Credit Sprint / Study guides / Marketing Unit 1

Credit Sprint's Guide to Marketing Unit 1: Marketing and Society

Marketing shapes how people live, so it comes with responsibilities. This unit covers the role marketing plays in an economy, ethical and socially responsible behavior, the laws that protect buyers and competitors, marketing for nonprofits and causes, and the special challenges of selling in other countries.

What you need to know

• Marketing creates utility: form (making the product), place (where it is), time (when it is available) and possession (the ability to own or use it). Marketing mainly adds place, time and possession utility.
• Ethics are moral standards of right and wrong. Social responsibility goes further: a firm weighs the effects of its decisions on society, not only on profit. Corporate social responsibility (CSR) often follows the triple bottom line: people, planet and profit.
• Common ethical problems: deceptive advertising, bait-and-switch, planned obsolescence, high-pressure selling, greenwashing (false environmental claims), unsafe products and misuse of customer data.
• Consumerism is an organized movement to protect consumers. President Kennedy's 1962 Consumer Bill of Rights named four rights: safety, to be informed, to choose and to be heard.
• Key U.S. laws: Sherman Act (no monopolizing or price fixing), Clayton Act (limits practices that lessen competition), Robinson-Patman Act (bans unjustified price discrimination between competing buyers), FTC Act (bans unfair or deceptive acts), Lanham Act (trademarks and false advertising), CAN-SPAM (commercial email) and COPPA (children's online privacy).
• Nonprofit marketing sells causes, ideas and services rather than profit. Nonprofits serve two publics: clients who use the service and donors who fund it. Social marketing uses marketing tools to change behavior for the public good, such as anti-smoking campaigns.
• Cause-related marketing links a company's sales to a donation to a cause. It builds goodwill but is criticized when the link is vague or exaggerated.
• Ways to enter a foreign market, from least to most commitment and risk: exporting, licensing, franchising, contract manufacturing, joint venture, and direct investment (wholly owned subsidiary).
• Global marketing can standardize the product and message everywhere (lower cost) or adapt to local culture, law and income (better fit). Many firms 'think globally, act locally.'
• Trade barriers include tariffs (taxes on imports), quotas (limits on quantity) and embargoes (bans). Dumping is selling abroad below cost or below the home price. Trade agreements and groups include the WTO, the EU and USMCA.

Formulas and rules

Exam traps

Key terms

• Utility: The want-satisfying power of a product. Types: form, place, time and possession.
• Ethics: Moral standards of right and wrong that guide behavior.
• Social responsibility: Weighing the effects of decisions on society, not only on profit.
• Triple bottom line: Measuring success by people, planet and profit.
• Greenwashing: Making false or misleading claims that a product or firm is environmentally friendly.
• Bait-and-switch: Advertising a low-priced item to lure buyers, then pushing a more expensive one.
• Planned obsolescence: Designing products to become outdated or to wear out so buyers replace them.
• Consumerism: An organized movement to protect the rights and interests of consumers.
• Consumer Bill of Rights: Rights to safety, to be informed, to choose and to be heard.
• Sherman Act: Federal law that outlaws monopolizing and price fixing.
• Clayton Act: Federal law that limits practices that may lessen competition, such as exclusive dealing.
• Robinson-Patman Act: Bans price discrimination between competing buyers that is not justified by cost or competition.
• FTC Act: Created the Federal Trade Commission and bans unfair or deceptive acts.
• Lanham Act: Federal law covering trademarks and false advertising.
• CAN-SPAM: Federal law that sets rules for commercial email, including an opt-out.
• COPPA: Law that limits collecting personal data from children under 13 online.
• Puffery: Obvious exaggeration that no reasonable buyer takes literally; generally legal.
• Nonprofit marketing: Marketing by organizations whose goal is not profit; they serve clients and donors.
• Social marketing: Using marketing tools to change behavior for the public good.
• Cause-related marketing: Linking sales to a donation for a cause.
• Exporting: Selling domestically made goods abroad; the lowest-commitment way to enter a foreign market.
• Licensing: Letting a foreign firm use your brand, patent or process for a fee or royalty.
• Joint venture: A partnership in which two firms share ownership and risk in a foreign market.
• Direct investment: Owning operations in a foreign country; the highest control and risk.
• Tariff: A tax on imported goods.
• Quota: A limit on the quantity of a product that may be imported.
• Embargo: A ban on trade with a particular country or of a particular product.
• Dumping: Selling goods abroad at a price below cost or below the home-market price.

Practice questions

Five of the 50 Unit 1 questions in Credit Sprint. Every choice is explained in the app.