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“People now expect brands to improve their lives, their personal well-being and that of their communities and society at large”.

Sara de Dois Admap April 2012.

Introduction

This article will address the opening statement and outline why this and similar sentiments are being put forward at this time.  This article builds the case, that many brands choose to connect their brand with the lives of consumers, which is good marketing, but they cannot be surprised by any repercussions it they do not live up to the values associated with the brand.

It outlines research highlighting that brands have stakeholders and they operate in a society, and that society, infers ‘social legitimacy’ on those brands to operate within certain expectations and standards.  This article, also, dispels the belief that shareholders invest solely for profit maximisation and highlights the fact that Corporate Social Responsibility (CSR) should be integrated into a firm, alongside strategic and brand management.

Connecting a brand with consumers.

Brands ensure customers of quality, consistency and security.  Providing such guarantees creates repeat customers and offer firms the potential of higher margins.  With the security of repeat customers, the firm can further invest in research and product development, marketing and distribution.  This further strengthens the brand and increases sales.  Ultimately, a brands appeal depends on its value proposition which leads customers to subjectively calculate the costs and benefits of the brand with alternative choices, for example ‘own brand’ goods such as Tesco Finest.

The aim of brand managers is to try and influence the consumers choice by connecting brand attributes with the needs and aspirations that arise from the consumer lifestyles.  The challenge is finding common ground between the brand’s promise and the extent to which the brand message resonates with customers.  This is good marketing but brand managers cannot be surprised when the values advocated by the branding process become benchmarks against the firm’s actions which are evaluated by customers.  Behaviour that contradicts the promoted brand values and attributes can damage and sever the brand loyalty of customers (Werther & Chandler 2005).

Brands operate in a society.

Brands and their parent firm are becoming more interdependent, for example, the Coca Cola brand in 2011 was worth $78billion equating to over 60% of the market capitalisation of the entire company (NY Times 2012). Many believe that brands operating in today’s society must conform to the opening statement, to survive.  Bansal & Bogner (2002) discuss ‘social legitimacy’ that is conferred by society upon organisations, to meet the criteria of acceptable behaviour.  This legitimacy comes in the form of laws imposed by governments, social norms and individual values that have developed over time.   The imperative for ‘social legitimacy’ comes from the obvious assumption that organisations operate in a wider environment or society, and that society, affects both performance and expectations of the firm, ultimately determining the success or survival of the firm.

Freeman (1984) puts forward a stakeholder approach to strategic management which also affects the success of the brand.  He identified a ‘stakeholder’ as any group or individual who is affected by or can affect the achievement of organisations goals.  Stakeholders include customers, employees, suppliers, stockholders, environmentalists, governments and in today’s socially connected world, bloggers and the social media public.  Similarly, Freeman & McVea (2004) believe the support of all stakeholders is central to the success of any brand.

Based on the fact that firms/brands operate in a society and they have stakeholders who infer social legitimacy on them, Werther & Chandler (2005) suggest that the growing integrations of strategy, brand management and the need for social responsibility moves corporate social responsibility (CSR) from being a social add-on to becoming a strategic necessity.  They believe that CSR and profit maximisation will become increasing inseparable as CSR impacts both social legitimacy and stakeholder perception which in turn affects economic performance, especially for brand based businesses.

Some would disagree.  Druckers (1986 as cited by Kennelly 2000) ‘the myopic institutions theory’, hypothesized that firms who invest in stakeholder management and improve their social performance will be penalised by investors who are only interested in financial returns. But research by Graves and Waddock (1994) contradict this theory.  They found that firms that demonstrated a high level of corporate social performance (CSP) tend to lead to an increase in the number of institutions that invest in the stock. Wood (1995) pointed out that causality is complex, the relationship between CSP and financial performance is ambiguous, but ultimately, bad social performance damages a brand, affecting brand value and brand image.

Overall, the research agrees, brands have to be aware of the society that they operate in to sustain and grow their business.  Unless companies want to face decline, they have to act within societal expectations, by respecting the view of their stakeholders and by acting within the values advocated by the brand.  Corporate social responsibility, not just profit maximisation, is now becoming a strategic necessity which is recognised by investors.

References:

 

Bansal, P., & Bogner, W. (2002) ‘Deciding on ISO 14001: Economics, Institutions and Content’ Long Range Planning, vol. 35, pp 269-290, available: EBSCO Premier Database [accessed 25 April 2013]

 

De Dios, S. (2012) ‘Meaningful marketing: A brand utopian world’, [online] available: http://www.warc.com/Content/ContentViewer.aspx?ID=bb5b6a63-4c9a-4146-b11d-b1a6138db99c&MasterContentRef=bb5b6a63-4c9a-4146-b11d-b1a6138db99c&Campaign=admap_prize_2013 [accessed 02 May 2013]

Freeman, E. & McVea, J. (2004) ‘Handbook of Strategic Management’ Oxford: Blackwell Publishing

Freeman, R. E. (1984) ‘Strategic Management: A Stakeholder Approach’ Boston: Pitman

Graves, S. & Waddock, S. (1994) ‘Institutional Owners and Corporate Social Performance’, The Academy of Management Journal, vol. 37, no. 4, pp 1034-1046, available: www.jstor.org/stable/256611 [accessed 1 May 2013]

 

Kennelly, J.J. (2000) ‘Institutional ownership and multinational firms: relationships to social and environmental performance’, [online] Available Here [accessed 2 May 2013]

McKinsey Report (2011) ‘McKinsey on society’ [online] available: https://mckinseyonsociety.com [accessed 1 May 2013]

 

NY Times (2012) ‘Best global brands report has Coca-cola on top and Apple Climbing’, The New York times, 10 Feb 2012, available: http://www.nytimes.com/2012/10/02/business/media/best-global-brands-report-has-coca-cola-on-top-and-apple-climbing.html?_r=0 [accessed 25 April 2013]

 

Werther, J., & Chandler, B. (2005) ‘Strategic Corporate Social Responsibility as Global Brand Insurance’ David Business Horizons, vol. 48, pp 317-324, available: EBSCO Premier Database [accessed 25 April 2013]

Wood, D. & Jones, R.E. (1995) ‘Stakeholder Mismatching: A Theoretical Problem in Empirical Research on Corporate Social Performance’, International Journal of Organizational Analysis, Vol. 3, no. 3, pp 229 – 267, available: EBESCO Premier Database [1 May 2013]

Cathal Quinn
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