To prepare for what’s to come, brands need to decide to what extent they will absorb rising costs or pass them onto consumers—and how to go about it. Inflation will put added strain on most of the sustainability commitments brands have made over the last few years. Clients, too, will put their marketing strategies under review. There will be significant pressure to focus on short-term returns—especially in CPG and retail, where sales and revenue are tracked daily.
As any marketer will tell you, divesting from purpose is rarely the strongest strategy for long-term success. Balance is needed, which is why companies should proactively seek to make their purpose and sustainability commitments work harder. Making them clearer, more tangible and more motivating for customers and employees will pay dividends. Here’s how:
Elevate empathy
With consumers under duress, it’s vital for brands to demonstrate active listening and real understanding and avoid providing flippant responses disguised as advice.
Read the room
Don’t feign that things are just a blip, or pretend that rising costs aren’t impacting everyday consumers. At the same time, remember that nearly 60% of Americans are alarmed or concerned about climate change—a percentage that has been increasing. The percentage of U.S. adults “alarmed” by the climate crisis went from 18% in 2017 to 33% in 2021.
Net-zero targets and the desperate urgency of the environmental crisis mean that, unlike previous economic dips, businesses cannot take this as a cue to deprioritize sustainability initiatives.
Instead, marketers need to show how their commitments to decarbonization are aligned with the values and needs of their audience. As recent Deloitte research reveals, 23% of consumers are willing to switch to products from a brand that shares their values on environmental issues, while 42% said they have already changed their consumption habits because of their posture on the environment.
Embrace purpose as the reason to pay more
The single most important marketing decision brands will make in the coming year will be related to pricing. Brands that enter 2023 in the “green” will be those that successfully optimized pricing structure to support margins without undermining volume sales.
Value and big box retailers will increasingly play into the fact that they offer discounted commodities—but no retailer will be safe from energy costs and supply chain hurdles and may need to charge more to compensate.
It falls on marketers to make customers feel comfortable with price increases through the affirmation of value and emotional reassurance that justifies why they should be open to paying more.
It all boils down to brand purpose. Brands that demonstrate a commitment to society, the environment and communities are the ones whose price increases consumers will accept. Doubling down on purpose will be key for brands seeking to protect their margins in the coming months. Furthermore, brands that understand their value proposition and their customers are often in a better position to target price increases in ways which will have the greatest impact on margin.
Use purpose to attract talent to help you win in the long run
One crucial implication of inflationary rates will be in its implications for the profits and losses of agencies and other businesses in our industry. Inflation drives higher salary expectations from employees, already pushed sky-high by the great resignation. Some businesses will struggle to match income demands and will ultimately risk losing some of their best talent.
But brand purpose can help make up some of that difference. Organizations with a clear sense of purpose—brought to life through a demonstrated commitment to employees and communities—have much stronger retention rates than other businesses.
Patagonia is known for leading with purpose in everything it does, from the way it treats its employees to the political stances it takes. The brand managed to flout the trend in retail where 13% turnover is the norm, keeping its staff turnover to just 4%.
There are plenty of studies that show that millennials and Gen Z, who will increasingly make up a larger proportion of the workforce, want their employers to take strong positions on social and sustainability issues. It doesn’t mean that just because you “stand” for something as a brand, that you automatically pay them less; instead, you work to create a balance with intention.
Remember, marketers and CSR/ESG departments are natural allies and need to support each other in this new world. Purpose and profit must be attended to in tandem. The key is looking at your offering in an integrated way, where proposition, profit and purpose are simultaneously managed. Consumer value equations are complex, and brands that build new and interesting propositions will build sustained, long-term growth.
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