Sunday, January 01, 2012

Ethical Consumerism

The topic came up in the context that blog-buddy Swati's post-grad institute is asking students to research on building identity through Corporate Social Responsibility. And so it was chosen as our blog-group's topic of the month, and thought-provoking that it is, Good Choice I thought! :O)

Coming straight to the point...The reason a business runs is for profit. So the reason why it would pick on any non-core theme would be (in order of priority)profit enhancement (even if through cost reduction), competitive edge and government regulations.
Some sustainability and environmental benefits themes fall right into the safety net of all the three above. But "more ethical" does not. And I'd hence argue that just for that end, a business cannot be ethical in a market economy. So before going any further, one has to first accept that these themes of Corporate Social Responsibility became so only because it was justified either on the balance sheet or consumer demand, if the law of the land did not already mandate it.

Doing it is one thing, but there is no point advertising it, or making an identity/brand of it, if the end customer is not looking for it. So it is time now to first understand what the consumer's priorities are. At the end of the day, everyone lives on an income. Cost has to be managed. But where cost is almost equal among competing products or manageable (low in proportion to income) other factors do come to play including, and firstly, Quality. So for a consumer, be it an individual or an entity, cost will be the first priority followed by quality and then other factors. Now depending upon the kind of product/service on sale, these "other" factors can have considerable influence, and it is in this space that high-end competition tries to show differentiators. Note, I stress here that only consumers who fall within middle-class and upwards will be even influenced by factors other than cost and quality, in most scenarios not being able to afford looking beyond cost. I must also add here that I am not mixing quality with safety, and even when the middle-class consumer buys something for its low cost, he will check for the minimal safety-levels, even if defined by "others use it too". Going back to "other" factors beyond cost and quality, these factors that influence choice could vary from banal economics like it a one-time expense (durable goods) so lets keep cost aside, to the emotional like religious influence (kosher/halal for example) so cost is not what matters most, and so on including factors like ethical and green benefits. The point I'm conveying here is that in thought-process of the "responsible" consumer, Corporate Social Responsibility can at best lie at Level 3 (top among other factors), if not lower.

So the message to the Corporation seeking to build its brand, is that while the theme may include Corporate Social Responsibility, it should first have laid the brand-recall foundation in the consumer's mind on cost and quality. If the product is not regarded by the consumer as cost-competitive and of acceptable quality, trying to sell Corporate Social Responsibility is fruitless. And actually, marketers should take pains to send the message that embracing the Corporate Social Responsibility theme would not come at the cost of alienating cost and quality.

Having known its place, Corporate Social Responsibility indeed can act as a crucial differentiator, for it shows an organization's humanity and commitment to be well-regarded. In the IT space, companies like Infosys caught on early to this theme, and admirably, devotes 1% of its margins to the Infosys Foundation devoted to the social cause. Themes chosen include (not exhaustive) education, social upliftment, and environment, and it does make a difference in winning favor (even business), where all else is equal. As both shareholders, partners, and clients, even if not individually involved in it, like to be known as associated with companies chanting the Social Responsibility mantra (bask in their glory!). In the pharmaceutical industry too, where clients are most-times the end-consumer,  this can make a big positive difference. For example, the ingredients in the medicine being from non-meat or vegetarian alternatives. Or effluents are safely disposed. Manufacturing processes are efficient. As a consumer, it would make a difference to me, provided (and you can complete this sentence by now) cost and quality at least are not sacrificed!!

I've switched to artoac1.wordpress.com

Dear reader, I've switched to WordPress upon getting the pop-up that the current Blogger app is not configured to the upgraded version ...