If a firm believes that one of its products is bad for its customers or bad for the environment, what should it do? If the product is contributing to youth obesity, to alcoholism or to energy waste, is there a responsibility to “unsell” that product in order to get people to use it less?
A firm can make product or program decisions that will be a win-win. The Marks & Spencer “Shwopping” program gives customers a voucher for every M&S item they bring in to recycle, enhancing both sales and image. Both diet sodas and reduced fat ice creams are examples of products that don’t hurt taste, but have provided their brands with a healthy business while addressing a societal problem. McDonald’s “healthy” menu items have shown a profitable direction for the brand.
Are decisions that risk damaging the brand or business ever warranted?
Assume that a snack and desert food firm knows, via sophisticated research, that many of its products that win taste and usage tests also have huge amounts of sodium, sugar or saturated fat. Should it walk away from those products or “degrade” them so that they are less unhealthy? If a firm’s clothing takes a lot of energy to make, should a firm encourage customers with a full closet to buy more?
In this context, it is fascinating and surprising to see how some firms are responding. Patagonia famously ran an ad telling customers, “Don’t Buy This Jacket” above a picture of a popular Patagonia jacket, the making of which required 135 liters of water and generated 20 pounds of carbon dioxide. Instead the customer is asked to join Patagonia’s “reduce, repair, reuse and recycle” pledge.
Many food brands, in one way or another, have addressed health and obesity issues with programs that may not advance their commercial interests. Budweiser has a “Drink Responsibly” program, the objective of which is to curtail heavy drinkers. Pepsi Cola has changed its portfolio over time to make healthier products a bigger part of their portfolio and marketing effort. They have also committed to targeting reduction in the average per-serving of sodium, saturated fat and added sugar in key global food brands, in key countries. Coca-Cola has attempted to reduce the consumption of its sugar-based drinks by reducing calories in some products, by providing smaller servings, by labeling the contents more clearly and (in part) by encouraging an active healthy lifestyle. Several fast food chains have more clearly labeled the calorie and fat content of its food, even though such information will divert customers from high margin items and maybe even from the brand itself.
When should a firm address a societal problem at the expense of its business?
Consider the following questions:
- Do the core value of the firm and brand make such an action an imperative? Would the customers and employees expect it?
- Is the problem a public policy issue that is best left to the government? If our firm did something in the absence of our competitors, would anything change? Is the better course to stimulate government action?
- Is the issue clear? Many issues are more complex than a cursory examination suggests. And scientific truth has a way of changing. Trans fat, now a villain, was once the solution.
- Will a firm’s action make a difference? If the saturated fat content is reduced only slightly, will that really make a difference to a customer or to society? Probably not.
- What is the big picture? For example, consuming something in moderation will rarely be that that bad for anyone, and having extra “things” creates jobs as well as uses energy.
- What will be the brand benefit to becoming a “good guy,” and how much net cost will there be to the firm?
I don’t know the answer to the questions posed at the outset — what should a firm do if it sells a “bad for society” product? I do know that such problems are complex, and the answers are elusive and often simplistic or even wrong.
But I am always surprised at the willingness of so many firms to take on such issues and by the impact their programs can make. They do get some payoff in terms of employee morale and customer sentiment toward their brand. But in most cases, that sentiment does not compensate for their profit hit. These brands would be financially better off by continuing to maximize customer satisfaction and profits.
But they don’t — and that makes me feel good.