Monday, September 27, 2010

Brain Food From Karmarama Kat

Now I know it may seem like this blog is only for frivolous nonsense and the odd party photo. But there is the occasional serious post.

Like this one. Below you'll find a 1000 essay that our very own planning genius Kat Ellis wrote for a WACL competition to win training in whatever field she fancied.

It's very good and very well thought through.

Oh, and it won. Get in.

Should companies lead or be led by their consumers? How does this translate to CSR?

Any essay on the topic of power relations between a company and its consumers cannot ignore the impact of recent market forces and new two-way media channels (Smith and Duffy 2004). Consumers now have the opportunity to gain a significant, collective voice through social media. This essay will discuss the shift in the company-consumer relationship to assess the extent to which their consumers should lead businesses. It will then address how this translates to Corporate Social Responsibility, arguing that a change in the definition of CSR is needed.

In the past companies decided what was best for their consumers – both in terms of their commercial offering and CSR. Shareholders, government and policymakers held more sway than a company’s consumers (Weinkrantz 2004). Their views and financial decisions were more directly and instantaneously felt by the business, and therefore more likely to be responded to. CSR, if engaged in at all, was limited to Corporate Philanthropy (Sethi 1977, Simcic Brnn and Belliu Vrioni 2001, Feldwick 2006). Initiatives were typically large and benefited society as a whole (Enderle and Tavis 1998, Cotton 2006). They were supported either because they were pet interests of the business owners/shareholders or as a response to studies indicating that consumers were more likely to choose ethical companies that were good citizens (Cone Roper 2001, Wilmott 2001).

With the advent of social media, individual consumers have a forum to make their voices heard (Trickett 2007, Clift 2010, Ives, Wickerham and Shi 2010). The inherent social nature of the new digital landscape makes it ideal for individuals or small pressure groups to gain traction for their views. A recent example of a small-scale campaign that snow balled with the help of social media is the pressure put on the Gaymer Cider Company to discontinue its new Blackthorn product. To appeal to a wider market the company reduced the cider’s alcohol content and made it sweeter. The softer taste caused outrage amongst a hardcore West Country audience. A Facebook group, started by less than 70 loyalists, inspired defacing of advertising, boycotts, press coverage and eventually a meeting with the brewery. The old Blackthorn variant has subsequently been reinstated in the Bristol area.

So, consumers today are far from being isolated individuals whose opinions, historically, would never have been picked up in consumer research run by brands. Now, they have channels that are megaphones for their opinions, and forums for hooking up with similarly minded individuals to form a voice that cannot be ignored by brands.

Brands are not as naïve as this essay question assumes. They have known for a long time that in a world of parity products and services, being seen to listen and respond to consumers can offer competitive advantage (Kay 1993, Simcic Brnn and Belliu Vrioni 2001, Murphy 2002, Smith and Duffy 2004, Cotton 2006, Ives, Wickerham and Shi 2010). Shareholders too are increasingly interested in socially responsible companies, as they generate more sustainable returns (Cordasco 2002). It seems as the degree of influence exerted by shareholders and consumers becomes evenly balanced, so their interests are less at odds.

A business will always be led by its commercial imperative – the need to generate returns for its shareholders (Murphy 2002, Mahmoud 2008). Listening to newly empowered consumers should not be seen as at odds with this objective. The ability to clearly hear consumers through social media is an opportunity, superseding the limited consumer research conducted in the past (Nicholas 2005). Gaymer Cider Company saw the failings of structured research, when focus groups and product testing did not pick up the bad feeling loyalists would feel at the eradication of the old product.

So, in terms of CSR this essay argues it can no longer be an add-on, as the old Corporate Philanthropy model was. Being in touch with publics and responding is no longer separate from the way it does business and its commercial objectives (Feldwick 2006, Mahmoud 2008). There is no longer a need for a top down model where shareholders and company owners blindly decide what is best for society. Initiatives can be directly guided by what your consumers want because now they can be heard. CSR initiatives and policies can be more relevant to the people a business is selling to, and for this reason more commercially valuable (Gadsby 2004, Hansted Blomqvist and Posner 2004, Nicholas 2005, Davis and Moy 2007, Lowe 2008, Oxley and Pace 2009). One only has to look at Marks and Spencer’s recent use of comprehensive social media monitoring to uncover Busts4Justice, a group of ample breasted women disgruntled by the fact they were paying more for bras above a D cup, than their smaller breasted contempories. The company proactively responded by dropping their £2 premium on D+ cups, and ran advertising promoting the initiative; capitalising on a valuable audience and creating a competitive differential that actually mattered.

This essay argues that a redefinition of CSR is needed, primarily to address how the shift in company-consumer relationship has changed what is covered by Social Responsibility. In the past Social was very much with a capital S. Businesses were responsible to Society at large, with almost a Reithian attitude towards improving the world. Today Social should have a lower case s. Businesses no longer have to make assumptions about what is best for society at large; they can focus on what is important to audiences that matter commercially (Visser 2010). social Responsibility should mean listening and responding to a range of relevant societies with a range of relevant initiatives. This ability to focus is invaluable in a recessionary climate where the wide scale Corporate Philanthropy of the past would be impossible (Hilton 2008)

Ultimately the question of whether a business should be led by its consumers is a commercial one. A company must do what is best for its own financial health and responding to every consumer whim, as some new media analysts would suggest, would be impossible and unnecessary. But today listening to consumers is easier, and responding to a significant voice makes financial sense. Shareholders also increasingly accept that their need for sustained returns and responding to the needs of consumers are complementary. The fact that consumers now have a stronger collective voice should be seen as a commercial opportunity. Businesses should allow themselves to be led by consumers as far as it offers them a competitive advantage, good will, and the associated fiscal rewards. Surely this has always been best practice, it is just easier to do and more transparent today.