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The Stakeholder Approach in the Marketing Discipline

  Speakers Madhu Viswanathan, Professor of Business Administration, College of Business, University of Illinois Daniel Korschun, Assistant Professor of Marketing, LeBow College of Business, Drexel University  Moderator Mary C. Gentile, Ph.D., Giving Voice to Values and Babson College

Company, Community, and Beyond (Or Me, Us, and Beyond): A Sustainable Market(ing) Orientation for Stakeholders of the 21

st

Century?

Madhu Viswanathan University of Illinois, Urbana Champaign

Overview

• Who are the stakeholders of the 21

st

century?

• What is a sustainable market(ing) orientation to address all stakeholders?

• What are businesses doing about it?

• Qualifications

Perspectives on Poverty

Macroeconomic approaches Business strategy approaches – e.g., Bottom of Pyramid Subsistence marketplaces approach – microlevel buyer, seller, and marketplace behaviors

Research

Consumption and Entrepreneurship Across Literacy and Resource Barriers Marketing and Management in Subsistence Marketplaces Literacy, Poverty, Culture and Psychology

Social Initiatives

Consumer and Entrepreneurial Literacy Program - India Nutrition Education Materials - USA Sustainable Prod. & Mkt. Dev. for Subsistence Marketplaces Sustainable Businesses for Subsistence Marketplaces Sustainable Marketing Enterprises

Teaching

A market vendor sells mud cookies at the La Saline market in Port-au-Prince, Friday, Jan. 25, 2008. The cookies are made of dirt, salt and vegetable shortening. (AP | Ariana Cubillos)

Disappearing Lake Chad

The Sustainability of Water Bottles?

Climate Change

Source: http://www.news.wisc.edu/11878 Source: http://watersecretsblog.com/archives/reports/index.html

Some Collision Courses?

Population Explosion

Source: http://phillips.blogs.com/goc/2006/02/population_expl.html

http://www.geography.learnontheinternet.co.uk/topics/popn1.ht

ml

Characteristics of Subsistence Marketplaces

PRODUCTS

Resource constraints – Lack of affordability

Betterment of Life

Immediacy

Circumstances

(Make or) buy or forgo decisions of basic needs

RELATIONSHIPS

Resource constraints - Interdependence among individuals

Emphasis on the Human Dimension

1-1 Interactions and strong word of mouth Development of consumer skills

MARKETS

Resource constraints – Lack of mobility & dependence on groups

Negotiation of the Social Milieu

Fragmented, small and myriad Varied group influences differences

Sustainable Market Orientation

Purposeful Understanding of Subsistence Marketplaces Business Implications

Understanding life circumstances Multifaceted product offerings to improve welfare (educational campaigns, etc.)

Addressing Customer Needs and Welfare Business Implications

Fairness and trustworthiness Emphasis on individual and community welfare

Implementing Business Plans through Social Good

Characteristics of Businesses

Lack of Knowledge or Expertise with Subsistence Contexts Preconceptions About Subsistence Marketplaces Lack of Personal Connection to Subsistence Contexts Business Implications

Working with diverse groups Social good as common denominator

Business

Doing Good For Doing Well

Doing Good Doing Well

A Sustainable Marketing Orientation Beyond Subsistence Marketplaces?

• Sustainable market orientation - ingraining product-relevant

social good

– development of a deep-seated organizational understanding

of individual and community welfare as it relates to product offerings

– incorporation of the goal of enhancing such welfare into

business processes, outcomes, and assessments

– inculcation of product-relevant social good into the

organizational culture

• Why?

– Resource constraints arriving soon or already here – Connectivity – Interconnectedness and interdependencies – Interest groups • “Blessed Unrest” by Paul Hawken

Cradle to cradle?

• What is cradle to cradle?

• “This book is not a tree” – Durable, waterproof, recyclable – Technical nutrient – can be broken down and circulated infinitely in industrial cycles

Product Design Example

• My inventory – Avalon versus Prius • Because we can versus because we cannot!

– As consumers – As producers

• • •

Wal-Mart

Has launched a host of sustainable supply chain programs Implemented a new supplier packaging scorecard their progress toward developing sustainable packaging, as well as their ability to help Wal-Mart reach its company-wide sustainability goals to reduce waste, use renewable energy and sell Collaboration with GE to use fluorescent lights Source: http://franklycsr.wordpress.com/ 2008/02/04/sustainable-supply chain-initiatives-booming/

Source: http://www.unglobalcompact.org/docs/news_events/9.1_news_archives/2007_11_ 28/US_Starbucks.pdf

Source: http://www.unglobalcompact.org/docs/news_events/9.1_news_archives/2007_11_28/US _Starbucks.pdf

From Conventional to Sustainable Marketing?

• Central role of consumption in both the problems and the solutions for the twenty-first century – Consumption, overconsumption, and underconsumption • What is the role of marketing in sustainable development? • How should the marketing discipline adjust to looming opportunities and challenges related to accelerated development, poverty alleviation, and ecological disaster? – Has led to sophisticated techniques to understand consumer preferences and create valuable offerings – Can it address the deeper aspirations of vast populations?

– And in ecologically and socially sustainable ways?

Sustainable Marketing

• Marketing ideally suited?

– Focus on consumption and exchanges – Interface with the marketplace – Understanding broader environmental trends • A dopt a long-term perspective based on a deep understanding – of cultures – of radically different contexts of poverty – of ecological challenges – and of the nature of sustainable development • Understand shortcomings of a predominant focus on consumption with seemingly endless resources. • Understand the potential to create sustainable value in the broadest sense of the word • Adopt a sustainable market orientation that enables sustainable consumer behavior through sustainable product design…. • Explicitly infuse values such as ecological and social sustainability into the core of the marketing concept

Sustainable Marketing: From Customer Wants to Human Aspirations?

Thank You!

Marketing in Multi-Stakeholder Environments: Lessons from Corporate Social Responsibility Daniel Korschun

Drexel University The Aspen Institute September 3, 2009

Stakeholder Theory and Marketing: A Lengthy Courtship

 Stakeholder Theory views an organization as collection of actors with whom it interacts   Stakeholders put something at risk Stakeholders have legitimate claims on organizational wealth  Continued calls to incorporate stakeholder theory in marketing (e.g., Kotler 1967-2009; Morgan & Hunt 1994; Wind 2006)   “More attention to stakeholder theory must be central to marketing scholarship” (Lusch 2007) Failure to acknowledge the importance of stakeholders can feed “a new form of marketing myopia” (Smith, Drumwright, & Gentile 2009)

29

Tenets of Received Wisdom

 Companies form relationships with

stakeholder groups

by

allocating resources

in ways that meet the

diverse interests

of each group

30

Tenets of Received Wisdom

 Companies form relationships with

stakeholder groups

by

allocating resources

in ways that meet the

diverse interests

of each group  Three “tenets” 1.

Assess stakeholder initiatives by expenditures 2.

Stakeholders reside in groups of likeminded others 3.

Trading-off stakeholder interests paramount

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Substantial Obstacles Remain

 Common challenges in stakeholder management:    Wide array of corporate activities involved Diverse demands of stakeholders Varied forms of exchange between company and stakeholders  Some lingering questions:    What do “good” company-stakeholder relationships look like?

What drives strong and enduring relationships?

How can managers/researchers address diverse interests of stakeholders?

32

Corporate Social Responsibility: A Source for New Insights?

 Enacted (frequently) at corporate level (e.g., Ford Foundation)  Involves wide variety of stakeholders  Tied closely to corporate identity  Has normative as well as instrumental elements (see Donaldson & Preston 1995)

CSR = allocation of corporate resources to initiatives aimed at improving societal welfare

33

Corporate Social Responsibility: A Source for New Insights?

 Enacted (frequently) at corporate level (e.g., Ford Foundation)  Involves wide variety of stakeholders  Tied closely to corporate identity  Has normative as well as instrumental elements (see Donaldson & Preston 1995)

Corporate Strategy 34

The Received Wisdom in Practice: An Example from a CSR Report Stakeholder Example Metric Investors Consumers Employees Community

Operating Earnings ($1.3 bln.) Number of new low sodium soups (32 in U.S.) Number of children in day care at HQ (80 100) Cumulative donation of food through “

Stamp Out Hunger!

” (900 M pounds)

35

Tenet 1: Assess Stakeholder Initiatives by Expenditures

 Two routes connecting CSR and corporate performance (Margolis et al. 2008)

36

Tenet 1: Assess Stakeholder Initiatives by Expenditures

 Two routes connecting CSR and corporate performance (Margolis et al. 2008) Direct Route

37

Tenet 1: Assess Stakeholder Initiatives by Expenditures

 Two routes connecting CSR and corporate performance (Margolis et al. 2008) Direct Route Indirect Route

38

Tenet 2: Stakeholders Reside in Groups

 Stakeholder groups

not

homogeneous

Individual Stakeholder Company 39

Tenet 2: Stakeholders Reside in Groups

 Stakeholder groups

not

homogeneous  Stakeholder responses to CSR activity not confined to single role (Sen, Bhattacharya and Korschun 2006; Bhattacharya Korschun and Sen 2008)

Individual Stakeholder Company 40

Tenet 2: Stakeholders Reside in Groups

 Stakeholder groups

not

homogeneous  Stakeholder responses to CSR activity not confined to single role (Sen, Bhattacharya and Korschun 2006; Bhattacharya Korschun and Sen 2008)

Individual Stakeholder Consumption Investment Employment Company 41

Tenet 3: Trading-off Stakeholder Interests is Paramount

 Central mediator of CSR-Behavior link is identification (e.g., Bhattacharya, Korschun, Sen 2009; Maignan, Ferrell and Ferrell 2004; Drumwright, Cunningham and Berger 2006)  Stakeholders are drawn to companies that share their values (repelled by those with value mismatch)  Corporation can serve as super-ordinate identity (Korschun 2008)

42

A Shift in Thinking Traditional Approach

Assess by expenditures Analyze at group-level Advance interests

Recommended Approach

Understand stakeholder psychology Analyze at individual-level Encourage expression of values

43

Thank You!

The Stakeholder Approach in the Marketing Discipline

  Speakers Madhu Viswanathan, Professor of Business Administration, College of Business, University of Illinois Daniel Korschun, Assistant Professor of Marketing, LeBow College of Business, Drexel University  Moderator Mary C. Gentile, Ph.D., Giving Voice to Values and Babson College