April 17, 2014 by

When Jim moved his business in the fall of 2010 from Lincoln to Omaha, he encountered a pricing problem. The cost of his services in Lincoln didn’t suit the Omaha market.

At least that was one explanation for why Jim wasn’t getting the accounts he had planned. How could Jim determine the market price for his services before he lost too many sales and crippled his business?

A colleague of Jim’s recommended a strategy: Have two or three friends who work in Omaha businesses call Jim’s competitors. Ask them to submit proposals for their services. Once the friends acquire the proposals, they tell the competitors “thank you” and inform them that they didn’t get the bid.  In this way, the friends, who didn’t want the services anyway, are in the clear, and can give the proposals to Jim to study for pricing information.

“Everyone does this,” the colleague said. “It’s an easy way to determine market price for products or services.”

Would a marketing professional recommend such a strategy? While “easy” and “efficient” are appropriate decision rules in business, they are not synonymous with ethics.

Many marketing professionals subscribe to the American Marketing Association’s Code of Ethics. The Code was created to help them remember that reputation and trust can be destroyed when they only focus on the easy way and forget to consider honesty and harm.

Codes of ethics can help business people overcome obstacles to ethical decision making. One of the obstacles is not identifying all relevant stakeholders and the impact of our actions on them (Werhane, et. al., 2013).

In the previous case, we often forget the competitors. However, think of the Golden Rule. Putting ourselves in their shoes, we realize that none of us likes wasting our time. They are harmed because they go through the work of preparing bids that have absolutely no chance of being accepted….time and expertise that they can use to really get business.

In addition, we might not recognize the impact on our friends. We are asking them to use their businesses in dishonest ways.  None of us would like to have our businesses or reputations treated in this way.

Bounded awareness is one reason we don’t identify all relevant stakeholders and the impact on them. Bounded awareness is a pattern of thinking that prevents us from noticing relevant data (Gino, Moore, and Bazerman, 2009). It can be a good psychological mechanism because it can help us survive. But bounded awareness also has ethical implications when relevant or useful data is missed and poor choices are made based on incomplete information.

Is there a remedy for the kind of bounded thinking that leads to bad marketing strategies?

Yes, and the remedy is practice.

We need to practice exercising our moral imaginations. When making a marketing decision, take the time to systematically identify all stakeholders and imagine the consequences for them when one alternative is played out, then another, and another. Start the practice by listing options and stakeholders on paper until the mental process becomes second nature. In this way, we strengthen our moral muscle and do a better job balancing the easy and efficient actions with the honest and less harmful ones.

 

Beverly Kracher, Ph.D.

Daugherty Chair in Business Ethics & Society

Executive Director, Business Ethics Alliance

College of Business

Creighton University

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