There Is an ROI for Doing Good
A couple of articles from the Wall Street Journal and from Advertising Age talk about whether social responsibility and cause marketing can pay off in terms of ROI. With billions of dollars spent on issues ranging from workplace diversity to human rights to protecting the environment, this is certainly a subject that needs to be discussed. Are consumers willing to pay a premium for products made with higher ethical standards, and will they punish those companies who are less responsible?
The WSJ article reports on an academic research project which showed that while many consumers are willing to pay a slight premium for the ethically made goods, they will buy unethically made products only at a steep discount. The study also demonstrated that if a company invests in even a small degree of ethical production, buyers will reward it just as much as a company that goes much further in its efforts. They also found that people with high standards for corporate behavior rewarded ethical companies with bigger premiums and punished the unethical ones with bigger discounts.
Bottom-line: practicing and promoting social responsibility appears to be a wise investment, while marketing unethically produced goods is a very bad one. The caveat - ethical acts past a certain threshold may reinforce the company's image, but don't convince people to pay more. Finally, marketers for socially responsible companies need to 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 Advertising Age article reinforces these findings with more anecdotal-type evidence which shows that cause programs may pay off considerably better than most ad campaigns because "consumers' emotional connections in equating a cause with a brand may be stronger than the connections forged by other advertising." The article provides some examples of projects that have paid off but no specific numbers about success rates and returns, because the impact "often gets measured -- or at least reported -- in fuzzy non-currency terms, rather than the hard dollars returned for dollars spent that data marketers increasingly try to generate for other programs."
The retail example given in the article is Sears' Heroes at Home program, which helps military families remodel and refurbish their homes, either to improve their living conditions or to make them accessible for injured veterans. A media integration with "Extreme Makeover: Home Edition" has been an enormous success. While the program has generated more than $4 million in its first year, Sears says that their ROI is "knowing we're out there doing something that matters to our customers and associates."
Obviously, social responsibility and corporate ethics don't just make you feel better about your job but are also worth it in terms of ROI, so what are you waiting for?
Posted by Universal Ad
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