The Cost of Good

October 15, 2015 | Robert Schermers
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Last week, I was invited for a panel discussion on the future in brand communication at the renowned faculty of advertising and marketing, the ESPM, in São Paulo. I shared my view that society nowadays demands brands to positively contribute to the solution of societal issues. One of the questions raised was: “All very nice, but is it in companies not all about the financial results at the end of the month? So is the investment in purpose not the first cut a brand faces when financial results are down?”

Driving a purpose is still often seen as only a cost. It is seen as the equivalent of putting money aside for Corporate Social Responsibility and looked upon as a necessary marketing-juice to quench the thirst for more sales or as armour against probing questions on the brands’ role.

Product -> How -> Purpose

The example I used at the ESPM: Volkswagen realized that the environmental impact of mobility has become a relevant theme that could negatively impact its sales. Volkswagen was quick to define as part of its purpose to be contributing to sustainable mobility.

But it behaved quite differently, as already exposed by Greenpeace in 2011 in a parody of the epic Darth Vader Superbowl-campaign. Apparently, when doing the math, Volkswagen reckoned that the cost of actually contributing to bringing to life what it published as its purpose, would be higher than the cost of merely creating an image of doing good. We know now that Volkswagen went as far as to think it’d better invest in misleading software than in actually producing cleaner cars. What Volkswagen defined as the cost of good (contributing to cleaner mobility), made it decide to actually do bad.

Apart from the fact that in their calculations, they might have grossly underestimated the financial impact in case things would came out (Volkswagen lost $26.5 billion of its market capitalization on September 21), the line of thinking Volkswagen on board level uses with regards to cleaner mobility is apparent:

  • What is our product? “We sell cars.”
  • How do we do that? “Lets tap into the environmental trend that demands cars to be more eco-friendly”.
  • What is the purpose? “Create the impression our cars are cleaner so we sell more”.

Driving purpose is seen as a cost of good.

Purpose -> How -> Product

For brands that are genuinely purpose-based, doing good –act on the better world the brand envisions- is an asset, not a cost. The line of thinking is the other way around:

  • Tesla starts from its purpose: “We will contribute to more sustainable mobility”.
  • How do we do that? “By developing technology that uses less fossil fuels and allows energy to be stored”
  • What is our product? “We sell cars and batteries”.

The purpose of the brand forms the base of the entire strategy of the company. The product is not leading; the purpose on which the products are based is leading.

And Tesla’s consumers? They buy into the point of view of Tesla, because it is in line with what they believe. Or -at minimum- they use the cause Tesla contributes to, as the justification to spend $100.000,- on a car. Whatever the motivation, they support what Tesla stands for represented in its cars. Tesla realizes that its cause cannot be separated from the brand and drives sales, thus allowing Tesla to further invest in its purpose. Tesla’s purpose is an asset.

Going dead

In the long run, the two opposite lines of thinking will benefit society. Society –we all as consumers- will reward the purpose-based brands with more sales and discard the ones not contributing to a better society.

Companies where purpose is an asset will do what businesses do with assets: invest to maintain their competitive advantage. Doing good becomes doing better.

Companies where purpose is seen as a cost will do what businesses do with costs: cut. They will be exposed because doing good –taking a role in society- will become the norm. Businesses doing bad will be businesses going dead.

Asset-management

Good financial results at the end of the month are essential for any brand. A noble role in society, yet without a fantastic product that makes the purpose tangible will make any brand go out of business in no time. But consumers nowadays have more knowledge and are more powerful than ever to drive the brands that create value for the better of society and eliminate the ones that cut corners at the cost of society. So brands ‘d better re-evaluate their asset-management.

I loved the ESPM-event and its discussions.

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Robert Schermers

Robert has a bachelor´s degree in business administration and a master´s in law. He started his career in the Netherlands and built his expertise over 18 years at Unilever. He worked in challenging marketing and business positions in various European countries as well as in South Africa and in Brazil. Robert knows from experience the massive positive impact on both business results and society of really putting people first in brands and teams, and is a true ambassador for humanizing business in the widest sense of the term. He loves exploring new cultures, leaving the beaten track. He has spent months traveling India and Malaysia; he has climbed Aconcagua (the highest mountain in the Americas at about 7,000 meters); he has spent weeks with indigenous families in the jungle of Colombia; and he loves to take the more adventurous routes when skiing, hiking, or diving. As a student, he already felt strongly attracted by the positive spirit, culture, beauty, and opportunities of Latin America, and his stay in Brazil made him decide to make this beautiful country his home. He currently lives with his wife in São Paulo, Brazil.