In the
business world today, marketing is increasingly tapping into the consumer
psyche of the masses. The corporate social responsibility of big businesses today
arguably takes more from society than what they give to it.
Companies
are expected to do more than just sell a mere product in the business world
today. Probably the best known subject for example is Toms, a for-profit
company with a social cause that has mass public appeal. The company employs
a “1 for 1” concept where the company delivers a free pair of shoes to someone
in need in an impoverished country through NGOs for every pair bought as a
product in its home country. Depending heavily on corporate social
responsibility, Toms has made a success out of this business model better known
as the B1G1 model (Buy1Give1 model).
The B1G1
model has tapped into the psyche of consumers who feel more altruistic with their
shopping decisions. While they put on their brand new shoes, they know that a
similar pair of shoes will be given to someone who is in need, however this
model raises some of dynamic questions:
Is this
really a long term solution?
Donations
can be of use in times of disasters or when the apparatus of markets don’t
function anymore. However, a means of supporting communities through donations
is a major source of deadweight loss. In small economies, donated shoes can and
will put local shoemakers out of business.
Is the
B1G1 model sustainable?
B1G1 models
are marketing themselves as the pioneers of supporting causes for the lesser
privileged thus making them subject to the market activity of some remote and
otherwise disconnected society. If the consumers are no longer in purchasing
products made by B1G1 companies, the potential recipient of the free product gets
hurt.
This sort
of altruism that can be purchased at the sales terminal seems to only keep the
underprivileged alive and does not better their overall condition.
Another
company that maintains similar practice is the Seattle based coffee giant
Starbucks.
A trip to one
of their franchises is designed to make the customer feel warmer about their
consumer habits. The price the customers pay isn’t just for a cup of coffee but
it also includes what they’re buying into – coffee ethics. The intangible
surplus of the coffee is the consumer’s satisfaction that they buy “coffees that
are Fair Trade Certified. By doing this, they ensure that farmers receive a
fair price for their hard work”. The idea that consumers can buy their
redemption at a higher price is a vicious circle which packages altruism in
consumption.
Acquired by
Starbucks in 2005 for $8 million, Ethos Water came with a mission of “helping
children get clean water.” With a price range of $1.80 to $2.00 in Canada, it stands
to be one of the more overpriced bottle of water in the market today. For every
bottle sold, 10 cents (5 cents in the US) are put in their Ethos Water Fund which,
to date, has $7.4 million in its reserve. Despite the donations at their end, the price of
the water bottle, $1.70 to $1.90, still remains highest amongst its
competitors. Such marketing practices have been likened to profiteering. A fund
of $7.4 million represents only 0.37% of their total operating income in 2012.
Something quite obvious just doesn’t seem to add up here.
What is
intriguing is that massive advertisement costs are incurred to keep the
consumer satisfied with the belief that the coffee that they have bought ‘into’
has served a higher purpose than just having provided them a caffeine fix.
