Chapter 5

CHAPTER 5
ETHICS AND SOCIAL

RESPONSIBILITIES IN SALES
MANAGEMENT
Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

ETHICAL BEHAVIOUR
• Ethics are the principle governing the behavior of an
individual or a group. These principles establish
appropriate behavior, indicating what is right and wrong.
• 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.
ETHICS AND PERSONAL SELLING
Sales personnel are frequently faces with ethical
dilemmas. Ethical behaviour refers to treating others
fairly. Specifically, it refers to:
– Being honest and truthful
– Maintaining confidence and trust
– Following the rules
– Conducting yourself in the power manner
ETHICS AND PERSONAL SELLING-cont
– Treating others fairly
– Demonstrating loyalty to company
and associates
– Carrying your share of the work
and responsibility with 100 percent
effort.
EMPLOYER ETHICS IN DEALING WITH
SALESPEOPLE
Four (4) ethical considerations sales managers face
are:
1. the level of sales pressure to place on a
salesperson
2. decisions concerning a salesperson’s territory
3. whether or not to be honest with the salesperson
4. employee rights
LEVEL OF SALES PRESSURE
• Managers are responsible for group goals. They have a natural
tendency to place pressure on salespeople to reach those goals.
• Some managers motivate their people to produce at high levels
without applying pressure whereas others place tremendous
pressure on salespeople to attain sales beyond quotas.
• managers should set realistic and obtainable goals. They must
consider individual territory situations. If they do so fairly and
sales are still down, then pressure may be applied.

DECISION AFFECTING TERRITORY
• Management makes decisions that effect sales territories and

salespeople. For example, for company might increase the number of
sales territories, which often necessitate splitting a single territory.
• A salesperson may have spent year building the territory to its current
sales volume only to have customers taken away. If the salesperson
has worked on commission, this would mean a decrease in earnings.

TELLING THE TRUTH
• Should salespeople be told they are not promo table, that they are marginal
performers, or that they are being transferred to the poorest territory in the
company so that they will quit? Good judgment must prevail. Sales managers
prefer to tell the truth.
• Do you tell the truth when you fire a salesperson? If a fired employee has
tried and has been honest, many sales managers will tell prospective
employers that the person quit voluntarily rather than being fired. One
manager put is this way. ‘I feel he can do a good job for another company. I
don’t want to hurt his future’.
EMPLOYEE RIGHTS
• rights desired by employees regarding their job security and their
treatment by employers while on the job, irrespective of whether
those rights are currently protected by law or collective bargaining
agreements of labour unions.
• The sales manager must be current on ethical and legal
considerations regarding employee rights and must develop
strategies for the organization in addressing those rights.

EMPLOYEE RIGHTS_cont
Here are several important questions that all managers should be
able to answers.
– Under what conditions can organization fire sales personnel
without committing a violation of the law?
– What rights do and should sales personnel have regarding the
privacy of their employment records and access to them?
– What can organizations do to prevent sexual and racial
harassment and other forms of bias in the workplace?

GROUP ACTIVITIES
Group 1 – “Sales People Burnout“
8 years ago, you hired an ace sales rep named Brandon. When he
started out, he was out in the field crushing it every day, making 150–
160 cold calls a day, setting up demos, and closing new customers. But
for the past 9 months, Brandon's shuffling his feet and has dark
circles under his eyes. The once enthusiastic and respected salesperson
is now avoiding phone calls and looks like he’s been hit by a bus.
Before you know it, your whole team is also affected by Brandon
attitudes—he are burned-out. Your General Manager asked you to
forced Brandon to retire. Was it necessary? As his sales manager, how
would you dealt with this issue without hurting his feeling.
GROUP ACTIVITIES
Group 2 – “The Dilemma“
As the new appointed sales manager of BRBX Company, you are
given a responsibility of making profits for the company without
considering your sales force welfare. Your top management
forcing you to make sure your sales force must be 24 hours
available if needed. As a sales manager, how would you dealt with
this problem without affecting your sales force welfare and
following order from the top management and continue making
profits for the company?
GROUP ACTIVITIES
Group 3 - "In Trouble - Sales"
• Recently your sales force are losing more and more account to
the competitors. To make thing worse, your General Manager
(GM) is now under financial pressure from the bank, is trying
to save the company by firing the underperformed sales people.
Your GM is asking you to choose only two sales people to stay
and the rest of the sales people must be forced @ volunteering
to quit their job or quit their job. What should be done
assuming you want to make sure the whole team stay?

GROUP ACTIVITIES
Group 4 - "New Strategy- new sales territories"
• A new appointed director who feels she is gaining intense
competition has decided and came up with new strategy which
is to open several sales territories and reallocate her sales
manager and sales people accordingly. As the sales manager,
suggest how to deal with the reallocating your sales people
without affecting their account?

GROUP ACTIVITIES
Group 5 - "Romance in the Office"
• Sales manager of sales force team A complains to the general
manager that one of your sales people and his sales people is
having a romantic affair and passing on information about his
team prospecting methods. Sales manager of sales force team
A, accusing your sales people as the person who responsible
for their lost and under performance of the month. As a result,
your General Manager forced you to transfer your sales people
to other department. Was it necessary to transfer the sales
people? Explain.
GROUP ACTIVITIES
Group 6 -"You're The Boss"
• You're a new sales manager who gets your first
evaluation from your sales people and there are
problems. The sales people complains that you
don't listen and don't trust them. What should you
do to correct the problems and the perceptions of
you as boss?
SALES PEOPLE ETHICS IN DEALING
WITH THEIR EMPLOYER
Both salespeople and sales managers may occasionally misuse company assets
or cheat. Such unethical practices can affect co-workers and need to be
prevented before they occur.
1. Misusing company assets
2. Cheating
3. Affecting other salespeople
4. Technology theft

MISUSING COMPANY ASSETS
• Salesperson misusing company assets for his or her personal gain

• Company assets most often misused are automobiles, expense
account, samples, and damaged-merchandise credits. All can be
used for used for personal gain or as bribes and kick-backs to
customers.
• For example, salespeople can give customers valuable product
samples or a credit for damaged merchandise when there has been
no damage
CHEATING
• Salesperson hide the truth from their employer for unknown
motives.
• A salesperson may not play fair in contests. If a contest starts
in July, the salesperson may not turn in sales orders for the end
of June and lump them with July sales. Some might arrange,
with or without the customer’s permission, to ship
merchandise that is not needed or wanted.
• The customer holds the merchandise until payments is due and
then returns it to the company after is over. The salesperson
also may overload the customer to win the contest.
AFFECTING OTHER SALESPEOPLE
• Salesperson doing unethical practices inside and outside the
company and his or her action will affect the whole team and
jeopardize the company image.
• Often, the unethical practices of one salesperson can affect other
salespeople within the company. Someone who cheats in winning a
contest is taking money and prizes from other salespeople.
• Salespeople also may not split commissions with co-worker or take
customers away from co-workers.
TECHNOLOGY THEFT
• Salesperson stealing company valuable assets and belonging for his or her
personal gain
• For example, a salesperson or sales manager quits, or its fired, and takes
the organization’s customer records to use for his or her or future
employer’s benefit.
• How is that possible? Well, it’s getting easier to do these days because
more and more companies provide their sales personnel with computers,
software, and data on their customers.
SALES PEOPLE ETHICS IN DEALING
WITH THEIR CUSTOMER
1. Bribes
2. Misrepresentation
3. Price discrimination
4. Tie – in sales
5. Sales restrictions
BRIBES
• A salesperson may attempt to bribe a buyer by offering money, gifts,

entertainment, and travel opportunities. Many companies forbid their
buyers to take gifts of any size from salespeople.
• Bribery is the practice by which a person who can take decision or action
on behalf of others by virtue of his authority or position is influenced by
paying or offering monetary benefits for influencing him to take an action
or decision which he would not have done otherwise.

MISREPRESENTATION
• Sometimes, casual misstatement by salespeople can put a company on the
wrong side of the law. Most salespeople are unaware that they assume legal
obligations – with accompanying risks and responsibilities – every time they
approach a customer.
• They exaggerate the capabilities of their products or services and
sometimes make false statement s just to close a sale. Often, buyers depend
heavily on the technical knowledge of salespeople, along with their
professional integrity. Yet, sales managers and staff find it difficult to know
just how far they can go with well-intentioned sales talk, personal opinion,
and promises.

MISREPRESENTATION
• They do not realize that by using certain statements they can
embroil their companies in a lawsuit and ruin the business
relationship they are trying to establish.
• When a customer relies on a salesperson’s statements, purchases
the product or service, and then finds that it fails to perform as
promised, the supplier can be sued for misrepresentation and
breach of warranty

PRICE DISCRIMINATION
• Some customers may receive price reductions, promotional allowances.

Individual salespeople or managers may practice price discrimination to
improve sales.
• Price discrimination refers to selling the same quantity of the same product to
different buyers at different prices. This can be illegal if it injures or reduces
competition.
• Price discrimination allows a company to earn higher profits than standard
pricing because it allows firms to capture every last dollar of revenue available
from each of its customers.
TIE – IN SALES
• Consumers can buy one good only if they purchase another good
as well (unwanted product). This is called a tie-in sale.
• Because they allow a monopoly to increase its profit over what it
could make by selling the two goods separately at constant prices,
tie-in sales can be used to price discriminate.
• However, it is important to realize that there are other reasons for
tie-in sales other than price discrimination, such as to increase
efficiency
SALES RESTRICTIONS
• sets the conditions under which restricted, unregistered

and control products/services can be sold or resold.
• Selling restrictions products/service to certain
customers to generate profit

DIRECT SELLING ASSOCIATION OF
MALAYSIA CODE OF CONDUCT
• The Direct Selling Association of Malaysia (DSAM),
being the standard bearer of ethical direct selling, has
adopted a stringent Code of Conduct by which member
companies in the Association are to adhere to in every
aspect of their business.

a. Deceptive or unlawful consumer or recruiting practices
-sales people shall not use misleading, deceptive and unfair sales practices
- Promotional literature, advertising and mailing shall not be misleading and
deceptive (must contain the company name, telephone and address)
- Sales people shall not abuse the trust of their customer and respect the
lack of commercial experience of consumer
- Sales people shall not use unauthorized and obsolete testimonial to
mislead customer during presentation
- Sales people shall not use comparisons (competitors) to avoid unfair
competition
b. Products or services
- Sales people must give an understandable and accurate answers to
the customer regarding the products
- Explanation and demonstration must be accurate and
understandable including the price of the product, credit terms,
terms of payment, return rights/reimburse, terms of guarantee,
after sales service and delivery
- Sales people shall fulfil the customer’s order in timely manner
c. Terms of sale
- Sales people can only make a verbal promise for authorized product by the
company
- Customer can withdraw an order and reimburse a payment in a given period of
time
- A written order form must be presented to the customer before or during the sales
process (face to face selling process)
- A written order form must be presented to the customer before or during the sales
process via internet (can be downloaded and print from the website) - non face to
face selling process
d. Warranties and guarantees
- Sales people can only make a verbal promise for authorized
product by the company
- Shall contains the following : the name and address of the
guarantor, the duration of the guarantee and the remedial
action
- All terms shall be clear and legible
e. Identification and privacy
- Sales people shall identify themselves, their company, their product
and their purposes to the prospective before the selling process
begin
- Personal contact and telephone contact can only be made in
reasonable hour to avoid intrusiveness
- Sales people shall discontinue demonstration and sales
presentation upon the request of customer
f. Pyramid schemes
- Pyramid selling is a fraud. It is a mechanism by which promoters of
so-called “investment” or “trading” schemes enrich themselves in a
geometric progression through the payments made by recruits to
such schemes.
- Related deceitful schemes have been described in various
international jurisdictions as “chain letters,” “snow balls,” “chain
selling,” “money games,” “referral selling” and “investment
lotteries”.
f. Pyramid schemes
- Company shall not ask sales people or prospect to pay
the following:
• High entrance fees
• Training fees
• Franchise fees
• Promotional material fees
• Other fees related to the right to participate in the business
SELF - TEST
1. Define ethical behaviour. (3 marks)
2. Explain five (5) ethical issues sales people have to face when dealing
with their customers. (15 marks)
3. State four (4) ethical issues sales people have to face when dealing
with their employer. (8 marks)
4. Explain the following term:
i. Price discrimination (3 marks)
ii. Sales restrictions (3 marks)

GROUP ACTIVITIES
• Form a group consist of 6 persons.
• Each group need to explain how DSAM dealing with the
following code of conduct:
Group 1 – Deceptive or unlawful consumer or recruiting
practices
Group 2 – Products or services
Group 3 – Terms of sale
Group 4 – Warranties and guarantees

END OF CHAPTER 5

Chapter 5

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CHAPTER 5

ETHICS AND SOCIAL

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

• Management makes decisions that effect sales territories and

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

• Salesperson misusing company assets for his or her personal gain

• A salesperson may attempt to bribe a buyer by offering money, gifts,

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

• Some customers may receive price reductions, promotional allowances.

• sets the conditions under which restricted, unregistered

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

Prepared by Ladvia Anak Ajiu_Sesi Dec 2017

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