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April 19, 2010

MARKETING AND ETHICS

A Night to Remember: Personal Time on Your Clients Dime

Frustrated, Florence Drake sat at her desk. Her evening, which was to include a date with
the gym and a healthy salad, had just been preempted. Five minutes earlier, Allen Shumann,
senior executive producer of News Today New York, had called to ask Drake to dinner that night.
She had been trying in vain to arrange dinner with him so that she could talk up her clients. Their
schedules had not been compatibleuntil now. Although she longed for a simple evening at the
gym and then at home, she could not pass up this opportunity to pitch her clients upcoming big
event to Shumann. News Today New York exposure would help establish Drakes credibility in
the firm and give her a chance at that big promotion. Drake grabbed her purse and gray wool
coat and dashed swiftly out the agencys front door. Within minutes, Drake was hailing a cab to
meet Shumann at Bank Street Grill, one of New Yorks finest steak and seafood houses.
While dining on filet mignon and drinking many glasses of her favorite Cabernet
Sauvignon, Drake discussed a variety of topics with Shumann. In addition to telling him about
her clients upcoming event, she gave him some background on the other brands she represented
and even spoke about her own journey into the world of public relations. Overall, she felt as
though the night had been a great success. She had achieved two goals: establishing a working
relationship with one of the nations leading producers and bringing her client to his attention.
And although there was no guarantee he would cover the event, she believed it was a job well
done. After all, he did ask her to send additional information about the event and said he might
send someone to cover it. After dinner, Drake parted ways with Shumann and met two of her
best friends at a local West Village bar.
After learning about where she had dined and how much she had spent at dinner
(approximately $180), her friends could not believe that she was going to bill this dinner to a
client. Was it really necessary to take this producer out to the one of the finest restaurants in the
city when there are numerous other options? one asked her. Another asked, Will your client be
made privy to the fact that you two ordered a bottle of wine, two martinis, and after-dinner
drinks during the meal? Also, how would you even put that on your expense report? Drake
This case was prepared by Jacki Fritz (MBA 10) with the assistance of Jenny Mead, Senior Researcher, under the
supervision of R. Edward Freeman, Signe and Elis Olsson Professor of Business Administration. It was written as a
basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.
Copyright 2010 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.
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reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means
electronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School
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knew that her friends just liked giving her a hard time. But something didnt feel quite right
about what they said.
That night, when Drake finally returned to her apartment, she mulled over her friends
comments. If my job is based around networking and relationship building, she thought, why
should it matter how much we spend on dinners with producers and editorsas long as we get
the work done? Is it important to disclose to the client in the expense report that she had had
tuna tartare as an appetizer or a chocolate raspberry souffl for dessert? Was it ethical to expense
a client for a dinner when you discussed more than just that client? Even though there was no
guarantee from the producer that something would come of this meeting, it was okay to bill the
clientwasnt it?

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Life in the Fast Lane: Getting Personal with Your Staff

In August 2002, Dana Westington founded Red Carpet Communications (RCC), a
boutique public relations agency specializing in garnering press for luxury consumer products.
Located in New York City, RCC had become the agency of choice for some of the trendiest and
most en vogue companies. Now, RCC had over 30 employees and was looking to expand. Most
employees at RCC were women between the ages of 22 and 29 who had many things in
common, including affable and outgoing personalities and a love for the finer things in life.
It was the middle of 2005s Fashion Week in New York Citys Morgan Park, which
meant runway shows, paparazzi, photo shoots, and designer after-parties. For some, this was an
extravagant week of glitz and glam. For Westington, this week was the busiest time of year. In
fact, during New York Fashion Week, RCC employees were expected to meet their clients at the
fashion tents each day no later than 8:00 a.m. to prepare for the days shows and help facilitate
media interviews. Then, after a full day of media interviews and handling photographers,
publicists were expected to attend after-parties with their clients or their media connections until
one or two in the morning, making for an exceptionally long day.
It was 12:30 a.m. Thursday, just minutes after designer Kit Torringtons after-party had
ended. It had been a successful evening. The client was happy, and the press had loved the spring
line. But Westington could not relax. Just hours earlier, she had overheard a conversation
between two young women on her staff about how certain employees in the firm, whom they
referred to by name, had been using drugs to stay energized during New Yorks Five Fabulous
Nights of Fashion. The conversation was brief, and they did not realize Westington was there.
Now, however, Westington was unsure what to do with this information. Since it might not be
true, and since she only overheard the conversation, should Westington just go ahead and drop
the issue? Given that all employees were working under a demanding schedule, should she
confront the entire staff about her concerns? Should Westington take these employees aside and
speak with them about what she had overheard or even directly confront the employees who
might have a problem? Although it had been just a short conversation about something that may
or may not be true, Westington asked herself if this were a much bigger issue than she had ever
thought. She also wondered if it even mattered whether they were taking drugs. In fact, their
performance was top-notch, and their clients were happy. So why should it matter?

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Creative Interview Tactics: The Art of the Half-Truth

Paige Dawson, head of recruiting at HR Enterprises, a boutique government consultancy
firm based in Alexandria, Virginia, had just completed an interview with Matt Simons, a Darden
Graduate School of Business Administration graduate with extensive experience in the
government sector. In addition to having a distinguished pedigree and incredible
recommendations, he was well mannered, amiable, and undoubtedly a team player. He was
particularly well suited for the job andso far as Dawson was concernedit was a done deal.
The next day, she would extend an offer to Simons in the hope that he would join the team as
early as the next week.
Suddenly she remembered: At the end of the week, she had scheduled another interview
for this position with Cindy Brown, a highly skilled and highly recommended candidate.
Although Brown was also impressive in her own right, she just did not compare to Simons. Her
relatively low GMAT score and lack of project management expertise placed her farther down
the list, so much that Dawson was not certain if it was worth even interviewing her.
Dawson wondered whether she should wait to extend an offer to Simons until she met the
other candidate, especially since Simons had another offer on the table with a tight deadline. Was
it fair to interview Brown when her experience did not rival Simonss? After some
contemplation, Dawson thought that the only professional choice would be to interview Brown
even if an offer went out to Simons beforehand. Brown could be a great fit for a future position;
therefore, she did not need to know that this position had already been filled. In addition, Brown
currently worked at Nevis Consulting, HR Enterprises biggest competitor. In her HR training,
Dawson had learned how to get information out of people by asking the right questions. In
interviewing Brown, she could perhaps learn more about Nevis, including how the company was
structured, how much it billed clients, and how it attracted new business.
Dawsons secretary buzzed: Paige, Cindy Brown is on the line right now. She just called
to confirm her interview on Friday. I was going to tell her that it was scheduled for 11:30 in the
morning, but I wanted to confirm with you. Is that still okay?

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The A-Team: Truthfully Representing Your Company

Eric Madsen was elated. He had just been chosen to be part of a select team of employees
at Choi & Barrow Advertising to participate in the companys biggest new business pitch of the
year for Find-It, a leading search engine. Find-It had been a leader in the online industry for
years; however, with innovative new capabilities, a fresh directive from the CEO and strong
competition, it was imperative that the company differentiate itself in the marketplace. The
current advertising campaign for Find-It was nothing better than lackluster. Thus, Find-It had
begun its search for a new advertising agency, and Choi & Barrow was up for the bid.
While Madsen had superb presentation skills and a knack for closing the deal (in fact, he
had won three new business projects during his first month on the job), he was not sure why he
should be on the pitch team. With no previous technology experience, Madsen knew that he
could not bring much to the table in that regard. In addition, there was already a team of
technology experts in the office. Why werent these experts tapped for the pitch? Further, he was
certain he would not be part of the team if the company won it.
Even though he was happy to be chosen, Madsen questioned the ethics behind the
decision. If he werent going to be involved in working on the actual account, was it ethical for
him to pitch the business? In general, clients assumed that the people on the advertising pitch
team would be working on the account. He had clearly been chosen to be on the pitch team
because of his highly successful presentation skills. Did it really matter?

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Medical Innovations: The Health of the Consumer OR Company

Saymeer Jain was a first-year sales associate at RMD, a medical devices company that
specialized in developing MRI (magnetic resonance imaging) equipment. For years, RMDs
model XR-U72 had been the standard imaging device found in most hospitals. But RMDs R&D
department had just made an internal announcement that the company had produced a new
model, MR-S72, which was much less expensive to produce and much more effective (studies
showed that it was 30% more effective in imaging than the XR-U72 model).
As the marketing manager of RMDs MRI equipment, Jain had a difficult challenge: to
unload the seven remaining XR-U72 models. At nearly $2.9 million per unit, the XR-U72 model
commanded a very high price compared with its competitors (the range for MRI equipment was
anywhere from $1 million to $3 million). Given RMDs high fixed costs (primarily R&D
expenditures) and the high cost of parts, Jain realized that it was not feasible to drop the models
price. In fact, his boss had given the mandate that the price could not be reducedthere could be
no bargain basement pricing to unload the XR-U72s.
Jain pondered his options. What kind of advertisements could he create for the old
product, knowing very well that the new model was 30% more effective? Should he wait to sell
the new model until after the old ones were sold out? If so, what would the ethical implications
of his actions be?

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Little White Marketing Lies: Challenges with Changing the Product

For the past year, Ginger Harrison had been the assistant brand manager for the Italian
Foods Division at Kleins Foods, a high-value food manufacturer. Since she started at the
company, her division had been extremely successful selling Kleins Foods brand of Italian
meatballs both direct-to-consumer and business-to-business. Overall, business with the brand
was booming. But with the rising costs of ingredients across all brands, the company had not
performed well during the previous two quarters.
With a mandate to cut costs in her division and submit a recommendation to management
in a week, Harrison was perplexed about what she should do. Her options were limited. Cutting
staff and lowering pay were not options, given that the division was already operating as leanly
as possible. Additionally, it would cost too much to change the marketing strategy and the
packaging on the product. Further, she could not consider increasing the products price because
it would probably deter customers from purchasing it (market research suggested that the
companys meatballs were a high-value-based purchase decision; thus, any price increase would
significantly decrease sales).
With one week to come up with a recommendation, the Italian Foods Division staff
members met to discuss their ideas. During a three-hour meeting, the room voted (majority rule)
that the only way to cut costs was to put less meat in the bags. To remain truthful in their
marketing, they would still include the same weight of product, but instead of protein, they
would add more sauce and spices. In essence, the customer was receiving exactly what was
advertised (four pounds of meatballs and sauce per bag), but Harrison knew this would be
misleading the consumers.
Harrison wondered about the ethics of this decision. Even though the products marketing
was going to be the same, and was in fact accurate, was it ethical to change what the customer
received? Did such an action engender ill will in the customer? How would this affect business
in the long run?

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Pharmaceutical Advertising: A Conversation or a Scam?

Jay Thompson, a recent Darden School of Business graduate, was spending his first year
postgrad in the marketing department of a large pharmaceutical company, Alphin Brown
Pharmaceuticals (ABP), based outside of Philadelphia. It was an optimal situation. He was close
to his family, his wife had a great job in the area, and his children were in one of the best school
districts in the country. Life could not be better, Thompson thought. In addition, he was currently
on the marketing team of Biplexic, a groundbreaking new treatment for bipolar disorder. With a
personal tie to the illness (his sister had been diagnosed with it five years ago) and a high level of
enthusiasm for the position, Thompson believed he had landed in the perfect job.
During Thompsons first week at ABP, he was asked to attend a meeting with the
advertising agency to meet the team and to see the unveiling of the new direct-to-consumer
marketing campaign. Prior to Biplexic, none of the companys bipolar drugs was advertised
direct-to-consumer, but rather directly to physicians. But because Biplexic was a revolutionary
drug and because the company had increased sales approximately 4% in the past year using this
method for other products, management believed that it was time for such a campaign. At the
meeting, the agency presented the advertising campaign it had created.
PROPOSED DIRECT-TO-CONSUMER COMMERCIAL for BIPLEXIC
Presented by Regal Advertising
<SCENE SET-UP>: An older man and woman are sitting at their kitchen table.
Neither speaks. The man was reading a newspaper. The woman was staring into
her cup of coffee. She breaks the silence.
WOMAN: Honey. Im not sure whats wrong with me, with us. <PAUSE> I
cant help the way I feel. I really dont understand it. But I do know that I dont
want it to affect us. Its time that I take a stand against it. <PAUSE> For me.
<PAUSE> For us.
MAN: Im so glad you want help, dear. I know its hard for you to live with the
mood swings. <PAUSE> One day youre up, the next youre so depressed. It must
be an emotional roller coaster for you, and I can see how painful it is.
<SCENE SET-UP>: Images of the couple laughing, holding hands, and
frolicking through a field appear onscreen as the narrator speaks.
NARRATOR: Do you ever feel down? Do you ever feel really happy? Do your
emotions range from extreme highs to extreme lows? <PAUSE> If so, you might
have bipolar disorder. And its about time that you take a stand! The next time
youre in your doctors office, tell him or her about your symptoms, and mention
Biplexic. Its your choice for freedom.

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Thompson walked out of the meeting frustrated and disturbed. With a sister who had
suffered with bipolar disorder, he knew how severe the illness really was. He also knew that
marketing directly to consumers had strong implications, including overprescription of drugs and
increased health care costs.
He closed the door to his office and questioned himself: Of course we all have highs and
lows. Isnt that part of being human? How can they take such a serious problem and profit from
it? How was pharmaceutical advertising ever ethical? I get that marketing to physicians is fine
they need to know about the drugsbut marketing to consumers? They really dont know whats
in their best interest health-wise, and this isnt helping. Sitting at his desk, Thompson tried to
sort out in his mind what was ethical and what wasnt about marketing pharmaceuticals directly
to consumers. At the same time, a distressing thought came into his head: Maybe this was not the
perfect job for him.