Canadian Marketing Blog

Facebook is for friends, but is it for brands?

Procter & Gamble, the world’s largest advertiser has been washing some of its laundry in the vast machine known as Facebook, hoping for a big load of crisp, engaged customers who can rhyme off the benefits of Cold Water Tide to anyone wearing a t-shirt.

Independent experts on Web advertising have been watching, however, and what they see is a list of difficulties in making brand advertising work on social networking sites. After all, members of social networks want to spend time with their friends, trade photos and update their status – not be brand ambassadors. At least that's what early campaign results are showing.

One of the potential benefits of Social Networking Sites (SNS) that the advertising industry has discussed is whether peoples’ connections (i.e., whom a user knows or is linked to) could be used to market to. For instance, publishers could show a car manufacturer's ads to a user's contacts because that user's online behaviour has indicated that she is interested in a particular brand of cars. However, this idea has not delivered. Of all U.S. Internet users, according to IDC, only 3% would allow publishers to use contact information for advertising.

What seems to draw more attention in SNS communities (and advertisers) is an element of the individual ‘helping’ the greater good. At least these are the campaigns that have attracted the most engagement in the form of ‘fans’ so far.

Take for example the Starbucks Coffee Company RED Campaign: They’ve added cause marketing to their site, and in just over two weeks generated a donation to the Global Fund will help provide 1.4 million days of medicine for HIV patients in Africa from the sales of the (STARBUCKS)RED EXCLUSIVE Beverages. The site has more than 631,000 fans.

Recently, The Great Schlep program. Comic Sarah Silverman created a video for YouTube (1.2 million views so far) targeting Jewish grandchildren visit their grandparents in Florida, educate them about Obama, and therefore swing crucial Florida vote in his favor. The page garnered 24,000 members.

It will be interesting to see what new advertising products the Facebook developers are cooking up for '09. But more importantly, to read case studies showing how companies used the best qualities of Facebook and its audience to crack the SNS code to achieve business results from this new medium.

That will be a status update worth reading.

Head and Shoulders Knees and Toes

I recently attended a special event hosted by The ALS Society of Canada and had the honour of viewing a new video launched by the society ‘Head and Shoulders Knees and Toes’. The campaign is intended to raise awareness about Amyotrophic Lateral Sclerosis (ALS) and the ALS Society’s efforts to fund research towards a cure for the disease. It has done that and more.

Created by Lowe Roche on a pro bono basis, the 60-second television public service announcement, “Head and Shoulders” is composed of a montage of clips, each one focusing on a man with ALS in emotionally charged moments as his disease advances to different parts of his body. Set to the children’s song, “Head and Shoulders, Knees and Toes”, as the spot progresses, and his conditions worsen, the cheerful singing becomes a sad whisper.

“We chose to create a spot that was musically and emotionally driven to raise awareness for ALS,” said Christina Yu, Vice President, Creative Director, Lowe Roche. “This song is one which everybody can relate to and we wanted to use it unconventionally to illustrate how this disease eventually affects every body part.”

“Lowe Roche has created a very powerful commercial that we think will help the public better understand what ALS is all about,” said Bobbi Greenberg, Director of Communications, ALS Society of Canada. “We’re very appreciative of their dedication to this project and of those who donated their time and services during the production process. We’re certain that their efforts will help us raise the funds we desperately need to proceed with research initiatives that will ultimately help us find effective therapies and a cure for this devastating disease.”

ALS, also known as Lou Gehrig’s disease, is a rapidly progressive and fatal neuromuscular disease that causes the degeneration of nerve cells in the brain and spinal cord. As the nerve cells die, people with ALS lose control of their muscles, which makes breathing, eating and even smiling almost impossible. Eighty per cent of those diagnosed will die within two to five years. There is no known cure or effective treatment of ALS.

Go directly to the ALS Society’s website to view the video.

Gen Y and Boomers Getting Along!

With the recent economic downturn, the dynamics between old-school managers and young talent is changing. Generation Y or the Millennials (those born in the 1980s and 1990s) are often perceived as spoiled, narcissistic individuals who cannot write, and waste too much time on instant messaging and Facebook. The Millennials, on the other hand, defend themselves that all their digital savvy proves that they are computer-literate multitaskers who are skilled at using online collaborative tools.

According to The Economist, this culture clash has been going on in many organizations - the Net Generation has grown up with computers and are brimming with self-confidence. They have been encouraged to challenge received wisdom, to find their own solutions to problems and to treat work as a route to personal fulfillment rather than merely a way of putting food on the table. Bosses complained that after a childhood of being coddled and praised, the Net Geners demand far more frequent feedback and an over-precise set of objectives on the path to promotion. In a new report from Pricewaterhouse Coopers, 61 percent of chief executives say they have trouble recruiting and integrating younger employees.

For the boomer managers, the current recession is the joyful equivalent of hiding an alarm clock in a sleeping teenager's bedroom. Having grown up in good times, Net Geners have laboured under the illusion that the world owed them a living. But hopping between jobs to find one that meets your inner spiritual needs is not so easy when there are no jobs to hop to.

As I've previously discussed in other blogs, compromise will be necessary on both sides. Net Geners will certainly have to temper some of their expectations and see the world as it is, not as they would like it to be. But their boomer bosses should also be prepared to make concessions. The economy will eventually recover and demographic trends in most developed countries will make clever young workers even more valuable. Many of the things that keep Net Geners happy - such as providing more coaching to young employees; providing more instant feedback; or embracing cheaper online ways to communicate - are worth doing anyway. In difficult economic times, the younger working generation is, at least for now, easier to manage!

Crossing the Line, Part 2

Building brand equity through Direct Mail (Part 1 here)

I have always been envious of mass advertising and its hold on brand! Mass is a sexy means to promote anything, and in the words of my favourite Absolutely Fabulous heroine, Edina Monsoon, it ‘turns even the dull into delicious…’
But as our media world becomes more and more fragmented, enhancing brand equity is no longer a single domain’s claim. Direct mail is proving instrumental in enhancing the associations a brand creates in the mind of the consumer – in other words, building brand equity.

Why would direct mail enhance brand equity? I believe when direct mail is timely, relevant and compelling, it acts as a ‘peak-positive’ (if untimely, irrelevant and lacking a call-to-action, as a ‘peak-negative’) experience for the consumer.

Nobel prize-winning psychologist, Daniel Kahneman, points out that people only remember two things during an experience – how they feel at the peak (no matter how good or how bad) and how they feel at the end. These peak-end feelings summarize the whole experience process and are stored in our brains at a subconscious level. These feelings eventually direct our next buying decisions; while the proportion and duration of pleasure or pain throughout the whole experience barely registers in our memory – we only remember the peak-end. (Quote from: Branded Customer Experience Ikea vs. Staples – by www.gccrm.com)

Case in Point

To demonstrate how brand perception is enhanced with direct mail in the mix, consider how brand attributes vary in the mind of the consumer when the latter is exposed to mass media only versus mass media plus dm. In a follow-up survey to Telus’ Addressed Admail recipients and to a control group exposed to mass media only, the addressed admail group:

-Perceived TELUS as a company that delivers great customer service at a significantly higher rate than control
-Recalled TELUS advertisements in other media by at least 6% over control
-Expressed less positive opinions about the quality and reliability of high-speed service provided by TELUS’s largest competitor; specifically, the competitor’s brand attributes were scrutinized or put into question based on exposure to Telus’ detailed offering in the direct mail piece (Full Case Study here.)

In addition to the qualitative results, the quantitative results from the campaign also align with the peak-end theory; namely, the feeling generated during the mail moment (the peak) directed the next buying decision. How? Recipients of the direct mail piece signed up for Telus high-speed internet at twice the rate of the control group.

We all agree that managing the brand is a complex marketing activity with increasingly more viral influence. Still, we should disengage from the limiting view that mass media is the only viable brand-enhancing medium and to keep in mind that direct mail, when done properly, is a critical component for building and increasing brand equity.

Brainstorming - Friend or Foe?

Does this sound familiar?

A room filled with bowls of assorted colourful candy. Objectives written on a flip chart or white board. Fifteen of your colleagues sitting together; some excited, others staring at the clock waiting for the hour to pass. A junior employee stands at the front of the room capturing notes while his/her boss shouts what to write. One of your colleagues won’t shut up. He keeps repeating the same ideas over and over again. He also intimidates the more junior staff and shoots down all of their ideas. Your other colleague is hoarding the candy. Frustrated yet? Welcome to a typical agency brainstorm session.

Love them or hate them, brainstorms are an essential part of the ideation process. If done properly, they can generate new, fresh and innovative ideas that will make you and your company shine.

There are various methodologies or processes one could use in a brainstorm. I would recommend every person from your agency take a course to learn what these are. One of the most reputable, inspiring and FUN brainstorm workshops I’ve ever taken was through www.27marbles.com. I highly recommend you have them present to your company. I guarantee they will blow your mind.

I won’t take you through the methodologies in this blog because you really must experience them to put them into practice. What I can do is share five simple rules one should follow when conducting a brainstorm session.

1. Assign a facilitator to conduct the session. The role of this person is facilitation not participation. Participation may bias the group. Think about it. The next time you are facilitating a meeting ask the group to stick their pen in their ear. Chances are everyone will do it without question. You as the facilitator have the power to influence. Influencing the group is the last thing you want to do in a brainstorm session.

2. Assign someone to take the role of the “owner”. This person is responsible for creating the task for the session and for ensuring the overall outcome of the brainstorm session has met their needs.

3. Select different styles of thinkers and representatives to participate in your session. If you are brainstorming about a particular category i.e. Generation Y, invite people from that demographic. If you are brainstorming on customer service, invite someone who lives and breathes it. Perhaps invite a flight attendant. You get the point.

4. There is no magic number of participants to invite to a brainstorm session. Just remember though, it’s easier to turn around a corvette vs. a bus. Try to keep it to a maximum of 10 people.

5. Keep the ideas absurd. Stay away from providing tactical solutions. When you start thinking tactically, it means you already know how to execute. Select ideas that scare you and that you have no idea how to execute. If you already know how to execute these ideas, chances are your competition does too.

Most importantly, something you will hear me say at my work on a daily basis is “it’s easier to build feasibility into a new idea than newness into a feasible idea. “

Current Economy and Attrition…is there a link?

I’m certain every situation is unique to its own circumstances, hence, my commentary speaks to the majority only. What makes people leave their job in the first place? Who has the biggest influence over this decision? Is it the direct boss? Is it the organization as a whole? Is it money? Is it co-workers, culture, motivation, etc? There are many reasons why people pursue alternate careers.

Which begs the question, what makes people stay? In recent months, the trend has been a lot heavier weighted to companies reducing their workforce versus the workforce attrite on their own. The reduction in workforce is clearly linked to the economic situation North America is in. However, a positive for organizations is the economic situation has dramatically slowed down voluntary attrition. One can Google the cost of attrition and come up with varying degrees of hard dollar cost. Regardless of the different amounts companies attach to attrition cost, all organizations agree it is a large cost.

The situation deepens further. As companies downsize in large numbers, it puts more pressure on the staff that stay. Workers are taking on more and Leaders are managing considerably larger groups of people. This forces organizations to ensure they keep the “right staff” and “highest performing leaders”. I have personally spoken to several companies (no names mentioned due to confidentiality) that tell me their attrition ratio’s have gone from high 60’s % to under 20’s % since the economy went south. And some that were in the high teens are now seeing next to no attrition. This has resulted without any additional spending on retention programs, no major changes to routines, basically, no efforts required.

One survey (Execuserve Corp) suggests the most negative impact of turn-over is felt in the Customer Service department. Downsizing is a vicious circle. As companies down size, generating revenue becomes a tougher challenge. When revenue is not coming in, organizations downsize further.

A personal opinion as to why voluntary attrition has reduced considerably in our down-turn economy is this: Hiring in all organizations regardless of industry has reduced considerably, making it extremely difficult for employees to move from company to company. The sheer fear of not knowing if a job will be available at another organization further solidifies employees to their current organization.

What is the right answer? Execuserve states unequivocally, “economy is directly linked to attrition”. Now what? Smart organizations should (and are) retain their top talent, knowing that the economy will come back. When the economy improves, finding and hiring top talent will be a daunting task.

Conclusion: Doing nothing to retain top talent is a critical mistake any company can make, during a strong or poor economy. Corporate values should not change simply because employees don’t have as many choices. Those who work at building their workforce now will definitely come out stronger once the economic situation turns around.

Good News, Any One?

We received unemployment numbers for Canada and the USA. As expected, the situation is bleak and so is the short-term outlook. Canadian economy shed 129,000 jobs in January 2009 pushing up the unemployment rate from 6.6% to 7.2%. The US lost 598,000 jobs last month increasing its unemployment rate to 7.6%. The economy has taken a down turn, we all know this and in fact many people have been feeling the pinch for last few months. Whether you choose to call it by its first letter “R” or by full word “Recession”, we are in it.

Most of the news is of despair. Business confidence is very low! Consumer sentiments are down! Bad news sells faster so media accentuate the feeling of despair by abject reporting, by floating phrases like Cash is King, Hold onto your Cash – Do not Spend. Deep-freeze winter, record level of snow and winter blues don’t help either. Bad news works as a catalyst in the economic downturn, bringing down business confidence, consumer sentiments, spending and demand, and economy. I think the only good news we had on politco-economic front during last few months was the inauguration of Barrack Obama and it is too early to expect positive outcome from the change. As the bigger the ship, the longer it takes to turn it around.

Governments are introducing effective polices on both sides of the border; however, the economic recovery will take time and the government cannot drive us out of this economic slowdown by itself. We all have to contribute our bit and do things differently, positively and do more of it. Changing times require a change in attitudes, behavior and performance. These are the times to remember the popular words of JFK and ask what we can do for Canada and for ourselves.

First thing we could do is trying cutting back on the bad news as an initial step towards checking and reversing the economic slide. Filter the irrelevant bad news. Information overload is not good and bad news overload is worse. It can cause indigestion. There must be good news around, small victories, successes, triumphs and achievements. Let’s make good news public and announce them. Good news is worth mentioning. No victory is small enough not to be rejoiced. This would help improve general confidence and performance, consequently rejuvenating consumer sentiments, demand, spending, business and economy. This along with government’s efforts and recovery package could re-generate the environment that will be conducive for jobs creation and would initiate an upward spiral.

We need good news and need lots of it. Let’s spell out goods new, if you have one, post it here. Share it with your friends, family and colleagues. Have you landed a new account, closed a deal lately, received positive findings from market research, increased market share, made a difference, are your kids are doing well at school? What ever it is under the sun and over the belt - share it. I begin by seeing a ray of light and sharing it here. Despite the current job losses, 31,000 jobs were added in Healthcare and Social Assistance sectors in January ’09.

Moreover, stay focused in inceasing your performance and productivity. Look inward and see what you can do. Go an extra mile, make more calls, develop another consumer promotion, consider another business perspective and add value. Stay on your toes and cover yourself. Make more money for your company to minimize voluntary retirements, lay-offs and plants shut downs. I believe that good news, good feeling, confidence and higher individual productivity will collectively create synergy for success. Your positive attitude and hard work will assist in weathering the current economic storm and prepare you to ride the wave of economic growth, when the economy recovers. As we all know, recession is an economic phase.

Are you thinking how small initiatives like cutting back on bad news, staying positive and working harder and smarter can check the massive economic slowdown? Well, if you are working with the GM, Lehman Brothers or Bank of America and other similar organizations, this might seem far-fetched. However, our economy does not end at these firms. Together, we can make it happen through power of numbers and the abovementioned small and simple initiatives will reach a tipping point for economic growth and prosperity. So let’s take the first step and share good news.

Good news, any one! Please share it.

The Science of Persuasion

I had the pleasure of attending the 2009 Best New Product Awards conference yesterday (managed by Brandspark). The awards were handed out last night; more on this next time.

The conference theme was 'persuasion in CPG marketing.' The conference was really a crash course (or refresher course) on how to win-over consumers, by following six simple principles - the truth is, many of these principles can just as effectively be applied to win-over your boss, colleagues, friends & neighbours. Before getting to the 6 principles....

There were a number of ah-ha moments, a few to share here. First, we learned from Drew Boyd, Director of Marketing Mastery, Johnson & Johnson (the conference leader/instructor), that contrary to the popular mantra that a brand is a promise...."a brand is really an expectation of someone or something delivering a certain feeling by way of an experience." Another is that "more than anything else, people are willing to follow your recommendations if they see that you like them" (at first, this appears a little counter-intuitive - yet useful to understand). Tom Asacker, author of "a little less conversation" and "A Clear Eye for Branding" - brought today's market into perspective: "Individuals quest for control and happiness - a balancing act within self and through others" - a far cry from what marketing and advertising had to contend with just a decade or two ago.

The course Drew led about the Six Principles is based on the research of Robert Cialdini, PhD. Throughout the day, Drew incorporated plenty of studies to back-up the principles - compelling evidence even for cynics.

Six Principles of Persuasion (cliff notes version)

1.Reciprocity: People give back to people who give to them (giving a gift sets the context for a future relationship - the key to making gifting work is giving the gift first)

2.Liking: People tend to say yes to those they know and like (focus on aspects you genuinely like in others, look for similarities, ways to cooperate, give praise)

3.Consensus: Look to what others are doing as evidence (people tend to base their decisions on what is appropriate for them to do by examining what others are doing - provide compelling evidence/proof or testimonials from individuals who are most similar to the prospect you are trying to influence)

4.Authority: Defer to the advice of experts (provide visual cues that trigger an authoritative position - also useful is admitting to a weakness, which then gives confidence about your honesty). Barak Obama does this very successfully as he often and repeatedly has said "I will make some mistakes," but I will learn from them and move on, or something to this effect.

5.Consistency: There is a personal pressure to stay consistent (people like to behave consistently to what they have said or done, so get them to make a commitment; best if the commitment is said in public, that it is voluntary, ie, a personal investment in it, and actively sought out - ask for the commitment)

6.Scarcity: An opportunity is more valuable when it is less available (this not only applies to things, but information too; present the offer as rare or dwindling, by what one stands to lose if they don't take-up the opportunity, provide exclusive information)

The Dawn of the Demand Center

Of all the desires emanating from the C-suite in relation to marketing quickly becoming the most dominant is the desire for leverage. CFOs and CEOs want to know where efficiencies can be found so that cuts can be made. CMOs are looking for answers so they don’t have to gut their function. It is the desire for leverage that is driving large organizations toward structures that maximize field marketing at a global level, and smaller organizations toward enhanced centralization.

The demand center is a central or regional hub of shared marketing services, infrastructure and process that enables organizations to bring programs to market by leveraging key corporate assets and best practices. It is a hybrid structure between centralization and decentralization, leaning toward a pragmatic “center of excellence” approach. B-to-b marketing has evolved dramatically in recent years, with field marketing leading the pack in terms of both performance and budget (typically 40% to 60% of overall marketing spend). What seems to be most frequently missing, however, is a go-to-market model that enables consistent field marketing performance across disparate geographies or lines of business. At the heart of this requirement are four key factors, including:

• A new campaign model. The old days of taking a response, looking to qualify it quickly and pass it on to sales are over, replaced by an integrated multi-touch, multi-channel model centered around prospect and customer buying cycles. Such an approach requires significant change management; leveraging a center-of-excellence approach can accelerate this change.
• Technology. The new campaign model focuses heavily on digital relationships that often leverage a marketing automation platform (MAP), emphasize the Web and require significant data management. Marketing campaigns that are designed to automatically serve offers based on a prospect’s behavior require a technological backbone, one that is both complicated and costly to deploy multiple times on a one-off basis.
• A marketing skills gap. Most b-to-b organizations have historically hired marketing managers with strong skills in designing one-dimensional campaigns that didn’t require sophisticated technology. With a new campaign model and new technology now required, these marketers are challenged to catch up. Replacing them is often not an option; with the concepts I’ve discussed so new, a strong talent base hasn’t had a chance to develop. In the end, these marketers need help, something that a center of excellence is specifically designed to do.
• A lack of best practices. I have observed many organizations that attempted to implement the strategies and purchased technology we originally classified as “Field Marketing 2.0” back in 2007 have only been partially successful. As a result, senior management has perceived the moves to be a waste of investment. By having marketing personnel equipped with the appropriate skills in a regional center that can deliver learnings and best practices to the remainder of the organization, more rapid success follows.

As an integrated regional marketing organization, the demand center should provide three core services.
1. Infrastructure. Regional centers from which marketing infrastructure can be deployed and accessed will provide the expertise and tools for a region or country, ensuring it is deploying best practices. Core infrastructure at the demand center level includes a MAP, data quality tools, media measurement tools and Website optimization technology.
2. Marketing services. Includes help for local marketers to assemble a best-practice campaign from corporate assets, or to provide the execution services to implement the campaign on their behalf. While often handling the campaign assembly and execution, the demand center is also allowing access to highly specialized marketing roles, including Web anthropologists, marketing automation power users and data management experts.
3. Teleservices. Providing telemarketing and teleprospecting services at regional inbound and outbound centers will allow an organization to leverage best practices and infrastructure, as well as to benefit from a central management approach that tends to be more effective for call centers. Such an approach, however, depends on the scale of the business and may be difficult to afford and execute.

Without the demand center approach, corporate or global marketing often creates assets and sends them to either a skeleton regional marketing group or directly to country marketers, hoping that the assets are effectively used. In the demand center model, corporate or global marketing creates the campaign strategy and marketing assets, then sends them directly to regional demand centers. The demand centers assemble the campaigns, adjust them for local markets and either hand them off to country marketers or execute for them. The demand center model is not appropriate for every company. Organizations under $250 million typically should implement a hybrid approach of country marketing and a demand center that is centrally managed but less regionally deployed.

The demand center model is usually not deployed without controversy. Regional marketers are often frustrated receiving assets they can’t localize or strategies they can’t effectively implement; as a result, any form of regionalization or centralization is not overwhelmingly popular at the outset. However, the demand center model is designed both to execute campaigns where marketing resources are limited as well as offer best practice advice. In many ways, this can provide the global community with the balance of applying unique marketing strategy to specific markets while leveraging best practices the company has learned.

Paradigm Shift in Aisle 4

Recently I had an opportunity to observe consumers make purchases at retail. Their behavior wasn’t different from the norm...it’s just that I never stopped for a couple of hours to study, compare and contrast the behavior of my fellow shoppers. It brought home a number of realizations:

• The CRM/forecasting models we work with to estimate (ROI) impact are a pale abstract of what happens in the real world.
• Consumers are much more tactile with our products than we recognize.
• Consumers are getting older and can't read mouse type copy anymore...but they sure spend a lot of time trying to read ingredient and nutritional labels.
• The cognitive selection process of picking brand A vs. brand B or C is far from being an either/or choice, its more like a billiard ball careening on a pool table (A to B to F to B to C) even ‘jumping tables’ to adjacent categories/brands instead. Who we think our brand buyers are and the buying process they go through is likely to amaze, confound and humble you.

This last point is perhaps the most important I wanted to highlight, as it brings to focus the need to rapidly evolve from push-based thinking if we hope to survive. Trying to compete in a world filled with an ever increasing number of options can only become more expensive and less effective. And in that environment trying to tweak the efficiency of offer push-based CRM programs is ….well, quaint.

If we ever hope to constrain the competitive set and thrive we need to shift our paradigms to pull-based thinking and programs. Because try as we might there always seems to be something a little less expensive or with a little more 'bling' that pops out of nowhere to carve out yet another slice from our pie.

To get there we will need to expand and challenge our thinking on what the numerators and denominators need to be in our metrics. And for those who truly want to be humbled, examine and understand the stickiness of our results. We need to be honest with ourselves and develop confidence intervals in our campaign metrics and come to reconsider whether the DNA of customer profit was ever encoded in our CRM formulas.

A starting point might be to estimate/measure the share of requirements our brands were under consideration for at the time of our various initiatives. It’s not the fact that “10%” of those who received our offer(s) and responded that’s of ultimate importance. But that our programs were able to tap into “30%” of the category purchase activity at the time AND made value added connections with 100% of the customers we reached out to, whether they purchased or not.

That change in perspective alone will send you down a new path. To recognize those who understand the strategic superiority of pull-based programs you will only need to look at the font size of their nutritional labels.

Cheers

Does it pay to be good? The challenges with Corporate Social Responsibility strategies

Today, CMOs are asking how they can differentiate their brands with a socially responsible differentiation strategy. Companies are investing heavily in socially responsible practices without first testing key assumptions about whether consumers will actually reward good corporate behaviour.

Marketers say customers tend to claim they pay more for ethically produced products. Is that what happens when they actually buy things? Are consumers likely to demand a discount for unethically produced products and pay a premium for ethically produced products? If so, by how much? Most existing research assumes a positive, direct link from corporate social responsibility to corporate performance.

Today companies face some crucial questions regarding their procurement strategies. Ethical sourcing such as fair price, organic produce, and socially responsible practices are likely to increase costs. But if a company pursues a fair trade and socially responsible differentiation strategy, what sort of consumer will it appeal to? It is important to understand the role the consumer plays in ultimate company profitability through revenue generated by the prices that consumers are willing to pay for the company’s products.

The problem with existing CSR research and strategies

Most marketing research has focused on the relationships between corporate associations or expectations and consumer response. But the attention has been on the relationship between favourable corporate actions and consumer behaviour. Research addresses the question of how consumers react to positive CSR activities. And yet one of the most generally accepted and far reaching phenomena in psychology is the asymmetry in the way people react to positive and negative information about the subject. Consumers treat positive and negative information differently. Individuals react more strongly to negative information than to positive information.

New research on CSR

Typically, research has addressed these questions with surveys of consumer attitudes. Not surprisingly, those do not always reflect actual behaviour because linking actual consumer spending behaviour in the market to specific company decisions is very difficult.

New research from the Richard Ivey School of Business shows that the negative effects of unethical behaviour have a substantially greater impact on consumer willingness to pay than the positive effects of ethical behaviour. The surprising insight is consumers can demand a substantial discount from companies that product goods in an unethical manner. Consumer responses also suggest that a small degree of ethical production “pays off” as much as a heavy investment in ethical production.

This is the first study to find that consumers use price to punish unethical companies more than they use price to reward ethical companies, and that the ethicalness of a company’s behaviour is, indeed, important consideration for consumers. The conclusion is clear: Doing good will lead to doing well, and to ultimate profitability.

Difficult questions

Will consumers pay an adequate premium to recoup the increase in production costs? If less than 100% of a company’s products are from fair trade or sourced locally, can the company still maintain its socially responsible positioning? CSR may have supplanted maximizing shareholder value at any cost but as companies consider and strive to limit the negative impact of their operations on society, some questions remain unanswered: Will consumers punish unethical acts? How ethical does a company really need to be seen as ethical by consumers? Is it “greenwashing” if less than 50% of a company’s products are ethically produced? Should a company focus on the process of ethical procurement or reduce waste in the production process if it cannot afford to do both?

Our firm's sustainability study confirms that while just 17% of consumers are willing to pay a premium for ethically produced products (they have higher ethical expectations of companies), 65% of consumers expect a significant discount from companies that market unethically produced products. Therefore, while fewer consumers may be willing to pay a premium for ethically produced products, a significantly higher percentage of consumers are likely to pay less for unethically produced products.