Wednesday, January 16, 2013

Consumers don't put their money where their mouth is

This article from the Strategy+Business website is eye-opening. Here is an excerpt:

The trouble with the data on ethical consumerism is that the majority of research relies on people reporting on their own purchasing habits or intentions, whether in surveys or through interviews. But there is little if any validation of what consumers report in these surveys, and individuals tend to dramatically overstate the importance of social and ethical responsibility when it comes to their purchasing habits. As noted by John Drummond, CEO of Corporate Culture, a CSR consultancy, “Most consumer research is highly dubious, because there is a gap between what people say and what they do.”
During the last 25 years, there has been debate about the value of corporate social responsibility (CSR), particularly as it relates to the rise of “ethical consumers.” These are shoppers who base purchasing decisions on whether a product’s social and ethical positioning — for example, its environmental impact or the labor practices used to manufacture it — aligns with their values. Many surveys purport to show that even the average consumer is demanding so-called ethical products, such as fair trade–certified coffee and chocolate, fair labor–certified garments, cosmetics produced without animal testing, and products made through the use of sustainable technologies. Yet when companies offer such products, they are invariably met with indifference by all but a selected group of consumers.
Is the consumer a cause-driven liberal when surveyed, but an economic conservative at the checkout line? Is the ethical consumer little more than a myth? Although many individuals bring their values and beliefs into purchasing decisions, when we examined actual consumer behavior, we found that the percentage of shopping choices made on a truly ethical basis proved far smaller than most observers believe, and far smaller than is suggested by the anecdotal data presented by advocacy groups.
The purchasing statistics on ethical products in the marketplace support this assertion. Most of these products have attained only niche market positions. The exceptions tend to be relatively rare circumstances in which a multinational corporation has acquired a company with an ethical product or service, and invested in its growth as a separate business, without altering its other business lines (or the nature of its operations). For example, Unilever’s purchase of Ben & Jerry’s Homemade Inc. allowed for the expansion of the Ben & Jerry’s ice cream franchise within the United States, but the rest of Unilever’s businesses remained largely unaffected. Companies that try to engage in proactive, cause-oriented product development often find themselves at a disadvantage: Either their target market proves significantly smaller than predicted by their focus groups and surveys or their costs of providing ethical product features are not covered by the prices consumers are willing to pay.
To read the full article, go here: Values vs. Value

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