• by Gregory J. Furman , Op-Ed Contributor, May 6, 2009

The increasing rift between the "haves" and the "have-nots," what The New York Times dubbed "the disappearance of the middle class," is putting public pressure on luxury brands to focus on their actions in the marketplace. Those that are insensitive to the political implications (global outsourcing), sociological (impact on people) and ecological (effect on the environment) will face loss of revenue from their best customers.

 

More and more luxury brands are asking themselves:

• What is our position on the use of renewal energy resources?

• Do we or those we outsource to use harsh chemicals in our manufacturing processes?

• How do we relate to the communities we serve?

• How do we give back?

• How do we promote our role as good corporate citizens?

• What is our position on energy conservation?

• Are we a leader sensitive to the range of human resources issues and practices in the communities in which we have a presence?

• Are we part of the solution or part of the problem?

• Do we educate our employees?

Recent research has shown that the way luxury brands address these issues has a direct impact on their reputations, revenues and that the negative consequence of ignoring them will be considerable.

A 2007 survey by Jem Bendell and Anthony Kleanhous, "A Deeper Luxury: Quality and Style When the World Matters," shows that those with the most wealth and education purchase, recommend brands and choose products or services on the basis of a company's reputation, and they avoid products or services they feel guilty about "unethically purchasing" and have actively campaigned for brands on environment and social issues. In short, people want to feel good about what they buy and the companies that sell to them.

Example: At Home Depot, there were two bins of firewood, same wood, same price. One was labeled "Forest Stewardship Council"; the other was not labeled. The Forest Stewardship Council sold more than two times more successfully. When the price was raised on the "branded" wood, it still realized a 37% increase in sales.

Signs of the times:

• 75 celebrities arrive at the Oscars in hybrids or zero-emission, hydrogen-powered vehicles

• The smartest luxury brands are consolidating their corporate focus; focusing on one good cause and promoting their involvement.

• Luxury brands increasingly are "going green" in the production of promotional and marketing materials as more find their customers asking for "carbon neutrality."

• More companies are micro-managing the outsourcing of their manufacturing abroad to ensue ethical treatment of the workforce.

• What many refer to, as "social equity" is becoming one of the most important drivers of brand value. Studies have shown a 77% correlation between "social equity" or esteem, and brand value as consumers demand a more ethical level of play.

The following are aspects of "social equity" influence brand value:

• ethical practice: honest, fair, financially reliable employment ethos: a good employer

• social engagement: responsive to local community

• service orientation: care about customers, reliable

• social responsibility: good corporate citizens and intelligently promote their good works so people know

• emotional proximity: "my kind of brand or company"

• social utility: provide value products and services -- well worth the price

• the public and socially conscious buyer is most discerning and expects substance in corporate citizenship programs. Beware: "green-washing" won't work.

• in hard times as in this recession the corporate "voice," positioning and messaging must resonate with what best customers are feeling

• the best customer won't pay a premium for green alone

• more corporations are looking to the not-for-profits (see Robert Frank's book, Richistan) to create self-funding "businesses" with use of original corporate contributions -- a radical departure from expectations of patrons/corporate sponsors up 'til now.

Indeed, as pertains to corporate citizenship, especially in this recessionary window, the times are "a-changing." Those brands that are sensitive to these changes will win the continuing loyalty of their best customers in ways that those that ignore these "early warnings" will not.

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