Sunday, March 10, 2013

Marketing Social Value


Social marketing has been around for several decades, since Philip Kotler’s pioneering work in social cause marketing. What started out two decades ago as an arena of marketing for non-profit organizations to help good causes raise awareness, action and money, has now evolved into a mantra of consumer and B2B branding.

 
 A new principle has been added to the traditional 4Ps of marketing – namely, the personal value to consumers of participating in the wellbeing of their environment and community through purchase of socially conscious goods and services. Let’s call this “P” people, in the sense of the personal value of social and environmental betterment.

 
            Companies in developed markets and in the advanced sectors of developing markets are embedding their product and service offerings in  tangible programs of social and environment improvement. Starbucks has pioneered cup recycling; Subway is a QSR leader in the cause of anti-obesity. PetSmart has performed great service for animal welfare. Many other companies have followed suit, like the wilderness protection programs of Timberland; the fair wage policy of Patagonia; and the renewable energy products of GE. Their purpose is to show the social benefit of their products and services to the better the health, diversity, human and animal rights, environment, education, and general well being of society. They are marketing their products and services to do good for society, and increasing their profits by doing this.

 
As quality differentiation in the marketplace has flattened; as business scale has achieved cost and pricing flexibility; as distribution has become universally accessible; and as promotion has becomes ubiquitous, social value has emerged a the new frontier of competitive advantage. Research has shown that all 4Ps being equal, customers will select the alternative that they sincerely believe is doing more good for society.

 
There a basically six ways that companies are demonstrating their product, service and corporate social value, as documented in GOOD WORKS, by Philip Kotler, David Hesekiel and Nancy Lee (2012, Wiley): 1) Taking actions that promote a good Cause; 2) Enabling consumer contributions to Causes based on product sales; 3) Marketing new products and services that motivate and support positive personal and social behavior change; 4) Making direct donations to a Cause; 5) Employee volunteering in Causes and communities; and 6) Adopting socially responsible business practices.

 
A few cases will suffice to illustrate this trend: Starbucks, PetSmart and Subway.  

 
Starbucks:  On the Cause awareness and action front, Starbucks provides attractive cup recycling containers and sponsors cup summits of manufacturers, materials suppliers, retailers and academic groups to explore new systems of cup recycling. For Cause related marketing, Starbucks contributes 5 cents for each bottle they sell of Ethos brand water to the Ethos Water Fund for projects in water stressed countries. In 2011, the Fund contributed $6 million to projects around the world. For corporate social marketing, Starbucks gives customers free bags of coffee grounds for organic composting, instead of using artificial fertilizer. For corporate donations, Starbucks gave $22.4 million in cash and kind for community building projects programs in 2010. With regard to volunteer service, Starbucks hosted in 2011 a global month of community service, supporting its employees to take positive actions to make a positive difference in their communities. With respect to socially responsible business practices, Starbucks is committed to the goal of buildings all new company owned stores according to environmentally sustainable LEED standards.

 
Subway: Some companies focus their responsibility on one or several of the six paths of responsibility. Subway’s corporate social marketing strategy to fight obesity has led it to a pledge to offer 50 percent of its six inch sandwiches at a 400 calories cap. This is a benchmark social marketing challenge to the entre QSR industry to attack obesity. Can McDonald’s meet this challenge?

 
PetSmart has partnered with local animal welfare organizations to promote the cause of animal welfare by providing free space for in-store adoption centers of homeless pets. PetSmart employees operate the adoption centers and the welfare organizations keep the adoption fees. In 2010, 403,000 pets were adopted. This brings traffic to the stores for the pet food and accessory accessories that adoption entails. It saves the lives of animals and is a win-win cause promotion program.

 
There are hundreds of exciting examples of corporate social responsibility in GOOD WORKS, by Philip Kotler, Nancy Lee and David Hessekiel (2012, Wiley). But let’s move on to why this is happening. Why has traditional corporate donor contribution to charities blossomed into an era of company cause promotion and branding, cause-related marketing, and corporate social marketing? Put another way, why has social value become a major force in brand strength and competitive advantage in the marketplace?

 
Tom Ostenton’s pioneering book, The Death of Demand (2004, FT Prentice Hall) documents the decline among large companies of the growth rate of sales revenues since 1980. Company earnings have since grown by cost reduction through corporate re-engineering; mergers and acquisitions, which captures already engaged customers of merged or acquired companies; and finally international sales expansion.

 
Ostenton argues that the domestic markets of developed countries have become saturated. The middle class largely has what it needs, except for replacements and incremental innovations; and there is no population surge or disruptive new technology to drive a period of expansionary demand.

 
How can companies grow in this “winter” of flat demand? Fortunately, there is a wellspring of new demand, still small but growing. Generation Y, or Millennials, were born since the 1980s and are the children of the prosperous Baby Boomer generation. They grew up buying, or having their parents buy, what they wanted. They number roughly 80 million in the U.S. and have intra-generational segments within this cohort. The central psychological character of this broad cohort is their sincere concern about the social and environmental conditions of society, the sustainability of natural resource and the planet, itself. This cohort has moved from the personal career and wealth ambitions that motivated their Baby Boomer parents to social concerns for human and animal rights, social justice, environmental protection, physical fitness, healthy food and preventive health, and help for the poor. Let’s call this agglomeration of concerns a desire for social value and it has had a profound impact on business offerings and business practice.

 
The Millennials are an alarmed generation. They despair at high unemployment; the greed of Wall Street manipulators who caused the financial crisis; the growing disparity of rich and poor; climate warming; endangered species and social violence. They occupied Wall Street and protested widely for many causes. Their attitude has impacted their consumption behavior. With the transparency of the Internet and rapid diffusion of knowledge and experience of marketplace through social media, they know a great deal about companies and their products. They have more confidence in self informed consumption of better products than they have in government regulation of health, safety and business practice.

 
Smart business has simply stepped in, when government stepped out. Millennials look to socially conscious businesses as a palpable social value. Social value and corporate social responsibility are a central new tenet of their product and service selections. Business has to creatively generate social value at part of the offerings to achieve consumer selection. It is marketing’s job to amplify the good that companies can do and the premium return on investment that comes with a new genuine contributions of social value for consumers.  

 
            This commitment of business to the fifth P, People, is the marketing challenge of the 21st century. It is not only a feature of developed markets, but of developing markets which will soon have more educated middle class consumers that developed economies. It is as relevant to Chinese companies as it is to American companies. The rewards for social value marketing for both society and business are great. GE Imagination, one of the pioneers of “Green” advocacy has just surpassed Vesta, as the largest wind power turbine maker in the world. Take social value seriously. It is a key to your future profits, as future middle class generations all over the world become more socially demanding.

          

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