Profit starts with a problem.
Before you jump to conclusions, let me explain.
Profitable companies offer products or services that clearly solve a problem. Someone noticed a need to be met. They started selling the solution. Customers saw the value in the solution they offered. Perhaps, customers not only bought once, but valued the solution enough to buy it again and again.
Profitable companies started with a purpose.
Let’s call this a linear purpose, as it follows the most obvious line of logic. Problem → Solution. Purpose = Problem, solved.
But, we all know it’s not that simple. The question of, “What’s our purpose?” is like a series of building blocks.
Let’s consider Walmart, for example.
Up until 2007, the company’s tagline was, “Always Low Prices. Always.”
It expressed the company’s linear purpose. The company saw a problem: people needed affordable groceries and essentials. The company found its purpose — meeting that need by offering a simple solution: groceries and essentials at always low prices.
It was unique. It was compelling. It was differentiating.
Until, suddenly, it wasn’t. Other companies started offering groceries and / or essentials for low prices, too. Ecommerce went from being a non-factor to a major competitor. For Walmart, its simple, linear purpose simply wasn’t enough anymore. It was no longer a sustainable source of competitive advantage.
19 years after introducing its “Always Low Prices. Always.” tagline, Walmart made a powerful realization: The true “problem” they solved went much deeper. The “Always Low Prices. Always.” tagline addressed a “symptom” — people needed low prices.
But why? After conducting an extensive amount of customer research and crafting clear target audiences, Walmart realized its true purpose: to make it possible for people to live better. An economic study by Global Insight revealed that Walmart’s low price cuts saved US customers an average of $2500 per household, or $957 per person.
This led to a new, transformative purpose that was expressed in the company’s new brand and tagline: “Save money. Live better.”
This transformative purpose became the North Star for all of Walmart’s actions and decisions. Did it help people to “Save money. Live better.”? If “yes”, then Walmart would pursue it. If “no”, they would reconsider.
Walmart applied this decision-tree to their entire customer experience, shoring up any leaks that would contradict the new purpose and implementing new projects that would support it.
They considered their transformative purpose when making decisions about product selection and assortment, pricing, advertising placement and messaging. The purpose truly transformed all that they did — from the outside-in. Their research had allowed them to see the value of Walmart through the eyes of the customer.
When the company launched its new tagline in 2007, it also launched a ticker that showed how much money people had saved so far that year by shopping at Walmart. In September 2007, that number totaled $200 billion.
Purpose is good for business — and profitability.
In many companies, “purpose” and “profitability” are two words that aren’t often mixed. When speaking of purpose, many still believe “profitability” is a dirty word.
Let me reframe this for you. Profitability is one indicator that a business is truly delivering on its purpose — well. Profitability means the customers see the value themselves, and buy not only once, but again and again. Profitability can be a measure of ability to deliver on a transformative purpose.
HEAR ME. Profitability is not, and should not be, the only indicator that a company is delivering on its purpose. Purpose starts with people — and doing the right thing should always be at the forefront. But revenue can be a measure of how well a company is hitting the mark.
In Fall 2019, brand agency StrawberryFrog and research firm Reputation Institute launched a study of over 7500 U.S. consumers. The study showed that consumers were more likely to recommend, purchase from, and work for brands with transformative purposes.
It also showed that consumers considered transformative purpose by asking:
— Is the brand committed to changing the world for the better?
— Does it do things to benefit all stakeholders (e.g., consumers, employees), not just shareholders?
— Does it have a higher purpose that’s bigger than profit?
— Does it do things to improve the lives of people and their communities?
Creative consultancy Lippincott launched a similar study, measuring a company’s purpose-driven progress by asking respondents, “Does XYZ company / product enable you to do something you otherwise couldn’t?”
More companies should be asking themselves that question.
Purpose — transformative purpose — establishes a company-to-customer bond that’s hard to break. It starts with getting the customer’s perspective of the problem to be solved.