How does a Good Market Strategy Improves Shareholder Value?

Good Growth Marketing
Shareholder Value

Transcript: How Does a Good Market Strategy Improve Shareholder Value?

Hello everyone this is Edmund Bradford and I’m delighted to have with me my good friend and colleague Professor Malcolm Mcdonald we’ve done a lot of things together um both universities and out there with real companies.

Malcolm has over 30 years I would say without putting too much of a number on it over 30 years of experience in marketing and is truly one of the great marketers out there in the world and in this short series of videos we’re talking about shareholder value we’re talking about marketing how they both connect together and also how they connect into just being a good company so welcome again Malcolm and thank you for joining us so I’ve asked now is that simple question about how does a good market strategy improve shareholder value?

Wow again Ed you are known certainly to me and those who know you for asking very difficult questions and this isn’t the easiest question to answer but

I will give it a go I mean first of all to put it in perspective what are the components of a marketing strategy anyway and you know I’ve sort of made a bit of a list here it’s not complete but it’s got the essential elements it, first of all, you need in an organization:

An inspiring vision you need clear strategies you need rigorous segment and brand positioning you need consistent innovation you need superior customer value you need high employee morale you need tight cost control and concern for all stakeholders.

Now what could be easier than that and thing is I’ve got 127 scholarly references which obviously I won’t bore people with today but over a long long period, these scholarly references have drawn a link between a successful marketing strategy and long-run financial success and you know they are very similar to the list I’ve just you know spoken about I mean firstly you know you’ve got a deep understanding of how the market works that’s common across all successful companies correct needs-based market segmentation.

Not that garbage that’s taught in many places about socioeconomics and demographics and geodemographics i mean for example just to get it out of the way Prince Charles and Ozzy Osborne ED are both socioeconomic group A but I don’t think they behave the same.

And you’ve got understanding customer needs it sounds simple hard to do but it’s a factor and then differentiation positioning and branding and planning for the future now i know in my work Ed what kind of organization I’m going to be facing when I get the board of directors the operating board of directors and my first question to them is without talking to each other write down on a piece of paper or type into your computer what are your key target markets in order of priority the second part of that question is pretty obvious against each of these key target markets what’s your company’s sources of differential advantage and invariably companies that haven’t got those characteristics instead of talking about key target markets, they start wittering about their products and it reminds me of you know the near disaster that Ibm had when they thought they were in the main frame market and um more recently oh guest step they thought they were in the duplicator market more recently Kodak thought they were in the camera and film market the Nokia thought they were in the phones market you know it’s not products and it hasn’t been for ages that give you differentiation and create satisfaction for customers it’s the way you relate to your customers and your markets.

I just want to by way of closing this off to give you one quick example of the silly notion that people have about what is called CSR corporate social responsibility of course you have to have it but it has to go hand in hand with shareholder value-added because if it doesn’t it’s not going to work.

I give you one example there is a famous chemical company that used to be the bellwether of the British stock exchange and it was a wonderful company it was good to its employees loved working for it it was good to local communities it was good to charities and so on and so forth the problem was it wasn’t as good as satisfying customer needs as the Duponts and the Siemens of the world consequently their shareholder value was not in the same category and started reducing and the result of that was hundreds of thousands of people unemployed no more money for charities no more money for local communities and so on and so forth so I’m afraid in order to be a good citizen you also have to create shareholder value and I hope during these brief few minutes Ed I’ve given you the components of what the successful strategies are so I better stop whispering on now and say that’s my answer.

That’s excellent Malcolm and I know that you are a big believer in marketing you know not being in the basement of companies and in a way that is dangerous not being in the basement of companies it needs to be in the boardroom of companies and there’s a big misunderstanding I think around marketing that you know the strategy is done by somebody else somewhere else another function another person and marketing I remember you saying marketing is really the people that blow the balloons of you know at corporate events and so I think
the point you’re making is that marketing has a major role to play in actually creating shareholder value by the impact and the influence that they have on the market-facing strategy that the company is adopting

Of course and i mean if you think about that example i gave you when i’ve got a board of directors there and I asked them what their key target markets are and what in order of priority and what their sources of differential advantage are if they can’t answer those questions Ed it tells you straight away that whatever they think marketing is they haven’t got it in the organization because what is it that makes organizations successful it’s actually selling something to somebody you better know who you want to sell it to you’d better understand their needs and you’d better make them an offer that makes them want to buy from you rather than from somebody else who’s got something similar now I don’t care whether you call that marketing strategy or what but it’s a bit fundamental and if companies can’t answer that quest those questions then I know they haven’t got um successful marketing strategies and therefore they will either be in a growth market but they won’t be profitable for long or they’re about to go belly up the sooner or later you have to get those components in place thank you Malcolm that’s excellent and that’s that’s is it is a huge subject to be said   but we’re deliberately keeping these little conversations short in the next conversation we’re going to be talking about how a good market strategy helps you to be a better company so thank you once again Malcolm and look forward to speaking to you again shortly

What is Shareholder Value Added and Why Should We Care About it?

Good Growth Marketing Risk
Shareholder Value-Added

In this interview we explain:

  • What is Shareholder Value-Added
  • Why is an important concept to understand
  • The importance of risk assessment

 

Transcript for: What is Shareholder Value-Added?

[00:00:05 –> 00:00:58] EdmundWell, Hello, everyone. This is Edmund Bradford, and I’m delighted to have with me today, Professor Malcolm McDonald. And we’re talking about three things, really. We’re talking about shareholder value, marketing, and how that connects to being a good company. And in the last video, we just kind of got an introduction to the subject of shareholders and what shareholders are interested in. But I know I’ve heard about and talk about this a lot and it isn’t easy to package up into a few small minutes. I think it’d be interesting just to at least pick up on the subject of shareholder value-added, which can be very technical, but I think it’s worth just trying to get ahead around that particular area. So Hello, Malcolm, and welcome to the Interview again.
[00:00:59 –> 00:00:59] MalcolmHello Ed
[00:01:00 –> 00:01:08] EdmundCould you summarize what is shareholder value and why anybody should care about it?
[00:01:08 –> 00:04:10] MalcolmWell, I must say, it’s an enticing thought to try and make a topic like shareholder value-added interesting and exciting. It clearly isn’t other than to those people who benefit from it. In the main, these are shareholders. But let’s keep it simple. I mean, what is it? Well, everybody knows what net free cash flow is and its net free cash flow having taken account of the time value of money, and you think that’s not a difficult concept because of the time value of money, you’d rather have a pound or a dollar or a Euro today than you would in five years time. So having taken account for the time value of money, the cost of capital, which I’ll talk a little bit about because it’s not the most exciting topic in the world and of course, the risks associated with the company or the organization’s strategy. And let me give you one very simple example of this. If, for example, keeping the math simple, the cost of capital is 10% and you’re a small company and you’ve got £20,000 invested in your company. And as I say, the cost of capital is 10%. If you make a net profit net free cash flow of 1500 pounds, you have actually destroyed £500 worth of shareholder value. If you, on the other hand, make £2000 net free cash flow net profit, you have neither created nor destroyed shareholder value. If on the other hand, you’ve created, let us say £2500 worth of profit, you’ve created £500 with a shoulder value. And the question I ask most people, I say what sort of nutty what sort of idiot would deliberately set out to destroy shareholder value? Because the point is it started off with a guy called Rappaport and then morphed into what’s become shareholder value-added. Now the world is full of expressions like Return on Investment, Rona, DCF Payback, Net profit, EBIDTA, Brand Equity, Customer Equity, Customer Lifetime Value, and so on. Each one, in its own way, is very valuable and tells you something different. But the reality is that the one that has filtered to the top over the last 15 or 20 years is shareholder value-added. And, you know, if you rather than going into all the details, it’s quite important for marketers, for example, to understand what the cost of capital is because every organization has it. It’s the one hurdle you’ve got to get it over in order to justify investment funds.
[00:04:13 –> 00:05:47] MalcolmThat’s one side of it. I talked about the time value of money, the big one, however, and the complicated one is this expression. I use risk, the risk of the strategy of the organization. It’s extremely complex, and I don’t want to muddy the waters now, other than to say, you know, there’s a model called a capital asset pricing model, which explains how stock markets work. All I’d say is that, in summary, a normal, rational, risk-averse investor requires an increase in expected future returns for any more risky investment in order to compensate for any potential volatility. I mean, that, to me, is a blinding glimpse of the obvious, but risk assessment has risen very high on the agenda of those organizations and people like me who work with organizations globally in assessing risk. And the best companies in the world do assess risk. Formally, we call it due diligence, but the best companies have processes in place to make sure that they have taken account of risk in their predictions for shareholder value-added. I think probably I will stop there because, as I say, it’s not the most exciting topic in the world. But I hope I have at least explained how it works and why it is so important.
[00:05:47 –> 00:07:23] EdmundYou have Malcolm, and you’ve done that is normally when I hear you present this, you’ve got some charts and graphs and things to help. And I think in concept is actually quite simple, really, because what we’re saying is that an investor has different alternatives to where to put their money. And if you’re not delivering the minimum returns, the cost of capital that they’re looking for, they don’t need to invest in your marketing project or even your company at all. They can invest that money elsewhere and get a better return. So just because you’ve got a good payback plan, you’re making some good profit doesn’t necessarily mean that actually, you’ve reached the minimum cost of capital. And that cost of capital, as you said, is dependent on time, time adjusted returns, and is also dependent on the risk that’s factored into it. And that is a big area. And in a giving your book, for example, in marketing and finance book, you talk about different types of risk. For example, market share risk is one sort of risk. In our book we do together, there’s an implementation risk as well, that the objectives that you set out, the strategy that you laid out doesn’t get implemented successfully. So risk itself is a huge area. But I think in a way, marketers can’t shy away from it. Understanding risk and how it’s used as a major area to get head around.
[00:07:23 –> 00:07:46] MalcolmYeah. And I suppose it’s pretty obvious at the end of the day that if a company has a history of its profits going up and down and so on and so forth, it’s known as a volatile company, and therefore the shareholders will require a high return to take account of that risk. So it’s a pretty simple concept at the end of the day.
[00:07:47 –> 00:08:12] EdmundExcellent. Thank you, Malcolm. Thank you for simplifying what can be very difficult and technical subject. I’m sure that’s really useful to a lot of people. In our next video, we’re going to be talking about how a good market strategy could improve shareholder value. So thank you again, Malcolm, for your time this morning. Much appreciated. And looking forward to our next conversation.

Are shareholders only interested in short-term profits?

Good Growth Marketing
Shareholder short-term

A key challenge for any company wishing to achieve long-term, sustainable, Good Growth is dealing with shareholder demands for short-term profits. But to what extent is this a real or a perceived problem?  In this interview, Professor Malcolm McDonald discusses:

  • The alignment between profits and long-term success
  • The reality of sustainable consumer behavior
  • The future trend towards sustainable corporate behavior

 

Transcript: Are shareholders only interested in short-term profits?

[00:00:06 –> 00:01:19] Edmund Hello, everyone. I’m Edmund Bradford. In this short series of videos, we’re going to be talking about a very important subject, which is shareholder value and how it links with marketing and just being a good company. And to help us with that particular topic, I’m delighted (and I mean that from the bottom of my heart) I’m delighted to have my good friend and colleague, Professor Malcolm McDonald with us. Now, I could do a very long introduction, Malcolm, but I will keep it short. I think the only thing people need to know really, is that you’ve been in this business “for 600 years” as you would say, and you’ve written over 50 books on the subject of marketing and finance, etc, etc. You’ve got a very good book – and I don’t mind giving it a plug – called “Marketing and Finance, Creating Shareholder Value” now in its Second Edition. So if anybody wants to know more about the subject, please go and check out that book. And so you’re one of the best people. I think we could have to talk about the subject. So Hello, Malcolm.
[00:01:19 –> 00:01:21] MalcolmGood morning. Good afternoon. Good day.
[00:01:21 –> 00:01:37] Edmund: Should we start with this simple question of what is a shareholder and are shareholders only interested in short-term profits?
[00:01:38 –> 00:06:18] MalcolmWow, Ed, you are a colleague and a friend, but you do ask very difficult questions. So let me think about the answer. First of all, there are many categories of shareholders, as you will know, from the individual to those who belong to things like mutual funds. For example, I’m an individual shareholder in a bank, but I also get to draw pensions from organizations like the University superannuation scheme which they invest on our behalf. And I don’t know how many of us pay attention to where they invest, but we assume that they’re decent human beings and don’t invest in organizations that are not good for our planet and society. But secondly, and I think this is most important, we know that there undoubtedly are shareholders who are not interested only in short term profits. But there’s really no conflict in this because, as I’ll show later, I hope I’ll spell out that most environmentally friendly companies also tend to be the most profitable. So there’s no conflict there. However, let me put one big “definite maybe” in here about all this, as often I perceive a big gap between what people say they’re going to do, what sounds good when being interviewed, and what they actually do. And let me give you an example. I mean, for example, more than 60% of younger consumers, according to Accenture, consider a firm’s ethical values before buying its products. The problem with that is if you look at Boohoo, for example, when it was revealed that they were paying their factory workers less than the minimum wage, did it affect them? Well, sales revenue is up by 41%. Profits increased by 37% to March 2021. And if you look at Amazon, you know, regularly criticized for their harsh employment conditions and aggressive tax avoidance measures. Yet customers spent more than £272 Billion with the company last year. And we’ll give you one last example: Volkswagen. They were found to have cheated on diesel emission tests. And yet, you know, five years later, the group achieved its highest market share ever, 22.1%. The reason, I think, is (perhaps it’s obvious or maybe it’s not obvious) that is if you ask someone, “Do you want brands to be ethical?” Nobody in their right mind is going to say, “No.” But the answer, of course, is that this social purpose will come very low on the list. Perhaps when money is involved and they get their wallets out, they get their purses out. Now, my personal view on this is that shareholders are very similar, but the consequences are grave indeed and just cannot go on. We have to change and we are changing and we will change. For example, the old Take,  Make, Waste model for the past 250 years is no longer sustainable. We just don’t have resources such as land, forest, water, metals, and mineral fuels to keep up with demand. In fact, according to Accenture, we’ll consume three planets’ worth of resources every year by 2050. And this will translate into trillion-dollar losses for companies and countries that remain tied to using these natural resources. And one last point, which I will conclude on this first question, let me say that we’re just one small step away from one lucky person, owning more wealth than the bottom half of the world’s population. Currently, it’s 62 people. Now that cannot go on. There will be legislation, if nothing else, to change that. The world cannot go on in that mode. So maybe I haven’t answered your question Ed, but they’re my rambling thoughts on the question of,  “Are shareholders only being interested in short-term profits?”
[00:06:18 –> 00:07:13] Edmund : I think that was excellent, Malcolm. I just wondered, because of course, you get different types of shareholder. Not all shareholders are created equal. And what some companies are finding is that, of course, some shareholders are actually more receptive to thinking about the long-term view, thinking about sustainability and ethics, for example. Do you think that actually, you could almost segment the shareholder market into different types of shareholders and almost in a way, they look for a balanced portfolio of products? You could also look for a balanced portfolio of shareholders with some that are more interested in the long term and some which are more interested in the short term. Can you borrow some thinking for marketing to do that?
[00:07:14 –> 00:08:11] MalcolmPossibly that is a possibility, Ed. But all I would say is that by definition, the people who are shareholders tend to be better off people in the main, and they’re probably in the higher echelons of intelligence as well. It occurred to me that there is a change taking place, and increasingly there is a realization that it is those organizations who are good to the planet, who are also the most profitable. And I think that that will begin to come into play increasingly over the next five to ten years. So there is hope for us. And I think this endemic of short-termism is, in my perception, reducing slowly but surely.
[00:08:11 –> 00:08:29] EdmundThank you very much, Malcolm. That’s excellent. And in the next video, we’re going to be talking a little bit, and going to go down a little bit into a bit more detail, and talk about what we mean by ‘Shareholder Value Added.’ So for the moment, thank you very much for that Malcolm and I’m sure that has been very helpful to a lot of people.

How can a marketer help sustainability?

Marketing Sustainability
Marketer sustainability purpose

Marketer and sustainability are often synonyms of greenwashing. This is because people usually think of marketing just from the communication point of view, leaving behind the marketing strategy.

In this interview, we will focus on explaining what a marketer can do about reaching the company’s sustainability goals.

Specifically, we will look at how:

  • Marketers can implement sustainability if they help to forge a strong sense of purpose in the company.
  • Consumers are positively responding to brands with a strong environmental sustainable purpose.
  • Not all Companies can achieve all ESG goals overnight, so it is important to clearly communicate the steps towards those goals even if they are years away.

Transcript of:  How can a marketer help implement sustainability?

Why should marketers care about “ESG”?

ESG Marketing
Marketing and ESG

Interview Abstract: Marketers and ESG

Edmund Bradford says they want to relate the subject of ESG to the marketing profession. Pooja Khosla says that marketing people will be like the captain of the ship because they have to find out product ideas, that bring sustainability. Edmund and Pooja say that science has to meet business to create good growth. Edmund says that marketing has a huge impact because they are talking to customers continuously. Pooja and Edmund discuss the power of marketing to spread the message that sustainability is in everybody’s interest. Edmund says good marketers are multi-skilled and cross-organizational. Pooja says they need an agreement from the executive team to start the mission of sustainability. Pooja says marketers will look into how to add sustainability venturing into new markets.

Transcript of Why should marketers care about ESG

[00:00:09 –> 00:00:38] EdmundHello, everyone. I’m Edmund Branford, director of the Good Growth Academy. And in these short videos, we’re talking about the subject of ESG. And now in this video, I want to relate it a bit to the marketing profession where we have a lot of contacts and a lot of viewers. And I’m delighted to have with me Dr. Pooja Khosla, who’s Vice President of Client Development at Entelligent, good morning.
[00:00:38 –> 00:00:40] PoojaGood morning Ed.
[00:00:40 –> 00:01:04] EdmundThanks for joining us again. And Yes, I know you’re not a marketer yourself Pooja, So you’re talking about this issue from outside the marketing profession, but why should marketers stand up and pay attention to this horrible acronym called ESG? Why does it matter to them?
[00:01:05 –> 00:02:51] PoojaSo I would say that you’re right. I’m not a marketing person by training, but definitely, I am learning marketing every day to learn and to spread knowledge of ESG more and more. Because if we talk about the ship of sustainability in an organization, I believe marketing people will be the captain of this ship. The marketing team will be the sailors on the ship to ensure that the ship is moving towards good growth because they have to find out product ideas, not only product ideas that bring revenues, but product ideas that bring sustainability. They have to be inventors of not just the product use, but consumer satisfaction also. That’s okay if I buy this product, how I am contributing to the environment, or what I am not extracting from the environment. To be very honest, I live in a really interesting town, Boulder (Colorado) where people do not look at price tags. Rather, they look into how much emissions have been produced using or getting that product to them. They are very aware and I know that this is going to spread. This is going to spread more and more as we sail towards sustainability. And now it’s time when marketers have to think like a scientist.
[00:02:53 –> 00:02:55] EdmundThat’s a very dangerous concept (ironic)
[00:02:56 –> 00:03:41] PoojaSo that’s right now they have to think like scientists in a way to innovate, messaging product future pathway of a company where they are not only increasing this revenue of the sales, but they are also bringing into concepts where people feel proud to possess those products because it is not only to satisfy a need, but it is also minimum impact on the planet. It is also a contribution towards management. So I think now it’s time where science has to meet business to create good growth.
[00:03:41 –> 00:05:21] EdmundActually, I think that’s a wonderful, wonderful idea. So I think many marketers maybe come in with a Master of Art background on a Bachelor of Arts background. And of course, through digital marketing, there’s far more science getting into marketing as well. So some of them are far more quantitative than they used to be. We know that understanding financials, it’s very important for markets as well. And I think from a wide perspective, there’s a huge impact that marketers can have in this area because they are talking to customers or should be talking to customers continuously. They need to be kind of helping to change the behavior of customers, nudging them more towards green options, maybe in the B2B area, you know, deprioritizing dirtier clients and prioritizing greener clients. And I would guess the more they can point their ship towards these better customers, the more it sends the right demand signals right through the supply chain, doesn’t it? People pay more for better products, higher-value products, more sustainably sourced, et cetera. That makes it easier. There’s enough for the supply chain guys to execute what needs to be done. So I think in my own saying that marketing has actually got a very big role to play here and making this happen.
[00:05:22 –> 00:06:35] PoojaAbsolutely. If we have to bend the temperature curve towards Paris goals (1,5-degree Celsius), if we really want to accelerate the speed of sustainability and we will need behavioral changes, we will need a new definition of value. And who can do that better than a person In marketing? They have the power to influence. They have the power to change how people think they have the power to create the demand for the product, even if the demand doesn’t exist yet. So I think they have to use their superpowers now to change it from inside the behavior to spread the message that sustainability is inside everybody. It is just like they have to look deep inside them and find ways how they can contribute. And I think that will come from our captains that are the people associated with marketing, people who have the power to change.
[00:06:36 –> 00:07:40] EdmundI suppose if you’re taking your analogy of the ship as well. I mean, if the CEO is the captain of the ship, you say then maybe the marketer should be the Navigator, the kind of chief Navigator, and in your early video, you’re talking about ESG being the GPS of sustainability. The nice thing I think about good marketers is that they are multi-skilled. They’re used to working across functions with product development, finance, sales, operations. They are cross-organizational. So they used to deal with customer organizations, distributors, wholesalers, third party relationships, and actually, all those skills of dealing across the whole organization and between organizations can be applied here to try to turn this to your own company around and make it point it and help it to move to better greener water, better value market waters, as you would say.
[00:07:40 –> 00:08:47] PoojaThat is absolutely correct Ed because definitely, you are right. We need an agreement of the executive team to start with, but then this mission of sustainability value mix navigators, navigators, not only looking into where a company will progress often be the new products are who will be the new consumer targets, but navigators which will look into how we can add the sustainability venturing into new markets, how we can develop new products that we can associate closely with the change towards sustainability. So this navigation is very important, and it will become very critical to the organization moving forward.
[00:08:48 –> 00:09:02] EdmundThat’s an excellent Puja. Thank you very much. We’re trying to keep these videos short, so that’s all we’ve got time for now. And thank you again. Push for your time has been extremely helpful for anybody that wants to know more about this stuff.
[00:09:02 –> 00:09:02] PoojaDone.
[00:09:02 –> 00:09:05] EdmundJust look at the Growth Academy website. Thank you.

What is a Sustainable Brand?

Marketing Sustainability
Sustainable brand

An interview with Stephen Mangham

The marketing function is often seen as the greenwasher of sustainability. Some would say that the other functions do all the hard work of making real progress and the marketers simply share the stories!

Yet, marketing and sustainability actually have a strong connection.   In this interview, we explore the subject of sustainable brands with Stephen Mangham.

Transcript

The timings are there to help you dive into the video at the right point if needed.

[00:00:05 –> 00:01:02] EdmundHello, everyone. I’m Edmund Bradford. I’m a Director of the Good Growth Academy and today we’re going to be talking about sustainability and marketing, which I think is a really interesting area.  I’m delighted to have with me Stephen Mangham, who is a branding expert and also a Master at Masters of Scale International. You and I, Steven, have chatted a little bit in the past about branding, sustainability and another concept that we’re kicking around called “good growth.” It’d be really interesting to get your thoughts on what we mean by Good Growth, a good growth brand, and how that is different to other brands that are out there. So any thoughts are very well received!
[00:01:02 –> 00:01:29] StephenOkay. Thanks. Well, the purpose of marketing has always been to produce growth. So in today’s world, I’d argue that the role of CMOs is to produce good growth, where sustainability is a strategic imperative at the core of their brand strategy.
[00:01:31 –> 00:01:40] Edmund: When we talk about good growth, do we mean sustainability? Is that something different to sustainability?
[00:01:40 –> 00:02:29] StephenWe do mean sustainability. But I’d say two things about it. First of all, that it is where sustainability is at the core of the brand strategy. It’s defining the brand in terms of its social purpose rather than being an add-on or an addendum or a part of the brand, it’s core to the brand. Arguably, it goes further than simple damage limitation or mitigation. It’s about the idea of being that good that you put in more than you take out.  When you define a brand in terms of its social purpose, ultimately it’s putting more into the ecosystem than it takes out.
[00:02:29 –> 00:03:02] Edmund: That reminds me of something that I saw a couple of weeks ago from Professor Steve Kempster, who’s a Professor at Lancaster University. He was telling me about the fact that we now talk about a regenerative company as being a higher goal. You’re thinking there about being “net good”. Is that a higher goal than just being sustainable? 
[00:03:02 –> 00:04:12] StephenYes, I think it is. Net-zero is a very laudable target, don’t get me wrong. But it’s about a different way of looking at your business as your brand. It’s about the idea that it isn’t looking at sustainability in terms of damage limitation or defining it in terms of mitigation or what steps can we take to mitigate the impact we have on our world. It’s looking at it in terms of what is the inherent usefulness of our brand or our business? Where is it actually a promoter of good things in some way? And it’s about looking in terms of the brand as saying, on balance, that it has a strong social purpose that is inherently useful to society in some way. It’s taking all the right steps in terms of its impact on our world, both in positive terms as well as negative terms. But at the end of the day, it’s actually about being net good.
[00:04:13 –> 00:04:24] Edmund:  Which companies would you put down as at least attempting to do this in a proper fashion?
[00:04:24 –> 00:05:00] StephenThere are so many companies that are doing that at the moment, and obviously, there are some companies that were created from scratch with a sense of social purpose. Who Gives a Crap, for example? But actually, there’s also a large number of the larger companies who are taking significant steps. So if you think of Unilever, for example, Alan Jope has famously gone on record as saying that if a brand in their stable of brands doesn’t have a social purpose that they can define, they’ll sell it.
[00:05:01 –> 00:05:04] EdmundYes, that’s right.
[00:05:05 –> 00:05:19] StephenThey’re taking major steps in terms of giving all of their brands a defined social purpose and measuring the impact and the success – or otherwise – of that purpose.
[00:05:20 –> 00:05:38] EdmundExcellent. And I think when we’re talking about a kind of good growth brand, it’s a brand that can be applied at a company level or could be applied at a product or service level. Do you see that? Or is it only a corporate level where this works?
[00:05:38 –> 00:06:52] StephenIt can work at a corporate level. Of course, it can. It must because you have to look at the way you do business as an organization. But I guess what we’re talking about here more specifically, is defining your brands in these terms. By doing that, you are looking at your brands. At the end of the day, you define your brand in terms of consumer appeal, and a brand lives or dies. Of course, in terms of how strongly it resonates with customers and how it persuades more consumers to buy it more often. So when you’re looking at sustainable brands as opposed to sustainable companies, you’re defining it in customer-facing terms. How is the brand inherently useful for its customers and defining it in terms of social purpose? How will a brand, as a result, be more relevant to consumers, drive talk-ability, even protect its price elasticity, for example? So with brands, we’re talking about a customer orientated centric conversation.
[00:06:53 –> 00:07:06] EdmundExcellent. And that, by the way, is a great teeing up for our next video, which is going to be all about differentiation. So many thanks, Steven. And I look forward to another conversation with you shortly.
[00:07:06 –> 00:07:08] StephenThank you very much. Great to talk to you. Ed.

Why a Sustainable Marketing Plan is Essential

Marketing Sustainability
Marketing Planning Sustainable

In brief:

  • Sustainability is a rising business issue that needs to be included in your marketing plan
  • Customers are demanding more transparent sustainability in choosing their provider
  • We explain why and how including it will help you and your brands to grow

The rise and rise of sustainability 

Global investment in sustainable companies (also known as ESG)  has risen dramatically over the past seven years.  In 2014, less than $20 trillion was held as assets under management. In 2020, this had risen to over $30 trillion.

There are now more funds being invested in sustainable companies than in other companies. This rise in investor interest in sustainability shows no sign of stopping. This is a major driver to work on a sustainable marketing plan.

By 2025, Bloomberg estimates that over $50 trillion will be invested, which is about one-third of forecasted total global assets under management (see ESG assets may hit $53 trillion by 2025, a third of global AUM by Adeline Diab and Gina Martin Adams).  The rise of ESG as an accepted measurement system for sustainability has been a key driver in the rise of investor confidence.

At a Government level, there are trillions of dollars being invested in sustainability. For example, in December 2020, the European Union agreed a €1.82 trillion Green Deal to support a green recovery. In February 2021, U.S. President Joe Biden announced a $2 trillion Green New Deal.  The UK Government has committed itself to legally binding targets in its 2008 Climate Change Act and will showcase its efforts at the COP26 UN Climate Change Conference in Glasgow, Scotland this November.  There is also rare cooperation between Western Governments and China on sustainability.

Consumers are also forcing change. A recent report by GfK has shown how environmental awareness and eco-activism are rising across global consumers.  For example, 24% of consumers are now taking prompt measures to cut their plastic waste (see “Eco-activism in FMCG is rising” image below from research done by Growth From Knowledge https://www.gfk.com/). Moreover, the Covid pandemic has driven an increase in environmental awareness as people breathe cleaner air and rediscover nature.

Eco-Activism-marketing sustainability

These changes are driving more sustainable practices throughout supply chains. In the B2B area, work is being done by procurement teams on how to measure supply chain sustainability. Unilever is one company driving its supply chain to become more sustainable and amongst many activities has recently announced that it will be asking its suppliers to add their carbon footprint to their invoices.  Joint programs are underway in many industries to reduce total waste. For B2C consumers and B2B customers, sustainability is becoming a key need alongside needs like cost and brand experience.

Why sustainability needs to be taken seriously by marketers in their plan

Sustainability is reshaping the marketing landscape.

Changing customer needs

Firstly, it is changing customer needs.  Research by GfK (Crisis as Catalyst report, 28 Apr 2021, by Growth From Knowledge ) suggests that consumer needs such as lower waste, preserving nature and more energy efficiency are rising in importance.  In the B2B space, customers like Unilever are demanding better marketing plans and more accurate measurements from suppliers about how they will become more sustainable.  Failure to produce viable plans and track implementation progress could lead to deselection as a supplier.

Sustainability is changing customer demand

The most obvious example of this is in the Electric Vehicle (EV) market where the IEA expects a 13 fold increase in the number of EVs on the world’s roads by the end of this decade. But this is not just happening in the automotive market. According to a 2020 report by Deloitte (Shifting sands: Are consumers still embracing sustainability?between 28-45% of consumers have already bought more locally produced goods, or actively chosen sustainable or ethical brands, or stopped purchasing brands because of sustainable or ethical concerns.  The change in demand is already happening.

These changes are driving the appearance of new segments, new products/services and new competitors.

So where is sustainability in the marketer’s world? Change is being driven by CEOs, by CFOs, by procurement, the supply chain function and new Chief Sustainability Officers, but rarely by marketing.  For the worst companies, marketing is tasked with talking up the meager investment being put into sustainability as a mere tick-box or greenwashing exercise. For the average company, marketing is left with the role of communicating to customers (and other stakeholders) the work being done by others. But for the best companies, like Unilever and Pepsi, marketing plays a key role in re-shaping the sustainable market strategy of the firm and its entire supply chain.

Stephen Mangham, a branding expert and Master at Masters of Scale International, summarizes this well when he says, “The purpose of marketing has always been to produce growth. The role of CMOs today is to produce ‘good growth’ where sustainability is a measurable, customer-driven strategic imperative.”

Why we need sustainable marketing plans

After all your communication efforts over the years, how trusted is your brand on sustainability?  Very trusted? Somewhat trusted? How about not trusted at all! Sadly, according to the GfK report, only 25% of consumers trust businesses to tell them the truth.  This compares to 64% who trust academics, 34% who trust the media and is only two percentage points above celebrities!

It’s time for marketers to stop being the brand spin doctors and to become the brave sustainability do-ers.  Marketers need to help their firm find the best green segments, introduce and grow new greener products and services, change its purpose and reap the rewards from customers, from investors and from available government incentives. The brand will then reflect the true work being done.

The experience of leading companies like Unilever and Pepsi is that being truly sustainable is not a trade-off between profits and planet, it is a mutually inclusive journey that drives stronger growth.

Dr. Pooja Khosla, Vice President of Client Development at Entelligent Smart Climate Investing reinforces this point: “Many businesses are struggling to define the real and measurable impact of their offerings on the environment and society.  Marketers can help achieve this and empower sustainability.”

Sustainable thinking needs to be in most areas of the marketing plan: the mission statement, the financial projections, the market overview, the SWOT, the competitor analysis, the objectives, the strategies, the value propositions, the digital marketing tactics, the resources, the actions, the measurement, and the assumptions.

Doing this develops a better growth path for the company to follow. That is better for the customer, the company, the brands, the supply chain, and the planet.

Developing skills in sustainability is better for marketers as well.  The demand for people with sustainability skills is skyrocketing. I have personal knowledge of a recent master’s graduate in sustainability who was recruited by an international engineering firm and is now working with the United Nations on developing better measurement standards.

Conclusion

Going green is not just for the eco-warriors.  It makes good business sense. Marketers can play a massive role in making this happen. They need to stop being seen as the greenwashers of the past and act more like the leaders of real sustainable change. Marketers need to move from the edge to center-stage in building real sustainable companies built on “good growth brands.” A key tool to do this is a sustainable marketing plan.

We are currently developing such a tool.

Marketing and Ethics: a way for Sustainable Growth?

Ethics Marketing
Ethics marketing

Marketing and Ethics

As I write this, it appears that many countries may finally have a vaccine-led way out of the Covid pandemic. There will, inevitably, therefore, be more focus on the marketing function to help companies capitalize on rising demand levels.

However, as marketing once more assumes a more significant business role, concerns about the ethicality of marketing will increase. We had seen this already before the pandemic arrived. In the past few years, several measures to protect the consuming public have been introduced to counter the danger of exploitative marketing practices. Thus, children are seen as a vulnerable target throughout the world, and so there is often legislation to protect them from unfair practices. For example, there are advertising standards authorities in many countries to help regulate the advertising industry; consumer protection legislation often exists to prevent organizations from making false claims about their products or conspiring to fix prices. The long-running debates like the ones about the promotion and selling of tobacco and alcohol products promoted opposition amongst several people and interest groups.

Despite these, concern about unethical trading practices and irresponsible marketing remains. These have been amplified by many significant events over the first part of the 21st Century to a large extent. Thus, it is increasingly accepted that ‘global warming is a problem exacerbated by carbon emissions. In response, and with great difficulty, nations have agreed that if they are to be viewed as responsible, they have a role in helping to reduce these emissions. Simultaneously, the notion of responsible governance has assumed a higher profile as corporate scandals such as Enron in 2001, followed by the collapse of Lehmann Brothers and RBS in 2008, have focused attention on ethical trading practices. In particular, the ‘banking crisis’ of 2008 caused by decisions to reduce lending standards for mortgages leading to excessive sub-prime mortgages and unwarranted risk levels for banks have reinforced the need to monitor the way businesses create market products and services.

Other stories that have kept the debate going include:

  • The accusation by some advocacy groups that Nestlé inappropriately promotes its infant formula over breast milk in several developing countries
  • Greenwashing – the marketing tactic of misleading consumers about a product or service’s environmental friendliness.
  • Dannon having to pay up to $35 million in damages to consumers who said they’d been tricked into buying Activia for its purported nutritional benefits; when it was pretty much the same as every other kind of yogurt.
  • The mis-selling of PPI (Payments Protection Insurance) to UK mortgage applicants

To behave ethically, an organization and its members need to adhere to a collection of principles of right or moral conduct that shape their decisions. Ethical marketing is about whether a firm’s marketing decisions are morally right or wrong. Practicing ethics in marketing means deliberately applying fairness or moral rights and wrongs to marketing decision-making and the organization’s resultant behaviors and practices. A marketing decision’s morality can encompass any aspect of marketing, from advertising to the pricing of their product or service or the sourcing of their raw materials.

The American Marketing Association promotes ethical conduct by advocating that professional marketing managers be careful to:

  • Do no harm.

By consciously avoiding harmful actions or omissions by embodying high ethical standards and adhering to all applicable laws and regulations in the choices we make.

  • Foster trust in the marketing system.

By striving for good faith and fair dealing to contribute toward the efficacy of the exchange process as well as avoiding deception in product design, pricing, communication, and delivery of distribution.

  • Embrace ethical values.

By building relationships and enhancing consumer confidence in marketing’s integrity by affirming these core values: honesty, responsibility, fairness, respect, transparency, and citizenship.

Marketing is criticized for playing on people’s weaknesses

The range of criticism that is brought against marketing is that it can (and sometimes does):

  • Play on people’s imperfections such as envy, fear, uncertainty, and doubt to persuade consumers that they must use a particular brand of washing powder or own that brand of mobile phone
  • Deliberately hide practices that would devalue a product or service’s image, such as the use of child labor, poorly sourced ingredients, or excessive and unnecessary packaging
  • Inappropriately use stereotypes that reinforce prejudices or societal divisions; or that play on sexual imagery to sell a product
  • Employ high-pressure sales techniques to sell to consumers or to pressure vendors to buy more than they need and pushing items that will result in higher commissions for the salesperson even though they are not right for the customer
  • Infringe people’s privacy by using overly invasive market research or holding data about individuals they do not want to be held. While data protection legislation provides safeguards, people do not always know about the data-bases they are on
  • Promote excessive materialism by making products and services appear attractive by associating them with traits that people desire or think they have. Besides, the over-promotion of credit, it is argued, encourages people to consume more than they need
  • Use ‘Dark Patterns’ that exploit psychological attributes such as a tendency to scan read terms and conditions or information pages or pursue the path of least resistance. This is particularly relevant to internet site user-interface design where the designers make: the default for an extra (insurance or special delivery) is ‘opt-in’ rather than ‘opt-out’; extras are automatically added to one’s ‘basket’; it is easy to sign up but challenging to get out of or return a purchase
  • Move from information and persuasion into manipulation; so that people purchase something they don’t want.

All these can be supported with recent examples and some with long-standing standards. However, they imply that consumers’ powers of perception are limited and that their intelligence is sufficiently low that they will be ‘fooled’ forever.

In the longer run, no matter what `marketing’ is performed, the consumer will always be sovereign as long as they are free to make choices – either choices between competing products or the option not to buy at all. Indeed, it could be argued that by extending product choices and the range of techniques used to sell products, marketing is enhancing consumer sovereignty rather than eroding it.

It should be noted, too, that although ‘clever’ marketing activity may persuade an individual to buy a product or service for the first time, it is unlikely to be the influential factor in subsequent purchases unless there is real value in the product. Thus, many customers complain about the methods used by some budget airlines to boost their revenue on the back of meager cost ticket prices but stick with them because they see them as value for money despite their poor customer service and suspect marketing practices.

It also suggested that skillful marketing can create needs. The argument to support this would be that nobody wanted an Apple iPhone before it was invented and that marketing has made it a ‘must-have’ product that has provoked many competitive ‘look-alikes.’ This, however, confuses needs and wants.

Nobody specified an iPhone before it was invented, but there has always been a need for portable communications, entertainment, and practical applications. Previously, these needs had been met by some separate devices such as mobile phones, digital audio players, sat-navs, newspapers, games consoles, and so on. Now technology has made available a means of satisfying these needs using one device. Creating further applications and greater functionality has produced something that consumers find very useful. It is common to see people extolling the virtues of this product simultaneously as they admit to not wanting one before they experienced it. At the time of writing, similar views can be found about tablet computers and e-book readers.

In these examples, marketing’s contribution was to identify in as much detail as possible what a customer needed and then to persuade him or her that a specific product or brand would provide the most effective means of satisfying the latent and expressed needs. The key is in providing a unique set of benefits that match real needs.

Underlying this view of marketing is the belief that consumers seek satisfactory solutions to their buying problems; first, they acquire information about available goods and services and their attributes and, eventually, by choosing that product that comes closest to solving their problem.

Most criticism is leveled at advertising

Much of the criticism leveled at marketing is, in fact directed at one aspect of it: advertising. Advertising practitioners themselves are fully conscious of these criticisms. These include the ideas that advertising:

  • Makes misleading claims about product or services
  • Uses hidden, dangerously powerful techniques of persuasion
  • By encouraging undesirable attitudes, has adverse social effects
  • Works through the exploitation of human inadequacy.

Advertisers themselves would point to the fact that advertising in all its forms is heavily controlled in most Western societies and cannot by itself achieve sustained patterns of repeat purchase.

The debate about marketing ethics also often confuses marketing institutions with the people who work in them. There are dishonest business people who engage in activities that are detrimental to their fellow citizens. However, it seems a grave error to criticize marketing institutions because of a small number of unethical marketers’ practices. It is clear, for example, that there are advertisers who engage in deceptive practices designed to mislead and possibly defraud consumers. Nevertheless, the institution of advertising can be used to inform consumers about potentially beneficial new products, such as new energy-saving technologies, and promote non-profit community services, such as theatres and state education. This argument can, of course, be applied to all marketing activities.

Consumerism and Marketing

Ironically, consumerism is pro-marketing

Closely connected with the issue of ethics in marketing is the issue of consumerism. This can be defined as the process of fostering an emphasis on, or preoccupation with, the acquisition of consumer goods. The consumerist movement seeks to moderate this process by promoting such practices as honest packaging and advertising, product guarantees, and improved safety standards. In this sense, it is a movement or a set of policies aimed at regulating products and services, and standards in manufacturing, selling, and advertising in the interests of the buyer.

Ironically, consumerist movements’ aims are pro-marketing in that what they want is for marketing in business to be implemented in a sincere rather than cynical spirit. Cynical implementation of marketing practices, which consumerists claim has been all too common, is no better than high-pressure salesmanship or misleading puffery. The sincere implementation of a marketing approach entails respect for each individual customer served. An interpretation of the consumerist desire is that the relationship between a manufacturer and a customer, say, a capital goods market should be created in consumer markets. In so far as that is both economically feasible and what the consumer really wants, marketers should also want a more satisfactory relationship between organization and customer.

Customer, consumer and company objectives can all be satisfied by good marketing practice

The marketing of children’s toys provides an example of how customers, consumers and company objectives can all be satisfied by careful business practice. Today’s successful toy companies inform parents that their products are not potentially dangerous, not coated with lead paint, and not destroyed the hour after they are first pressed into active service. At the time of writing, Fisher-Price is still one of the most successful toy manufacturers. Since 1968 it has eschewed child-manipulative promotion, carefully tested its products with children for durability, safety, and purposeful play, and charged the prices necessary to make and market `good’ toys. The consequent sales and profit margins have been impressive.

On the other side of the coin, McDonald’s, one of the strongest brands in the world, has been forced to make its food offering healthier to comply with changing customer tastes and the demands of consumer lobbyists.

In the end, the difference between ethical and unethical marketing is in the intent.

The judgment about the ethicality of the plan is, however, down to the individual. In this, the extremes of intent never create problems; it is the grey or middle ground that is hard. To be an ethical marketing manager, it is therefore important to be ‘honest with yourself as well as others as to motivations and the moral codes you have decided to adhere to. Good intent should therefore support Good Growth and a more ethical economic recovery.

home-icon-silhouette remove-button twitter-social-logotype instagram youtube twitter facebook twitter linkedin plus