The Times
May 14, 2008
Consumer behaviour might be something with which we are all familiar, but in many instances it remains somewhat of a mystery. If consumers could be read like an open book, then there would be no unsuccessful ad campaigns. So it’s always useful when research comes out that throws light on the kind of issues which tend - usually - to be the province of assumption and conjecture.
Take corporate social investment. Does it actually pay off? Do consumers really reward brands that take care to manufacture their products in an ethical or sustainable way? (For example, Starbucks has started to advertise their ethical relationships with coffee growers in third world countries; locally, Woolworths sells pricey pesto produced at a hydroponics project in Beaufort West…it’s been so long since I last got to use alliteration so shamelessly.)
Surely, consumer demand should be a major driver of ethical corporate behaviour - so that demand should go straight to the bottom line.
Now, finally, there is evidence that behaving ethically does indeed pay off. The Wall Street Journal recently carried a fascinating article on the question of whether consumers reward companies for being ethical. Remi Trudel and Jean Cotte of the University of Western Ontario conducted a series of experiments to validate whether consumers are genuinely willing to pay more for ethical products. What they found will encourage anyone who campaigns for greater corporate social responsibility:
In all of our tests, consumers were willing to pay a slight premium for the ethically made goods. But they went much further in the other direction: They would buy unethically made products only at a steep discount.
What’s more, consumer attitudes played a big part in shaping those results. People with high standards for corporate behavior rewarded the ethical companies with bigger premiums and punished the unethical ones with bigger discounts.
Interestingly enough, the companies in question did not have to do a lot: “If a company invests in even a small degree of ethical production,” note the authors, “buyers will reward it just as much as a company that goes much further in its efforts.”
So much for Canadians, who as a nation tend to try to be nice. To what degree can these results be applied to South African consumers?
I have yet to be convinced that going green, for example, has anything beyond a niche appeal in a country where there are still massive income disparities and many newly affluent consumers are focused on overt signifiers of wealth. Ethical credentials make sense when marketed in the sense of investment the community - if one expects the community to buy your products - but will consumers under financial pressure pay more in order to feel good? I have my doubts.
The authors conclude:
The lessons are clear. Companies should segment their market and make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods.
The point is, as in all marketing communication: tell someone who cares. Most South African consumers will necessarily purchase on price and product performance above all else, but for a significant minority, ethical products matter a great deal and they are willing to pay more for them. Based on this research, it makes perfect sense for a brand like Woolworths to expand into the ethical product niche, less sense for brands like Shoprite or Pep.
What’s clearer now is that marketing itself as ethical does make financial sense for companies that are willing to commit to the task and communicate in a way that is targeted and relevant. And that’s an argument that any marketer can buy.
May 14, 2008
Consumer behaviour might be something with which we are all familiar, but in many instances it remains somewhat of a mystery. If consumers could be read like an open book, then there would be no unsuccessful ad campaigns. So it’s always useful when research comes out that throws light on the kind of issues which tend - usually - to be the province of assumption and conjecture.
Take corporate social investment. Does it actually pay off? Do consumers really reward brands that take care to manufacture their products in an ethical or sustainable way? (For example, Starbucks has started to advertise their ethical relationships with coffee growers in third world countries; locally, Woolworths sells pricey pesto produced at a hydroponics project in Beaufort West…it’s been so long since I last got to use alliteration so shamelessly.)
Surely, consumer demand should be a major driver of ethical corporate behaviour - so that demand should go straight to the bottom line.
Now, finally, there is evidence that behaving ethically does indeed pay off. The Wall Street Journal recently carried a fascinating article on the question of whether consumers reward companies for being ethical. Remi Trudel and Jean Cotte of the University of Western Ontario conducted a series of experiments to validate whether consumers are genuinely willing to pay more for ethical products. What they found will encourage anyone who campaigns for greater corporate social responsibility:
In all of our tests, consumers were willing to pay a slight premium for the ethically made goods. But they went much further in the other direction: They would buy unethically made products only at a steep discount.
What’s more, consumer attitudes played a big part in shaping those results. People with high standards for corporate behavior rewarded the ethical companies with bigger premiums and punished the unethical ones with bigger discounts.
Interestingly enough, the companies in question did not have to do a lot: “If a company invests in even a small degree of ethical production,” note the authors, “buyers will reward it just as much as a company that goes much further in its efforts.”
So much for Canadians, who as a nation tend to try to be nice. To what degree can these results be applied to South African consumers?
I have yet to be convinced that going green, for example, has anything beyond a niche appeal in a country where there are still massive income disparities and many newly affluent consumers are focused on overt signifiers of wealth. Ethical credentials make sense when marketed in the sense of investment the community - if one expects the community to buy your products - but will consumers under financial pressure pay more in order to feel good? I have my doubts.
The authors conclude:
The lessons are clear. Companies should segment their market and make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods.
The point is, as in all marketing communication: tell someone who cares. Most South African consumers will necessarily purchase on price and product performance above all else, but for a significant minority, ethical products matter a great deal and they are willing to pay more for them. Based on this research, it makes perfect sense for a brand like Woolworths to expand into the ethical product niche, less sense for brands like Shoprite or Pep.
What’s clearer now is that marketing itself as ethical does make financial sense for companies that are willing to commit to the task and communicate in a way that is targeted and relevant. And that’s an argument that any marketer can buy.
Comments
Post a Comment
Join the conversation