The pandemic, like most crises, forced us all to take a hard look at the meaning of our careers and our lives. The same was true for companies, which suddenly found themselves exposed to a social test that involved some tough questions by the general public. Among them: What does your company stand for? How is it making a difference in society? Are your products healthy? Are your ingredients natural and sourced through fair labor and sustainable supply chains? Do your products’ brand images reflect values espoused by disadvantaged segments of our communities? Is your competitive strategy ethical and fair? In short, what is the social image of your corporate and product brands?
Some companies passed this test with flying colors. Many companies failed miserably. It’s too soon to judge the long-term implications for those that failed the social test, but it’s time that they recognize something important: we have entered the era of marketing for good.
The lack of qualified leadership may be the largest obstacle companies face today in implementing successful marketing for good. According to a 2019 McKinsey study, 83 percent of CEOs self-report marketing as a major driver of growth, and yet the turnover rate for CMOs has increased. Other sources indicate that the CMO tenure is now the shortest in the C-suite, and that 80 percent of CEOs do not trust their CMO. In contrast, only 10 percent do not trust their CFO. This dissatisfaction with CMO performance is due in large part to a lack of good training on analytics and marketing and the lack of accountability in marketing decisions and marketing spending. There is a shortage of qualified CMOs who can lead an evidence-based marketing team with scientifically based decision-making.
But there is an equally striking lack of qualified leaders in sustainable marketing. Companies need to adapt their goals to include a social mission and a social identity, and marketing needs to be about more than short-term corporate profits. Marketers are already expected to create a socially aligned marketing mission and to communicate what a company and its brand stand for. Going forward, marketers will also be expected to provide metrics of accountability on this corporate identity.
Milton Friedman’s statement that “the social responsibility of business is to increase profits”—what’s come to be called the Friedman doctrine—is frequently misinterpreted. Some conclude that a company’s only responsibility is to its shareholders and that a company has no social responsibility. But in an era where stakeholders value social corporate identity, social responsibility is becoming synonymous with long-term profitability.
Many shareholders do value social impact, as we’re observing with the rapid growth of impact investing. This is also why we saw a shareholder revolt at ExxonMobil in May. But long-term profitability also means considering all stakeholders—not just shareholders, but customers, employees, suppliers, and the community. Procter & Gamble’s chief sustainability officer reminded attendees of a Booth event in May that Mother Nature is also a stakeholder, as environmental regulation and resource availability constraints affect supply chains.
Consumers and employees place a premium on companies and brands that are authentic and engaged in helping the world.
As expensive as environmentally sustainable products and packaging are, they are long-term commitments to sustainable sourcing of key raw materials. Kraft Heinz has committed to 100 percent recyclable and/or biodegradable packaging by 2025. The recent shareholder activism at ExxonMobil reflected shareholders’ concerns about mismanaged supply-chain risks and public image in light of climate change. Early adopters of a scalable sustainable supply chain will have a long-term advantage as governments continue to restrict emissions and other environmentally objectionable practices.
Beyond shareholders, what about other stakeholders? Before the pandemic, younger consumer generations were already turning away from the traditional brands that have dominated our pantries, garages, and offices for more than half a century. In a recent study of the US craft-beer segment, Tilburg University’s Bart J. Bronnenberg, University of Texas at Dallas’s Joonhwi Joo, and I find that established national brands have collectively lost 15 percentage points of beer sales share since 2005, and between 2011 and 2015, large consumer brands collectively lost $18 billion in market share to craft manufacturers. Who are these craft manufacturers? Smaller brands promising higher-quality artisanal standards, sustainable local sourcing, and an appealing social image.
The CMO Survey, founded and directed by Duke’s Christine Moorman, finds that during the pandemic, greater acknowledgement of companies’ attempts to do good was one of the most frequently observed changes in consumer behavior. In 2019, before the pandemic, the Edelman Trust Barometer, which surveys consumers worldwide, found the impact of consumer trust on purchase intentions to be on the same level as factors such as quality, value, and convenience. In 2020, 71 percent of the respondents indicated that brands and companies that put profits ahead of their people would lose their trust forever. (In this context, “people” likely means the company’s employees but also can generalize to the full set of stakeholders.) Edelman concluded that most European companies would need to double their efforts to emphasize their purpose just to regain consumer trust after the pandemic. In Asia Pacific markets, almost 60 percent of consumers self-reported trying a new brand simply because of the way it responded to the pandemic. In sum, a prosocial corporate image is important for consumer demand and thus for revenues and revenue growth.
Companies are also marketing, to some extent, to employees. Over half of the millennial workforce is considering leaving or plans to leave their jobs, and 60 percent are open to a new job opportunity. That is a strikingly lower employee loyalty rate than in any other generation.
Millennials work for a purpose, not just a paycheck, and can find a purpose in the role their company plays in the community and society. Anecdotally, we’ve heard that Booth students on the job market interview recruiters about their priorities and their social-responsibility initiatives. A 2003 survey by Stanford’s David M. Montgomery and UC Santa Barbara’s Catherine A. Ramus found that over 90 percent of MBA students from 11 leading North American and European schools were willing to forgo financial benefits to work for a company with a good reputation for corporate social responsibility and ethics. A 2004 study by Deloitte found that 72 percent of Americans choosing between jobs with comparable benefits said they would pick the company that supported charitable causes. A prosocial corporate image also bolsters a company’s human-resources strategy by improving its ability to hire top talent in what is an increasingly competitive labor market.
Consumers and employees place a premium on companies and brands that are authentic and engaged in helping the world. And because few stakeholders can verify the true social impact of a company’s initiatives, authenticity is typically signaled through the company’s actions, not its words. Authenticity cannot be cheap talk, puffed up press releases, unverifiable packaging claims such as organic or natural, or empty promises of diversity in the workplace.
Authenticity is signaled through the publicly visible cost of an action, and this signaling can and probably needs to be expensive to resonate. Starbucks attempted in 2015 to open racial discourse in the United States by getting all of its baristas to write “Race Together” on each coffee cup sold. People felt this was tone deaf because Starbucks didn’t engage with the issues or pay any real cost—its action felt like cheap talk. By contrast, in what has been held up as a prime example of marketing for good, Dove made over its entire creative portfolio, including women of all physical shapes and ethnicities and eliminating photoshopping. In 2018, Nike’s share price tumbled following a boycott over its 30th anniversary “Just Do It” campaign with Colin Kaepernick. The campaign was risky and expensive, and the company paid a price with a brief dive in investor sentiment after the ad released. But one year later, Nike’s sales were booming, and its share price was 8 percent higher than where it was the day before the campaign launched.
My research with Tilburg University’s Bart Bronnenberg and Stanford’s Matthew Gentzkow has measured the long-term advantages over decades to brands that are first to strike the right chord with consumers, and therefore the right social brand image has long-term value. Marketing for good is already synonymous with the long-term profitability of the modern company, and it’s an investment in the creation of an authentic and credible public image with all stakeholders. The successful CMO fosters marketing for good through a nexus of relationships, some internal and others communicated publicly to all stakeholders, not just shareholders. The heart of marketing leadership in the 21st century is the management of this public image at the nexus of stakeholder relationships, both internal and external.
Jean-Pierre Dubé is the James M. Kilts Distinguished Service Professor of Marketing and a Charles E. Merrill Faculty Scholar at Chicago Booth. This essay is adapted from a speech given in June at the Chicago Booth diploma ceremony of the 534th Convocation of the University of Chicago. Click here for video of the event and a full transcript of the address.