Gen Z will be more demanding about purpose-led brands: Dr Nirmalya Kumar

With many changes in business models, constant shifts in consumer behaviour, it’s important to note that skills that made companies successful in the past, may not be as relevant in the future. Importance of communication research as a guide to identify and explore many inter related elements, is gaining ground. In this episode of Mrigashira, Charu Raizadaspeaks to Dr Nirmalya Kumar, one of the leading marketing scholars in the world, to get a better understanding of the changing consumer behaviour and the value of building a research culture.

A Professor of Marketing at Singapore Management University, Dr Kumar has produced some of the most influential academic research on the topic of interfirm relationships; worked with over 50 Fortune 500 companies in 60 countries, has been included consistently in the Thinkers50 listings of the top 50 management thinkers in the world, a prolific case writer and more.

Listen to the podcast here:https://open.spotify.com/episode/6HKNp4tRhm0O3HuQ8s4YNX?si=CgvscuqFS2qwZomXcsfCTQ&dl_branch=1

With discussions around purpose led brands flowing through our ears, the term is often misunderstood. What does brand purpose mean to you?

Earlier, people chose brands based on simply the quality. Then, post World War II especially, as consumers became more wealthy, we started looking for both the logic and the magic. Logic being the functional performance of the brand and magic is the emotional performance of the brand. Which is really, how does it make the customer feel, either to themselves or for other people. So, that became the unique selling proposition of a brand. We said, it has to be beyond just simply the quality or the functional performance, it has to also encompass what we call this magic, which is the emotional connect to the customer. Now, of course, as we have evolved 70 years later, from the Second World War, we have become much more comfortable, we have become much more developed, consumers have become more aspirational. And the younger consumers, of course, are changing in terms of what they see, as the fundamental challenges. After the World War II, the fundamental challenge was really to rebuild the society to rebuild the top warrant on populations. So, people were concerned about moving to a better economic lifestyle. Now, people tend to be more satiated with their economic lifestyle. So, they look for a higher purpose.

One of the high purposes they are looking at is that consumers are very worried today about what is the future of our planet, and in this there are many different concerns, includingwhat is now called popularly ESG - environmental, social justice and governance concerns. When we talk to consumers, what we are finding is that 65% of consumers say they would like to buy purpose driven brands, by that they mean is that the brand should stand for something more than simply functional performance in the category. It should actually try to make the world a better place not only for the current generation, but also for future generations. As the millennials and Gen Xers, Gen Z become more powerful, more economically dominant, they are going to be more demanding about purpose led brands. They will tell you that they see environment as a bigger concern than health or employment, which is amazing.

Your 5-point guide for communicators to help brands in shaping their purpose?

Even though 65% of consumers say they want to buy purpose driven brands, only about 20-25% actually do. And what stops them from doing it? While people say they would like to buy these brands, they are worried about three big problems. First, is that it is going to cost them more, if they buy more purpose driven, sustainable brands? Second, they believe it will be less convenient to use or buy. Thirdly, they believe the brand will have less efficacy or quality.

So as brands, we have to think about how to reduce these three negative associations. Customers believe that sustainable brands are going to be more expensive, they are going to be less convenient. And they are going to have less functional performance. In terms of price premium, our service seems to indicate that 37% of consumers say they are willing to pay more. But how much more is the question. Even in service we find that people are willing to pay about 5% more at 10%, most of the interest in buying the sustainable brands disappears. So, even if we are going to have a price penalty for consuming these sustainable products and brands, you have to ensure that the price penalty stays within 5%. So, that’s my first point.

The second point is that - while what the company does matters in making a more sustainable future, the choices that consumers make around the product also adds a lot. 70% of the sustainability of a product depends on the choices a consumer makes. Let me give you an example, Unilever can sell consumers more sustainable laundry detergent. They can do lots of things in their supply chain to make the laundry detergent more sustainable, environmentally friendly. Still 70% of how much impact that will have on the environment depends on the choices the customer makes. Whether they choose the most sustainable product or not, how much water and energy they use while washing their clothes with that product, how whether they recycle the empty packaging afterwards or not. A large part of the sustainability effect of our brands depends on the choices consumer make.

The third thing I would like to say is that, we have found that you can actually change consumer behaviour to more sustainable choices. Most people choose sustainable products either to reduce the guilt of consumption or to signal to other people, what kind of human being they are. One Canadian city found that they could increase recycling in the garbage, if, instead of having the dark garbage bags, they use transparent garbage bags. In Canada and in the US, people have to take out their garbage bag and put it on the curb side in front of their house from where the garbage man picks it up. If you have black bags, you don't know what is inside the bag. But if you have transparent bags, then everybody in the neighbourhood can see if you are throwing things that could be recycled in your garbage. That increased recycling by about 30 to 40%. So this is another way in which we can encourage customers to make better choices with respect to their environment. More public choices lead to better decisions from an environmental perspective by consumers.

Last thing I will say is that while stressing the environmental aspect of a brand helps, but it only gets you the believers. It is better to stress the functional and positive attributes like design and performance like Tesla does, and have the environmental thing in the background. Because that’s more likely to lead to your brand being chosen. The environmental thing should not be a sledgehammer with which you hit the customer, because the customer is in any case worried about performance and cost. So, what you need to do is reassure the customer first about your performance and cost, and then have the environment as the third leg of the spinner.

In the second half of 2021, how do you think the pandemic will continue to influence behaviour of consumers? What kind of changes do we see for brands coming up?

You have to first decide whether this is a onetime change, or a more permanent change. There are some things for which there will be one time change, and things will go back to normal. There are other things for which there is a permanent change. For example, I think business class travelis something that's not going to come back anytime soon, as people have now been forced to realise that Zoom works, at least for 90% of the cases. I can do with Zoom instead of having to travel and spare my body, spare the cost for the company, then spare the environment. So, I think that some things like business class travel will take a long time to ever return to the levels it was. On the other hand, other things were snapped back very fast into play. So, going out to eat, leisure travel will all come back. It might even come back with a vengeance once things open up, because people have been deprived for so long.

There are three kinds of categories. There are categories where, like business travel, the demand has gone away, and I don’t think it’s going to come back anytime soon. Then there are categories where the demand has gone away, but it will return with a vengeance, what we call revenge consumption, eating out leisure travel is going to fall in that category. And then the other categories where the demand will fall after the pandemic ends. But it will not fall back to where it was before the pandemic, which is things like cleaning products, sanitizers, face mask, because people have now realised that there are some benefits to that. And a certain percentage of people will continue to stay with them, even though the need after the pandemic may go away.

What advice would you give communicators on building a research culture? And why is it so important?

As I always tell people, everybody can have their own opinion, but you can’t have your own data. So, I think research is very important, because we would like to have debates that are informed by data. Whenever we are trying to discuss anything related to customers, their behaviour, or the future, people will always differ in their opinions. The more data we have, the more likely we are able to resolve these differences and disagreements, by shedding light, rather than heat on the argument; and the more likely we are to make decisions that are more robust in terms of their quality. So, I'm a very big believer in data.

Of course, at some stage, you have to interpret the data for sure, you have to use your judgment, because the future is never likethe present or the past. Having said that, I believe that a research culture is very important for anybody who wants to build brands. You will see that the top brands invest a lot on research, good managers invest a lot on data. Now, of course, data has become plentiful, is more easily available, and is cheaper than it ever was, because of the internet. You have to marry the data analytics of artificial intelligence, with the judgment of managers to get the best out of the data to get the best out of the manager. We need a mix of machine and man.

*Edited for length and clarity

(Mirgashira is a podcast for Indian PR and Communication professionals anchored by Radha Radhakrishnan and Charu Raizada. To listen to all episodes visit https://www.mrigashirapodcast.com/)