Why Conscious Consumers Should Have You Rethinking Your Next Innovation
Conscious consumers — those who make a deliberate choice to support ethical businesses with their purchases — are hardly a new phenomenon. Customers have long been boycotting companies that employ poor labor practices, promote intolerance, or harm the environment. Voting with one’s wallet is a fundamental tenet of capitalism.
Yet two things are changing the impact that conscious consumers will have on innovation. The first is social media. Conscious consumers are known for communicating more about brands that they like or dislike, and social media platforms now make it easier than ever to build a following. The second is the standard to which businesses are held. It’s quickly becoming insufficient to simply refrain from doing things that are bad.
While this shifting environment places greater demands on companies, it also creates opportunities. According to one estimate, 84% of consumers actively seek out responsible products. And 66% of consumers are willing to pay more for products that come from companies that are committed to making a positive social or environmental impact — a figure that has grown significantly in recent years. Even conservative estimates suggest that consumers will pay 10% more for responsible products.
So what do companies need to do to attract business from conscious consumers? Three things stand out.
Be transparent. In an age of constant data breaches and privacy missteps, it’s hard to overstate the value of transparency. But transparency means more than just bypassing the all-too-common practice of harvesting and selling customer data. True transparency is about letting customers know what matters to your organization and letting them see the steps you’re taking to ensure that your business practices support your stated values.
Patagonia — an environmentally-conscious apparel company — is a good example. The brand proudly uses its website to give a detailed look at the company’s supply chain. You can find things like the locations of the farms and factories it uses, the gender breakdown of its vendors’ employees, and the percentage of water that is recycled in the manufacturing process. There is an incredible amount of detail. What’s more, the organization is completely open about its process for bringing new partners into the supply chain, which includes auditing potential suppliers on factors such as sourcing, quality, and environmental impact. Patagonia’s strategies have paid off. Its widely discussed “Don’t Buy This Jacket” campaign — where the organization asked customers to refrain from buying its products if they didn’t need them — led to a 30% increase in sales. When the organization pledged to donate its 2016 Black Friday proceeds to nonprofits working to help the environment, the company took in a record-breaking $10 million in sales — 5 times what it expected.
Source ethically and sustainably. Beyond just being transparent, winning over conscious consumers means actually adjusting your supply chain to ensure that your vendors and raw materials meet consumer expectations for being ethical, sustainable, and — for some consumers — local. While the arguments in favor of ethical sourcing may seem stale by now, the data makes a strong case for making it a priority. An annual Nielsen study showed a strong increase (rising to 72%) in the percentage of Generation Z respondents who are willing to pay more for products from companies who are committed to having a positive social or environmental impact. Today’s estimates suggest that Gen Z already represents up to $143 billion in buying power and is on track to become the largest generation of consumers by 2020. And that price premium is nothing to sneer at. Analysis from the clothing industry suggests that consumers are willing to spend 10–15% more on ethically produced apparel.
Help customers give back. While large companies have a long history of supporting charitable causes, recent data shows that younger consumers place more weight on charitable contributions than members of older generations. Philanthropy is an important factor for younger consumers as they make decisions about buying products and recommending brands to friends. But just giving money away often isn’t enough to make an impression on consumers. Taken a step further, Philip Morris found itself widely criticized for spending more to publicize its charitable donations than it spent on the donations themselves.
Giving back needs to be genuine, not a marketing stunt. And in our research, we’ve found that many consumers highly value companies that give them a say in what they support. Consider Stash — an investing app that lets its customers invest in exchange-traded funds (ETFs) that reflect their own values. A “Clean & Green” fund, for example, allows customers to invest in companies that produce solar, wind, and other forms of renewable energy. The strategy has paid off. Stash’s app serves 1.7 million clients, and it’s adding roughly 40,000 new clients per week. These figures represent major increases in both the total number of customers and the rate of growth. The company recently raised another $37.5 million in Series D funding.
Conscious consumers are an important part of our economy, and their influence is only increasing. Companies that appeal to these consumers are not only “doing their part,” but they’re also setting themselves up for success. Companies that truly commit themselves to being responsible corporate citizens are able to attract better talent, build loyal customer followings, and command price premiums for their products. So as you think about innovation and what your company should be doing next, give some thought to how you might better appeal to conscious consumers.
Dave Farber is a strategy and innovation consultant at New Markets Advisors. He helps companies understand customer needs, build innovation capabilities, and develop plans for growth. He is a co-author of the award-winning book Jobs to be Done: A Roadmap for Customer-Centered Innovation.