This article in the Wall Street Journal Online from some years back examines the business of social responsibility and asks what’s the financial payback for generating all this goodwill. Perhaps the most interesting point to emerge was that social responsibility was not directly rewarded financially by effort invested. Companies that did just a little were rewarded almost as much as those that went all out, leading the writers of the article to conclude: “It seems that once companies hit a certain ethical threshold, consumers will reward them by paying higher prices for their products. Any ethical acts past that point might reinforce the company’s image, but don’t make people willing to pay more.”
So, beyond a certain point of noticeability, the notion of social responsibility is actually more important than the reality. As consumers we are motivated to reward positive actions – up to that point, but not far beyond.
This in itself raises begs wider questions around the elasticity of goodwill. How far does it stretch economically? What credibility should we give goodwill as a consideration factor? And, therefore, what are the implications for brands in terms of “goodwill” decisions around a whole host of activities that are often underpinned by “goodwill” motivations, such as sponsorship, ethical behaviour and sustainability?
To help answer that, let me take a step sideways for a moment. A recent study in New Zealand of the economic outcomes arising from sponsorship of major events is a sobering reminder that the claims for goodwill and economic stimulation made before an event/action seldom eventuate. In the study, 18 events were estimated to have collectively generated approximately $32.1 million of net economic benefit. However, that compares somewhat poorly to the estimated $143.8 million of aggregate national economic benefit originally submitted by event organisers and their consultants.
There are many reasons for this discrepancy, according to the study:
• Expenditure was included as a contribution when it actually represented only a transfer of expenditure or savings that would have occurred anyway;
• Generic and/or unjustifiably high multipliers were applied to direct economic activity that then led to questionable indirect and induced effects;
• Estimates of per day expenditure were often imprecise or inflated because of how the basis data was collected in the first place; and
• Expenditure was attributed to visitor activity regardless of whether those visitors were “coincidental” or “additional”.
I’m more than willing to accept that this piece casts the net wide – but my search is for the broadest view on what conclusions, if any, might be drawn from the projections of goodwill returns vs the economic realities? Here’s where I landed:
The tide clearly doesn’t rise as high as forecast. There is little or no reliable economic case, so far, for the generation of income from goodwill-producing actions. Goodwill gets a lot of airtime and yes, it counts – but the economic case only stretches so far and it often counts for much less than was originally forecast because of the criteria on which those forecasts have been based. In the case of the major events studied in New Zealand, the real returns amounted to just 22% of what had been ‘promised’. So if your brand is relying on what it does or what it supports to boost the overall value of what it is via direct goodwill inputs, that’s the wrong strategy. There will be an uplift compared to doing nothing, but you should be mindful of promises of optimistic returns.
To get the best results, specific actions or support should be targeted to attract the loyalty of specific audiences. From the Wall Street Journal article: “Companies should segment their market and make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods.” Goodwill, in other words, is most powerful to those who regard it as most good.
Your actions should align directly with your story. Your sponsorships, ethical behaviours and sustainability measures should “prove” perceptions of your brand that specific segments of your audience value and that differentiate you, in terms of what you prioritise and are prepared to act on, from your competitors. They should correlate directly with your purpose and values. They should prove that as a brand you are indeed prepared to do good not just talk good. They should be distinctive and on-brand.
Conversely, goodwill actions that match the actions of your competitors raise the industry’s social commitment overall, but will make no specific goodwill difference to your brand.
I’ve talked previously of the power of good social actions to impose a corporate “moral compass”, and this article by Dr Raj Raghunathan proposes another metric for assessing progress. The opportunity exists to quantify goodwill by actual enjoyment. It’s a bigger gamechanger than it might first appear.
Goodwill is an assessment of what brands get in return for their investment. It’s all about their reward financially.
Joy is about what people feel at the time and beyond and what that then will generate. It’s an assessment of how customers are rewarded emotionally.
It gives rise to some fascinating questions:
1. How many people will actually enjoy us doing this? (active support)
2. Why will they enjoy it? (how do they assess the benefit to them, individually and collectively?)
3. How does this add to people’s enjoyment of the brand? (what’s the “translation effect” in terms of direct upsurge of sales, and why will that upsurge occur?)
4. How does it actually change how they value the brand? (what will they feel about the brand that they don’t feel now, and why will that motivate them to spend more?)
5. Who will not enjoy it? Why? With what consequences? (negative interest)
And if we apply this idea of “joy” as a measure of individual impact to the examples given earlier, some interesting insights seem to emerge:
People might expect ethical behaviour from brands but they only notice it to a point, and reward it to a point. In other words, ethical delivers limited joy but non-ethical delivers damaging mistrust.
People may act on any enjoyment in various ways, and not all of them will manifest financially. That’s important in terms of assessing realistic tangible and intangible returns.
Many more people may be exposed to an event or action than will enjoy it. For example, while many people may like the idea of an event being in their city, they themselves may leave to escape the expected crowds. That insight contradicts the way that a lot of “goodwill” is calculated. It’s not about eyeballs. Also, lack of enjoyment is a genuine economic consideration in itself because of its ability to generate “badwill”. If your brand is associated with an event or an action that people resent or avoid, there is likely to be a negative impact in terms of their inclination towards you.
Further reading
Here’s some sobering insights on the proliferation of stadia in the States and the effects they have had economically.
Nicely balanced article in Forbes on what cities do and don’t get out of sponsoring major events like the Olympics.
Acknowledgements
Photo of “ANZ Stadium” taken by Vijay Chennupati, sourced from Flickr
Sincere thanks to Shamubeel Eaquab of NZIER for directing me to the MBIE report.
