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Chap. 3 ethical & legal issues

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  • 1. Ethical and legal issues in selling Reported by: Rizza Estoconing Analyn Jaos Mark Angelo Dela Cruz Wilma Bernardo
  • 2. Ethics and personal selling Ethics are the principle governing the behavior of an individual or a group. These principles establish appropriate behavior, indicating what is right and wrong.
  • 3. continuationExamples of difficult situations that salespeople face.• Should you give an expensive Christmas gift to your biggest customer?• If a buyer tells you it is common practice to pay off purchasing agents to get orders in his or her country, should you do it?• Is it acceptable to use high-pressure sales approach when you your product is the best for the customer needs?
  • 4. Ethics and personal relationship Ethical principles are particularly important in personal selling. Most businesses try to develop long-term, mutually beneficial relationships with their customers. Salespeople are the official representatives of their companies, responsible for developing and maintaining these relationships.
  • 5. Continua…….. Legal principles guide market exchange relationships. The issues governing buying and selling in these relationships are typically straightforward. The terms and conditions are well defined and can easily be written into traditional contract.
  • 6. Continuation Strategic partnerships. The parties in these relationships cannot accurately asses the potential benefits. Manipulation- eliminates or reduces the buyer’s choice unfairly. Persuasion-one is trying to influence the buyer’s decision, not force it.
  • 7. Factor Affecting Ethical Behavior of Salespeople Social norms Personal goals Customer goals Company goals Ethical behavior Company policies Personal code of ethics laws Values of significant to others
  • 8. Personal Company, and Customer Needs CONFLICTING OBJECTIVESCompany Salesperson CustomerObjectives Objectives ObjectivesIncrease profits Increase Increase profits compensationIncrease sales Receive recognition Solve problems, satisfy needs.Reduce sales cost Satisfy customers Reduce costsBuild long term Build long term Build relationships withCustomer Customer suppliersrelationships relationshipsAvoid legal Maintain personal Avoid legal troubletrouble code of ethics
  • 9. CONTINUATION Low baling is one unethical tactic that occurs in large sales. Research shows that a positive ethical climate is related to job satisfaction, commitment to the organization, and intention to stay among salespeople.
  • 10. Company policies To maintain good relationships with their companies and customers, salespeople need to have a clear sense of right and wrong so that their companies and customers can depend on them when questionable situations arise.
  • 11. Ethics policy for Motorola salespeople Improper use of company funds and assets.The funds and assets of Motorola may not be used for influential gifts, illegal payments of any kind or political contributions whether legal or illegal.The funds and assets of Motorola must be properly and accurately recorded on the books and records of Motorola.
  • 12. Customer supplier/government relationshipsMotorola will respect the confidence of its customers, Motorola will respect the laws, customs and traditions of each country in which it operates but, in so doing, will not engage in any act or course of conduct that may violate us laws or business ethics. employees of Motorola shall not accept payments gifts, gratuities or favors from customers or suppliers.
  • 13.  Conflict of interestA Motorola employee shall not be a supplier or a competitor of Motorola or be employed by a competitor, supplier, or a customer of Motorola. Shall not have a relationship with any other business enterprise that might affect employees independence of judgment in transaction bet. Motorola and other business enterprise
  • 14. Values of significant others Some important people influencing the ethical behavior of salespeople are their relatives and friends, other salespeople and their sales managers. Sales manager are particularly important because they establish the ethical climate in their organization through the salespeople they hire, the ethical training they provide for their salespeople, and the degree to which they enforce ethical standards.
  • 15. Continuation One study in the financial services industry showed that salesperson ethical behavior leads to higher customer satisfaction, trust and loyalty, which mean greater repeat purchases. another study for manufacturing firms. "unethical reps are run out of our industry." good ethics are good business! Sales managers and salespeople know that.
  • 16. Laws Laws dictates which activities society has deemed to be clearly wrong, the activities for which the salespeople and their companies will be punished.
  • 17. Personal code of ethics Salespeople should abide by their own codes of ethics, they are tempted to avoid difficult ethical choices by developing "logical” reasons for unethical conduct. 3 choices when a manager asks to engage in activity you consider unethical. Ignore your personal values and do what your company asks you to do. Take a stand and tell your employer what you think. Refuse to compromise your principles.
  • 18. SELLING ETHICS AND RELATIONSHIP– The core principle at work in considering ethics in professional selling is the principle of fairness. The buyer has the right to make the purchase decision with equal and fair access to the information needed to make the decisions. Further, all competitors should a fair access to the sales opportunity.
  • 19. RELATIONSHIPS WITH CUSTOMERS• Areas of ethical concern involving customers include using deception; offering gifts, bribes and entertainment; divulging confidential information and rights to privacy and backdoor selling.
  • 20. Deception• Deliberately presenting inaccurate information, or lying, to a customer is illegal. However misleading customers by telling half-truths or withholding important information is a matter of ethics. Bribes, gifts and entertainment• Bribes are payments made to buyers to influence their purchase decisions.• Kickbacks are payments made to buyers based on the amount of orders placed.
  • 21. Continuation Buyers typically are sensitive about receiving expensive gifts, according to Shirley hunter, account manager for Teradata. Some guidelines for gift giving are as follows:• Check you motives for giving the gift.• Make sure the customer views the gift as a symbol of appreciation and respect with no strings attached.• Make sure the gifts does not violate the customers or your firms policies.• The safest gifts are inexpensive business items imprinted with the salesperson company name or logo
  • 22. Special treatment• some customers try to take advantage of their status to get special treatment from salespeople. Confidential information• During sales calls salespeople often encounter confidential company information such as new products under development, costs and production schedules. Offering information about customers competitor in exchange for an order in unethical. Backdoor sellingSalespeople engage in backdoor selling when they ignore the purchasing agents policy, go around his or her back, and contact other people directly involved in the purchasing decision.
  • 23. RELATIONSHIP WITH SALESPERSON COMPANY BUYERS VIEW OF AN UNETHICAL SALES BEHAVIORS2. EXAGGERATE BENEFITS OF PRODUCT.3. PASSES THE BALME FOR SOMETHING HE OR SHE DID TO SOMEONE ELSE.4. LIES ABOUT PRODUCT AVAILABILITY.5. MISREPRESENTS GUARANTEE.6. LIES ABOUT COMPETITION7. SELLS PRODUDT THA PEOPLE DO NOT NEED8. MAKES ORAL PROMISES THAT ARE NOT LEGALLY BIDING9. IS NOT INTERESTED IN CUSTOMER NEED.10. ANSWERS QUESTIONS EVEN WHEN HE OR SHE DOES NOT KNOW THE CORRECT ANSWER.11. SELLS HAZARDOUS PRODUCTS
  • 24. RELATIONSHIP WITH SALESPERSON’S COMPANY EXPENSE ACCOUNTS• A salesperson who cannot live within the company compensation plan and expense policies has two ethical alternatives:3) Persuade the company to change its compensation plan or expense policy.4) Find another job.
  • 25.  REPORTING WORK – TIME INFORMATION AND ACTIVITIES• Employers expect their salespeople to work full time.• To monitor work activities, many companies ask their salespeople to provide daily call reports. SWITCHING JOBS• When salespeople decide to change jobs, they have an ethical responsibility to their employers.
  • 26. The ethical approach to leaving a job includes the following:• Give ample notice.• Offer assistance during the transition phase.• Don’t burn your bridges.• Don’t take anything with you that belongs to the company.
  • 27. RELATIONSHIP WITH COLLEAGUES SEXUAL HARASSMENT• Sexual harassment includes unwelcome sexual, requires for sexual favors, jokes, or graffiti, and physical conduct. Some actions that are considered sexual harassment are:3. Engaging in suggestive behavior4. Treating people differently because they are male or female
  • 28. Continuation3. Making lewd sexual comments or gestures4. Joking that has sexual content5. Showing obscene photographs.6. Alleging that an employee got rewards by engaging sexual acts7. Spreading rumors about a persons sexual conduct.
  • 29. Following are some suggestions for dealing with sexual harassment from customer:• Don’t become so dependent on one customer that you consider compromising your principles to retain the customers business.• Tell the harasser in person or write a letter.• Utilize the sexual harassment policies of your firm and customers firm to resolve problems.
  • 30. RELATIONSHIP WITH COMPETITORS Making false claims about competitors products or sabotaging their efforts is clearly unethical and often illegal. Another questionable tactic is criticizing a competitors products or policies.
  • 31. LEGAL ISSUES The activities of salespeople in the united states are affected by three forms:• Statutory law is based on legislation passed by either state legislatures or congress. The main statutory laws governing salespeople are the uniform commercial code and anti trust laws.• Administrative laws are established by local state or federal regulatory agencies. The federal trade commission is the most active agency in developing administrative laws affecting salespeople.
  • 32. however the securities and exchange commission regulates stockbrokers, and the food and drug administrative regulates pharmaceutical salespeople.• Common law grows out of court decisions. Precedents set by these decisions fill in the gaps where no laws exist.
  • 33. UNIFORM COMMERCIAL CODE UNIFORM COMMERCIAL CODE (UCC) is the legal guide to commercial practice in the united states. The UCC defines a number of terms related to salespeople. AGENCY a person who acts in place of his or her company is an agent. Authorized agents of a company have the authority to legally obligate their firm in a business transaction.
  • 34. SALE The UCC defines a sale as “ the transfer of title to goods by the seller to the buyer for a consideration known as price.” a sale differs from a contract to sell. Any time a salesperson makes an offer and receives an unqualified acceptance, a contract exists. A sale is made when the contaract is completed and title passes from the buyer.
  • 35. • The UCC also distinguishes between an offer and invitation to negotiate. A sales presentation is usually considered an invitation to negotiate. An offer takes place when the salesperson quotes specific terms.• Salespeople are agents when they have the authority to make offers. However, most salespeople are not agents beciase they have the poer only to solicit written offers from buyers. These written offers called orders, become contracts when they are signed by an authorized representative salesperson company.
  • 36.  TITLE AND RISK OF LOSS • If the terms of the c contract specify free on board (FOB) destination, the seller has the title until the goods arte received at the destination. • The UCC also defines when titles transfer for goods shipped cash on delivery (COD) and for goods sold on consignment. ORAL VERSUS WRITTEN AGREEMETS • In most cases oral agreements betwenn a salesperson and a customer are just as binding as written agreements.
  • 37.  Obligations and performance • When the salesperson and the customer agree on the terms of a contract, both firms must perform according to the firms of “good faith”. warranties • A warranty is an assurance by the seller that the products will perform as presented sometimes a warranty is called a guarantee. • The UCC distinguishes bet. two types of warranties, expressed and implied. An expressed warranty is an oral or a written statement by the seller. An implied warranty is not actually sated but it is still an obligation defined by law.
  • 38. MISREPRESENTATION OR SALES PUFFERY Glowing descriptions such as “ service can’t be beat” are considered to be opinions or sales puffery. Customers cannot rely on these statements. Credulous person standard. This standard means the company and the salesperson have to pay damages if a reasonable person could be misunderstand the statement.
  • 39. ILLEGAL BUSINESS PRACTICES The Sherman Antitrust act of 1890, the Clayton act of 1914, the federal trade commission act of 1914, and the Robinson- Patman act of 1934 prohibit unfair business practices to lessen competition. Business defamation occurs when a salesperson makes unfair or untrue statements to customers about a competitor, its products, or its salespeople.
  • 40. Continuation Reciprocity • Is a special relationship in which two companies agree to buy products from each other. • Reciprocity is illegal if one company forces another company to join the agreement. Reciprocity is legal only when both parties consent to the agreement willingly.
  • 41.  Tying agreements • A buyer is required to purchase one product in order to get another product. Conspiracy and collusion • An agreement between competitors before customers are contacted is a conspiracy whereas collusion refers to competitors working together while the customer is making a purchase decision. Restrictions on resellers • It was illegal for companies to establish a minimum price below which their distributors or retailers could not resell their products, this practice is called resale price maintenance
  • 42. • Spiff stands for special promotion incentive a fund, and dates back a time when there was more selling by retail salespeople. Price Discrimination • Court decisions related to Robinson – patman act define price discrimination as a seller giving unsatisfied special prices , discounts or services to some customers and not to others. Privacy laws • Limit the amount of information that a firm can obtain about consumer specify how that information can be used or shared.
  • 43. International ethical and legal issues Lubrication involves small sums or gifts, typically made to low ranking managers or government or officials, in countries where these payments are not illegal. The lubrication payments are made to get the official or manager to do the job more rapidly. Subordination involves paying larger sums of money to higher ranking officials to get them do something that is illegal or to ignore an illegal.
  • 44. RESOLVING CULTURAL DIFFERENCES CULTURAL RELATIVISM is the view that no cultures ethics are superior. EHICAL IMPRIALISM is the view that ethical standards in ones home country should be applied to ones behavior across the world.