The empathy economy has accelerated rapidly since the onset of the coronavirus pandemic and social justice movements impacting the global community. But what exactly is the empathy economy and, as it implies, how can showing empathy have economic benefits?
According to Michael Ventura, author of the book “Applied Empathy”: “People think empathy is about being nice, being compassionate, being sympathetic. It’s none of those things. Empathy has a broader meaning that extends well beyond its dictionary definition of ‘the ability to understand and share the feelings of another.’”
The author goes on to describe empathy as “self-aware perspective-taking to gain richer, deeper understanding.” Attributes we often associate with being empathic, like showing compassion for others, are simply byproducts of being an empathic person.
For marketers, that concept disrupts everything we thought we knew about showing empathy, even in our marketing campaigns. But as Venture suggests, in today’s hypersensitive economy, everyday pleasantries must give way to a deeper understanding of the audiences we are trying to reach and the stories behind their purchases.
But the empathy economy stretches beyond marketing campaigns. It touches corporate leadership, culture, governance and ethics, brand perception and book value. Empathy has become as essential to business success as the products and services a company offers.
According to The Empathy Business, a U.K. based consultancy, empathy is a quantifiable metric that should be tracked. In 2016, the company’s Empathy Index was used to rank the top 20 Most Empathic Companies. The top 10 increased in value more than twice as much as the bottom ten and generated 50% more earnings, highlighting that more empathic companies deliver more financial value.
Less than five years later, we see an unrealized opportunity for empathy to shape corporate America’s response to the social justice movement. While there has been a push for the hiring of more diverse talent and creating more culturally sensitive marketing campaigns, diversity and inclusion have yet to be linked to the empathy economy movement.
Diversity and inclusion, in my opinion, are part and parcel of the empathy economy. I believe it is the most critical piece. Here’s why:
A lack of diversity and inclusion negatively affects all aspects of corporate culture. Numerous studies have shown a clear correlation between companies with diverse leadership teams and business success.
One McKinsey report showed that companies in the top quartile for racial/ethnic and gender diversity were respectively 35% and 15% more likely to have financial returns above their respective national industry medians. In the U.S., for every 10% increase in racial and ethnic diversity among leadership, earnings rose by 0.8t.
Diversity and inclusion in marketing increase positive aspects of brand perception. Regarding talent cast in advertisements, Dr. Jake Beniflah of the Journal of Cultural Marketing Science says, “The ethnicity of the model may result in consumers of the same ethnicity to ‘self-reference’ the ad information. The advantage for marketers is that research suggests that relating information to oneself heightens ad recall and can generate more favorable ad evaluations (Meyers-Levy and Peracchio 1996; Krishnamurthy and Sujan 1999). Consequently, ads are better remembered and better liked by consumers.”
Reaching diverse audiences deliver more financial value. Diverse audiences are more than data points. Companies are ultimately looking to drive value and financial returns for stakeholders, and many are beginning to realize that marketing to diverse audiences will deliver those benefits.
Together, multicultural consumers have an impressive spending power of $3.2 trillion. Looking at consumer goods alone, multicultural consumers have contributed $14 billion of sales growth to that market since 2013.
As for the empathy economy, whether you believe in the concept or not, one thing is true. The adoption of diversity and inclusion priorities is critical to your organization. Not only is it a moral obligation, but it is a business imperative.
As your talent increases in diversity, so will the volume of different perspectives in which to teach and learn, fostering an environment for creative problem-solving. That’s empathy on display, and that’s how you grow a business.