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Future growth depends on being responsible

Future growth depends on being responsible

Impactful brands may leave the smallest footprint

Global changes in consumer attitudes about consumption, climate change, privacy, health, and other issues have impacted many categories, including beer, beverages, cars, energy, even technology. These concerns, which reflect the rise of Millennials and Centennials, can slow growth, even in developing markets, and are acutely relevant to the future of brands.

Sometimes these attitudes are bundled with other social issues into a generalized public grievance blaming brands for creating many of planet’s problems and governments for being ineffective in finding solutions. Paradoxically, brands that make the greatest impact on consumers in the future, may be those that leave the smallest footprint.

This development is intertwined with the notion of brand purpose, or higher purpose. Some brands—like some individuals—may make enormous, even historic, contributions to saving the world. More likely, most brands—like most people—will do what they do. And the considerable challenge is to do it ethically, day after day.

Simultaneously, brands also face the challenge of keeping younger, more sophisticated consumers engaged. As change becomes more iterative, even in categories like smartphones, the possibility of differentiating in a way that is fundamentally different from the competition becomes more difficult.

Ecosystems brands may have enough gravitational pull to sustain loyalty. But a counterforce is gathering strength in the East, particularly in China, in the form of quality, well-designed, less expensive products.

Why now?

The reason that these challenges are roiling now is in part generational. Members of the Millennial generation are rising to responsible positions in organizations, even into the C-Suite. Older members of the next generation, Centennials, are entering the workforce.

And the impact of these generations across categories is clear. The Millennials drove the craft beer phenomenon. Because Centennials are likely to drink less alcohol, beer brands are developing new, no- and low-alcohol drinks. Carmakers will continue to forge metal into vehicles, but those vehicles will be hybrid or electric and they will exist alongside other mobility options.

With the increased concern for health and wellness, consumption of carbonated soft drinks declined, and Coke and Pepsi introduced less sugary products. In Coca-Cola Co.’s acquisition of the Costa Coffee, the UK-based café chain, and PepsiCo Inc.’s acquisition of SodaStream, the carbonating device, the brands also found clever ways to deliver a drinking experience suited to new generations of drinkers.

The oil and gas brands are shifting to energy alternatives at a gradual but accelerating pace. Because their impact on the environment is obvious, these brands have received substantial reproach. Going forward, well defined and expressed brand purpose could help these brands navigate the transition to alternative energy.

In addition, the experience of the energy brands is cautionary for brands across categories. More mindful consumers will be less tolerant of the impact that manufacturing and distribution have on the environment. While the energy brands may remain in the bullseye, other categories and brands also will be targeted.

Innovation and competition

The need to respond with purpose to changing consumer values is driving innovation. Beer brands developed alternatives for the plastic rings that yoke six packs together. Adidas introduced a sneaker made from recycled ocean plastic.

In partnership with TerraCycle, a recycling operation, companies, including P&G, Nestlé, Unilever, and UPS are developing Loop, a back-to-the-future method of distributing product in reusable containers that are picked up from the consumer when empty to be refilled and redelivered.

Aside from accommodating the changing values of consumers, particularly young people, there is another reason for brands to be responsive—competition. Related to the generational shift is the rise of new, agile competition, sometimes led by young entrepreneurs attuned to changing attitudes about issues, including personal health and the environment.

In soft drinks, brands like La Croix filled the need for a non-sugary, but tasty, carbonated drink. Tesla challenged the combustion engine mentality by demonstrating that a market existed for electric cars and that traditional dealer networks were not the only distribution model.

And there is also the possibility of regulations, although that varies regionally. Sugar taxes in Europe are influencing the formulation of soft drinks, while in the US, Coke, Pepsi and Dr Pepper Snapple have collaborated to advertise healthier choice and preempt regulatory pressure. Similarly, the EU promulgated the General Data Protection Regulations in response to privacy infractions by technology brands. No national regulations have been imposed in the US, but California passed the Data Privacy Protection Act.

There is an additional complication—people—and a dissonance between what we as consumers say they believe and how we act. We may choose to buy brands from small, purposeful, start-up brands that are “woke” about sustainability and other social issues. But we also may be fine with ordering these products from Amazon and accepting the carbon footprint required to transport the products half way across the world. We may say we are concerned about climate change and want carmakers to build electric vehicles, but we mostly buy SUVs.

How this dilemma will be resolved is not clear. One option is that we become more mindful, less obsessed with convenience, and decide that it is impossible to have our cake and eat it too. The other option is that the magic of technology will produce more solutions that enable us to sustain our consumption habits. Eating Halo Top ice cream, for example, we indulge a dessert passion while limiting calories and feeling good about adding protein to our diet.

Taking a stand

All of these trends are politicized. How they are perceived, and their interrelationship depends on the ideological lens of the viewer. Consequently, the safest response for brands has been to tread lightly or skirt around the issues. The problem for brands is that avoidance or excess caution is no longer a viable strategy because consumers, especially young consumers, expect more.

But taking a stand is fraught with unintended consequences. Naming as its spokesman Colin Kaepernick, the NFL quarterback who protested racism by kneeling during the National Anthem, worked well for Nike. The brand and its core customers shared similar values, and Nike became a high-profile advocate for progressive social change.

Gillette experienced less success with its attempt to promote an evolved version of manhood in ads that showed “The best a man can be,” an updated version of the earlier strapline, “The best a man can get.” The campaign drew criticism both from customers who disagreed with the message and those who applauded the message but deemed the execution too didactic or heavy-handed.

It is possible to argue that we privileged consumers, in pursuit of our own comfort and convenience, accepted narrow views of beauty and gender, bought more stuff than we needed, and had no qualms about dumping plastics and other packaging into landfills and the ocean. That argument may have merit, but it will not help brands if we decide to hold them responsible for all the problems we have helped create. Young people, especially, expect brands to close the loop, to be responsible and provide solutions.

Brand Building Action Points

  1. Be ethical

Do not bolt on a purpose, which would look artificial to the consumer. Do what the brand does well but do it responsibly and ethically. That means conducting all aspects of the business—production, supply chain, relationships with employees and customers—with a moral compass and being honest.

  1. Be clear

Make it simple and easy for consumers to know exactly why the brand exists. That helps the brand feel Meaningful to consumers (relevant in meeting their needs) and Salient (coming to mind when they consider a purchase), which are two components of brand equity.

  1. Look outside

It is easy to get caught up in the daily pressures and routine of running a business. It is vital to step away for a fresh vantage to perhaps see the business the way some young entrepreneur sees it. Look outside the category and beyond the usual competitive set. Look not only for potential competitors but also for the next big idea.

  1. Look East

Not too many years ago, retailers looking for cutting-edge ideas in store formats or technology made a pilgrimage to North America. Today, they head for China to learn how to develop the rapid and responsive systems that serve people with products and services they want—when and where they want them—with just a click and cashless payment. Consider how to adapt the best ideas. Conditions in the West—higher privacy concerns and labor costs—preclude copying them.

  1. Refine brand experience

The experience starts with product itself and includes how it is packaged, and how it is sold and recycled. Customers judge the brand experience at every touchpoint, and touchpoints will change. As banking shifts online, there will be fewer branches. As cars are sold online, the role of the dealer will evolve.

  1. Customize

A new level of mass customization should emerge from the convergence of sustainability (the distribution of product in reusable containers) and technology (the ability of the consumer to select the particular mix of ingredients to go in the container) with data (the possibility of determining which ingredient mixes are most popular).