As mentioned in a previous post, giving back to the community and maintaining responsible business practices are really hot for consumer loyalty right now. I personally hope this trend continues into perpetuity, as businesses have amazing reach and leverage to make a difference in the world. I pray this is not just a fad.
I read a sidebar in the WSJ today about businesses following in the footsteps (no pun intended) of Toms Shoes. For every pair of shoes they sell, they give one pair to a child in need. Pretty cool. While this may add extra costs or eat into margins, its also the reason why many loyal customers continue to support Toms – and they get ton of great PR around it. The WSJ article states that a July survey by Cone LLC found that 19% of adults would switch brands – even to those with higher prices – to support a cause. That’s pretty powerful, especially during a recession.
Toms passes the extra costs onto consumers, who don’t mind paying it because, hey, they need shoes anyway and want to help people in need at the same time. Now many start-ups are mimicking this concept in small ways. The article cites Warby Parker who gives money to a nonprofit called Restoring Vision or every pair of glasses they sell. And a necktie retailer called Figs donates school uniforms to children in Africa for every tie sold.
While profit margins and growth may be slowed because of this, the companies seem to be trading off brand loyalty and attracting a certain kind of loyal customer for the long term. That’s pretty smart, if they can keep it going. But I wondered if this is a business model shift or a brand shift? Obviously, you have to tweak your pricing and fulfillment to make this happen, so it does impact the business model and how fast you can grow. But it also ties so closely in with the “soul” of the company and what it stands for – and that is a brand decision if you ask me. It’s promoting a value to attract customers who share that value – which means it’s about a promise and a targeted message. All branding decisions.
Whatever you call it, I like it. And I hope it continues. But maybe that is because I am the type of person they are trying to attract. If someone is striving to make ends meet and cares about price, they are not the target audience for these companies.
Does that mean businesses who engage in this practice always need to be targeting a more affluent customer? What do you think?
{ 2 comments… read them below or add one }
I do not doubt but that we will continue to see this trend continue. Interestingly enough, it is not a new trend, merely one which is only now achieving enough critical mass to draw attention.
In the mid-1960s through the mid-1980s, Control Data Corporation president, William Norris, set about on a mission to change the mission of his super-computer company. Troubled by the unrest facing society–race riots, the Vietnam War, the growing divide between the “haves” and the “have nots”–Norris felt that technology, most notobly super-computers, could be used to alleviate many of society’s issues. By applying computers to education he believed schools could reach more students, challenge them in new ways, and relieve teachers of their more menial and time-consuming tasks so they had more time to provide one-to-one support to students.
He believed that by building computer manufacturing plants in low-income neighborhoods and only hiring–and training–neighborhood locals, there was an opportunity to train society’s forgotten populations for rewarding, skilled, and forward-looking careers–potentially raising up individuals, families, and communities.
Having grown up on a family farm in Nebraska, he hoped that by giving farmers dial-up remote access to super-computers with up-to-the-minute weather reports, grain prices, and agronomy research – long before the internet was available to anyone outside of DARPA–the American small farmer would have a leg-up, and a fighting chance, against the growing tide of corporate take-over of the family farms.
Norris was generous with CDC resources – finances, staff, and equipment – with the firm belief that eventually his good works divisions would prove profitable. For Norris was, besides being a philantropist and social activist, also an entrepreneur and a capitalist. He never felt there was any conflict in the roles and repeatedly stated that there was nothing wrong with the idea of “doing good and making a profit”. For this “quirky philosophy” he was deemed a flake, but the perspective of 30 years is merely proving that he was a man ahead of his times.
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Tess Surprenant | Gemini Chair in Technology Management | Technological Leadership Institute (TLI)
College of Science & Engineering | University of Minnesota
510 West Bank Office Building | 1300 South Second Street | Minneapolis, MN 55454
surpr004@umn.edu | 612-626-1611 Office | 612-624-7510 Fax | tli.umn.edu
Thanks Tess. I too am a firm believer that making money and making a difference do not have to be mutually exclusive. And it boosts your brand reputation to boot!