This paper formulates a foundation using various variables to gauge advertising in ethical respect. It describes ethics as a way of formulating a certain behavior accentuating fairness in all deals regarding personal and external environments. The argument that has been raised in this research was whether ethical advertising is followed by Consumer banking institutes while advertising credit cards or not. Its effects on the consumer perception and the limitations under which the consumer perceives them are shown light upon. In the theoretical framework the factors that might influence ethical advertising are stated namely legal, social, environmental, personal/individual, situational, social, economic and consumer trend. The research was conducted in 5 banks in Lahore, through survey method. Questionnaires were floated amongst a sample size of 30 professionals related to the field of advertising in each banking institute. Once the date was collected and referred through facts from the conducted interviews it was found out that all the above mentioned independent variable indeed did affect the dependant variable of ethical advertising.
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Introduction to Advertising
The two basic functions of advertising are to inform and to persuade. It can be defined as a form of communication used to influence a certain target audience to purchase products, services or ideas. Advertising has diversified to being personal as well as a non personal way of approaching an audience. It has evolved into various types covering indoor and outdoor advertising. The major ways of deliverance are newspapers, magazines, television, radio, billboards or direct mail (internet). Advertising is no longer restricted to commercials promoting products or services, it has advanced to deliver public service adverting, on behalf of various institutions, programs and causes and also political advertising in the interests of parties and candidates.
Advertising is a complex process which differs for various audiences from form to form conveying information to keep them indulged. However cultures and standards of living differ from person to person or country to country and so does advertising. This holds true as far as ethical aspect is concerned too, something that maybe considered ethical in one community might not be the same for another, for example advertising alcohol.
Background
The advertising business first discussed the need for a professional code of ethics in the years from 1900 to 1917, often called the Progressive Era. During that period individual practitioners in the Midwest formed the first national advertising organization, the Associated Advertising Clubs of America, for the explicit purpose of making the business a profession.
“What is the difference between unethical and ethical advertising?’
Unethical advertising uses falsehood to deceive the public, while ethical advertising us truth to deceive the public.” Vilhjalmur Stefansson, anthropologist (1870-1962).
Ethical advertising is such a vast terminology that it cannot be defined in a definite statement. One of the key issues here is that ethical is a subjective term- what is ethical to one person may not be to another. Moreover the concept of what is ethical is not fixed- for example it used to be thought ethical to advertise cigarettes but not condoms, however these days the position has completely reversed.
In actuality ethical is not an absolute term and the word ethics, strictly speaking merely means the moral code by which someone decides right from wrong and is therefore highly personal. The term ethical has acquired a specific meaning over the recent past. When the word ethical is used it usually means an activity that does no harm. For example the term ethical advertising implies that money will not be invested in those advertisements that cause harm to people, animals or the environment. In this sense ethics really come down to respect for the world and the consequences of one’s actions.
Every advertisement should be prepared with a due sense of social responsibility and should conform to the principles of fair competition, as generally accepted in business. All the advertising should be legal, decent, honest and truthful.
Decency
Advertisements should not contain statements or visual presentations which offend prevailing standards of decency.
Honesty
Advertising should be framed such that it does not abuse the trust of consumers or exploit their lack of experience or knowledge.
Social Responsibility
Advertisements should not condone any form of discrimination, including that based upon race, national origin, religion, sex or age nor should they undermine human dignity. Advertisements should not appear to disregard or incite violence or unlawful behavior.
Truthful presentation
Advertisements should not contain any statement or visual presentation which directly or by implication, omission, ambiguity or exaggerated claim is likely to mislead the consumer in particular with regard to:
The value of the product and the total price actually to be paid
Delivery, exchange, return, repair and maintenance
Terms or guarantee
Copyright and industrial property right
Social aspects of advertising
Advertising as a part of the firms marketing efforts operates in the society for which it should follow social norms. Key areas of debate regarding society and advertising are:
Deception
Manipulation
Taste
Deception: it refers not only to the information content in advertising but may also arise from misplaced emphasis in presentations. Advertising as a whole must not create any sort of misleading impression although every statement, separately considered may be literally truthful.
Manipulation: the freedom of choice for consumers is restricted by the power of advertising since doing so can manipulate buyers into making against their will or interest. Manipulations are usually done through emotional appeal.
Taste: sometimes ads are offensive, tasteless, irritating, boring and so on.
Deceptive Advertising
Key area of debate regarding ethics and advertising is the truth in the advertising which involves deception and puffery (commercial exaggeration).
Deception: deception exists when an advertisement differs from the reality of the situation and it affects the buying behavior of the consumer
Puffery: this takes two general forms the first is the advertisement of opinion about a service’s quality using terms such as ‘best’ or ‘greatest’. The second form of puffery is an exaggeration extended to a point of outright spoof that is entirely not true. In these case words such as ‘perfect’ and ‘amazing’ are regarded as mere puffing. For example the consumer banks advertising credit cards, now these adverts show the attributes that would get the audience to buy it. However certain details like the fact that credit will be putting consumers in heavy debts is held off from the consumer
Significance of the Study
The significance of our study is to determine the widespread issues regarding ethical advertising in consumer banking relating to credit cards adverts. There are certain ethical codes in our society and this study will help gauge if the banks follow on those codes. The dependent and independent variables defined in this study help establish a relationship between such advertising and the environment in general. It goes on to explain the ethical norms and the degree to which consumers rely on these norms to make their purchasing decisions regarding a commodity or service.
Study Objectives
Distinctively, our study objective is to identify and develop certain questions and then to find the answers to justify those questions.
To study whether ethical codes being followed in general?
To study whether consumer banking sector is following the ethical codes.
To determine the independent variables of ethical advertising and its effects on morality.
To determine whether these variables are interlinked and their combined effect on the organizations environment.
How much are consumers relying on ethical norms or perceived consequences in forming a specific ethical judgment about their buying behavior?
Theoretical framework
ENVIORNMENTAL FACTORS
SOCIAL FACTORS
LEGAL FACTORS
ETHICAL ADVERTISING
PROFESSIONAL
FACTORS
CONSUMER DEMAND
ECONOMIC FACTORS
PERSONAL AND INDIVIDUAL FACTORS
SITUATIONAL
FACTORS
Variables affecting Ethical Advertising
Social factors
Environmental factors
Professional Environment
Situational Environment
Legal Environment
Personal and Individual Factors
Consumer Trends
Economic factors
Dependent Variable
Ethical advertising
Independent Variables
Social factors
Social factors are associated to the values and the beliefs about how a society operates. Regarding the organizational environment, it signals to the characteristics of work in that organization. These characteristics tell us how the employees perform a certain given set of tasks and what factors do they keep in mind while perceiving ethic. This in turn affects the organizational environment that determines what is considered ethical or unethical in performing organizational assignments.
Environmental factors
Environmental factors include the values and behavior determined by the cultural environment of an institution originating from the moral intentions of the policy makers. Moral intention is the probability of an organization to engage in a certain behavior which tells us about the moral values which determine the basic convictions that underline the conduct and dealing of that organization.
Professional factors
This deals with the top management policies, the codes of conduct followed by the society in general, the corporate organization in particular. It’s the moral reasoning through which they determine what’s right and what’s wrong. Basically outlining the organizational regulations that determine what is to be regarded as ethical and what not.
Situational factors
They deal with stages of development of moral values and determinants of moral attitudes. Moral values are the convictions underlying decision making process regarding ethics. Moral attitudes are the result of an evaluation of moral behavior while moral behavior is denoted by action taken. After moral attitudes, moral reasoning results in moral judgments which are decisions regarding whether a certain alternative is morally good or bad.
Legal factors
Legal factors are of great importance since these are the first barrier that advertising needs to cross in terms to reach its target audience. Legal clearance in other words ensures that the advert is based on principles of ethical conduct and highlights rules and regulations regarding ethical decision making.
Personal and individual factors
Individual factors are the individual attributes which include personal goals, the motivation, experiences, personality, and demographics. While personal factors are influenced by the company we keep and the social class that we associate with. These factors are linked together via moral perception, knowledge and moral evaluation. Moral perception is when ethical problems are perceived and the amount of knowledge people hold regarding their moral standards. Specific knowledge about these standards then lead to moral evaluation which is the final decision making determining ethical or unethical conduct
Consumer Demand (trend)
The trend in what the consumer wants and if the offered product is catering to those changing trends, affects the sales of the product immensely. Without d demand, any product, however much advertised will not be able to attract the target market.
Economic factors
These include the trends in inflation or economic stability and growth that in return affect the buying power and patterns of the consumers. These are the major determinants of demand for a certain product.
Research Hypotheses
On the basis of theoretical framework the following hypotheses are formulated:
H0 : The social factors will not significantly affect ethical advertising
H1 : The social factors will significantly affect ethical advertising
H0 : The environmental factors will not significantly affect ethical advertising
H1 : The environmental factors will significantly affect ethical advertising
H0 : The professional environment will not significantly affect ethics in advertising
H1 : The professional environment will significantly affect ethics in advertising
H0 : The situational factors will not significantly affect ethical advertising
H1 : The situational factors will significantly affect ethical advertising
H0 : The legal environment will not significantly affect ethical advertising
H1 : The legal environment will significantly affect ethical advertising
H0 : The personal and individual factors will not significantly affect ethical advertising
H1 : The personal and individual factors will significantly affect ethical advertising
H0 : The consumer trends will not significantly affect ethical advertising
H1 : The consumer trends will significantly affect ethical advertising
H0 : The economic factors will not significantly affect ethical advertising
H1 : The economic factors will significantly affect ethical advertising
LITERATURE REVIEW
Judith W. Spain, in Ethics and Geography -Impact of Geographical Cultural Differences on Students Ethical Decisions, conducts an exploratory survey to determine if there are differences in ethical decisions by business students based upon cultural backgrounds. Students’ responses to a vignette concerning advertising of cigar products in a variety of different media provided evidence of significant cultural differences between three groups of students from different geographical locations within the United States. This article suggests that the presumption that an individual’s ethical beliefs and behaviors do not change after childhood may be in error.
In “Ethical Dimensions of Advertising Executions”, Nebenzuhl and D.Jaffe determined the ethicality of disguised advertising presented to consumers under the assumption that it’ll gain potential benefits for the organization. For evidential proof a consumer survey was conducted in which exposure to the object message is followed by unaided recall and recognition tests. The results, however, unearthed the fact that conspicuous approach to advertising is not only unethical but also the gains to the sponsors of such advertising could not outweigh the losses to independence and privacy of the large number of consumers exposed.
Scott J. Vitell, in his paper, The effects of culture on ethical decision-making: An application of Hofstede’s typology addresses a significant gap in the conceptualization of business ethics within different cultural influences. Though theoretical models of business ethics have recognized the importance of culture in ethical decision-making, few have examined how this influences ethical decision-making. Therefore, this paper develops propositions concerning the influence of various cultural dimensions on ethical decision-making using Hofstede”s typology. Over the last decade, the topic of social responsibility and ethics in business has been made the focus of just a few studies, even though existing theoretical models recognize the importance of this factor. Great emphasis is laid on the importance of the role of culture in ethics decision-making identifying cultural factors such as values and customs, religion, law, respect for individuality, national identity and loyalty (or patriotism), and rights of property as influencing ethics.
Kennedy and Lawton (1993) in the article “Ethics and Services marketing” states that marketing lacks an important component for ethical decision making while identifying the conceptual marketing approaches to the field of marketing ethics. This field consists of component such as the inter-organizational variables including professional environment, individual attributes and legal environment. Furthermore, while defining ethical behavior in a broader term a behavioral model of ethical and unethical decision making related to organizations has been presented. It links the inter-organizational relationships and ethics in terms of power, dependence and uncertainty and what effects these inter-organizational factors have on ethics.
Ethical advertising: How ethical business is good business practice by Mike Catherall stresses on how any businesses should be accountable, transparent and responsible to their clients, suppliers and employees alike to characterize it as good business practice. He moves on further describing how a business must be true to its word since this acts as the hallmark for good business practice, and consequently ethical business. The article analyzes that in recent years, social-consciousness has become a buzzword, and ethical business practices more lip service than a philosophy.
Legislations, regulations and self regulations was information that I came across on the website of Pakistan Advertising association which helped me gauge a few aspects to what really accounts as code of ethics here in Pakistan. The article states that although there is not any one specific law or piece of legislation that encompasses all aspects of advertising, there are codified pieces of legislation and frame wares. These include the Pakistan Advertising Association’s (PAA) code of ethics. The article goes on to say that the advertising codes, although generate broad and comprehensive in nature; have suffered from a lack of effective implementation and a new specific focus. The majority of codes with respect to content are based on widely accepted concepts of social and moral decency. The occasionally vague and non specific nature of the regulations has often led to problems, where specific parties or social groupings take it upon themselves to exclude what is moral and what is not.
Likewise Wenling Chen and Mei-Chyi Lui (1998) in the article “Agency Practitioners Perceptions of Professional Ethics in Taiwan” conducted a survey on the advertising practitioners in Taiwan concerning their experiences of ethical challenges at work. The study made use of a semi structured questionnaire which combined both quantitative and qualitative approaches to collect relevant information attempting for satisfying interpretations from the collected data. Among 120 respondents, 67.5 percent admitted that ethical problem was a commonplace at work. According to these respondents, the most frequently mentioned ethical problems area representing unethical products or services, the message of advertisements, agency-client relationship, the creditability of research, under table rebate, and the quality of service. Due to its preliminary nature, the present study should be considered exploratory and descriptive rather than conclusive, with the hope to inspire more research on advertising ethics in Taiwan as well as in other countries in the world.
Candy A. Bianco and Susan M. Bosco in their article Ethical issues in credit card solicitation of college students, states how credit card companies aggressively solicit college students, without regard for the consequences of high credit card debt for these customers. The ethical conflict of the sale of easy credit to college students too often results in hazardous outcomes. This paper will investigate the dangers that credit card use presents to the young customer, the unethical manner in which the companies that issue these cards promote their products to this audience, and the role of institutions of higher education. A majority of students are not only using credit unwisely (average balances of over $1000 regardless of who reports the data) but are paying overpriced interest (18%-22%). The credit card companies call this “responsible” use. They are collecting enough interest and fees to more than cover losses resulting from bankruptcy. They use a variety of marketing techniques to lure college students – glitzy ‘MTV’ type shows, free prizes and gifts, special interest rate offers, and now they can pretend through
‘Educational services’ to explain to college students why credit cards are important. This
Paper investigates current solicitation policies of colleges and universities are also.
Bank Credit Cards: Not-Illegal Does Not Equal Ethical by Charles H. Green strongly criticizes banks for deceiving the consumers where credit offerings through credit cards is concerned. The article talks about how for organizational profits the banks not only use unethical advertising as a tool but also neglect the distinction between illegal and unethical. The article goes on to say that most people can intuitively understand the difference between ethical and legal, and between unethical and illegal. Most of us want to live in a society where laws are ultimately derived from a sense of ethics-not the other way around. Just because something is not illegal hardly implies it is ethical.
The article Opportunities vs. ethics by White, Phillip D points out how, in the area of fee income, bank marketing officers are being increasingly called upon to do two things the first being to assist the bank in identifying more fee income opportunities while the second states how to help the bank optimize or maximize fee income performance through the refinement of existing pricing strategies. The purpose of this article is to briefly review how bankers involved in marketing analysis and decision making should be aware of arguments and developments regarding potential ethical issues.
Ethical standards in advertising: a worldwide perspective by Maria Cecilia talks about a study that was conducted that indicates how close advertisers from all the continents have been from the natural law and other fundamental moral principles. The ethical problems have not been equated with objectivity and the realist approach is appointed as a solution. The paper moves on explaining how there have been comments about the difficult practicability of ethically behaving in the advertising world due to problems faced by private companies, marketing research and advertising agencies, media and government. In many western countries, conflicts between ethical/moral and social/economic values can be observed. Many professionals see themselves disoriented concerning the correct attitude to take when facing the dynamic and diversified possibilities of their advertising campaigns. The objective of the paper was to call the attention of academicians and professionals who deal with advertising and to their responsibility toward the market. The intention is to encourage them to consider the values implicit in the campaigns they develop, guiding them toward the common good, helping them to find a wise and sensible way of acting rather than acquiring ways that misguide and mislead their consumers.
Laczniak and Inderrieden (1987) in the article “The Influence of stated organizational concern upon ethical decision making” did the experimental study and evaluated the influence of stated organizational concern for ethical conduct upon employee behavior at managerial levels. A sample was tested on scenarios suggesting illegal conduct and others suggesting only unethical behavior. Only in the case of suggested illegal behavior tempered by high organizational concern were managers influenced by organizational policy to modify the morality of their actions. However the responses to the illegal scenarios were significantly more ethical than the reactions given to the unethical (but not illegal) situations. This particular study adopts an in-basket framework in order to investigate the influence of various levels of organizational sanctions upon ethical decision making.
Methodology
The methodology I will implement has two aspects and is going to be based on survey strategy:
Questionnaires will cover the general trends in responses from the bankers also keeping in mind to structure them to be able to gauge some consumer trends.
Interviews, of the bankers, will further help evaluate results gathered from the questionnaires
The sample for this research will be the banks that offer consumer banking I will attempt to cover as many banks as I can since credit card issuance is foreign to none keeping in mind the growing trend.
The sampling frame would be all the banks in Lahore City.
The sample size would be 30 people from consumer banking sector involved in advertising credit card facility.
The Research Study would start off from the questionnaire and thereafter statistical measures will be applied on the results to obtain analysis by using computer software SPSS.
Analysis
Q1. Do you think that the ethical codes of advertising are being followed?
Q2. Do you think that the government is concerned with the censorship of advertisement through different mediums?
HYPOTHSIS:
H0- The legal factors will not significantly affect ethical advertising
H1- The legal factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 4. 436. Since this proves my T-stat to be greater than my T-critical, the H0- The legal factors will not significantly affect ethical advertising is rejected.
Q3. Has your business increased over the recent years in credit card financing?
HYPOTHSIS
H0- The consumer demand trends will not significantly affect ethical advertising
H1- The consumer demand trends will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 4.254. Since this proves my T-stat to be greater than my T-critical, the H0- The consumer demand trends will not significantly affect ethical advertising, is rejected.
Q4. Do you think that the rules and regulations of the bank affect moral reasoning determining the ethical behavior of advertising?
HYPOTHSIS
H0- The professional factors will not significantly affect ethical advertising
H1- The professional factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 5.737. Since this proves my T-stat to be greater than my T-critical, the H0- The professional factors will not significantly affect ethical advertising, is rejected.
Q.5 The culture of a bank determines the behavior of employees regarding corporate social responsibility.
HYPOTHSIS
H0- The environmental factors will not significantly affect ethical advertising
H1- The environmental factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 6.343. Since this proves my T-stat to be greater than my T-critical, the H0- The environmental factors will not significantly affect ethical advertising, is rejected.
Q.6 Do you think economic factors are a major determinant for the demand of your product (credit cards)?
HYPOTHSIS
H0- The economic factors will not significantly affect ethical advertising
H1- The economic factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 5.125. Since this proves my T-stat to be greater than my T-critical, the H0- The economic factors will not significantly affect ethical advertising, is rejected.
Q.7 Corporate social responsibility is an important factor in ethical advertising
HYPOTHSIS
H0- The social factors will not significantly affect ethical advertising
H1- The social factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 4.938. Since this proves my T-stat to be greater than my T-critical, the H0- social factors will not significantly affect ethical advertising, is rejected.
Q.8 Do individual attributes such as personal goals, life experiences and education determine the perception of the consumer regarding advertising?
HYPOTHSIS
H0- The personal and individual factors will not significantly affect ethical advertising
H1- The personal and individual factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 7.408. Since this proves my T-stat to be greater than my T-critical, the H0- personal and individual factors will not significantly affect ethical advertising, is rejected.
Q.9 Does your bank tends to suppress pertinent information about your services from consumers?
HYPOTHSIS
H0- The situational factors will not significantly affect ethical advertising
H1- The situational and individual factors will significantly affect ethical advertising
Analysis
We know from the data analyzed using SPSS that our degree of freedom is 28 and I have supposed the confidence interval 95% (0.95), hence using the T-Table and determining the T-critical value against Degree of Freedom 28 and Confidence Interval of 95% (0.95), the value comes out to be 2.048, which is less than the T-stat of 8.773. Since
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