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Conscious Capital

Only Conscious Capitalists Will Survive

Burgess COMMENTARY

Peter Burgess

Only Conscious Capitalists Will Survive

Is conscious capitalism profitable? In a simple answer, yes. We have seen it happen more often over the past several decades—the success of companies that truly commit to the greater good. Yet, we would say that not only can conscious capitalism be profitable, it will be one of the defining mechanisms of profit in the future.

English: A picture of the inside of a remodeled Walmart (Photo credit: Wikipedia)

First, let’s define conscious capitalism. Two leaders in the space, Whole Foods’ John Mackey and his research partner Raj Sisodia, say conscious capitalism refers to businesses that serve the interests of all major stakeholders—customers, employees, investors, communities, suppliers, and the environment.

It’s easy to think of conscious capitalism, corporate social responsibility and cause marketing as interchangeable terms. In reality, CSR and cause marketing can be key pieces to the overall conscious capitalism puzzle. They are often important supporting players, but not the main character.

It’s a key distinction, because it’s on this point where many brands get tripped up. We see brands use CSR as a clear add-on, a simple “tick-the-box” approach that allows them to feel they’ve accomplished some good while getting back to business. Consumers are smart and they will catch on. It’s these differences that separate brands that have truly loyal customers and those that are simply conducting a transaction and crossing their fingers for a return visit.

You can find a wealth of data that shows brands that are conscious capitalists succeed. Sisodia himself found in his research that these brands’ investment returns are 1025% over the past 10 years, compared to only 122% for the S&P 500 and 316% for the companies profiled in the bestselling book “Good to Great”—companies selected purely on the basis of their ability to deliver superior returns to investors.

According to Nielsen’s “Global Survey on Corporate Social Responsibility,” 43% of global consumers said they are willing to spend more for a product or service that supports a cause. And businesses are responding in kind. According to the 2012 IEG Sponsorship report, cause marketing programs in North America alone totaled $1.7 billion.

How do these trends make conscious capitalism the defining way to make money in the future? Several factors:

• Media. This very publication writes every day about how media consumption is reshaping marketing strategy. It’s also redefining WHY we market. Customers expect more than a story from you. They want to hear about your products, but they also want the purpose behind your brand. Why is it cool? What makes it useful? Who makes it? They want to know it all. By nature, a brand that’s a conscious capitalist has a valuable story to tell and an authentic way of sharing it.
• 21 Jumpstreet. They may not have known it, but Channing Tatum and Jonah Hill were teaching a valuable marketing lesson in their popular reboot a couple of years back. The cool kid and the nerd return to high school—not very far removed from graduating themselves—to a completely foreign environment where compassion ruled and it was better to care deeply about studying. Since when is it cool for teenagers to outwardly try and care? Millennials have flipped many myths about young people on their heads. And believe it or not, Millennials aren’t getting any younger. In fact, they are having kids – about 9,000 per day on top of the over 10,000,000 already born to Millennials over the age of 25. It’s a safe prediction that starting a family is going to make an already socially conscious generation even more concerned about what their purchases mean to the world around them.

Marketing 101 teaches us that a recommendation from a trusted friend is more valuable than any advertising budget. Shareworthiness—the rate at which your brand is shared by fans—is the “unearned media” of the new millennium. Taken a step further, a brand’s success can be measured by its relationship between shareworthiness and participation. Do passionate fans advocate for your brand? Is your brand’s story easily shared? I would argue that the brands that live in the upper right corner of the following matrix are all conscious capitalists. What better way to be a shareworthy, participatory brand than to stand for a cause?

While this is promising data, let’s not forget that scale will be the ultimate test for brands that have already embraced conscious capitalism. The key is for growing or niche brands like Tom’s Shoes and Warby Parker to expand to the scale of mass retailers or be satisfied with a powerful brand that isn’t the largest in their category. Then we will see a true apples-to-apples comparison about where consumers will send their money. You can see this battle play out on a large scale with Walmart and Target TGT +0.32%. The two brands seemingly do the same thing, yet they operate in stark contrast of one another when it comes to conscious capitalism. While Walmart continues to lead on sales, much of that has to do with its pervasive accessibility. Yet we are starting to see chinks in the armor, with Walmart reporting three straight quarters of sales declines in 2013. As Target continues to expand its footprint into middle America (still where the vast majority of their stronghold comes from), it will be an interesting battle to watch.

Our guess is that when a rural town has both a Target and Walmart to choose from, the red bullet will prevail.