This thought-provoking presentation includes some interesting observations on the contrasting effects of brands on the world. On the one hand the Y&R planners point out, brands are responding to consumer expectations that they will drive social change, spending around $18 billion a year on charitable efforts and using their financial clout and influence to affect real change. On the other, some of the biggest brands now know more about us as consumers and individuals than government agencies and we have no real ways of knowing how they will use that information, and to what effect, going forward.
Brands are becoming primary agents of change, it seems. They also have many stakeholders with very different priorities. The question is, will they use their influence to increasingly advocate for what matters to their consumers and communities or will they take their cues from the markets and focus on initiatives that enable them to keep growing as long and as much as they can?
I can’t see how there can be one answer to that. Each brand will follow its strategy and decide its priorities – based, one hopes, on the values it espouses. But Y&R’s observations do raise the wider question don’t they as to which of these stakeholder groups should be driving how brands behave?
The reason I raise this is that we seem to get conflicting messages about those priorities across the business press all the time. Many decision makers will argue that it is incumbent on organisations to deliver the best returns they can for shareholders. Others tell us that we should always put the customer first if we want to remain competitive and that consumers are increasingly wanting to see organisations behave responsibly. Others will argue that every brand is only as good as its people and that great brands are built from the inside out.
So who should brands serve first – their investors, their customers or their staff, all of whom are responsible for growth in different ways – and to what extent should they allow one group’s interests to dominate at the expense of the others?
When every market participant behaves in the same manner, the Coach experience anywhere becomes the Coach experience everywhere.
Perhaps nothing symbolises the battle of wills between two of these groups, investors and customers, as succinctly as the debate over the humble seat. From planes to cinemas, the area being made available to value-minded consumers is becoming smaller and smaller as operators seek to boost their profits by putting more bums into shrinking spaces. Increasingly what the consumer is not prepared to pay for (Premium or First Class) decides what the brand is not prepared to provide or safeguard. And while there is competition in theory, when every market participant behaves in the same manner, the Coach experience anywhere becomes the Coach experience everywhere. Cue the Knee Defender.
To investors of course, the need to make profits while they can, and in whatever ways they can, to future-proof the business, deliver on guidance and therefore protect the stock price not only makes sense, it’s tantamount to responsible behaviour.
And what about the needs of staff and suppliers – as awareness of both mindfulness and productivity continue to rise, how do companies strike the right balance with their people?
One can assume that there will be brands, particularly public brands, that continue to take their cues from the markets. There will also be those who are prepared to risk the wrath of activist investors and/or delist in order to regain control. But if you’re a publicly listed brand, is there a third way? Is it possible to strike a balance between agendas?
Reconciling differences on the bottom line
This article on impact investing suggests that concepts are now being aired and debated that look to achieve much more defined and rounded outcomes for all parties. For this to work it seems to me, brand owners are going to need to adopt balanced brand models that prioritise exactitude over open-ended opportunity. In such an environment, intentions would be much more highly defined, deliverables clearly stated, quid pro quos considered and successes robustly measured.
Companies wouldn’t strive to beat their earnings at the expense of other metrics. Instead, they would look to hit their numbers and their other metrics simultaneously knowing that doing so sustains the wider business. Michael Dexler and Abigail Noble have focused on reconciling financial return and social impact, but I see no reason why the model couldn’t be extend to staff and supply chains. Perhaps this is where transparency is heading?
One can’t overplay how far-reaching such changes could be – not least, for how senior execs are evaluated and remunerated. However, as brands continue to increase in strength and influence, my view is they will increasingly come under pressure to define their ambitions much more fully and against a wider context and to behave in ways that align with their growing global status as brand-states.
So could the conversations around CAGR (compound annual growth rate) that dominate how brands plan and analysts predict today be replaced in time, for some brands at least, by discussions over SAGR (sustainable annual growth rate) or even RAGR (responsible annual growth rate)? For some, maybe.