Sustainability, environmentally-friendly products, policies for Corporate Social Responsibility (CSR), all of these concepts are generally considered to be an added-value for companies. Yet recent research highlights the fact that these positive initiatives can sometimes backfire. What is the role of consumer perceptions when marketing a company’s sustainability and CSR policies?
We speak with Sumitro Banerjee and Robert Mai, associate professors of marketing at Grenoble Ecole de Management (GEM). Sumitro shares with us results from his research on the topic of company decisions to invest in CSR versus product quality. Robert's research explored consumer perceptions of sustainable products, in particular the implicit view that sustainable products have lower strength (known as ELSI: Ethical = Less Strong Intuition).
CSR: mass market versus quality
"Everyone believes that CSR is a good idea. And research data shows that higher CSR leads to higher market value for firms. But questions remain: Why is market value higher because of increased CSR? How much should firms invest?" starts Sumitro. As product quality is a good indicator of R&D and previous investments, Sumitro investigated how much return on investment was provided by CSR versus product quality. "The interesting finding was that it's more important for firms with high-quality products to continue investing in quality, whereas mass market firms can get more bang for their buck by investing in CSR."
Two factors explain this finding: First, CSR is ultimately paid for by consumers and the company. Companies with lower quality products that target mass markets have greater economic incentive to invest in CSR because the costs and advantages of such policies are spread across a mass market. Second, Sumitro explains that consumers of high-end products who understand this tradeoff believe that CSR policies incur costs that could distract a company from maintaining the high quality of its products.
Sustainability: a deeply rooted negative image
Robert also looked at consumer perceptions, in particular their implicit and explicit views of sustainability: "In terms of health and sustainability, consumers generally make irrational decisions. If you ask them about their views on the matter, they will tend to prefer healthy and sustainable options. But in practice, they end up choosing the opposite!"
One of Robert's studies was carried out in a hospital. They provided people with two hand detergents (sustainable and conventional) and observed what people preferred. "We wanted to understand how behaviors change when their decisions are intuitive or observed (was the person being openly observed by the researcher or not). People who were openly watched by the researcher tended to pick the sustainable option 30% more often than the people we watched from a hidden viewpoint. Social expectations play a huge role in our decisions. Much like Sumitro's research on CSR, we found that the negative intuition concerning sustainability is particularly important when quality is valued (e.g., users value hand detergent in a hospital for its efficiency and quality)."
Robert goes on to explain: "Our research underlines the fact that the general populace holds a deeply rooted intuition that sustainable goods might be less strong, tasty or efficient. This has important implications for marketing because our natural reaction has been to highlight a product's sustainability. However, our findings illustrate that this approach may backfire, in particular with mass markets."
Understanding your market
The results provided by both researchers emphasize how important it is for companies to understand their market in terms of CSR and sustainability. Sumitro suggests: “For CSR investments, managers first need to evaluate customer perceptions of CSR and product quality. In particular, consider whether you’re serving a large or small segment of the market (mass merchandise versus high quality products). For smaller segments, it’s probably better to invest in quality and R&D. But for mass markets, it might be worthwhile to even prioritize CSR over quality or R&D.”
It is interesting to note that sustainability shares a similar fate: “When you’re marketing sustainable options, you have to be aware of the fact that while this can be very attractive to certain customers, it’s not the case for larger masses. In fact, chances are you will trigger a negative intuition,” adds Robert. As a result, the researcher suggests marketers play on aspects such as packaging, quality certificates and distribution channels to counteract negative intuitions about sustainable products. “For example, slogans that emphasize the relationship between sustainability and quality might help offset this negative intuition. Companies can also explore packaging options that reinforce a strong image through rich, dark colors and sturdier packaging materials.” The essential lesson to remember is that positive initiatives such as CSR and sustainability can backfire in terms of marketing. Each company has to find a balance that enables them to efficiently reach their target audience.