Doing Well while Doing Good

Prof. Reetika Gupta

Professor Reetika Gupta of ESSEC Business School Asia-Pacific and research colleague Prof. Sankar Sen share their research on how a change in consumer beliefs is affecting the ethical products market

 By CoBS editorialist Afifeh Fakori from the paper The effect of evolving resource synergy beliefs on the intentions-behavior discrepancy in ethical consumption.

A ‘sweet spot’ that consumers are not entirely convinced of…yet!

Every once in a while, consumers and NGOs raise a hue and cry when unethical practices of a company are brought to light. It is, indeed, quite easy to condemn the widespread use of child labour in sweatshops in Sudan or Myanmar from the comforts of our homes. However, when push comes to shove do we really refrain from buying products that come forth from organizations that have a track record of engaging in activities that are detrimental to the environment or are in violation of human rights? The answer reveals interesting insights on consumer psychology.

Weighing up the ethics of it all

When responding to polls, consumers often express interest towards products that have positive attributes pertaining to the environmental sustainability, poverty alleviation, and/or the support of human rights and animal welfare. Yet, at the point of purchase these considerations are prioritized below functional attributes of the product.

This discrepancy between stated intention and actual behaviour can be attributed to a number of factors.

  1. Distinct temporal frames: This is by far the most significant reason behind the intention-behaviour gap. Consumers tend to value ethical attributes very strongly in consumption decisions when the decision is to be implemented in the distant future as opposed to the near future. When a decision needs to be taken immediately, consumers tend to focus almost exclusively on functional attributes such as performance and durability. In the near future, consumers seek immediate gains and ethical attributes do not signify immediate gains to them.
  2. Lack of Consumer Awareness: Consumers often do not proactively seek information regarding ethical attributes of products and hence remain unaware about the potential synergies between functional and ethical attributes. Many tend to think that there is a trade-off made by companies when they divert valuable resources away from their core competencies in pursuit of crafting products with high ethical attributes.
  3. Marketing Methods: Marketers often do not promote the ethical aspects of their products adequately. As a result, consumers tend to perceive ethical products as “good-to-have” rather than “must-have.” A myriad of other product attributes assumes relevance at the point of purchase.

Is the size of the pie really fixed?

Consumers often believe that when a firm devotes resources to ensure ethical attributes, it comes at the cost of resources that could otherwise have been devoted to improving functional utilities of the product. This is also known as Negative Resource Synergy Beliefs. In consumer mind, it is a zero-sum game where high product functionality and full compliance to ethical standards are not simultaneously attainable. However, the truth is that in today’s day and age, resources devoted to ensuring ethical attributes actually reinforce the firm’s efforts in developing desirable functional attributes. This school of thought is referred to as Positive Resource Synergy Beliefs.

A deep dive into the intricacies of consumer decision-making

Time to unravel the issue

Gupta & Sen (2012) conducted a study to demonstrate the role that resource synergy beliefs plays in the consumer decision making process. 128 subjects were asked to evaluate a hypothetical athletic shoe based on:

  • 3 functional attributes (comfort, style, shock absorption)
  • 1 ethical attribute (child labor policy prohibiting the employment of children in factories)
  • A purchase time frame of either “tomorrow” or “six months from now”.

However, before they had to make their decision, the subjects were exposed to one of two articles examining the correlation between CSR activities and company profitability. One article suggested that the two are positively correlated (Positive Resource Synergy Beliefs), while the other one contended that more attention to CSR or ethical activities eroded company profitability (Negative Resource Synergy Beliefs).

The results were interesting. Respondents valued the functional attributes in the same way regardless of whether the purchase time frame was the near future or the distant future. However, this was not the case for the ethical attribute. This attribute seemed to be valued more strongly by participants who were placed in the distant time frame of “six months from now” as opposed to “tomorrow.” Also, near versus far purchase time frames had an impact on the weighing of ethical attribute only in case of the subjects who were exposed to ‘negative resource synergy beliefs.”

The same researchers conducted a second study where participants had to state their relative preference between two brands of shampoo. The two brands were stated to have the exact same features and price. The only difference was in the extent to which each adhered to ethical practices.  This time too, the participants were assigned a temporal purchase frame and were exposed to one of the two articles on resource synergy beliefs.

The results showed that consumers exposed to the article on negative resource synergy beliefs ascribed a functional disadvantage to the brand of shampoo that was rated higher on ethical standards. This perception persisted across the two different time frames tested in the study. However, they were more likely to state an intention to buy the more ethical product in the long term rather than in the short term. Such temporal frame-based differences were, naturally, not evident among consumers who believed that positive synergies existed between ethical practices and profitability.

 Connecting the dots for consumers to prove that ethical practices and superior product performance can go hand-in-hand

Talking the walk, ticking the tock

Consumers need to be made aware that being ethical and being competent are not two mutually exclusive slices of a zero-sum game. They can co-exist, and not merely co-exist but create shared value too. This is possible because increasingly more firms are moving away from non-strategic philanthropy and towards the concept of creating shared value. Companies should thus formulate and communicate their CSR strategies in a way that can ensure positive resource synergy perceptions.

It is also important to be specific, since for many consumers being ethical is some abstract, unrelated concept. Rather than saying that one complies with labour rights, it would be better to talk about fair trade sourcing which can generate positive synergies with the core business.

Quite understandably, skeptical consumers will require some time to understand the win-win dynamic between ethical practices and a product’s functional superiority. Meanwhile, it could be a good idea for companies to segment their markets based on the resource synergy beliefs of their consumers – as such, they could send customized CSR messages to each segment in an effort to maximize positive synergy beliefs and trigger ethical consumption.

Useful links:

Discover Responsible Business and Leadership. Download Global Voice, the Council’s quarterly eMagazine:

The Council on Business & Society Global Alliance is an international alliance between four of the world’s leading business schools and an organiser of Forums focusing on issues at the crossroads of business and society – The Council Community helps bring together business leaders, academics, policy-makers, students and journalists from around the world. Follow us on Twitter #The_CoBS . Visit the Council’s website for a host of information, learning opportunities, and free downloads.  

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s