I was sitting at home and watching the results of the closely contested US election unfold on CNN when I kept seeing a Hyundai commercial focused on sustainability. They were not promoting any particular car model, any features, or technology but just getting a message (in primetime) out there that they are working towards using sustainable materials.
That’s a sharp contrast from a car ad that I remember from 2004, which featured a Honda and a Mitsubishi car driving on a bridge and one was able to stop a meter ahead of the other, which was enough to not fall into the collapsed part of the bridge.
I know what Hyundai were onto. They were trying to capitalize on a trend where more and more consumers want to buy from brands that share the same values as them.
Covid-19 accelerated even more a shift that has been gradually forming for over 10 years. There has been a global psychological shift in values, beliefs, and needs. Values have evolved, with renewed demands that brands put integrity and purpose before profit. The basis for many customer decisions has shifted. Through COVID-19, the triple bottom line of people, profit, and the planet has become more important than ever.
This trend is evident in many reports that I’ve come across recently:
- Accenture Strategy’s Global Consumer Pulse Survey 2019 revealed:
- that 65 % of consumers want businesses to take a stand on issues that are close to their heart. That number rises to 74 % for 18- to 39-year-olds.
- 43 % walk away when disappointed by a brand’s words or actions on a social issue.
- KPMG Nunwood report from 2020, based on their Global Covid-19 tracker found:
- 90% of customers are willing to pay more for ethical retailers
- 56% say environmental and social practices of a company have an impact when choosing to buy from them
- 71% of customers say, if they perceive a brand is putting profit over people they will lose trust in that brand forever
Here’s the one that best captures it in my opinion: 77% of consumers say they buy from brands who they share values with (Havas Group, 2019).
Research shows Gen Z and millennials (Generation Y) are more inclined to hold brands accountable to their corporate social responsibility goals. You can see that from the Accenture study and further evidence comes from 5W Public Relations’ 2020 Consumer Culture Report. Their research shows that 76% of 18 – 34-year-olds like it when CEOs of companies they buy from speak out on issues they care for. This compares to 66% of 35-54-year-olds and 55% of the 55+ age group.
Why is this important? Because Gen Z and millennials now outnumber all other generations globally! This means that this trend has reached a tipping point with a critical mass of people expecting organizations to act with integrity and purpose.
This is all good, but we at Beyond Philosophy, know that there is a big difference between what customers say they want and what they do. For example, Disney knows that when they ask their customers what they want to eat in their theme parks, customers say they want healthy meal options such as salads, but Disney also knows that by and large, customers don’t eat salads in their theme parks but predominantly hot dogs and burgers. So depending on how a survey is constructed, customers will say a lot of things, but their actions may speak differently.
In this case though, while some of that is still valid, there is still a critical mass of people that are ready to put their money where their beliefs are. We’re seeing a rise in recycling, upcycling, vintage, secondhand. We’ve got global marches… The Accenture study found that two-thirds of consumers think their protest actions, including boycotting brands or calling them out on social media, can make a difference in company behavior. Thirty-six percent reported being disappointed by how a company acted, which betrayed their belief in what the company stands for. Nearly half (47%) stopped doing business with a company in response to a moment of brand disappointment.
In short, Accenture says “Generations Y (millennials) and Z have ascended to Generation P(urpose)”, while KPMG says we’ve entered into a new age in economy – the “Integrity Economy”.
Zoom Out
Clearly, this is very important and we’ll talk about what it means below, but this is just another way to make an emotional connection with customers. Research from Motista shows that emotionally connected customers:
- have a 306% higher lifetime value;
- stay with a brand an average of 5.1 years vs 3.4 years;
- recommend the brands at a much higher rate of 71% vs 45%.
Therefore, building emotional connections with today’s modern consumer is critical! Brands that are successful in building an emotional connection will operate at premium margins and will have fans, who use them a lot more often, not just customers.
With this in mind, I like more the definition that Mary Portas gives: “people are moving from “buying from to buying into”.
What’s at stake? According to Accenture, companies will either stand to lose, gain, or retain a piece of the US$5 trillion global switching pie.
There are already plenty of examples that this strategy is successful.
Patagonia is one of those. I’ve started noticing people with their t-shirts even in places where I’d not expect that many people have heard about them. Patagonia says that they are “in business to save our home planet”. And they mean it. Their strategy has always been to produce high-quality clothing that doesn’t just last one season. They want to reduce textile waste by encouraging customers to either repair their gear or recycle it. Since 1985, Patagonia has pledged 1% of sales to the preservation and restoration of the natural environment. They are also an embodiment of what is nowadays called an “activist company”. They have fought President Trump on his views on the environment. This year, they announced they were giving away the Trump tax cut, estimated at $10,000,000, to environmental causes. They stand against overconsumption and even put an advert for Black Friday with the message “Don’t Buy This Jacket”. In spite of what looks like an anti-marketing effort, the company has seen its revenues grow in the face of a challenging environment for traditional retailers. The year the company put that ad (2011), revenue grew by about 30% and a further 75% between 2013 and 2018. In fact, their revenue grows every time it amplifies its social mission.
Lush is another very good example and a long-time favorite of ours as we’ve taken customers on our Study Tours to their shops. Their mission is “to make their products by hand with only vegetarian ingredients and little-to-no preservatives”. Why? Because they stand big time against animal testing and cruelty. Lush has been amongst the top performers in the UK Customer Satisfaction index for many years and have seen tremendous growth globally.
We know what most organizations would say “it’s easy for them because they were founded with these beliefs and purpose in mind”. We hear this quite often. However, established organizations like Nike also stand out. When in 2016, quarterback Colin Kaepernick started kneeling during the national anthem before games to protest racial injustice, which effectively ended his NFL career, Nike stood by him. Kaepernick has had a contract with the company since 2011, but it was on the verge of expiration when the company crafted an extension. Then in September 2018, Nike released the advert, titled Dream Crazy, featuring the former NFL quarterback. The ad read: “Believe in something. Even if it means sacrificing everything. Just do it.”. A negative reaction was swift and predictable. Videos were also uploaded on Twitter of people burning their Nike shoes. Despite the blowback from some Americans, the campaign was deemed a success, and the company’s stocks rose by 5% in the weeks following the advert’s release. The ad also won the award for outstanding commercial at the Creative Arts Emmys.
Doing things in a sustainable way doesn’t necessarily mean more costs but rather more revenue.
IKEA, for example, set out to be 100% powered by renewable energy by 2020 and now generates more renewable energy than it uses. The retailer has invested in 70,000 solar panels for its stores, selling the extra energy, generating a new revenue stream.
While these may seem like outliers (and perhaps they are to some extent), they fit the broader trend. Brands with a high sense of purpose have experienced a brand valuation increase of 175% over the past 12 years compared to the median growth rate of 86%, Kantar Consulting found.
Let me give one more example, this time from a small business in … Eastern Europe. When security forces in Belarus used brutal force and started chasing protesters against president Lukashenko, following an election widely seen as rigged, protesters found shelter in a small cafe. That was until its windows were shattered to pieces by the head of the security forces himself. On the next day, Minsk residents helped clean up the glass and have been queuing up outside the O’Petit cafe all day long to show support by buying a cup of coffee. They bought over 300 cups of coffee in the morning alone. This photo shows a sense of the scale of support.
The Stick and the Carrot from BlackRock CEO
And if this wasn’t convincing enough for you, just days after publishing this article on LinkedIn, BlackRock CEO Laurence D. Fink wrote a letter to the world’s CEOs urging companies to prioritize sustainability. He called on businesses to reach net-zero emissions by 2050 and do their part to keep global warming in check.
Fink can’t technically make companies do anything. But, as the Morning Brew puts it, like a parent who controls your allowance (in this case, almost $9 trillion in assets), he effectively can. Last year, BlackRock put 191 businesses on a watch list and voted against 64 directors and 69 companies for climate-related reasons.
So what does this mean for organizations?
The good news is, that now it’s actually a good time to showcase your values, purpose, and integrity. According to Google research, 84% of U.S. consumers say that how companies or brands act during the current market is important to their loyalty moving forward.
Leading organizations know this and have moved to action. Uber, which has been working very hard to build customer trust in recent years, has committed to providing 10 million rides and food deliveries to healthcare workers and people in need, free of charge. Dyson in the UK is turning from manufacturing vacuum cleaners and hand driers to making ventilators at scale. LVMH is manufacturing hand sanitizer rather than perfume.
Marriott is another good example. I got an email, titled “A message from our CEO” in mid-March that basically communicated all the steps they are taking to ensure health and safety, extending the time to redeem points, changes to the cancellation policy, etc. Communication in those times was important. But what was more impressive was the follow-up email about 3 weeks later titled “An update from our CEO”. Right at the top was a section “In the Community”. Here are some of the things in there: “Around the world, our hotels located in close proximity to hospitals are in a unique position to help. Many of these properties are providing respite to weary hospital workers, military personnel, and supermarket employees who need to stay close to work or are concerned about going home to their loved ones. In Suzhou, China, associates at five Marriott brand hotels found another way to help first responders. When a local surgical mask factory announced that it needed workers, about 30 of our associates volunteered to help manufacture and package the masks. … It’s that kind of spirit that will sustain us through this crisis.”
Of course, there are hundreds of similar stories from the Pandemic. I also like a story from before Covid-19. Dawn dish soap was hailed as a wildlife rescue hero for cleaning hundreds of birds after the Gulf Coast oil spill in 2010. Consumers viewed the brand with pride for being part of the overall humanitarian response to this ecological disaster.
What organizations need to do?
➡️ Aim for an emotional connection. The businesses that can connect with people as people, not merely consumers, will start generating a whole new way of shopping. This can be done through the design of the customer journey and also through the brand and marketing. Since we talked mostly about the latter in this article, we’ll focus more on that aspect.
➡️ Define what social and environmental issues you as a company care about. Think of a multiyear plan about how to make change happen. Some go even as further as to think in terms of a 30-year framework. Such is Lorna Davis, former CEO of the multibillion-dollar organic CPG conglomerate DanoneWave, who counts Patagonia’s CEO Rose Marcario as a close adviser. She pushes those around her to work on a “30-year framework,” to understand the long-range consequences of business decisions, rather than merely what will move the needle next month or next year.
In a more immediate future, when making their 2021 plans, marketers will need to find authentic ways to incorporate social and environmental issues into their everyday work.
➡️ Think of the entire ecosystem. Think about the well-being and engagement of your employees. When we at Beyond Philosophy have been advising clients on the emotions they want to target in their customers, we’ve been also saying to them that they need to target the same emotions with employees a) so employees don’t see the organization as cynical but also b) so they can see what it means to evoke and feel these emotions.
The same goes for customers. Organizations need to plan for an emotional connection with customers. Especially now, as more and more journeys are now digital, organizations should not just think in terms of process steps (i.e. click here first, enter this info, then click here). They should also plan on designing an emotionally engaging experience along the customer lifecycle journey.
An important consideration in this new “integrity economy” should be given to the suppliers. We’ve seen the backlash when it turns out that a supplier has used child labor in the production of the products or makes employees work in inhumane labor conditions.
This works both ways. Everyone’s brand is being redefined right now based on their actions; the actions of leadership, the actions of employees, the action of suppliers.
In summary, organizations need to find ways to connect with their customer base on issues they care for, show them through communications, that these are front and center of what they do as a company and above all make them real through the experience they deliver. How to find the real drivers of customer perceptions? Read more here.