Saturday, June 27, 2009

Does It Pay To Be Good?

Idea in Essence:

¶ Customers are willing to pay extra for ethically produced goods.
¶ Consequently, unethical producers have to offer heavy discounts.
¶ The instinct to penalize unethicality dominates the tendency to reward ethicality.

Do customers actually buy ethically produced goods? Differentiation through social responsibility requires fairness in production methods, thus escalating costs. This strategy appeals to what kind of customer segments and do they pay the extra costs? Is there pro-rata benefit for incurring ethical costs?

Research supports that motivated by reward-seeking and punishment avoidance, customers penalize unethicality by seeking price discounts. This amounts to indirectly rewarding ethicality as such products are able to gain firmer foothold in the markets. However, the punishment meted to unfairly produced gods is higher vis-à-vis benefits towards fairly produced goods.

This finding largely ignored individual differences and applied sweepingly to all customers. The underlying conclusion is patent: acting in a socially responsible manner enables charging more for the products and services.

Caveat: The research covered various scenarios for coffee buyers and cotton T-shirt buyers and is laboratory based experimentation. You need to extrapolate for your own product genres.


¶ Tilt the portfolio towards ethically produced goods.
¶ Avoid any association with unethicality your customers can have towards your products.