Nielsen: responsible brands are big business
Far from being a ‘nice to have’ brands that demonstrate a commitment to sustainability now have real meaning for consumers and the resultant ability to provide healthy returns for manufacturers and retailers alike. Evidence of this is the 2015 Nielsen Global Corporate Sustainability Report which shows that 68 percent of South African consumers are willing to pay more for brands that come from companies who are committed to positive social and environmental impact. This in comparison to 66 percent of global respondents, which in turn is up from 55 percent in 2014 and 50 percent in 2013.
These findings stem from a Nielsen poll of 30,000 consumers in 60 countries during which consumers were asked how much influence factors such as the environment, packaging, price, marketing, and organic or health and wellness claims had on their consumer-goods purchase decisions.
Nielsen Africa Managing Director Allen Burch said: “Sustainability is a worldwide concern that continues to gain momentum—especially in countries where growing populations are putting additional stress on the environment. An increasing number of consumers in developed regions consider sustainability actions more of an imperative than a value-add.
“Consumer brands that haven’t embraced sustainability are at risk on many fronts. Social responsibility is a critical part of proactive reputation management and companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners, and importantly, consumers.”
This is also clear from additional findings on the South African market where in response to the question; “Thinking about the consumable brands purchased in the last week, how much influence did the following factors have on your purchase decision?” 65 percent of respondents stated that the products were made by a brand/company that they could trust; 57 percent said because the product was known for its health and wellness benefits and 53 percent said because it was made from fresh, natural and/or organic ingredients.
Another interesting insight to emerge from the study is that it’s also no longer just wealthy suburbanites in major markets willing to open their wallets for sustainable offerings. Consumers across regions, income levels, and categories are willing to pay more, if doing so ensures they remain loyal to their values. Sustainability sentiment is particularly consistent across income levels. On a broader scale this has seen sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4 percent globally, while those without grew less than 1 percent.
Topping the list of sustainability factors that influence purchasing for nearly two-of-three (62 percent) consumers globally was brand trust.
Nielsen Senior Vice President for Reputation and Public Relations Solutions Carol Gstalder commented: “This indicates an opportunity for consumer-goods brands that have already built a high level of trust with consumers to evaluate where best to introduce sustainable products into the market to drive growth. On the flip side, large global consumer-goods brands that ignore sustainability, increase reputational and business risk. This may give competitors of all sizes, the opportunity to build trust with the predominantly young, socially- conscious consumer looking for products that align with their values.”
Despite the fact that Millennials are coming of age in one of the most difficult economic climates in the last 100 years, they continue to be most willing to pay extra for sustainable offerings—almost three-out-of-four respondents (73 percent) in the latest findings, up from approximately half in 2014. The rise in the percentage of respondents under 20, also known as Generation Z, who are willing to pay more was equally strong—from 55 percent of total respondents in 2014 to 72 percent in 2015.
Brands that therefore establish a reputation for social responsibility and environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending Millennials of tomorrow, too.
Health and wellness
Consumers are looking for products that are both good for them and good for society. A product’s health and wellness benefits are influential purchase decision drivers for more than half of survey respondents (59 percent). Products made with fresh, natural, and/or organic ingredients carry similar weight with consumers (57 percent). Finding opportunities to bridge the two is a powerful and impactful way to connect with consumers.
When it comes to sales intent, commitment to the environment has the power to sway product purchase for 45 percent of consumers surveyed. Commitment to either social value or the consumer’s community are also important (each influencing 43 percent and 41 percent of respondents, respectively). Retail data backs up the importance of these influencers. In 2014, 65 percent of total sales of consumer goods measured globally were generated by brands whose marketing conveyed commitment to social and/or environmental value.
It’s clear that the hierarchy among drivers of consumer loyalty and brand performance is changing. Commitment to social and environmental responsibility is surpassing some of the more traditional influences for many consumers and consumer-goods’ brands that fail to take this into account will likely fall behind.
TV ads highlighting a company’s commitment to positive social and/or environmental impact are influential in the path to purchase for 34 percent of global respondents. Brands that actively reinforce societal commitment must amplify and socialize their message using multiple sources and distribution channels.
Gstalder adds; “While marketing good deeds is encouraged and expected by consumers, authenticity and credibility are essential. Using multiple communication methods is important to demonstrate good deeds, such as third-party validation (news coverage), annual reports, affiliation with a respected non-profit or civic organization, employee volunteerism, advertising, or reporting actual work in the community on a web site. A balanced approach is key for brand communicators, with the emphasis on demonstrating good deeds versus self-serving promotion. ”
Developed vs Developing Markets
While the relative importance of sustainable factors that influence the path to purchase is consistent across regions, the overall rates were lower in North America and Europe than in the Middle East, Africa, Asia, and Latin America. Consumers in developing markets are often closer to and more aware of the needs in their surrounding communities as they are reminded daily of the challenges around them, which leads to a desire to give back and help others. This suggests a greater likelihood to seek out and pay more for sustainable products.
When it comes to sustainability, the findings show it is generally harder to influence consumers in developed markets to pay more. Consumers in Latin America, Asia, Middle East, and Africa are 23 percent-29 percent more willing to pay a premium for sustainable offerings.