bait & Switch?

Bait & Switch?

Bait & Switch?

Advertising to Children• Vulnerable to deceptive advertising.• Believe claims on TV.• Children have difficulty differentiating between fantasy and

reality.• Laws passed to protect children.• Prohibits creators/producers of children’s cartoon from

advertising products related to the characters of that program during the broadcast.

• Buy Me That http://youtu.be/d7VNFO4ksCE

Advertising to Children

Advertising to Children

Advertising to Children

Telemarketing• Telemarketing – practice of selling directly to individuals

through unsolicited phone calls, e-mails, or faxes.• Technology has made this practice more common.• Many people feel that telemarketers are wasting their time.• Do not call lists.

Advertising Ethics & PrinciplesAmerican Advertising Federation’s (AAF) Code of Ethics:1.Truth2.Substantiation 3.Comparisons4.Bait advertising5.Guarantees and warranties6.Price claims7.Testimonials8.Taste and decency

Truth• Advertising shall tell the truth, and shall reveal significant

facts, the omission of which would mislead the public.• Ethics starts with truth and fairness.• Choosing not reveal important facts about a product is a form

of dishonesty.

Truth

Substantiation• Advertising claims shall be substantiated by evidence in

possession of the advertiser and advertising agency, prior to making such claims.

• Requires more than believing a claim to be true.• Substantiation – the validation of advertising claims with

objective data from independent research. • Advertiser must be able to prove all claims are true.

Substantiation

Comparisons• Advertising shall refrain from making false, misleading, or

unsubstantiated statements or claims about a competitor or his/her products or services.

• Making false claims about competitors is illegal.• Company may be sued for libel.

Comparisons

Comparison

Bait Advertising• Advertising shall not offer products or services for sale unless

such offer constitutes a bona fide effort to sell the advertising products or services and is not a device to switch consumers to other goods, or services, usually higher priced.

Bait Advertising

Guarantees and Warranties

• Advertising of guarantees and warranties shall be explicit, with sufficient information to apprise consumers of their principal terms and limitations or, when space or time restrictions preclude such disclosures, the advertisement should clearly reveal where the full text of the guarantee or warranty can be examined before purchase.

Guarantees and Warranties (cont.)• Guarantee – an assurance attesting to the

durability or quality of a service or product.• Warranty – written promise to repair or replace

a product if it breaks or becomes defective within a specified period of time.• Often explained in small print and complex

language.• Carefully read the details!• Example: Apple Warranties, ShopAdidas

Guarantee

Price Claims

• Advertising shall avoid price claims which are false or misleading, or saving claims which do not offer provable savings.• Violations are hard to prove.• People fail to notice the small print containing

disclaimers to the ad.• Example: • Walmart Rollback • Meijer Everyday Pricing• Best Buy Price Match

Testimonials

• Advertising containing testimonials shall be limited to those of competent witnesses who are reflecting a real and honest opinion or experience.• Testimonial – an endorsement of a product by someone

claiming to have benefited from its use.• Features celebrities or experts (Marie Osmond)• Very effective sales technique

Taste and Decency

• Advertising shall be free of statements, illustrations or implications which are offensive to good taste and public decency.• How many people must be offended for an ad to be

considered offensive?• Pleasing everyone is impossible.• Offending a particular group can have huge

consequences for a company.

• Example: Janet Jackson, SuperBowl Half-Time

Taste and Decency

Taste and Decency

Limitations of the Advertising Code of Ethics• For code to be effective, must be enforceable and actually

enforced.• Membership in trade groups like the American Advertising

Federation (AAF) is voluntary.• Don’t need a license to be an advertiser.

Ethical Problems and Concerns in Selling• When income is based on ability to sell products,

temptation is greater.• Salesperson may think the ends justify the

means.• Most salespeople are honest.• Small number of dishonest salespeople give the

profession a negative image.

Price Gouging

• The practice of pricing a product far above the normal market value on the basis that consumers have no other way to buy the product.• Example: Gas prices increasing on 9/11 to over

$4.00/gallon.• Illegal in most states.• Stores are monitored after disasters.

False Prizes

• Winning a valuable prize such as a car or vacation and then told you must pay a service or delivery charge before you can collect the prize. • Prize doesn’t exist and money disappears.• Loopholes usually explained in small print.• May lure you in with prize to get you to listen to

a sales pitch on another product/service.• Too good to be true? Probably is!

Commission

• Earning a percentage of the total sales that a person makes.• More you sell, more you earn.• Straight commission – employee doesn’t not get

a salary or hourly wage; income is based solely on what they sell.• Motivates people to sell.• Can encourage deceptive and dishonest sales

techniques.

Principles of Ethical Selling

• Think long term• Elevate the goal• Change the tactics• Learn to listen

Think Long-Term• Majority of unethical business decisions/actions are based on

short-term thinking.• Acquiring money immediately which can lead to taking

shortcuts/cutting corners.• Often forget about long-term consequences of their actions.

Elevate the Goal• Goal is to create a mutually beneficial relationship, not just

selling a product.• No reason for manipulation or lying.• Act for the customers’ best interests, not making a buck.

Learn to Listen

• Traditional model of selling• Memorize key points• Present information to customers• Hope the pitch convinces customers• Questions asked of customers lead to a decision to

buy• Unsolicited questions are considered distractions

• Put yourself in customers’ shoes• Forget the sales pitch! Listen to your customer!