Personal Selling Chapter 3


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  • Personal Selling Chapter 3

    1. 1. Ethical and Legal Issues in Selling Chapter 3
    2. 2. Important Questions Answered <ul><li>Why do salespeople need to develop their own codes of ethics? </li></ul><ul><li>Which ethical responsibilities do salespeople have toward themselves, their firms, and their customers? </li></ul><ul><li>Do ethics get in the way of being a successful salesperson? </li></ul><ul><li>Which guidelines should salespeople consider when confronting situations involving an ethical issue? </li></ul><ul><li>Which laws apply to personal selling? </li></ul>
    3. 3. <ul><li>“ Without my clients having the confidence and knowledge of my moral and ethical standards, I doubt that I would have been able to create a solid client base.” </li></ul><ul><li>~Eric Pollack </li></ul>
    4. 4. Ethics and Personal Selling <ul><li>Ethics are the principles governing the behaviour of an individual or a group. </li></ul><ul><li>These principles establish appropriate behaviour indicating what is right and wrong. </li></ul><ul><li>Difficult to determine what the principles are? </li></ul><ul><li>Ethics/Ethical values vary from person to person, culture to culture, country to country and from industry to industry. </li></ul>
    5. 5. Ethics and Partnering Relationships <ul><li>Ethical principles are particularly important in personal selling. </li></ul><ul><li>Partnerships between buyers and sellers cannot develop when salespeople behave unethically or illegally. </li></ul><ul><li>These become increasingly important as firms move to strategic partnerships. </li></ul>Manipulation eliminates or reduces the buyer’s choice unfairly. Persuasion is trying to influence the buyer’s decision, not force it. VS
    6. 6. Factors Influencing the Ethical Behaviour of Salespeople
    7. 7. Factors Affecting Ethical Behavior of Salespeople <ul><li>Factors influencing the ethical behavior of salespeople </li></ul><ul><ul><li>Personal, company, and customer needs </li></ul></ul><ul><ul><li>Company policies </li></ul></ul><ul><ul><li>Values of significant others </li></ul></ul><ul><ul><li>Laws </li></ul></ul><ul><ul><li>A personal code of ethics </li></ul></ul>7.
    8. 8. Personal, Company, and Customer Needs <ul><li>Often salespeople get into situations where there is a conflict between their and the customers’ interest. The best way out is to rely on their ethical standards and understanding of the laws governing these situations </li></ul>
    9. 9. Conflicting Objectives
    10. 10. Company Policies <ul><li>Company policies help salespeople and customer understand the does and don'ts and avoid difficult/indecisive situations. </li></ul>
    11. 11. Values of Significant Others <ul><li>People acquire their values and attitudes about what is right and wrong from the people they interact with and observe. e.g. relatives and friends, other salespeople, and their sales managers. </li></ul><ul><li>Sales managers 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 </li></ul>
    12. 12. Laws <ul><li>Laws dictate which activities society has deemed to be clearly wrong, the activities for which salespeople and their companies will be punished </li></ul>
    13. 13. A Personal Code of Ethics <ul><li>Each salesperson has a sense of right and wrong - a standard of conduct - from family and friends. Although salespeople should abide by their own codes of ethics, they may be tempted to avoid difficult ethical choices by developing “logical’’ reasons for unethical conduct. </li></ul>
    14. 14. An Organization’s Main Responsibilities
    15. 15. Guidelines for Ethical Behavior <ul><li>Universal Nature </li></ul><ul><li>The golden rule </li></ul><ul><li>Everyone plays by the same rules </li></ul><ul><ul><li>Truth Telling </li></ul></ul><ul><ul><li>Trust facilitates </li></ul></ul><ul><ul><li>cooperation </li></ul></ul><ul><ul><li>Responsibility for One's Actions </li></ul></ul><ul><ul><li>Don't blame others for your problems </li></ul></ul><ul><ul><li>The &quot;victim&quot; mentality </li></ul></ul>
    16. 16. Checklist for Ethical Decisions
    17. 17. Choices You Can Make if Your Manager Asks You to Act Unethically <ul><li>When a salesperson views polices or requests of the firm as improper, he/she has three choices: </li></ul><ul><ul><li>Ignore personal values and do what company asks to do. Self-respect suffers when one has to compromise principles to please an employer. This will probably make the salesperson feel guilty and dissatisfied with the job in the long run. </li></ul></ul><ul><ul><li>Take a stand and tell the employer what he/she thinks. Try to influence the decisions and policies of the company and supervisors. </li></ul></ul><ul><ul><li>Refuse to compromise his/her principles. Taking this path may mean that the salesperson will get fired or be forced to quit. </li></ul></ul><ul><li>One should not take a job with a company whose products, policies, and conduct conflict with your standards. </li></ul>
    18. 18. Selling Ethics and Relationships <ul><li>The salespeople may confront some ethical situations in their relationships with </li></ul><ul><ul><li>Customers </li></ul></ul><ul><ul><li>Competitors </li></ul></ul><ul><ul><li>Other colleagues (other salespeople) </li></ul></ul>
    19. 19. Relationships with Customers <ul><li>Deception </li></ul><ul><li>Bribes, Gifts and Entertainment </li></ul><ul><li>Special Treatment </li></ul><ul><li>Confidential Information </li></ul><ul><li>Backdoor Selling </li></ul>
    20. 20. Deception <ul><li>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. </li></ul>
    21. 21. Bribes, Gifts and Entertainment <ul><li>Bribes : payments to buyers to influence decisions </li></ul><ul><li>kickbacks : payments made to buyers based on the amount of orders. Both of these have negative consequences for the purchasing agent’s firm. </li></ul><ul><li>On the other hand determining which gifts and entertainment activities are acceptable and which are not brings up ethical issues. </li></ul>
    22. 22. Special Treatment <ul><li>Some customers take advantage of their status to get special treatment from salespeople, which may upset other customers who do not get the special attention. This special service can reduce the salesperson’s productivity. Therefore, salespeople should be diplomatic but careful about undertaking requests to provide unusual services </li></ul>
    23. 23. Confidential Information <ul><li>Offering information about a customer’s competitor in exchange for an order is unethical. Long-term relationships can develop only when customers trust salespeople to maintain confidentiality. Disclosing confidential information gives a bad reputation (untrustworthy) to the salesperson. </li></ul>
    24. 24. Backdoor Selling <ul><li>Sales to ultimate consumers bypassing the middlepersons or A salesperson's practice of avoiding a purchasing agent. Some companies do not allow, therefore, Backdoor selling can be very risky and unethical. </li></ul>
    25. 25. Buyers’ View of Unethical Sales Behaviour
    26. 26. The Tree of Business Life I T C Ethical Service Builds T r u e Relationships <ul><li>The Tree is rooted in </li></ul><ul><ul><li>Integrity: being honest and without compromise or corruption </li></ul></ul><ul><ul><li>From integrity flows confidence that one can trust the other </li></ul></ul><ul><ul><li>Integrity and trust form the attributes often referred to as character </li></ul></ul><ul><li>Framed by </li></ul><ul><ul><li>Ethical Service that Builds True Relationships </li></ul></ul><ul><li>Shown with T’s standing for </li></ul><ul><ul><li>Truth: facts needed to make ethical and moral decisions </li></ul></ul>T T T T T T T T T T T
    27. 27. Relationships with the Salesperson's Company <ul><li>Sales people in the field cannot be monitored. Companies trust the salespersons and the professional salespersons do not abuse this trust. Still there could be problems between the salesperson and the company: </li></ul><ul><ul><li>Expense Accounts </li></ul></ul><ul><ul><li>Reporting Work-time Information & Activities </li></ul></ul><ul><ul><li>Switching Jobs </li></ul></ul>
    28. 28. Expense Accounts <ul><li>Many companies provide their salespeople with cars and reimburse them for travel and entertainment expenses. It is good to have policies to be able to treat all the salespersons equally. To do their jobs well, salespeople need to incur expenses. However, using their expense accounts to offset what they consider to be inadequate compensation is unethical. </li></ul>
    29. 29. Reporting Work-time Information & Activities <ul><li>Salespersons are expected to work full time. Some salaried salespersons steal time and waste time on coffee breaks, long lunches, or unauthorized days off. While some salespeople paid by commission cheat by not working full time. This result in decrease of their income and profit of the company. </li></ul><ul><li>To monitor work activities, many companies ask their salespeople to provide daily call reports. </li></ul>
    30. 30. Switching Jobs <ul><li>As for every professional, when a salesperson decides to change the job, has some ethical responsibilities like: </li></ul><ul><ul><li>Give ample notice. </li></ul></ul><ul><ul><li>Offer assistance during the transition phase. </li></ul></ul><ul><ul><li>Don’t burn the bridges. </li></ul></ul>
    31. 31. Relationships with Colleagues <ul><li>To be effective, salespeople need to work together with others. Unethical behaviour toward their co-workers, such as engaging in sexual harassment and taking advantage of colleagues, can weaken company morale and have a negative effect on the company’s reputation . </li></ul>
    32. 32. Relationships with Competitors <ul><li>Making false claims about competitors’ products or sabotaging their efforts is unethical and often illegal. This can even backfire can harm reputation of the salespeople and their companies both. Another questionable tactic is criticizing a competitor’s products or policies. </li></ul>
    33. 33. ETHICS Responsibility to Self <ul><li>your conscience </li></ul>                                       Responsibility to your Company <ul><li>Inaccuracies in Expense Accounts </li></ul><ul><li>Honesty in Using Time and Resources </li></ul><ul><li>Accuracy in Filling Out Order Forms </li></ul><ul><li>Representing the Company </li></ul>Responsibility to Competitors <ul><li>No false claims </li></ul>Responsibility to Customers <ul><li>Overselling and Misrepresenting Products or Services </li></ul><ul><li>Keeping Confidences </li></ul><ul><li>Gifts & Entertainment </li></ul>
    34. 34. Legal Issues <ul><li>Salespeople violating the activities determined by the society as unethical and are often countered by a legal system. This does not only causes problems to themselves but to their companies as well. </li></ul>
    35. 35. Uniform Commercial Code <ul><li>Uniform Commercial Code (UCC) is the </li></ul><ul><li>legal guide to commercial practice in the United </li></ul><ul><li>States. The UCC defines a number of terms </li></ul><ul><li>related to salespeople. </li></ul><ul><li>Agency </li></ul><ul><li>Sale </li></ul><ul><li>Title and Risk of Loss </li></ul><ul><li>Oral versus written Agreements </li></ul><ul><li>Obligations and Performance </li></ul><ul><li>Warranties </li></ul>
    36. 36. Agency <ul><li>Salesperson who is a representative of the company, therefore, his/her statements and actions represent the company. These legally bind the company and have significant financial impact. </li></ul>7.
    37. 37. Sale <ul><li>The transfer of title to goods by the seller to the buyer for a consideration known as price. </li></ul>7.
    38. 38. Title and Risk of Loss <ul><li>Understanding the terms of the sale and who has title can be useful in resolving complaints about damaged merchandise. </li></ul>7.
    39. 39. Oral Versus Written Agreement <ul><li>In most cases oral and written agreements between a salesperson & a customer are equally binding. Normally, written agreements are required for big transactions. One must be careful when signing written agreements. </li></ul>7.
    40. 40. Obligations and Performance <ul><li>Once the agreement is concluded, both firms must perform according to those terms in “good faith.’’ Even if salespeople overstate the performance of their products, their firms have to provide the stated performance and meet the terms of the contract. </li></ul>7.
    41. 41. <ul><li>Is an assurance by the seller that the products will perform as represented. Sometimes a warranty is called a guarantee. </li></ul>Warranties
    42. 42. Misrepresentation or Sales Puffery <ul><li>Misrepresentation </li></ul><ul><ul><li>“ Mechanically, this oil rig is a 9 on a scale of 10.” </li></ul></ul><ul><ul><li>“ Feel free to prescribe this drug to your patients, doctor. It’s nonaddicting.” </li></ul></ul><ul><li>At times salespersons exaggerate performance of products. Glowing descriptions are considered as Opinions or Sales Puffery. </li></ul><ul><ul><li>“ This is a top-notch product.” </li></ul></ul><ul><ul><li>“ This product will last a lifetime.” </li></ul></ul><ul><li>Factual statements become particularly strong indicators of an expressed warranty when complex products are sold to unsophisticated buyers </li></ul>
    43. 43. Illegal Business Practices <ul><li>Laws are defined and courts use these laws to Create common law that defines illegal business practices </li></ul><ul><ul><li>Business Defamation </li></ul></ul><ul><ul><li>Reciprocity </li></ul></ul><ul><ul><li>Tying Agreements </li></ul></ul><ul><ul><li>Conspiracy and Collusion </li></ul></ul><ul><ul><li>Interference with Competitors </li></ul></ul><ul><ul><li>Restrictions on Resellers </li></ul></ul><ul><ul><li>Price Discrimination </li></ul></ul>
    44. 44. Business Defamation <ul><li>It occurs when a salesperson makes unfair or untrue statements to the customer about competitor, its products, or its salespeople. </li></ul>7.
    45. 45. Reciprocity <ul><li>It is a special relationship in which two companies agree to buy products from each other. These agreements are illegal if one company forces the other one to join the agreement. </li></ul>7.
    46. 46. Tying Agreements <ul><li>If a buyer is required to purchase a product in order to get another one. Such agreements are legal only if it could be proved that both the items should be used together </li></ul>7.
    47. 47. Conspiracy and Collusion <ul><li>An agreement between competitors before customers are contacted is a conspiracy; while collusion refers to competitors working together while the customer is making a purchase decision </li></ul>7.
    48. 48. Interference with Competitors <ul><li>Salespeople may illegally interfere with competitors by </li></ul><ul><ul><li>Trying to get a customer to break a contract with a competitor. </li></ul></ul><ul><ul><li>Tampering with a competitor’s product. </li></ul></ul><ul><ul><li>Confusing a competitor’s market research by buying merchandise from stores. </li></ul></ul>7.
    49. 49. Restrictions on Resellers <ul><li>Numerous laws govern the relationship between manufacturers & resellers/wholesalers and retailers. These laws change with time. </li></ul>7.
    50. 50. Price Discrimination <ul><li>A seller price discriminates when it charges different prices to different buyers. </li></ul>7.
    51. 51. Legal Guidelines <ul><li>To reduce the chances of violating laws governing sales practices, you should adopt the following guidelines </li></ul><ul><ul><li>Be sure that all specific statements about your product’s performance, such as technical characteristics and useful life, are accurate. </li></ul></ul><ul><ul><li>Be sure that all specific positive statements about performance can be supported by evidence. If you make strong positive statements that cannot be supported, use very general wording, such as high quality and great value. </li></ul></ul><ul><ul><li>If your customers do not pay attention to warnings and operating instructions, remind them to read this information. Never suggest that this information can be ignored. </li></ul></ul><ul><ul><li>If customers contemplate using your product incorrectly or in an inappropriate application, caution them specifically about how the product should be used. </li></ul></ul>
    52. 52. <ul><ul><li>Assess your customer’s experience and knowledge. Your legal obligations are greatest with unsophisticated customers. </li></ul></ul><ul><ul><li>Don’t make negative statements about a competitor’s product, financial condition, or business practices. Never pass along rumours about competitors. </li></ul></ul>Legal Guidelines (Contd.)
    53. 53. Ethical and Legal Issues in International Selling <ul><li>Ethical and legal issues are very complex when selling in international markets. Value judgments and laws vary widely across cultures and countries. Behaviour that is commonly accepted as proper in one country can be completely unacceptable in another country. </li></ul>
    54. 54. International Ethical and Legal Issues <ul><li>Lubrication…small sums of money or gifts, typically made to low-ranking managers or government officials in order to get things to happen more quickly. </li></ul><ul><li>Subordination…large payments to higher-ranking officials to get them to do something illegal or ignore an legal act. </li></ul><ul><li>Resolving cultural differences </li></ul><ul><ul><li>Cultural relativism…no culture’s ethics are superior </li></ul></ul><ul><ul><li>Ethical imperialism…home country’s ethics should be applied to one’s behavior across the world. </li></ul></ul><ul><li>It is important that the salespersons are aware of the host as well as their own country when working internationally . </li></ul>7.
    55. 55. LEGAL ISSUES FACING THE SALESPERSON Some Legal Traps <ul><ul><li>Quality below standard specified </li></ul></ul><ul><ul><li>Violation of delivery date </li></ul></ul><ul><ul><li>Pricing concessions </li></ul></ul><ul><ul><li>Incomplete or incorrect instructions </li></ul></ul><ul><ul><li>Price fixing </li></ul></ul><ul><ul><li>Delivering a different brand than that sold </li></ul></ul><ul><ul><li>Misrepresentation of product usage </li></ul></ul><ul><ul><li>Kickbacks to buyer </li></ul></ul><ul><ul><li>Charges after the sale </li></ul></ul><ul><ul><li>Misuse of proprietary data </li></ul></ul><ul><ul><li>Signing agreements without the proper authorization </li></ul></ul>Categories of Laws <ul><ul><li>Antimonopoly </li></ul></ul><ul><ul><li>Deceptive actions </li></ul></ul><ul><ul><li>Preserve competition </li></ul></ul>
    56. 56. How to keep out of Legal Trouble <ul><li>&quot; Puffery&quot; vs. statements of fact. </li></ul><ul><li>Educate the customer thoroughly before making the sale </li></ul><ul><li>Know technical specs, etc. for the product you sell. </li></ul><ul><li>Know your company's literature. Challenge it if is false </li></ul><ul><li>Know the terms of sale policies. You can bind the company </li></ul><ul><li>Know federal and state laws regarding your product and its warranties </li></ul><ul><li>Don't guess at your product's capabilities </li></ul>
    57. 57. <ul><li>Legal and ethical responsibilities of salespeople are important because salespeople may face conflicts between their personal standards and the standards of their firms and customers. </li></ul><ul><li>Salespeople’s ethical standards determine how they will conduct relationships with their customers, employers, and competitors. </li></ul><ul><li>Many companies have ethical standards that describe the behavior expected of their salespeople. </li></ul><ul><li>Good ethics are good business. </li></ul>Summary
    58. 58. End of Chapter 3
    59. 59. Thank you