Chapter 8 - Consumers and Business Ethics

If treating customers well is beneficial, why do ethical abuses still happen?

because companies may prioritize short-term profits, use manipulative marketing, or ignore long-term trust and reputation.

What are Consumer Rights in business ethics, and what duty do sellers have toward consumers?

Sellers must respect consumer dignity and treat consumers as ends in themselves not just as a means—reflecting duty of care.

What three main areas create ethical issues between marketing and consumers?

1. Marketing management

2. marketing strategy

3. market research

what are the four components in marketing management

1. product policy

2. marketing communications

3. pricing

4. distribution 

What are the main ethical issues in product policy, marketing communications, pricing, and distribution?

• Product policy: Safety, fitness for purpose, due care

• Marketing communications: Misleading claims, deception, artificial wants, materialism

• Pricing: Excessive pricing, predatory pricing, deceptive pricing

• Distribution: Power imbalances, gifts/bribes, slotting fees

What basic rights do consumers have regarding products?

The right to products that are safe, effective, and fit for their intended purpose.

What is the manufacturer’s ethical duty regarding product safety?

Manufacturers must show due care—taking all reasonable steps to ensure products are safe and free from defects

Is the consumer’s right to product safety unlimited?

No—it also depends on the consumer’s own actions and precautions.

What two levels of advertising criticism exist?

1. Individual level – Concerned with misleading or deceptive practices

2. Social level – Concerned with aggregate social and cultural impact

What are the two aims of marketing communications?

To inform consumers about goods/services and persuade them to purchase.

When does marketing communication become deceptive?

When it interferes with rational consumer choice by creating false belief

What are major social and cultural criticisms of marketing communications?

• Intrusive and unavoidable

• Create artificial wants

• Reinforce consumerism and materialism

• Create insecurity and perpetual dissatisfaction

• Perpetuate social stereotypes

What is the consumer right related to pricing?

Pricing issues relate to a fair exchange and the consumer’s right to a fair price

Four types of pricing practices where ethical problems may arise:

• Excessive pricing

• Price fixing

• Predatory pricing

• Deceptive pricing

What is excessive pricing?

Charging unreasonably high prices that exploit consumers.

What is price fixing?

When competing firms agree on a set price instead of competing fairly.

What is predatory pricing?

Setting prices extremely low to drive competitors out of the market.

What is deceptive pricing?

Misleading consumers about the true price or discounts of a product.

What triggers criticism about unfair treatment of consumers?

A perceived violation of consumers’ right to be treated fairly (duty of care).

What is consumer vulnerability?

When groups like children, the elderly, or low-income consumers are at higher risk of harm.

What is consumer exclusion?

When people are denied access to essential or necessary products.

types of consumer exclusion

• access exclusion

• condition exclusion

• price exclusion

• marketing exclusion

• self-exclusion

what is access exclusion?

When consumers cannot access goods or services due to physical, geographic, or technological barriers.

what is condition exclusion?

When consumers are excluded because they fail to meet required conditions 

what is price exclusion?

When consumers are excluded because the price is too high for them to afford the product or service.

What is marketing exclusion?

When certain consumers are left out because a product, service, or marketing message isn’t accessible or available to them.

What is the main ethical issue in modern market research?

The threat to a consumer’s right to privacy due to data collection and use without full awareness or consent

What is Consumer Sovereignty?

The idea that under perfect competition, consumers control the market and act as “king.”

Why is the “consumer is king” or consumer sovereignty idea often unrealistic?

Because market imperfections limit consumer power and decision-making ability.

What are the two ethical issues caused by limits on informed consumer choice?

1. Individual transactions may be unfair

2. The economic system may allocate resources unfairly, favouring businesses over consumers

Why is consumer sovereignty seen as ideal for ethical marketing?

it shifts power toward consumers and promotes fairer outcomes.

What are the 3 elements of the Consumer Sovereignty Test?

1. Consumer capability

2. Information

3. Choice

Consumer capability (definition)

Freedom from limitations in rational decision-making (e.g., age, education, health).

Information (definition in consumer sovereignty)

Availability and quality of relevant data; absence of bias or deception.

Choice (definition in consumer sovereignty)

Opportunity for switching; number of competitors and switching costs.