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Corporate Responsibility – Beyond Babel

December 24th, 2008 by Devangshu Dutta

At the outset let me mention the fact that in the title of this post lies a Freudian slip. The intended title was “Corporate Responsibility – Beyond Labels”. But the new – unintended – title captures the thought perfectly. (And I’ll come back to that in closing.)

Third Eyesight was recently asked by a multi-billion dollar global consumer brand to facilitate a round-table discussion focussing on the issue of how to drive ethical behaviour and sustainable business models into their sector. This company has a well documented strategy and action plan until 2020, and their team was travelling together in India visiting other corporate and non-corporate initiatives, to learn from them.

For the round table, we brought together brands, retailers, manufacturers, compliance audit and certification agencies, craft and community oriented organisations and non-government organisations (NGOs working on environment stewardship. Some were intrinsically linked to the consumer goods / retail sector, others were not. Among those present was Ramon Magsaysay award winner Mr. Rajendra Singh of the Tarun Bharat Sangh, an organisation that has, over the last several years, worked in recharging thousands of water reservoirs leading to the rebirth of several rivers.

The diversity (and sometimes total divergence) in views among the participants was a powerful driver for the debate during the day, which was the main intention behind having a really mixed group.

(Try this experiment yourself. Get a bunch of people together who define their work as being in the “corporate responsibility” stream. Then ask them the meaning of that phrase, and watch the entirely different tracks people move on. You might be left wondering, whether they are really working towards a common goal.)

At the end, though, the result was productive, since the divergent perspectives opened avenues that may have previously not been visible.

In the case of our discussion, the topics that were covered included labour standards and compliance, reduction of the product development footprint, closed-loop supply chains, water management, organic raw materials, energy conservation and community involvement in business. Some of the issues raised were:

  • How are learnings from green factories consolidated and disseminated to other suppliers?
  • How do companies plan to continue to support sustainability and corporate responsibility initiatives considering the drastic economic changes and the dire retail scenario?
  • What does fair trade have to do with sustainability?
  • Minimum wage Vs living wage
  • Trade barriers and the need for government support for green products
  • Why labour laws are not being followed? Are the laws outdated and impossible to follow? Are there any other reasons, which could be dealt with by companies themselves?
  • Can consumer consciousness and pressures be brought to bear? Does the question “Is the product I am buying ethically produced” come in the mind of an Indian consumer? Or even to the mind of the Indian retailer?
  • The need to address the core issue of unbalanced demand and supply of workforce in cities.
  • What should responsible and aware companies do to stop other companies from polluting rivers and water systems?
  • The role of village craft in providing learnings on efficient and responsible use of resources

My view is that these diverse areas and views can be aligned most effectively if we look at responsibility and sustainability in all its dimensions. These dimensions, to my mind, are:

- The Environment

- The Community

- The Organisation

- The Individual

Most corporate responsibility / sustainability initatives end up addressing only one of the dimensions to focus and simplify the action-points. However, the reality is that there are many areas where the Environment, the Community and the Organisation overlap with each other – many a time, when you ignore the interaction between these dimensions, you get totally divergent opinions. And the point of view related to your own history, geography and experiences, further colour the opinion. The individual – “I” – as a citizen, as a corporate manager, as a parent of future generations, or in any other role, is at the overlap of all three external dimensions. That should tell us something about where the action needs to be initiated.
(The post continues under the graphic below…)
The Individual and the External Dimensions of Corporate Responsibility, Community, CSR, fairtrade, labour
(Post continuing from above.)

Here is a suggested list to start with, which we can use to try out thought-experiments, viewing each issue in different dimensions and from different points of view (for example, buyer based in a developed market, supplier based in a developing country, an individual working in the supply chain, his family and broader community):

  • child / family labour
  • fair pricing and fair compensation across the supply chain, including consumer, retailer, supplier, workers
  • replacement of cottage scale production with large-scale industrial production of goods
  • setting up production in cities versus in villages
  • organic versus inorganic
  • synthetic / genetically modified versus natural raw materials

In closing, let me come back to “Babel”. According to the Book of Genesis, a huge tower was built “to the heavens” to demonstrate the achievement of the people of Babylon who all spoke a single language, and to bind them together into a common identity. God apparently was not particularly happy with this self-glorifying attitude, and gave the people different languages and scattered them across the earth. 

Whatever your religious (or non-religious) affiliation, this story holds a gem of a lesson.

No matter how noble the cause of the corporate responsibility warrior, it is good to be humble and allow diversity rather than trying to capture everyone under one monolith with an apparently common goal. The diversity may be a lot more productive and help to spread the benefits wider than one single initiative.

The day that we spent on the sustainability round-table certainly demonstrated that very well.

Posted in Apparel, Branding, COLUMN-Progressive Grocer, Consumer, Corporate Social Responsibility, EVENTS, Food & Grocery, Footwear, Lifestyle & Fashion, Marketing, Retail, Soft Goods, Strategy, Supply Chain, Textiles, Uncategorized | 1 Comment »

Loyalty – Scheme or Sham?

December 16th, 2008 by Devangshu Dutta

A keystone of a retailer’s business is the loyalty that customers show in shopping at his or her store.

Loyal customers help to sustain a basic level of sales and reduce the need for expensive broadcast-style marketing spending that the store may otherwise have to do in order to keep the traffic and business flowing. This is as true for chain-stores as it is for independent mom-and-pop stores.

Therefore, as competition increases along with the number of stores selling the same products within a common catchment, retaining the loyalty of the customer becomes crucial, both in terms of strength of relationship (which is reflected in how much of the total spend the customer spends at the specific store) as well as the duration of the relationship.

In some parts of the more developed markets regulation may prevent the overcrowding of grocery stores and supermarkets. However, in markets such as India, one can see as many as four or five mini-supermarkets coming up on barely a kilometre along a busy street, before you even count the numerous kiranawalas. How can a store ensure a continued loyal custom from a certain share of that catchment?

Managers at modern chain stores may draw some comfort from studies which suggest that customers with higher incomes tend to be more “loyal” than customers with lower incomes. Since Indian chain stores tend to be targeted on high-income customers when compared to the traditional kiranawala, they may benefit from an intrinsically more loyal base of customers.

The variety of factors behind this “loyalty” may essentially boil down to the fact that with rising incomes the perceived benefit – lower prices, potentially better products or service – from comparing alternative stores may be outweighed by the perceived cost (time) of seeking these options and the personal adjustment involved in shopping in an unfamiliar environment. (Or, perhaps, to put it more bluntly: “rich customers couldn’t be bothered”?)

However, as the number of competing offers increases, promotional noise draws the consumer’s attention to benefits they might be missing out on, whether this is through flyers in the mailbox, kiosks set up near the consumer’s primary store, or even a full-blown ad campaign across multiple media. With every new offer or promotion, there is a temptation to try out an unfamiliar retailer.

This is more acute during recessionary times, when just about every competitor is shouting out deals to lure the customer to at least step into their store. And don’t think that high income customers are immune from the “toothpaste-discount” bait. During such times, whether they acknowledge it or not, everyone is down-shifting. It is at such times that loyalty is truly called upon. And it is also at such times when retailers start to think of loyalty schemes.

Most loyalty schemes are focussed on the objective of retaining existing customers through the use of incentives that are available only to loyalty programme members. They will ask a customer to provide some personal and contact information, and will provide some reference – a set of coupons to be redeemed during future purchases, or a card (index, swipe or smart) – that must be presented during subsequent transactions. In almost all cases, there is an attempt at getting the customer to return to the store because, as we all know, when we step into a store to redeem anything, almost without exception we end up shelling out more money than the redemption is worth. Since the value of the cash-back equivalent can be anywhere between 1 and 10 per cent (sometimes higher) customers are happy with the bribe, while the store is happy to ring up the additional sales.

However, it is surprising – or perhaps not – how many loyalty schemes turn into shams. In many such cases, the true benefits and the liabilities during the life cycle of the loyalty programme or of the customer’s relationship with the store have not been considered deeply enough. We all have multiple examples from our personal lives, which offer valuable lessons on such shambolic “loyalty schemes”. For instance:

  • An oil company’s “membership card” that you pay for, whose points can never be redeemed because you never get the points statement nor a list of rewards, and the last time you see the card is when the petrol pump attendant takes it with the promise to check the status with the company.
  • “Reward points” which offer a customer a second-rate bag or an uncertain brand of electrical gadget for points PLUS a cash amount that would be the equivalent of what you might spend with a pavement retailer buying a similar item.
  • A credit card that looks attractive with discounts at certain merchant establishments, until you discover that someone who doesn’t hold that card is getting the same benefit even on cash payment.

Very often we find that a loyalty scheme has been conceived by an executive in charge of advertising to get the message out more cheaply (?) and focussed on a set of frequent customers. There is little link with the other parts of the operation, such as merchandising, store planning, or even promotion management, and certainly no influence. Thus, a second and potentially more powerful objective – using customer shopping data to tighten merchandising and improve the targeting of promotions – is virtually ignored.

Some companies have decided that managing a loyalty programme would offer lower benefits than the cost of maintaining the scheme, and decide to pass on the amount to the consumer directly in the form of lower prices. However, given the times, and the prospective goldmine of consumer purchase information that consumers willingly provide through such transactions (despite all vocal concerns about privacy) I would expect loyalty schemes to mushroom in the next few years.

The fact is, whatever our income levels, evolution has deemed that we become creatures of habit. Once a certain path has been followed successfully, a berry has been eaten safely, a transaction has been made satisfactorily, we are inclined to return to it again and again.

Trust, predictability and precedence are huge factors in developing loyalty, and when translated into the modern life of shopping (especially for food and groceries), this translates into the phenomenon that has been called first store (or primary store) loyalty. This can lead to as much as almost 70 per cent of grocery shopping being carried out at one store. Typically consumers will have a strong secondary store, and the balance grocery shopping would be split between multiple stores based on product availability, convenience and opportunity, deals and other factors.

But just because customers are genetically wired for loyalty to the familiar, the retailer should not treat this loyalty with contempt. Or even laziness. Because that can tip over the loyalty scheme into being a loyalty sham. And that is it only one letter away from “scam” – a dangerous label in these times of the consumer-activist.

Posted in Apparel, COLUMN-Progressive Grocer, Consumer, Customer Relationship, Food & Grocery, Footwear, India, Lifestyle & Fashion, Marketing, Retail, Soft Goods, Strategy, Textiles, Uncategorized | 3 Comments »

Does offshore mean bad service?

December 13th, 2008 by Devangshu Dutta

News items seem to be ringing the death-toll for offshoring (Here’s one from the Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/10/AR2008121003574_pf.html.)

Job transitions across borders are an emotive issue at any time, certainly even more so during times of economic upheaval such as now.

But should the debate be about “offshore vs onshore” or about management competence?

A management team whose effort isn’t structured well enough to deliver on their customer’s expectation of a good product (service included) could also find many things on which to pin the blame for poor service, including the geographical location of the support engineers, their native language or what they had for breakfast.

(Or, maybe we should reword the old saying: success has many fathers, but failure is the neighbour’s baby.)

My experiences of phone support around the world range from the superlative to the abysmal, sometimes within the same day in the same country. Painting in broad brush strokes and generalizations (“onshore is high quality and prompt, offshore is low quality and frustrating”) totally miss the point.

The best illustration is when you walk into two brick-and-mortar retail stores on the same high street, and receive dramatically different levels of service. In any country.

To my mind, it is senior management that drives service – vision, culture and the processes. Senior management is responsible for creating the environment, and for creating the hiring and training standards. If you are encultured for fantastic service, your location or origin on the globe is immaterial.

Remote servicing is challenging even without differences in time zones, languages, cultures. The lack of technical or any other sort of individual competence shouldn’t be added to the mix. And that goes for both (onshore) management and (offshore) support staff.

Lastly – followers of BBC sitcoms may be the only ones with whom this might ring a bell – Fawlty Towers should be on the must-watch list for anyone who has anything to do with customer service. Especially if they are part of the management.

Posted in Customer Relationship, Outsourcing, Uncategorized | No Comments »

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