By Bianca Bartz, Editor in Chief of SocialBusiness.org
The purpose of this blog post is to highlight the emerging opportunities that ethical consumerism is bringing. It’s also to illustrate the difference between cause marketing and true purpose-driven business, or social business.
A recent study showed that 94% of consumers will choose a cause-oriented brand when faced with the choice between two similar, equally-priced products, when the other has no social/eco impact. Another study from StatsCan showed that Canadian men are just as likely as women to make a purchasing decision (either buy or boycott) based on ethical reasons. It also showed that people with higher educations tend to be more politically involved, and in turn are more likely to make purchases based on ethical reasons — 41% of university grads made purchasing decision based on ethics in 2008 vs. 8% of high school grads.
But there is a new motivator beyond education that is spurring consumers to buy cause-supporting brands, thanks to a gamechanging business model. You have heard of TOMS, right?
TOMS Shoes has become famous for its one-for-one giving model, a creative way to do business while also doing good. Blake Mycoskie, who founded TOMS, launched the social business after a trip to Argentina where he saw how many children live without shoes, and are thus left vulnerable to disease, not to mention discomfort. Not letting a lack of knowledge in the footwear industry hinder him, he launched TOMS in 2006 with a promise to give a pair of shoes to a child in need for every pair sold. He’s kept his word: by September 2010, TOMS had put shoes on one million deserving feet.
People want TOMS shoes. Badly. That’s not necessarily because they’re the most beautiful shoes; in fact, TOMS are quite simple in style, inspired by the South American alpargata shoe. They’re revered for being comfortable, but the leading reason people flock to these shoes is for their story, and because they let the customer be part of something bigger than themselves. “When I bought these shoes, TOMS gave a pair of shoes to a kid who needed them.”
As happens when an idea hits it big, spin-offs start to arise. In the case of TOMS, other social entrepreneurs began adopting and adapting. I recently featured an article of 10 Shoe Brands With Soul that covers footwear businesses that have incorporated social impact right into their business models. What I omitted from that article were limited edition shoes that benefit charity. I was just looking at the social businesses: the ones with giving in their DNA, not just in their marketing plans.
There’s a big difference there.
Yes, other social entrepreneurs were inspired to use the one for one model to give back using business principles. That’s cool, because they were inspired by the idea of making an impact while also making a living. But not everyone was inspired in the same way: some companies saw the TOMS story of success and wanted the same attention, so adopted the model as a cause marketing initiative. See how they differ? It’s all about the original intention. At the end of the day, however, people are helped, yet the karma points don’t stack up the same way — and increasingly, consumers are looking at those stacks.
Take BOBS for example. All you need is a glance at the name to see where this Skechers line got its inspiration. They also adopted the alpargata design TOMS uses, as well as the one for one giving model. Not surprisingly, people were quick to critique BOBS, including Fast Company and Digital Mom Blog. Why? Because they immediately recognized it as a marketing stunt.
Of course, even TOMS has received flack, but never because people questioned its will to do good. The key criticism has been that the shoe drops have taken away income from local shoemakers, and thus the economy. That was never Mycoskie’s intention, of course; he wanted to help, and he does — if he had already reached a million kids by fall 2010, imagine how many have been touched now. Nevertheless, the model wasn’t perfect (what is?), and it left an opportunity for innovation.
Enter TWINS for Peace. The founders of TWINS were inspired by the TOMS story when they launched their social business, but they also examined the product and what was being said and used it to tweak their model. Instead of a simple design, they opted for edgy and high quality, crafting sneakers from Italian leather. They use 90% recyclable packaging. They pay fair wages at a family-owned factory in Portugal. And they provide income-earning opportunities in different countries. As I wrote previously:
Each collection of TWINS for Peace shoes supports a different NGO-led Shoe Project—and rather than simply making the second pair at the factory in Portugal, the donated pair is made in the country of the according Shoe Project. This not only allows shoemakers to tailor the shoes to the children, but also provides employment at a local level.
As I said in the beginning of this post, my intention here is just to highlight an opportunity, and to clarify the different ways businesses can give back. I barely touched on the environmental side of ethical consumerism, but the bottom line is simple, and it comprises three parts: honour people, planet and profit (aka the triple bottom line). Consumers increasingly care about a brand’s impact on the world, so to remain favourable in the eyes of their customers, businesses will need to focus on purpose. Genuine purpose. The next gen has a radar for it — if it’s not genuine, I promise, they’ll sniff it out, and call you out.
The most common social companies are in the first phase, which rely on grants and donations. Many companies do not exit that phase as creating a sustainable business model is not possible. In the middle phase is the most complicated and we will discuss this one in more detail. The last phase attracts normal venture capital funding and would also likely be viable for stock offerings and large corporate investment.
Social innovation meets business revolution 