Ethics in Small Business

Questionable Marketing Practices

Written by Clayton Reeves for Gaebler Ventures

Marketing can sometimes teeter on the edge of the morally gray. As such, it is important for small businesses to realize when they are taking their customers for granted. Being a responsible corporate citizen is essential if you want to be around for the long-term.

In marketing, there are sometimes inherent conflicts between the seller and the buyer.

This is because while the customer should know everything possible about an item and the purchase, sometimes this knowledge may prevent a sale.

We discuss some of the shady marketing practices that are sometimes criticized as socially irresponsible.

Regardless of any criticism, most of these are practiced with unflinching regularity. Be sure you avoid them in your own business if you want your business to be successful.

Pressure Selling

This can take many forms. Usually these practices are deemed socially irresponsible when the salesperson seems to take advantage of the purchaser. Some items are not bought, but rather sold. These items include cars, houses, insurance policies, etc. This is because these items are hard to efficiently price, so the seller has the power of being more educated about the item than the purchaser. Although the information age has opened up comparative pricing and the advent of the educated consumer, sellers still have a leg up on most buyers.

One example is the predatory lending practices that were in place prior to the real estate bubble. Smooth, canned speeches delivered to a borrower based on the commissions associated with the sale instead of the suitability of the loan. Elderly people are subject to predatory selling oftentimes because they usually have large sums of cash saved for retirement.

Unsafe Products

Sometimes cutting costs can go too far. This usually occurs overseas when items are made with cheap labor and materials. Examples of this include dog food from China that was blamed for the deaths of American pets. There are fewer controls in environments like China, and so it is the responsibility of company to maintain their companies and visit regularly.

Deception

This can be combined with high pressure selling. Sometimes the salesman will completely lie about the product they are selling. If the buyer even realizes it down the road, it can be impossible to undo the purchase. While this may not be a prevalent practice, the damage done by these sales is usually substantial.

High Mark Ups

Anyone can go to the store and see generic brands next to name brands. Sometimes these name brands can be marked up twice as high as the generic, even though in all likelihood they are made in the same factory. This is sometimes viewed as irresponsible. However, since the products are basically substitutes, it seems difficult to fault a name brand for this aggressive pricing. If people buy it on the shelf, they are not being convinced or coerced by a salesman. Most likely, they feel socially obligated to purchase the luxury or name brand item. This is more of an internal fault.

Customer Segmentation

Advanced telephone systems often segment customers based on how much value they bring to the company. Credit card companies do this often. If you pay your bill every month and maintain a low balance you may find yourself waiting in line for a long time. However, high revenue customers with high balances often get service very quickly. This can sometimes criticized because every customer feels like they should be treated equally.

When he's not playing racquetball or studying for a class, Clayton Reeves enjoys writing articles about entrepreneurship. He is currently an MBA student at the University of Missouri with a concentration in Economics and Finance.

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