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Shopping and Politics
Author: Jack Borland
April 17, 2006
I noticed an interesting Business Week article, Companies in the Crossfire, through a RetailWire synopsis/thread discussion this week. There are a number of good thoughts in both the article and the posts on how consumer activism is affecting companies. These break down into 3 major issues:
1 - Is shopping becoming more politicized?
Given that vocal minorities are finding more and better ways to get their message out I’d say yes. However, the take-away for the manufacturer/retailer/service provider seems to be that good ethical business practices will keep you out of the majority of controversy.
Walmart’s shifting some product like Brokeback Mountain DVDs from front-of-store POPs to the general shelves, and dropping product from some stores based on community response shows a good model for how a general merchandiser handles these issues. Walmart doesn’t have a stand on the morality issues of the film, and they’re not caving in to the "Moral Majority" - they’re just addressing the interest or lack thereof in local communities for the product.
2 - Should companies invest shareholder dollars in political contributions?
To my mind Jim Senegal of Costco has it exactly right. If management compensation is properly structured, then they’ll put their personal money behind political issues that are meaningful for the health of the company.
Company funds used for issues seem to break out into a couple of buckets: a) the large bucket of corporate Political Action Committee (PAC) donations which are political / regulatory relief issues; and b) advertising/branding/corporate philosophy stands on topical issues such as pro-/anti-gay rights or pro-/anti-gun control.
In the PAC case, I’d suggest that senior management benefits more strongly than investors. These individuals get access to politicians, and career and networking benefits through that access - while the trickle-down to the average investor is very limited. Wendy’s Denny Lynch says it all with his comment that Wendy’s PAC is party-neutral, they just fund whoever is in power.
Also, many times when I’ve noticed a company taking a stand on a topical issue my general impression is that this is an effort to spend dollars marketing to a niche segment rather than a well-thought out extension of the company brand.
3 - Is there a benefit to shareholders to their company taking a political or issue stand?
I’d answer this with a qualified yes. Companies should research their [loyal + profitable] customer base to find additional ways to retain their loyalty and attract like-minded prospective customers. If one of the key findings is a propensity for one side of an issue, then there’s a big up-side to weighing in on the issue. Stated in this fashion, the argument sounds somewhat cynical - but when executed correctly it really isn’t. Think of Avon’s support for breast cancer research.
The corollary here is that if you are not attempting to segment your market and then address the needs of a both loyal and profitable segment, then there’s really no benefit to taking a stand on an issue.
Think about the American auto makers, with their dealership on every corner and abysmal loyalty rates. GM or Ford wouldn’t benefit from supporting specific causes because even if they do know who they’re selling to, they’re not keeping them loyal after the sale.
Lexus takes a diametrically opposite approach to segmenting and selling in the automotive market. Lexus could benefit from overt political support for an issue if a) they found their rock-solid customer base was strongly behind it; and b) their prospective customers were also strongly supportive.
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If you do take a strong stand on a controversial issue, be sure you know why you’re doing it, and how it fits in with your overall brand strategy. To do it right research your loyal and profitable customers!
