Chapter 5

Ethical Issues in
Services Marketing

©2006 Thomason Learning, Inc. South-Western

Chapter Objectives

• Define the difference between ethical

decisions and ordinary decisions.
• Understand the reasons that consumers
are particularly vulnerable to ethical
misconduct within the service sector.
• Describe the moral philosophies upon
which individuals base their ethical
decisions.

©2006 Thomason Learning, Inc. South-Western

Chapter Objectives Cont

• Appreciate the types of ethical issues

that often arise in the business sector.
• Examine factors, other than moral
philosophies, that may influence ethical
decision making.
• Discuss the consequences of ethical
misconduct.
• Explain strategies that attempt to
control ethical behavior.
©2006 Thomason Learning, Inc. South-Western
Opening Vignette: Vail Resort
Your Responsibility Code:
•Always stay in control and be able to
stop or avoid persons or objects.
•People ahead of you have the right of
way; it’s your responsibility to avoid
them.
•Do not stop where you obstruct a trail
or are not visible from above.
•Whenever starting downhill or merging
on a trail, look uphill and yield to others.
•Always use devices to help prevent
runaway equipment.
•Observe all posted signs and warnings.
Keep off closed trails and out of closed
areas.
•Prior to using any lift, you must have
the knowledge and ability to load, ride
and unload safely.
©2006 Thomason Learning, Inc. South-Western
What are Ethics?

• A branch of philosophy
dealing with what is good
and bad and with moral
duty and obligation.

• The principles of moral

conduct governing an
individual or group.

©2006 Thomason Learning, Inc. South-Western

What are Business Ethics?

• Comprises moral principles and standards

that guide behavior in the world of business.
– Businesses must make a profit in order to
survive.
– Business profits should not be obtained by any
means necessary.
• A trade-off must exist between the firm’s
desire for profits and what is good for
individuals and society.

©2006 Thomason Learning, Inc. South-Western

The Opportunity for Ethical
Misconduct in Services

• Intangibility complicates the

consumer’s ability to objectively
evaluate the quality of service provided
• Heterogeneity reflects the difficulty in
standardization and quality control
• Inseparability reflects the human
element involved in the service delivery
process

©2006 Thomason Learning, Inc. South-Western

Factors Contributing to
Consumer Vulnerability

• Few search attributes

• Technical and
specialized services
• Time lapse between
performance and
evaluation
• Sold without guarantees
and warranties

©2006 Thomason Learning, Inc. South-Western

Factors Contributing to
Consumer Vulnerability

• Performed by boundary-
spanning personnel
• Accepted variability in
performance
• Outcome-based reward
systems
• Consumer participation in
production

©2006 Thomason Learning, Inc. South-Western

Methods for Ethical
Decision Making
Teleology

• Act is morally
acceptable if it
produces some
desired result.
• Form of
consequentialism--
morality of decisions
are based on their
consequences.
©2006 Thomason Learning, Inc. South-Western
Methods for Ethical
Decision Making
Teleology

• Egoism--acts that benefit the

individual’s self-interest.
• Utilitarianism--acts that maximize total
utility--the greatest good for the
greatest number of people.

©2006 Thomason Learning, Inc. South-Western

Methods for Ethical
Decision Making
Deontology

• The inherent rightness

or wrongness of an act
guides behavior,
regardless of the
outcome.
• Believes that there are
some things people
should never do.

©2006 Thomason Learning, Inc. South-Western

Methods for Ethical
Decision Making
Relativism
• The correctness of decisions is thought
to change over time.
• Uses others to judge the ethicality of
decisions.

©2006 Thomason Learning, Inc. South-Western

Issues that Create Ethical Conflict

• Conflict of Interest
• Organizational Relationships
• Honesty
• Fairness
• Communication

©2006 Thomason Learning, Inc. South-Western

Cognitive Moral Development Stages

Stage 1:
– “Right” is based on rules and authority.
Stage 2:
– “Right” is based on one’s own needs or
another’s in terms of what is fair.

Stage 3:
– The individual focuses more on others as
opposed to personal gains.

©2006 Thomason Learning, Inc. South-Western

Cognitive Moral Development Stages

Stage 4:
– “Right” is based on the individual’s duty to
society.
Stage 5:
– “Right” is based on basic rights, values, and legal
contracts.

Stage 6:
– “Right” is a set of universal ethical principles that
everyone should adhere to.

©2006 Thomason Learning, Inc. South-Western

 Factors that Influence Ethical
Decision Making

• Cognitive Moral • Opportunity

Development • Reward Systems
• Personal Values • Significant
• Corporate Culture Others
• Cultural Differences • Competitive
• Organizational Environment
Structure • Changes in
Technology
©2006 Thomason Learning, Inc. South-Western
The Effects of Ethical Misconduct

• Personal Effects • Organizational Effects

– Job-related tension – Customer
– Frustration dissatisfaction
– Anxiety – Unfavorable
– Ineffective word-of-mouth
performance publicity
– Turnover intentions – Negative image for
– Lower job firm and industry
satisfaction

©2006 Thomason Learning, Inc. South-Western

 Strategies for Controlling
Ethical Decision Making

• Employee socialization
• Standards of conduct
• Corrective control
• Leadership training
• Service/product knowledge
• Monitoring employee performance
• Stress long-term customer relationships

©2006 Thomason Learning, Inc. South-Western