A634.5.4.RB - Is Marketing Evil

Fraud includes when individuals engage in intentional deceptive practices to advance their own interests over those of the organization or other group. Fraud is any purposeful communication that deceives, manipulates or conceals facts with the intent to harm others. Fraud can be a crime and convictions can result in fines, imprisonment or both. Globally, fraud costs organizations over $3.5 trillion a year. The average organization loses about 5 percent of annual revenues to fraud. Some major ways fraud is detected include: tip, management review, internal audit, by accident, document examination and external audit. The majority of fraud detection is due to tips. Types of fraud include: accounting, marketing, puffery and implied falsity. (Ferrell, Fraedrich, and Ferrell, 2015)

Marketing fraud is the process of dishonesty creating, distributing, promoting and pricing products and services and is a business area that generates potential ethical issues. False and misleading marketing communications destroys customers' trust in a company. Lying, a major ethical issue involving communication, is a potentially significant problem. For both internal and external communications, it causes ethical predicaments because it destroys trust. For example, the Securities and Exchange Commission (SEC) charged two units at financial services firm Oppenheimer & Company with misleading investors about the value of their private equity funds. They agreed to pay more than $2.9 million to settle the lawsuit. Misleading  marketing can also cost consumers hard-earned money. (Ferrell, Fraedrich, and Ferrell, 2015)

False and deceptive advertising is a key issue in marketing communications. One set of laws common to many countries concerns deceptive advertising - that is, advertisements not clearly labeled as advertisements. In the US, Section 5 of the Federal Trade Commission (FTC) Act identifies deceptive advertising. Abuses in advertising range from exaggerated claims and concealed facts to outright lying, although improper categorization of advertising claims is the critical point. Courts place false or misleading advertisements into three categories: puffery, implied falsity and literal falsity. (Ferrell, Fraedrich, and Ferrell, 2015)

Puffery can be defined as exaggerated advertising, blustering and boasting upon which no reasonable buyer would rely and is not actionable under the Lanham Act (1946). For example, in a lawsuit between two shaving cream companies, the defendant advertised the moisturizing strip on its shaving razor was "six times smoother" than its competitors' strips, while showing a man rubbing his hand down his face. The court rejected the defendant's argument that "six times smoother" implied that only the moisturizing strip on the razor's head was smoother. Instead, the court found the "six times smoother" advertising claim implied that the consumer would receive a smoother shave form the defendant's razor as a whole, a claim that was false. Implied falsity means the message has a tendency to mislead, confuse, or deceive the public. Advertising claims that use implied falsity are those that are literally true but imply another message that is false. An example of implied falsity could be a company's claim that its product has twice as much of an ingredient in its product, implying that it works twice as well, when in reality the extra quantity of the ingredient has no effect over performance. Literally false includes two categories: tests prove (establishment claims), when the advertisement cites a study or test that establishes a claim; and bald assertions (nonestablishment claims), when the advertisement creates a claim that cannot be substantiated, as when a commercial states a certain product is superior to any other on the market. Literally false also includes "weasel word" expressions such as "helps prevent," "helps fight," and "helps make you feel." (Ferrell, Fraedrich, and Ferrell, 2015)

Ethical guidelines can have a positive impact to marketers, however, it makes more of an impact when you have to sign something, e.g., ethics training (yearly), an ethics commitment (yearly) and a code of conduct. This makes more of an impact because it is in writing and documented and not "hearsay." This can also help companies "balance" the need to win with being ethical. Above all, ethics should be a company value that is embedded in culture to help manage and lead marketing efforts.

No, it is not ethical to track my buying habits or web visits to target me for marketing purposes. Why, because it is an invasion of privacy and personal information from public scrutiny and violation of my constitutional rights (the right to be left alone). However, there are some websites that track my information automatically based on searches and purchases, e.g., Amazon and Barnes & Noble, and make recommendations of what I would be interested in. And unfortunately, some of this information goes out to marketers for further action on their part.

From a leadership perspective, I would lead by example, e.g., words and actions, along with the "Golden Rule" of respect, trust and understanding.     

References

Ferrell, O.C., Fraedrich, John, and Ferrell, Linda (2015). Business Ethics: Ethical Decision Making and Cases (10th ed.). Stamford, CT: Cengage Learning.

Is Marketing Evil? Marketing Viewed as a tool by German University in Cairo students Hala El Sayed and Ingy El Ghazaly (n.d.)