Ethical Frameworks in Business and Their Application to Social Media Marketing more

Matthew Lievertz Ethical Issues in Social Media Paper “Ethical Frameworks in Business and Their Application to Social Media Marketing” Dr. Thomas Baird MKT 300, MWF, 11:00-12:00 pm December 3, 2010 Lievertz | 1 of 16 Table of Contents Introduction……………………………………………………………………… ………………………....... Business Ethics……………………………………………………………………………… ……………..... Ethical Frameworks……………………………………………………………………… ……………….. Ethical Frameworks’ Use in Ethical Dilemmas in Marketing……………………………... Social Media (in Marketing) …………………………………………………………………………… Ethics in Social Media Marketing…………………………………………………………………….. Conclusion………………………………………………………………………… …………………………... Cited References………………………………………………………………………… ………………….. 3 4 4 7 8 1 0 1 2 1 3 Lievertz | 2 of 16 Introduction According to Perrault, one can broadly define marketing in two ways: first, as the “social process that . . . accomplishes the objectives of society,” such as connecting producers and consumers; and second, as a process that “seek[s] to accomplish an organization’s objectives,” such as producing a desired commodity and selling it to a customer (6). Unfortunately, the objectives of society and the objectives of any individual organization may clash in what is called the “micro-macro dilemma” (Perrault 23). In other words, an activity that may serve the objectives of a particular individual or organization may harm the objectives of society (Perrault 23). For instance, previous to a 1972 court order, the Warner-Lambert Company marketed Listerine as a remedy or preventative for colds and sore throats (Jennings 416). It was in the interest of Warner-Lambert to advertise a claim that Listerine would prevent colds and sore throats although there was no proof to substantiate this claim. It was in the interest of society, however, that only claims substantiated by proof be advertised. As in this case, court orders, laws, and regulations often represent and enforce the interests of society. Despite these safeguards, failures in business ethics have resulted in the loss of billions of dollars belonging to investors, creditors, and customers. Forbes.com chronicled major corporate scandals between 2000 and 2002 that resulted in well over Lievertz | 3 of 16 $200 billion in losses. (Patsuris n. pag.) It has become evident that in order to prevent such losses, the study of ethics must be brought into the business world. Business Ethics Ethics is a complicated field of study dating back to at least the time of Plato (De George n. pag.). Ethics basically deals with “learning what is right or wrong, and then doing the right thing;” the reason why this seemingly simple subject is complicated is that people may not agree about what is right (McNamara n. pag.). In fact, not all people even agree whether what is right is a constant or whether it changes depending on the situation (McNamara n. pag.). As a result, scholars have developed a series of terms and frameworks to help people consider and discuss the topic rationally. Situations in which an individual has some doubt as to what the right thing to do is are called ethical dilemmas, and such situations often arise as a result of the conflict between an individual or firm’s objectives and society’s objectives (Jones 127). The idea that a firm or individual has a responsibility to make a positive contribution (and avoid making negative contributions) to society’s objectives is called social responsibility (Perrault 23). Lievertz | 4 of 16 Ethical Frameworks Ethical frameworks are useful in un-obscuring the question of what is right in any given ethical dilemma, although they do not change the fact that ethics are based on individuals’ values, and may thus be subjective. Jones presents four ethical frameworks for use in a business context: 1) the utilitarian rule; 2) the moral rights rule; 3) the justice rule; and 4) the practical rule (139). The utilitarian rule states that the right thing to do is whatever “produces the greatest good for the greatest number of people” (Jones 139). This rule is intuitively logical as it resonates with people’s sense of the common good, but this rule is ineffective in un-obscuring ethical dilemmas in which the common good comes into conflict with an individual or group’s fundamental rights. For instance, is it ethical to execute a serial murderer? Does ethical primacy belong to the common good of society in wishing to be safely rid of a demonstrated threat, or to the murderer’s fundamental right to life? Furthermore, it can be argued that maintaining the fundamental rights of individuals is in the common good . . . In other words, the utilitarian rule is useful in many situations, but does not simplify issues in which the common good conflicts with the fundamental rights of individuals. The moral rights rule takes the opposite approach of the utilitarian rule. It states that the right decision to make regarding any Lievertz | 5 of 16 given ethical dilemma is that which best protects the fundamental rights of those affected (Jones 140). The strength of this framework is in deciding ethical dilemmas that pit the interests of two parties against each other. The weakness of this framework is identical to that of the utilitarian rule: conflicts between the fundamental rights of individuals and the common good. An ethical framework that begins to address conflicts between individual’s fundamental rights and the common good is the justice rule. The justice rule states that the right thing to do is to “[distribute] benefits and harms among people and groups in a fair, equitable, or impartial way” (Jones 140). This emphasizes the common fate of society, and is therefore very useful in deciding ethical dilemmas involving groups. The major weakness and strength of this framework lies in its requirement of a value judgment to define “fair” (Jones 140). The last ethical framework that Jones introduces, the practical rule, relies even more heavily on subjective value judgments, but presents them in a way that is useful in deciding difficult ethical dilemmas (140). The practical rule says that an action is the right thing to do if it meets three tests: “1) Does my decision fall within the accepted values or standards that typically apply in business activity today? 2) Am I willing to see the decision communicated to all Lievertz | 6 of 16 people and groups affected by it-for example, by having it reported in newspapers or on television? 3) Would the people with whom I have a significant personal relationship, such as family members, friends, or even managers in other organizations, approve of the decision?” (Jones 141) This ethical framework holds the significant advantage of being applicable to almost all ethical dilemmas. Furthermore, this ethical framework, as its name suggests, accounts for most practical consequences of any given decision. Finally, by harnessing emotion and experience in addition to intellect, this ethical framework allows the decision-maker to make use of greater personal resources than the other frameworks. The one area where this framework struggles is in decisions involving specialized knowledge that typical people do not have. In these instances, what friends or stakeholders would think of a given situation may not have much bearing on what is right, or may even lead the decision-maker to make a poor decision simply because it is in line with misinformed common perceptions. Ethical Frameworks’ Use in Ethical Dilemmas in Marketing These ethical frameworks provide direct insight into ethical Lievertz | 7 of 16 dilemmas in business and marketing, especially when used intelligently and in concert. For instance, take a situation in which a manufacturer finds that its product, which had enjoyed a strong niche market using selective distribution, is now demanded widely on the mass-market. In this situation, the objectives of the manufacturer and society may be best served by switching to an intensive distribution strategy. On the other hand, this switch may reduce profits enjoyed by the selective retailers currently distributing to the product. Clearly, the handling of this situation presents several ethical dilemmas, but use of the ethical frameworks discussed can disentangle most of the necessary choices. For instance, since the objectives of the greater number of parties (society and the manufacturer) are advanced through the switch to intensive distribution, the utilitarian rule calls for the manufacturer to make the switch. At this point, the moral rights rule cautions that although a switch to intensive distribution may be called for, the manufacturer should be careful not to injure any of the fundamental rights of the selective distributors, such as rights owed to them in legal contracts or simply the right of fair notice. This could mean a sort of compromise position in which the switch to intensive distribution is made at the beginning of the new business year, giving selective distributors time to rethink their business-plans. This would embody the spirit of the justice rule, in which no single party is made to suffer all negative consequences of a switch. Finally, the practical Lievertz | 8 of 16 rule could act as a safety net for all decisions, cautioning decisionmakers to give extra thought to decisions that they would hesitate to relay to the members of the distribution channel, their friends and family, or the wider public. By utilizing these ethical frameworks, decision-makers can avoid damaging scandals that needlessly harm others or the deciding organization itself. For instance, by insensitively handling a switch to intensive distribution, the manufacturer in the above example could risk losing both its core channel-partners and its core customers. Social Media (in Marketing) As useful as these ethical frameworks are for relatively commonplace ethical dilemmas such as the above example, ethical frameworks are most useful in determining how to correctly address ethical dilemmas that have few or no historical precedents to use as a guide. Many recent such dilemmas have arisen as a result of the advent of the new technology of social media, which is a word that describes the horizontal networks enabled by internet platforms (e.g. facebook, myspace, twitter, etc.) that routinely incorporate over 500 million unique repeat users per platform (Carver n. pag.). Using social media, these millions or billions of worldwide users form communities to discuss, promote, or disparage organizations and products with or Lievertz | 9 of 16 without input from those organizations and product producers. In the early years of social media, large companies quickly learned the dangers of this phenomenon. For instance, Jeff Jarvis, a well-known blogger, had a negative experience with Dell, and his blogposts about it in 2005 attracted a storm of social media attention that eclipsed Dell’s own (expensive) marketing message, as demonstrated by a falling share-price for Dell and the ranking of Jarvis’ negative rants about Dell above Dell’s own website on Google.com. Jeff Jarvis was so influential in his Dell tirade because he himself is regarded as an expert in social media. In his blog postings, he praises the power of social media, and warns and encourages corporations to take part in the social media conversation about them and their products that will occur with or without their guidance (Jarvis n. pag.). Interestingly, in response to Jarvis’ attack on the company, Dell became one of the leading large corporations in using social media in its marketing efforts (Jarvis n. pag.). Not only should organizations take part in the social media conversation in order to attempt to prevent a major negative event such as what Dell experienced in 2005, but organizations also have a lot to gain. For example, a New Orleans pizza company called Naked Pizza utilized a billboard and Twitter to advertise in 2009 (Hoffman and Fodor n. pag.). The practically-free Twitter campaign, in which the pizza company attracted 4000 “followers” (people who had voluntarily Lievertz | 10 of 16 signed up to receive direct marketing from Naked Pizza on an ongoing basis) in a matter of months, resulted in the company breaking its single-day sales record (Hoffman and Fodor n. pag.). Furthermore, the overwhelming majority of these customers (68% of customers that day, and 85% of new customers that day) came because of Naked Pizza’s Twitter presence (Hoffman and Fodor n. pag.). Clearly, organizations cannot afford to ignore a marketing channel that delivers such stunning results. Ethics in Social Media Marketing Unfortunately, the adoption of social media as a marketing tool has not come without its share of mistakes made by organizations. In 2003, Dr. Pepper/7UP paid a group of young people to post positive social media messages about a new product called “Raging Cow” (Hoffman and Fodor n. pag.). In a sad ethical oversight, however, the positive social media posting team did not disclose their financial incentives (Hoffman and Fodor n. pag.). Once discovered, the ensuing social media backlash resulted in negative publicity and outright boycotts that caused the product launch to fall flat (Hoffman and Fodor n. pag.). This case study clearly reveals why ethical frameworks are important for actions without historical precedents. If this campaign had used traditional media, the marketing manager would have known Lievertz | 11 of 16 what control measures (i.e. ensuring disclosure) were necessary. If the marketing manager made a practice of evaluating decisions against the practical rule (discussed above), however, then perhaps he or she could still have figured out that people would feel lied to if the positive social media posting team did not disclose their financial incentives. This is representative of an ongoing issue in social media ethics, well stated by the title of a recent blog post by John Bell, former president of the Word of Mouth Marketing Association: “Social Media Ethics is Simple: Disclose Your Material Connection.” Bell lambasts the lack of disclosure in social media, and notes that abuse of this ethical principle is a current trend in social media use by lobbyists. One of the most troubling ethical issues in the use of social media today results from the fact that Google and other aggregation platforms rank Internet sites by the number of links they have. An Internet site’s rank on a Google site, or an important aggregation platform like digg.com, has a powerful effect on its visibility, which is directly correlated to its ability to fulfill its organization’s objectives (Rubel n. pag.). Thus, organizations have a powerful incentive to gather as many links to their websites as possible. Unfortunately, this can be accomplished artificially through a process known as gaming, which is where an organization automatically posts thousands of irrelevant, link-containing comments on numerous blogs and other social media. Jarvis and Rubel both make the point, however, that the Lievertz | 12 of 16 worth of social media to society and to marketing is in content, not pointless links. Clearly, the utilitarian rule would show that gaming is unethical. Brogan points out that gaming is not only unethical, but now the victims (the unwillings hosts of the thousands of irrelevant, linkcontaining comments) can create a damaging social media backlash for the offending organization. Moreover, gaming practices can get organizations’ websites removed by the very search engines and aggregation platforms they try to game (Stather n. pag.). These negative backlashes also powerfully illustrate the social media consequences of ignoring the moral rights rule, which would indicate that it would be unethical to violate bloggers’ rights by posting irrelevant comments and unethical to violate search engines’ and aggregators’ rights by gaming their systems for ranking websites. Conclusion In examining the two sides of social media-its potential to help or harm an organization and its marketing efforts-there appears to be a ray of hope for defense of society’s objectives. Unlike the general business environment, where failures in ethics harm innocent people and businesses in addition to the offending organization, failures in social media ethics tend to primarily harm the offending organization. While Enron’s negligence of business ethics resulted in $100 billion in Lievertz | 13 of 16 damages by the time the government stepped in to defend society’s objectives (Patsuris n. pag.), an unethical social media spamming campaign by the UK furniture seller Habitat was met with such a backlash that the company discontinued the practice and apologized for it within days (Gloria n. pag.). At least in the social media realm, society’s objectives have a much more effective defender than legal action by the government. At the same time, this only underscores the importance of social media ethics to a company’s success. In the social media world, unethical practices are quickly discovered and punished by the same people organizations are trying to convince to become customers. Therefore, in this relatively new field, ethical frameworks are critical to business and marketing success. Lievertz | 14 of 16 Cited References Bell, John. “Social Media Ethics is Simple: Disclose Your Material Connection.” Socialmediatoday: The Web’s Best Thinkers on Social Media, Social Media Today LLC. 24 Apr. 2010. Web. 2 Dec. 2010. Brogan, Chris. “The Ethics Imperative in Social Media.” Chris Brogan, chrisbrogan.com. 7 Oct. 2008. Web. 3 Dec. 2010. “Carver, Cidney. “World’s Top Social Media Sites.” Socialnomics.com, Wordpress. 22 Nov. 2010. Web. 2 Dec. 2010. De George, Richard T. “A History of Business Ethics.” Markkula Center for Applied Ethics, Santa Clara University. 19 Feb. 2005. Web. 1 Dec. 2010. Gloria, Tiphereth. “How Not To Use Twitter: HabitatUK as a Case Study.” Socialmediatoday: The Web’s Best Thinkers on Social Media, Social Media Today LLC. 20 June 2009. Web. 2 Dec. 2010. Hoffman, Donna L. and Marek Fodor. “Can You Measure the ROI of Your Social Media Marketing?” MIT Sloan Management Review, Massachusetts Institute of Technology. 14 Sept. 2010. Web. 2 Dec. 2010. Jarvis, Jeff. Buzzmachine.com, Wordpress. 1 Dec. 2010. Web. 2 Dec. 2010. Jennings, Marianne. Business: Its Legal, Ethical, and Global Lievertz | 15 of 16 Environment. 7th ed. Toronto: Thomson, 2006. Print. Jones, Gareth R. and Jennifer M. George. Contemporary Management. 5th ed. Boston: McGraw-Hill, 2008. Print. McNamara, Carter. “Complete Guide to Ethics Management: An Ethics Toolkit for Managers.” Free Management Library, Free Management Library. n.d. Web. 1 Dec. 2010. Patsuris, Penelope. “The Corporate Scandal Sheet.” Forbes.com, Forbes.com. 26 Aug. 2002. Web. 1 Dec. 2010. Perrault, William D., Joseph P. Cannon and E. Jerome McCarthy. Basic Marketing: A Marketing Strategy Planning Approach. 16th ed. Boston: McGraw-Hill, 2008. Print. Rubel, Steve. Micro Persuasion, micropersuasion.com. 25 June 2009. Web. 3 Dec. 2010. Stather, Daniel. “Social Network Marketing Ethics.” Articlesbase: Free Online Articles Directory, Articlesbase.com. 5 Aug. 2010. Web. 3 Dec. 2010. Lievertz | 16 of 16