OBJECTIVE 3 OBJECTIVE 2 Explain the fundamentals of competitive
20.2 TOMS: “ Be the Change You Want to See in the World”
Founder Blake Mycoskie launched TOMS on a “one for one” model and a mission that seeks both company profits and to make the world a better place. At TOMS, “doing well” and “doing good” go hand in hand.
© ZUMA Press, Inc./Alamy If the world were a village of 100 people, 14 of
the 100 would be illiterate, 20 would be mal- nourished, 23 would drink polluted water, 25 would have no shelter, 33 would have no elec- tricity, and 40 would have no shoes. Less than a decade ago, these stark facts, especially the last one, struck Blake Mycoskie up close and personally as he visited Argentina to learn how to play polo, practice his tango, and do some community service work. While there, the sight of barefooted children, too poor to have shoes, stunned him.
So Mycoskie launched TOMS Shoes with
$300,000 of his own money. The founding con- cept was this: For every pair of TOMS shoes that customers bought, the company would donate another pair of shoes to a child in need around the world. Mycoskie had previously started five successful strictly for-profit busi- nesses. “But I was ready to do something more meaningful,” says Mycoskie. “I always knew I wanted to help others. Now, it was time to do something that wasn’t just for profit.” Mycoskie remembered Mahatma Gandhi’s saying: “Be the change you want to see in the world.”
“Doing good” is an important part of TOMS’ mission. But so is “doing well”—the company is very much a for-profit venture. At TOMS, the two missions go hand in hand.
Beyond being socially admirable, the buy- one-give-one-away concept is also a good business proposition. To achieve social change, TOMS has to make money—lots of it. At the same time, the social mission gives customers a powerful reason to buy.
With all these “do good” and “do well”
goals swirling in his head, Mycoskie returned home from his Argentina trip, hired an intern, and set about making 250 pairs of shoes in the loft of his Santa Monica, California, home.
Stuffing the shoes into three duffel bags, he made the fledgling company’s first of many
“Shoe Drop” tours, returning to the Argen- tine village and giving one pair of shoes to each child. Mycoskie arrived back home to find an article about his project on the front page of the Los Angeles Times Calendar sec- tion. TOMS had been in business for only two weeks, but by that very afternoon, he had or- ders for 2,200 pairs of shoes on his Web site.
True to the company’s one-for-one prom- ise, Mycoskie undertook a second TOMS
Shoe Drop tour. Consistent with his new title,
“Chief Shoe Giver of TOMS Shoes,” he led 15 employees and volunteers back to Argentina, where they went from school to school, village to village, and gave away an- other 10,000 pairs of shoes. “We [didn’t] just drop the shoes off, as the name might imply,”
says Mycoskie. “We [placed] the shoes on each child’s feet so that we [could] establish a connection, which is such an important part of our brand. We want to give the children the feeling of love, and warmth, and experience.
But we also get those feelings as we give the shoes.”
Today, TOMS Shoes is, in fact, both “doing good” and “doing well.” TOMS has given away more than 10 million pairs of shoes in 59 countries. Under its one-for-one model, that means TOMS has also sold more than 10 million pairs of shoes, ringing up an esti- mated $300 million in annual revenues. Re- tailers such as Nordstroms, Neiman-Marcus, Urban Outfitters, Amazon.com, and even Whole Foods Market now offer TOMS shoes in locations across America. And the company just keeps growing. “Within the next 18 to 24 months, we expect we’ll have given away
10 million more,” says an optimistic Mycoskie.
“I had no idea it would ever get this big.”
TOMS’ rapid growth is the result of pur- chases by caring customers who then tell the TOMS story to their friends. Although strongly represented on Facebook, Twitter, Pinterest, Instagram, YouTube, and other so- cial media, TOMS spends almost nothing on traditional advertising and promotion. Instead, loyal TOMS disciples promote the brand with evangelical zeal. “Ultimately, it is our custom- ers who drive our success,” says Mycoskie.
“Giving not only makes you feel good, but it actually is a very good business strategy, es- pecially in this day and age. Your customers become your marketers.”
Riding this success, TOMS and Mycoskie are now looking for even more ways to make the world a better place. Beyond the one- for-one shoes program (The Gift of Shoes), TOMS has already expanded its lines to in- clude TOMS-branded eyewear and coffee.
For each pair of TOMS glasses purchased, the company donates a free pair (The Gift of Sight); for each bag of TOMS coffee bought, the company donates a week of clean water to a person in need (The Gift of Water).
644 PART 4| Extending Marketing
says Mycoskie grandly. If the number of copy- cats is any indication, that change is already underway. Dozens of companies have now adopted the one-for-one model pioneered by TOMS, from Warby Parker (eyewear), KNO Clothing (clothes for the homeless), and LSTN (headphones for hearing restoration) to One World Futbol (soccer balls), Smile Squared (toothbrushes), Soapbox Soaps (bars of soap), and Open Happiness (baby outfits and blankets—“one to love, one to give”).
“My thinking was that TOMS would show that entrepreneurs no longer had to choose between earning money or making a differ- ence in the world,” says Mycoskie. “Business and charity or public service don’t have to be mutually exclusive. In fact, when they come together, they can be very powerful.”
are already seeking ways to consume respon- sibly. They’re shopping at farmers markets, buying organic food and clothing, giving up their birthdays to raise money for charity, and buying TOMS shoes. Through expansion, TOMS is “taking them along this path where they can integrate giving,” says Mycoskie.
Customers who buy TOMS products are buy- ing into doing something positive with their consumer dollars. Confirms the head of retail marketing for TOMS, “We’re about empower- ing people, inspiring people, helping them to see the life they could live differently.”
More than affecting how consumers buy and see life, TOMS is also out to change the way companies do business. “I believe what we’re doing is affecting the way businesses will be built for hundreds of years to come,”
However, having a double bottom line of values and profits isn’t easy. Over the years, brands such as Ben & Jerry’s, Timberland, The Body Shop, and Burt’s Bees—all known and respected for putting “principles before profits”—have at times struggled with less-than- stellar financial returns. In recent years, however, a new generation of social entrepreneurs has emerged, well-trained business managers who know that to do good, they must first do well in terms of profitable business operations. Moreover, today, socially responsible busi- ness is no longer the sole province of small, socially conscious entrepreneurs. Many large, established companies and brands—from Walmart and Nike to Starbucks and PepsiCo—
have adopted substantial social and environmental responsibility missions.
Societal Marketing
Following the principle of societal marketing, a company makes marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. Companies should be aware that neglecting consumer and societal long-run interests is a disservice to consumers and society. Alert companies view societal problems as opportunities.
Sustainable marketing calls for products that are not only pleasing but also beneficial.
The difference is shown in Figure 20.4. Products can be classified according to their degree of immediate consumer satisfaction and long-run consumer benefit.
Deficient products, such as bad-tasting and ineffective medicine, have neither immediate appeal nor long-run benefits. Pleasing products give high immediate satis- faction but may hurt consumers in the long run. Examples include cigarettes and junk food.
Salutary products have low immediate appeal but may benefit consumers in the long run, for instance, bicycle helmets or some insurance products. Desirable products give both high immediate satisfaction and high long-run benefits, such as a tasty and nutritious breakfast food.
Sources: Stephanie Strom, “Turning Coffee into Water to Expand Business Model,” New York Times, March 12, 2014, B3; Stacy Perman, “Making a Do-Gooder’s Business Model Work,” BusinessWeek Online, January 26, 2009, www.businessweek.com/smallbiz/content/jan2009/sb20090123_ 264702.htm; Cotton Timberlake, “Compassion- ate Consumerism Draws Copycats,” Businessweek, August 2, 2012, www.businessweek.com/articles/2012-08-02/
compassionate-consumerism-draws-copycats; Jeff Chu and Jessica Weiss, “The Cobbler’s Conundrum,” Fast Company, July/August 2013, pp. 98–112; Christopher Marquis and Andrew Park, “Inside the Buy-One Give-One Model,” Stanford Social Innovation Review, Winter 2014, pp. 28–33; and www.toms.com/about-toms#companyInfo and www.toms.com/one-for-one-en, accessed September 2014.
In fact, Mycoskie asserts, TOMS isn’t just a shoe seller anymore—the company has even detached the word “Shoes” from its brand. In- stead, he envisions TOMS as a lifestyle brand that sells many different products and uses the proceeds to fund social initiatives. “I want to show people that one-for-one is not just for the lifestyle-fashion space,” Mycoskie says. “It can even be for everyday products.”
How far might TOMS expand? Mycoskie isn’t telling yet, but in addition to trademark- ing the term “One for One” for the shoe, eye- wear, and coffee categories, TOMS has also sought to extend that trademark to a host of other beverages, from beer and mineral wa- ter to fruit drinks. And TOMS’ parent com- pany, Mycoskie LLC, has registered more than 200 Internet domain names, includ- ing tomswine.com, tomscreditcard.com, tickettogive.com, and tomsmortgage.com.
Mycoskie even envisions a chain of TOMS café-stores where people can not only buy TOMS shoes, glasses, or a bag of whole bean coffee, they can order a coffee bever- age Starbucks style.
All this sounds pretty far-reaching. But, Mycoskie explains, TOMS’ target customers
Societal marketing
A company should make marketing decisions by considering consumers’
wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests.
Deficient products
Products that have neither immediate appeal nor long-run benefits.
Pleasing products
Products that give high immediate satisfaction but may hurt consumers in the long run.
Salutary products
Products that have low immediate appeal but may benefit consumers in the long run.
Desirable products
Products that give both high immediate satisfaction and high long-run benefits.
CHAPTER 20 | Social Responsibility and Ethics 645
Examples of desirable products abound. For example, Vapur makes a line of reusable, lightweight, collapsible water bottles that are highly functional and also more convenient, stylish, and environmen- tally friendly than either the disposable plastic bottles or rigid water bottles they replace. When full, pliable Vapur Anti-Bottles can be easily stuffed in pockets or backpacks; when empty, they can be rolled, folded, or flattened and easily tucked away. At the same time, the bottles require less energy to make and transport than rigid bottles, and unlike disposable plastic bottles, they don’t clog landfills or require recycling. Vapur also do- nates portions of its sales to organizations such as Leave No Trace and The Conservation Alliance, and its Drops of Hope program annually donates thousands of Vapur bottles to charitable organizations around the world.27
Companies should try to turn all of their products into desirable products. The challenge posed by pleas- ing products is that they sell very well but may end up hurting the consumer. The product opportunity, therefore, is to add long-run benefits without reducing the product’s pleasing qualities. The challenge posed by salutary products is to add some pleasing qualities so that they will become more desirable in consumers’ minds.
For example, PepsiCo hired a team of “idealistic scientists,” headed by a former direc- tor of the World Health Organization, to help the company create attractive new healthy product options while “making the bad stuff less bad.” PepsiCo wants healthy products to be a $30 billion business for the company by 2020. The group of physicians, PhDs, and other health advocates, under the direction of PepsiCo’s vice president for global health policy, looks for healthier ingredients that can go into multiple products as well as reduc- tions of sugar, salt, and fat while maintaining the same flavor in its familiar products. For example, in 2011 Frito-Lay cut the salt in all of its potato chips by 25 percent. And, to help cut calories, it uses a zero-calorie sweetener, Pure Via, in its Tropicana Trop50 orange juice and Gatorade G2 brands. By 2012, PepsiCo’s nutrition business revenue represented 20 per- cent of its annual net revenue, and 49 percent of its U.S. beverage volume came from juices, low- or zero-calorie drinks, and active hydration beverages.28
Marketing Ethics
Good ethics are a cornerstone of sustainable marketing. In the long run, unethical marketing harms customers and society as a whole. Further, it eventually damages a company’s reputation and effectiveness, jeopardizing its very survival. Thus, the sustainable marketing goals of long- term consumer and business welfare can be achieved only through ethical marketing conduct.
Conscientious marketers face many moral dilemmas. The best thing to do is often unclear. Because not all managers have fine moral sensitivity, companies need to develop corporate marketing ethics policies—broad guidelines that everyone in the organization must follow. These policies should cover distributor relations, advertising standards, customer service, pricing, product development, and general ethical standards.
The finest guidelines cannot resolve all the difficult ethical situations the marketer faces. Table 20.1 lists some difficult ethical issues marketers could face during their careers. If marketers choose immediate-sales-producing actions in all of these cases, their FIGURE | 20.4
Societal Classification of Products
High
Low
Low
High Desirable
products The goal? Create desirable products–
those that create both immediate customer satisfaction and long-run benefit. For example, Vapur Anti-Bottles are highly functional but also convenient, stylish, and environmentally friendly.
Long-run Consumer Benefit
Immediate Satisfaction
Salutary products
Deficient products Pleasing products Desirable products: Vapur Anti-Bottles’ reusable, collapsible water
bottles are highly functional and also more convenient, stylish, and environmentally friendly than either the disposable plastic bottles or rigid water bottles they replace.
Vapur, Inc. Vapur® and Anti-Bottle® are registered trademarks of Vapur, Inc.
646 PART 4| Extending Marketing
marketing behavior might well be described as immoral or even amoral. If they refuse to go along with any of the actions, they might be ineffective as marketing managers and un- happy because of the constant moral tension. Managers need a set of principles that will help them figure out the moral importance of each situation and decide how far they can go in good conscience.
But what principle should guide companies and marketing managers on issues of eth- ics and social responsibility? One philosophy is that the free market and the legal system should decide such issues. Under this principle, companies and their managers are not responsible for making moral judgments. Companies can in good conscience do whatever the market and legal systems allow.
However, history provides an endless list of examples of company actions that were legal but highly irresponsible. A second philosophy puts responsibility not on the system but in the hands of individual companies and managers. This more enlightened philosophy suggests that a company should have a social conscience. Companies and managers should apply high standards of ethics and morality when making corporate decisions, regardless of “what the system allows.”
Each company and marketing manager must work out a philosophy of socially re- sponsible and ethical behavior. Under the societal marketing concept, each manager must look beyond what is legal and allowed and develop standards based on personal integrity, corporate conscience, and long-run consumer welfare.
Dealing with issues of ethics and social responsibility in an open and forthright way helps to build and maintain strong customer relationships based on honesty and trust. For example, Graco—maker of strollers, car seats, and other children’s products—relies heavily on parental trust to keep customers loyal. In early 2014, after receiving reports of stuck buckles in a dozen different car seat models, Graco quickly recalled some 3.8 million units, making it the biggest car seat recall in history. But the company didn’t stop with the official recall. Instead, it swiftly launched a proactive campaign to alert parents of the problem,
Table 20.1 | Some Morally Difficult Situations in Marketing
1. Your R&D department has slightly changed one of your company’s products. It is not really “new and improved,” but you know that putting this statement on the package and in advertising will increase sales. What would you do?
2. You have been asked to add a stripped-down model to your line that could be advertised to pull customers into the store. The product won’t be very good, but salespeople will be able to switch buyers who come into the store up to higher-priced units. You are asked to give the green light for the stripped-down version. What would you do?
3. You are thinking of hiring a product manager who has just left a competitor’s company. She would be more than happy to tell you all the competitor’s plans for the coming year. What would you do?
4. One of your top dealers in an important territory recently has had family troubles, and his sales have slipped. It looks like it will take him a while to straighten out his family troubles. Meanwhile, you are losing many sales. Legally, on performance grounds, you can terminate the dealer’s franchise and replace him. What would you do?
5. You have a chance to win a big account in another country that will mean a lot to you and your company. The purchasing agent hints that a “gift” would influence the decision. Such gifts are common in that country, and some of your competitors will probably make one. What would you do?
6. You have heard that a competitor has a new product feature that will make a big difference in sales. The competitor will demonstrate the feature in a private dealer meeting at the annual trade show. You can easily send a snooper to this meeting to learn about the new feature. What would you do?
7. You have to choose between three advertising campaigns outlined by your agency. The first (a) is a soft-sell, honest, straight- information campaign. The second (b) uses sex-loaded emotional appeals and exaggerates the product’s benefits. The third (c) involves a noisy, somewhat irritating commercial that is sure to gain audience attention. Pretests show that the campaigns are effective in the following order: c, b, and a. What would you do?
8. You are interviewing a capable female applicant for a job as salesperson. She is better qualified than the men who have been interviewed. Nevertheless, you know that in your industry some important customers prefer dealing with men, and you will lose some sales if you hire her. What would you do?