Belhaven University Universal Paper Company Ethics in Marketing Case Study

Ethics and ethical decision making are important matters in marketing as
they are in our lives. Basically ethics concerns what is right and what
is wrong. Our ethical values are grounded in our family of origin and
in our own societal norms. Many of us agree on certain ethical
principles, and yet we may disagree at times, depending on the
situation.
In marketing work, ethics is often a concern. Why? Marketing people have
a lot of pressure on them because their job is to bring money through
the front door of the company! That’s a lot of responsibility! Shortcuts
and schemes can exist with marketing personnel because of the pressure
they are under.
Read the short case below and comment on where you believe that ethical
conflicts existed. What could have been done to avoid this ethical
dilemma? What action should be taken now?
Universal Paper Company
The Universal Paper Company, UPC, sells copy paper to commercial
customers for use in printers and copy machines. UPC has about 500
customers that they sell to and ship to throughout the United States,
and their yearly sales normally exceeds $25 million.
During the fourth quarter of the fiscal year the VP of Sales, Bill
Smith, needed to show a higher sales figure than what was currently
projected for the fourth quarter. Bill received a year-end bonus that is
based upon company profits and sales volumes achieved. Additionally,
the five Sales Associates are compensated with a base salary plus a
commission for exceeding their sales projections.
Bill Smith met with the Sales Associates at the beginning of the fourth
quarter and proposed a program to increase fourth quarter sales by 20%.
He told the Sales Associates to ship 20% more of their usual orders to
their customers and offer a 2% discount on the price for the fourth
quarter. Furthermore, he told the Sales Associates to allow customers to
return any excess paper that they did not need for a refund, provided
that it was returned in the next fiscal year. This practice is commonly
referred to as “channel stuffing”.
Mary Tyler is an administrative assistant who works in the sales office.
Mary felt uncomfortable about the practice that Bill Smith and the
Sales Associates were engaged in. Mary left a voice message with the
Chief Operating Officer, Tom McCabe, indicating that she felt this
practice was unethical and could hurt the company’s reputation. Tom
decided not to act on this information from Mary, as he felt that Bill
Smith and the associates generally did an exceptionally good job in
sales and servicing its customers’ needs. The company CEO, Ray Holtz,
was not aware of the channel stuffing scheme. Bonuses and higher
commissions were paid to Bill and the Sales Associates at the end of the
fiscal year based upon increase sales revenues and profits reported.
During the first and second quarters of the following fiscal year, UPC
received several complaints from their customers about their channel
stuffing tactic. Roughly 15% of the excess product shipped to customers
was returned to UPC for a refund. UPC lost 20% of their customers due to
the channel stuffing tactic. Two of the sales associates left the
company. Mary Tyler was terminated by Bill Smith. The board of directors
decided to meet to review the loss of business and bad will created
among their customers.