In 1965, Ralph Nader published "Unsafe at Any Speed" and influenced a movement now known as ethical consumerism. Based on the concept of dollar voting, ethical consumers either purchase ethical products and services or boycott those deemed unethical. The ethical consumer movement has challenged marketers ever since, under the basic assumption that brands are selling for maximum profit, not for the greater good. So how can brands best approach this significant and expanding consumer base that has the power to grow (or shrink) revenue?
While ethical consumers have been around for more than 50 years, the adoption of the internet has had the greatest impact on the influence brands and consumers can have on each other. Organizations like PETA, Greenpeace, and Anonymous have leveraged the web to educate consumers and influence corporations, while brands like Johnson & Johnson, Patagonia, and Toms proactively made choices that (arguably) negatively impacted their bottom line in the short-term in order to follow their own ethical compass (and inarguably benefit long-term). Smart marketers understand this is a market and a message that needs to be addressed. This article outlines best practices for brands interested in making the most of the opportunity.
A little background
Before we get too far down the road, it may be helpful to frame up the discussion on ethical consumerism. At the broadest level, ethical consumerism is a label for companies that provide products that appeal to people's best selves. Examples include fair trade coffee or a purchase that includes a donation to a charitable cause. Social responsibility is one facet of ethical consumerism and covers a diverse range of issues including consumerism, environmentalism, regulation, and political and social marketing. While purchase criteria typically revolve around price, value, quality, and brand familiarity for general consumers, ethical consumers buy based in part on societal or ethical reasoning. In essence, ethical consumers want to feel like they are making an impact or difference in the world, which is why footwear brands like Toms and Sseko Designs have been so successful.
Marketing challenges with ethical consumerism
There are significant challenges with regards to marketing to ethical consumers. First and foremost, our behavior doesn't directly translate into rewarding ethical companies and penalizing unethical ones. The reality is that while companies sometimes can do well by doing good, more often they can't. In most cases, doing what's best for society means sacrificing profits. Often the target market proves significantly smaller than predicted by focus groups and surveys, or the costs of providing ethical product features are not covered by the prices consumers are willing to pay.
Success stories like Patagonia and Toms appear to be exceptions to the rule rather than the norm. Past research indicates that expressed wants and needs of consumers do not translate into purchase behavior. That same research shows that there is an asymmetrical influence on consumer attitudes: Vices detract from attitudes more than virtues enhance them. More importantly, ethical information is difficult for the average consumer to process, and it is common for consumers to want to remain willfully ignorant of various questionable practices like child labor law violations (e.g., The Gap or Nike) because the product is still worth buying. While it may appear today that companies pursuing ethical marketing do not seem to be rewarded commercially, I do believe that perception will change along with the reality.
Psychology and economics
While consumer psychology may indicate an insurmountable challenge in affecting ethical consumer buying behavior, there is hope. According to recent research involving a shampoo preference test, being told to think in terms of excluding led to more ethical decisions. In other words, there are ways to short-circuit the decision-making process by excluding certain products or attributes rather than including them in the decision. That said, challenges remain. There's a difference between sophisticated consumer characteristics and sophisticated consumer behavior.
Some consumers are information-driven and act based on their research or knowledge, while other similarly informed consumers may not act on that information. For example, there are examples of commercial products designed for ethical consumers that have failed (e.g., McDonald's salads or other healthy menu item options, VW Golf Ecomatic diesel, etc.) because consumers more often purchase with their head than with their heart. Some industries and brands have had to adapt and take a more ethical stance, whether driven by governmental regulations or consumer opinion (e.g., McDonald's, Phillip Morris, Exxon). According to Gaski, "The ethics of one day may be the law of the next," so stay ahead of the regulatory curve and take the higher ground to gain a competitive edge.
Now that you have a clear understanding of the challenges ahead, let's talk about the opportunity. In the U.K., the ethical consumer market is now worth just over £54 billion -- greater than the market for alcohol and tobacco. The U.S. market should roughly mirror the U.K., although equivalent data is not readily available. There are a handful of primary categories of ethical consumables, which include: ethical food and drink, green home, eco-travel and transport, ethical personal products (now including jewelry), and ethical money. In terms of spending, the biggest overall investments per household in the U.K., in declining order, include: food and drink, sustainable home products, and transportation.
According to the Ethical Consumer Research Association Markets Report, 70 percent of people have bought to support local shops or services, and nearly 20 percent of the U.K. population boycotted specific products or outlets as a result of ethical concerns in 2014. With the Millennial population coming into their own career-wise and having more buying power, the ethical consumer market will only continue to grow. Millennials cite ethics and sustainability as core values and want to work for companies that give back to the community. Buying habits seem to mirror this trend thus far.
6 marketing opportunities and strategies
With an ounce of understanding and a pound of hope, let's look at effective marketing strategies that will engage the ethical consumer. The following opportunities are outlined in no particular order, but any and all should be considered and validated through testing.
Understand what matters to your customer and embrace it
Companies have to identify which ethical issues are important to their consumers and ensure they are satisfied with the company's stance on those matters. Then you have to communicate the information with minimal inconvenience or discomfort to the consumer, since time is a scarce commodity. According to a recent study, 85 percent of respondents had a more positive image of a company that supported something they cared about, while 15 percent stated they would be more likely to pay more for a product or service associated with a cause important to them. Conversely, consumers would still buy products from unethical firms, but only at a lower price. Get feedback from your consumers (then take it with a grain of salt), as they may have great ideas on how you can more effectively appeal to ethical consumers with your business and marketing practices. When possible, take a local angle on your product or service, as that can be a significant influencer in the decision-making process.
Align with culture
Research does not support an ROI on ethical marketing, as unethical companies are still getting rewarded and ethical companies are seemingly penalized by consumers. Corporations should be philanthropic and altruistic because it is part of their culture. Do not to expect an ethical consumer initiative to directly drive sales, especially if your corporate values do not align with the ethical consumer. Brands like Levi Strauss and Johnson & Johnson appeal to the ethical consumer because their culture drives that type of behavior in their business. Consumers are likely to be especially brand loyal if their deeply-held values are engaged in their purchasing. For example, Walmart shoppers have a different level of loyalty than Whole Foods shoppers, based on corporate values. There are other stakeholders to consider besides consumers as well (government, employees, media, community), which should also inform decision-making.
Educate your customers
Leverage consumer interest in issues that impact them by educating them about your position and supporting initiatives. Tell them how their purchase will make a difference, as consumers generally do not believe they can make a difference. It is also important to educate customers on your industry and your position in the marketplace. Consumers appear to take a macro view of ethics in business. They rarely have specific knowledge regarding individual companies, which implies the need for brands to differentiate themselves, particularly in challenging industries like energy, telecommunications, apparel, and food. If you are in one of those industries, you need to be more proactive with your marketing and positioning.
Consumers love cats
Consumers are much more sympathetic to animal rights (exploitation of animals specifically) than those of humans, which may translate into a premium pricing model for some products that are animal exploitation-free. If your product is exploitation-free, make sure consumers are aware. If your organization is actively against animal exploitation, leverage that opportunity in your communications. If your product is not related to animals, then acquiring relevant industry certifications and/or awards can be particularly valuable (e.g., free-trade coffee or conflict-free diamonds).
It's all in the packaging
Consumers are generally passive ethical shoppers vs. active ethicists. Consumers rely primarily on product labeling, so package design and copy are critical. Consumers will be more likely to purchase ethically if there is no additional cost, loss of quality, or necessity to "shop around." Don't forget the small print: While a majority of general consumers do not read fine print, ethical consumers are much more likely to do so. Include essential facts, industry certifications, and initiatives in your packaging and marketing materials to give them the nudge.
Utilize PR to tell your story
A brand's ethical or unethical activities do not seem to have a direct impact on purchase decisions, with the rare exception of significant amounts of negative media coverage, so long as its products are valued. This implies that brands need to get ethically-oriented information out to the public via third-party PR efforts, as well as proactively managing any negative information. Online reputation management (ORM) has exploded as a service for high-profile brands as a result of this trend. Before you go out to the press, however, be sure to clean up your act, as scrutiny from the media can work against you. Revisit vendors, ingredients, processes, and logistics to identify areas where you can be more sustainable and socially responsible without creating economic hardship.
There is no debate that the ethical consumer market is growing and cannot be ignored by marketers. By following the strategies outlined above, brands can take advantage of a relatively untapped market. In order to succeed, however, marketers must create context to engage the ethical consumer. Then you will be able to both make a difference to the greater community and find a sweet spot in the competitive landscape that will empower growth of revenue and profitability. Don't be the next Corvair, be the next Prius.
- Ethical Consumer Research Association Markets Report 2013
- "Ethical Consumerism Isn't Dead, It Just Needs Better Marketing"
- "How to Align Your Entire Company with Your Marketing Strategy"
- "How To Be An Ethical Consumer"
- "The myth of the ethical consumer -- do ethics matter in purchase behaviour?"
- "Value vs. Values: The Myth of the Ethical Consumer"
- Ethical consumerism, Wikipedia
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