By Darren Weiss, Account Director
It’s 2020 and anything is possible, so let’s hop in a time machine for a moment and go back to 1970…
The U.S. was nursing its hangover from landing the first man on the moon. Nixon had just been inaugurated. And one of the nation’s top economists — Milton Friedman — dropped a bombshell theory that would govern business executives for decades.
The so-called Friedman Doctrine, laid out in a September 1970 NY Times Magazine piece, proposed two important things:
- A businesses’ main responsibility is to its shareholders
- As such, its top goal is to maximize returns (aka profits) for these shareholders
This made plenty of sense to business leaders at the time. The 1970 economy was still riding post-WW2 growth, business was good, consumers were spending and shareholders were happy. Trivial matters like having a corporate purpose, addressing needs of underserved communities and environmentally conscious business practices were not top concerns in corporate boardrooms.
Today’s consumers prioritize purpose
Today, this business theory feels woefully dated. The economy remains sluggish, consumer trust in brands is stagnating and a laser focus on profits over all else pits a business against an obvious shift in buying sentiment: consumers, especially Gen Ys and Zs who now outnumber all generations, are now demanding proof of purpose and will use their influence and spending power to prove it.
A 2019 study from Accenture lays this out. It found that today’s consumers trust companies less than two years prior. They’re less easily duped by thin dedication to social issues, they find companies committed to green/social initiatives more attractive and are willing to pay higher prices for brands that prove it.
The myriad events of 2020 — from the social injustice protests to the pandemic’s disproportionate impact on underserved communities — have further amplified this sentiment. Today, a businesses’ main responsibility is no longer to its shareholders but rather its customers and multiple stakeholders. And for customers in 2020, purpose > profits.
What being purpose-driven really means
A for-profit organization may see this shift and feel strong-armed into action or risk losing business. But it’s important to note that being “purpose-driven” does not require a Salesforce-like 1-1-1 philanthropic model. Nor is it blindly funneling resources into a CSR program just because. Consumers today are complex and savvy; they see right through corporate B.S. and have plenty of outlets to call you out on it.
This also means consumers can appreciate, resonate with and become loyal to brands that establish purpose with intent and at nuanced levels, not just those who cut checks to non-profits. Brands striving to be purpose-driven today can and should examine their business practices at a deeper level to understand who they impact and how. To start, they can ask themselves tough questions like:
- Can we be handling customer data in a more responsible, transparent way? And can we better articulate this publicly?
- Would our customers truly say we’re committed to their privacy and security? If not, how can we change this perception authentically and actionably?
- Are we actually committed to diversity, inclusion and environmentally friendly business practices or do we just think we are?
- Are we actively open, honest and transparent with our stakeholders with all matters that impact them?
- And, do we truly believe — top to bottom, all aspects of the business — that it’s important to have a purpose?
Remember, purpose comes in all shapes, sizes and colors. A true commitment to consumer privacy or full transparency can absolutely be core parts of your brand’s purpose, just as much as a give-back program. What matters most to customers today is authenticity and proof in whatever it is you believe your purpose to be.
Finding that north star is not always an easy or quick endeavor, but the investment will be worth it. Though Mr. Friedman might disagree, profits and purpose can co-exist.