Recently, 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 automaker’s popular Darth Vader Super Bowl ad. 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 be better to 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 its calculations, it might have grossly underestimated the financial impact in case things 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? “Let’s 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 – actually acting on the better world the brand envisions — is an asset, not a cost. The line of thinking is the other way around:
- Tesla, for example, 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 justification for spending $100.000 on a car. Whatever the motivation, they support Tesla’s purpose as represented in its cars. Tesla realizes that its cause cannot be separated from the brand and drives sales, thus allowing it to further invest in its purpose. Tesla’s purpose is an asset.
In the long run, the two opposite lines of thinking will benefit society. Society will reward 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.
Good financial results at the end of the month are essential for any brand. But a noble role in society, without a fantastic product to make the purpose tangible, will put any brand out of business in no time. Consumers nowadays have more knowledge and more power than ever to drive the brands that create value for the betterment of society and eliminate the ones that cut corners at the cost of society. So brands had better re-evaluate their asset management.
This post first appeared on LinkedIn on October 12, 2015.