You will recall from learning in prior coursework that distribution involves a network of channel partners that allow the marketer to deliver value to the consumer. Pricing of course typically refers to the product price and is determined by the organization’s pricing objectives. If you would like a review of these important marketing concepts see the “For More Information” area of this week’s Reading List. Distribution and pricing both are vital to a successful marketing effort. But many common practices include potential ethical –if not legal – issues, so let’s begin with some issues that may not be obvious. ETHICAL ISSUES Murphy, Laczniak, Bowie & Klein (2005) identify five overarching ethical issues in distribution: 1 Cite this module as: Distribution & Pricing Issues. (2018). Document posted in University of Maryland University College MRKT 601 online classroom, archived at http://learn.umuc.edu 1. The power-responsibility equilibrium. “Basically, this perspective holds that power and responsibility must be approximately equal for any business institution to be effective in society” (Murphy, Laczniak, Bowie & Klein, 2005, p. 118). This is a duty-based ethic. 2. Gift giving and bribery. When is it not a gift, but a bribe? Entertaining customers, giving business associates gifts—these are all common occurrences in business. When gifts are demanded for business, it’s called extortion. Extortion and bribery can be legal issues in many situations. Clear organizational guidelines are needed to deal with such practices. 3. Price setting. Extremely efficient organizations like Wal-Mart are very adept at squeezing concessions from vendors in order to deliver the lowest cost to the consumer. Setting prices at artificially high levels, say on a prescription drug that has a monopoly, may be legal but may not be ethical. 4. Advertising of prices. This can entail bait and switch, failure to have advertised specials sufficiently available, and the problems of small print qualifiers. 5. Slotting allowances. Slotting allowances “involves distributors or retailers requiring additional compensation (in the form of money or free goods) to take on a new item in their warehouse or store. For example, a grocer demanded that the bottled ice tea company, Honest Tea, buy special coolers to display its products and then pay the grocer $1,000 per cooler (in lieu of slotting fees) to get the chains to carry its products” (Murphy, Laczniak, Bowie & Klein, 2005, p. 129). Slotting fees and allowances are a common practice in the consumer packaged goods industry. Murphy, Laczniak, Bowie & Klein (2005) suggest two very different ways to look at this practice: 1. …(A) virtue ethics position might state that manufacturers and retailers should be open and forthright in their dealings and should share the burden of new product introductions. Then only justifiable costs could be passed along via slotting fees (p. 129). 2. OR …”A utilitarian (cost-benefit) approach might argue that the retailer appropriately gains from slotting fees because these charges are justifiable in terms of costs. To the extent that the monies from slotting lead to higher profitability, retailers have a great flexibility to provide innovative services to their customers” (p. 129).
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