The Principle of Curbing Potential Harm

As much as possible, transactions freely entered into by producers and consumers are their private business. The political system curbs producer or consumer freedom only to prevent transactions that harm or threaten to harm the producer, consumer or third parties, Transactional harm is widely recognized

In Search of Universal Ethics

Marketing Highlight 2.5

SOURCES: Tun Dickson, 'The search for universal ethics', Financial Times (22 July 1994), p. 11. Also, copies of the Principles far Business can ho obtained from Caux. Round Table Secretariat, Arnaliastraat 10, 2514JC, The Hague, Netherlands

Frequent Flyer: Perks or Bribes?

A high-ranking official at the Swedish Board of Health and Welfare faced prosecution for allegedly violating regulations prohibiting public sector employees from making private use of airline bonus points gained on business trips. The official was suspended for using bonus points accumulated on regular business flights under Scandinavian Airlines System's EuroBorms scheme to fund private holidays. A similar case has also been reported from Finland, where strict anti-corruption laws also prevent employees from accepting inducements.

The incidents reflect tensions between employers and SAS over the frequent-flyer programme, which, companies say, inflates ticket prices, restricts competition and encourages staff to make unnecessary trips in order to amass bonus points.

Public organizations have declared that the benefits constitute illegal inducements when offered to business travellers, and have issued instructions to employees banning private use of frequent-flyer benefits. In the private sector, personal use of bonus points has also been deemed unlawful unless sanctioned by the employer. Ulf Frankc, of the Stockholm-based Institute Against Corruption, a private watchdog, said; 'Giving private benefits to business travellers is just like sending them a cheque. The law is absolutely clear, it is corrupt behaviour.'

But employers say it is practically impossible to track down individuals who contravene the regulations. The Swedish parliament said state bodies and companies were powerless to inter vene because the frequent-flyer programme was a private contract between airline and traveller. The parliament is among a growing number of public and private sector employers that have protested to SAS. urging it to modify the system by allowing them to handle the bonus points on behalf of their workers. SAS has rejected the pleas out of hand as the key object of the scheme is to cultivate the loyalty of individual passengers. Instead, business travellers' associations in Sweden and Denmark turned to the European Commission in Brussels, urging it to rule frequent-flyer schemes unlawful on competition grounds. The Swedish Business Travellers' Association spokesperson said that bonus programmes discriminated against smaller carriers. 'Only the biggest companies have the resources to fund these schemes. If a carrier does not have a large numbur of routes, it is forced out of the market.'

SAS insists that its frequent-flyer programme does not prompt staff to make unnecessary journeys, but simply encourages them to fly more with SAS. With 800,000 members, the SAS EuroBonus scheme is expanding at the rate of 150,000 new subscriptions per year. The airline brushes off talk of illegal inducements. It is up to employers to clamp down on abuses.

'It is not up to us to be a police force,' said Knut Lovstuhagen, SAS's director of corporate communications.

iifi- Greg Mclvor, 'Swedes say frequent-flyer perks are bribes', The European (15-21 February 19%), p. 17.

Marketing

Highlight as grounds for government intervention. The central issue is whether there is sufficient actual or potential harm to justify the intervention.

The Principle of Meeting Basic Needs

The marketing system should serve disadvantage ~ consumers as well as affluent ones. In a free-enterprise system, producers make goods for markets that are willing

Principles/or Public Policy Towards Marketing • 71

In f/iis innovative ad, the Co-operative Bank reflects its unspoken /md unwritten culture - it pro/esses that it twill not do business with organisations that arc environmentally or politically unsound.

and able to buy. Certain groups who lack purchasing power may go without needed goods and services, causing harm to their physical or psychological well-being. While preserving the principle of producer and consumer freedom, marketers should support economic and political actions to solve this problem. The marketing system should strive to meet the basic needs of all people, and all people should share to some extent in the standard oi living it creates.23

The Principle of Economic Efficiency

The marketing system strives to supply goods and services efficiently. The extent to which a society's needs and wants can be satisfied depends on how efficiently its searee resources are used. For marketing to work efficiently, the system needs competition. An open market allows for competition, free flow of goods, freedom of information and informed buyers. These make a market efficient. To make profits, competitors must watch their costs carefully while developing products, prices and marketing programmes that serve buyer needs. Buyers get the most satisfaction by finding out about different competing products, prices and qualities, and choosing carefully. The presence of active competition and well-informed buyers keeps quality high and prices low. But, more importantly, competition brings out the best in products and services. Producers that strive to offer the best value can expect to thrive.

The Principle of Innovation

The marketing system encourages genuine innovation to reduce production and distribution costs, and to develop new products to meet changing consumer needs. Much innovation is really imitation of other brands, with a slight difference to provide a selling point. The consumer may face ten very similar brands in a product class. But an effective marketing system encourages real product innovation and sustainable differentiation to meet the wants of different market segments.

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