Thursday, March 27, 2014

Do consumer boycotts matter to companies?

I wonder how many people are boycotting Hobby Lobby because of the company’s stance on the Affordable Health Care Act and contraception. Perhaps more people than ever are shopping there in support. Co-blogger Anne Tucker recounted the Supreme Court’s oral argument here in the latest of her detailed posts on the case. The newspapers and blogosphere have followed the issue for months, often engaging in heated debate. But what does the person walking into a Hobby Lobby know and how much do they care?

I spoke to reporter Noam Cohen from the New York Times earlier today about an app called Buycott, which allows consumers to research certain products by scanning a barcode. If they oppose the Koch Brothers or companies that lobbied against labels for genetically modified food or if they support companies with certain environmental or human rights practices, the app will provide the information to them in seconds based on their predetermined settings and the kinds of “campaigns” they have joined. Neither Hobby Lobby nor Conestoga Woods is listed in the app yet. 

Cohen wanted to know whether apps like Buycott and GoodGuide (which rates products and companies on a scale of 1-10 for their health, environmental and social impact) are part of a trend in which consumers “vote” on political issues with their purchasing power. In essence, he asked, has the marketplace, aided by social media, become a proxy for politics? I explained that while I love the fact that the apps can raise consumer awareness, there are a number of limitations. The person who downloads these apps is the person who already feels strongly enough about an issue to change their buying habits. These are the people who won’t eat chocolate or drink coffee unless it’s certified fair trade, who won’t shop in Wal-Mart because of the anti-union stance, and who sign the numerous change.org petitions that seek action on a variety of social and political topics. 

I had a number of comments for Cohen that delved deeper than the efficacy of the apps. The educated consumer can make informed choices and feel good about them but how does this affect corporate behavior? Although the research is inconsistent in some areas, most research shows that companies care about their reputations but the extent to which a boycott is effective depends on the amount of national media attention it gets; how good the company’s reputation was before the boycott (many firms with excellent reputations feel that they can be buffered by previous pro-social behavior and messaging); whether the issue is one-sided (child labor) or polarizing (gay marriage, Obamacare, climate change); how passionate the boycotters are; how easy it is to participate (is the product or service unique); and how the message is communicated. 

Many activists have done an excellent job of messaging. The SEC Dodd-Frank conflict minerals regulation made it through Congress through the efforts of NGOs that had been trying for years to end a complex, geopolitical crisis that has killed over 5 million people. They got consumers, social media and Hollywood actors talking about “blood on the mobile” or companies being complicit in rape and child slavery in Congo because when they changed the messaging they elicited the appropriate level of moral outrage. The conflict minerals “name and shame” law depends on consumers learning about which products are sourced from the Congo and surrounding countries and making purchasing decisions based on that information. Congress believes that this will solve an intractable human rights crisis. The European Union, which has a much stronger corporate social responsibility mandate for its member states has taken a different view. Although it will also rely on consumers to make informed choices, its draft recommendations on dealing with conflict minerals makes reporting voluntary, which has exposed the EU to criticism. As I have written here, here, here here and here, relying on consumers to address a human rights crisis will only work if it leads to significant boycotts by corporations, investors or governments or if it leads to legislation, and that legislation cannot harm the people it is intended to help.

So what do I think of apps like GoodGuide, BuyCott and 2ndVote (for more conservative causes)? I own some of them. But I also send letters to companies, vote regularly, call people in Congress and write on issues that inspire me. How many of the apps’ users go farther than the click or the scan?  Some researchers have used the word “slacktivists” to describe those who participate in political discussions through social media, online petitions and apps. The act of pressing the button makes the user feel good but has no larger societal impact. 

What about the vast majority of consumers? The single mother shopping for her children in a big-box retailer or in the fast food restaurant that has been targeted for its labor practices may not have the time, luxury or inclination to buy more “ethically sourced” products.  Moreover, studies show that consumers often overreport on their ethical purchasing and that price, convenience and costs typically win out. The apps’ developers may have more modest intentions than what I ascribe to them. If they can raise consumer awareness- admittedly for the self-selected people who buy the app in the first place- then that’s a good thing.  If the petitions or media attention lead to well-crafted legislation, that’s even better.

 

 

 

http://lawprofessors.typepad.com/business_law/2014/03/do-consumer-boycotts-matter-to-companies.html

Corporate Governance, Corporations, Current Affairs, Ethics, Marcia Narine, Religion, Securities Regulation | Permalink

Comments

For what it's worth, the Chick Fil A CEO recently said he regretted wading in to the gay marriage debate. It's impossible to tell what motivated this statement, of course, but I suspect there was enough of a financial impact on the company that he felt he needed to address the issue.

Posted by: Ann Lipton | Mar 27, 2014 1:51:41 PM

Anne you are correct. I wonder too. I was going to discuss that in the post but decided not to speculate

Posted by: Marcia Narine | Mar 27, 2014 2:00:47 PM

Ann and Marcia, I have good friends who work at Chick-fil-A (CFA) corporate and I have met the Cathys (the CFA owners a few times). Supposedly, CFA had record profits following the gay marriage controversy. Far more people supported them, I think, than boycotted. I am not sure if the boycotts or the support had more staying power, but every CFA I have visited since has been packed. The Cathys are wonderful people, and CFA may be the best fast food restaurant in the country. I imagine any regret simply stems from hurting people or coming across as unloving. This article in the Huffington Post shows the real Dan Cathy: http://www.huffingtonpost.com/shane-l-windmeyer/dan-cathy-chick-fil-a_b_2564379.html

Posted by: Haskell Murray | Mar 27, 2014 4:49:07 PM

Ann and Marcia: I can say that in my jurisdiction, because of the media coverage entire communities mobilized to patronize CFA. I think that boycotts are more about press and perception than actual impact.

Posted by: Tom N | Mar 27, 2014 9:44:14 PM

Oh, I meant to mention that Haskell and I are in the same jurisdiction.

Posted by: Tom N | Mar 27, 2014 9:46:35 PM

Even if there is no immediate backlash from consumers given the exposure there will be consequences depending which side you are on. Agree with Haskell, the old saying "any publicity is good publicity" applies in these case the consumer agreeing with the stand will entrench their loyalty while those against will buycott as you say.

Just look at chick-fill-a where consumers essentially had to pick sides forced by the political pundits 24/7 exposure on TV.

Although last night's daily show killed it against Hobby Lobby.

Posted by: CREIT | Mar 27, 2014 10:42:13 PM

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