RAPAPORT… Wealthy consumers say they would pay higher prices for goods and services under a brand name that is recognized for socially responsible business practices. Just to be clear, responsible practice includes internal (employee respect and pay,) and external (product sourcing) initiatives, according to the Luxury Institute of New York in a recently commissioned survey of high-income consumers.
The Luxury Institute found that 57 percent of high-income adults (with an average household net worth of $3.1 million and average annual income of $307,000) would give greater consideration to purchasing a specific brand that they perceive to be socially responsible.
Ten percent even say that they would pay a “significant price premium” for such brands — a tendency that grows greater with wealth and income. Wealthy consumers between 21 and 44 years of age also have a strong penchant for being willing to pay significant premiums for socially responsible brands, with 14 percent of the younger wealthy indicating that they would do so.
Even though a luxury firm’s perceived corporate social responsibility ranks behind other attributes in driving actual consumer purchases, it can still be a deciding factor for wealthy consumers choosing between competing brands.
Three-fourths of wealthy consumers agree that a company can improve its image in the marketplace through socially responsible activities.
Other leading benefits that accrue to successful practitioners of social responsibility, according to the wealthy, are improving employee morale (60 percent,) improving sales (43 percent,) and improving profits (34 percent.) Most wealthy individuals do not see a positive role for social responsibility with shareholders; only 29 percent say that it will improve a company’s stock price or that it is what shareholders want.
According to 82 percent of wealthy consumers overall, companies with good business ethics provide fair wages and benefits to employees. Seventy-nine percent look for a company to clearly state, and demonstrate, its business ethics — something that is a particularly important for 86 percent of wealthy consumers 65 years of age and up.
There is greater agreement among the wealthy that if companies operate overseas, they must uphold the human rights of foreign workers. A majority (58 percent) see this as essential in maintaining good ethics – although older, wealthier and higher income individuals are not as insistent on the rights of workers overseas.
Another popular criterion for getting a sense of a company’s business ethics is its commitment to local development. More than half (55 percent) of the wealthy overall and 61 percent those worth at least $5 million demand this of an ethical firm. Local development is an especially important contributor to a company’s ethical reputation for wealthy individuals younger than 45.
Automaker Lexus earns the highest accolades from wealthy consumers of any brand for its business ethics. When wealthy consumers were asked which luxury brand they admired most for its business ethics, 25 percent named Lexus, 18 percent named Mercedes, and 13 percent named Tiffany & Co.
Perceptions of business ethics can have a big impact on sales, especially if a company is perceived to be unethical.
While 65 percent of wealthy individuals say that they would seek out and purchase brands that excel in business ethics, values, policies and practices, 78 percent say that they would not buy a brand they perceive not to have a passing ethical grade. Women are especially strident in avoiding ethically challenged brands; 83 percent say that they would not purchase them.
High ethical standards can also bring higher selling prices for luxury firms.
More than half of wealthy consumers (56 percent) say that they would pay premium prices for brands with admirable ethical reputations. Especially willing to pay up for outstanding ethics are women and $500,000+ earners.
Concern for the environment is the second most popular way for a company to flash its responsible credentials to wealthy consumers.
Nearly two thirds (64 percent) of those surveyed say that socially responsible firms demonstrate their environmental concern, a belief especially prevalent among wealthy consumers 44 and younger. Showing a commitment to fighting global warming is the most popular way that a company can beef up its environmental image, something cited by 81 percent of wealthy consumers overall.
Lexus and outfitter Patagonia are the most respected firms for their environmental records, both cited by seven percent of wealthy individuals as examples of excellence in environmental leadership.
The penalty for failure to uphold high environmental standards is also high -75 percent of the wealthy say that they would not buy a luxury brand that did not show concern for the environment. Some standouts: 40 percent of individuals older than 65, and 32 percent of those earning at least $500,000, say that a brand’s bad environmental record would not deter them from purchasing it.
Sixty percent of wealthy consumers say that they seek out brands that encourage and support philanthropic activities. Among the wealthy 79 percent want to see a company’s commitment to community development, and 75 percent believe that a philanthropic company should donate a percent of profits to charity (especially popular among women, younger respondents and those earning more than $500,000.)
But philanthropic work doesn’t always translate into a price premium. In fact, a majority (55 percent) of wealthy consumers say that even though they may admire a company’s philanthropic track record, the goods or services must still be price competitive. Women and high-income earners are the two groups most likely to pay a premium for a brand with a respectable philanthropic history.
Nearly two-thirds (64 percent) of the wealthy rely on magazine, newspaper and web articles to learn about a company’s efforts; 48 percent learn of initiatives through conversations with friends and family.
Caroline Brown, CEO of Akris, a Swiss-based luxury apparel brand, said of the data that it reflects the need to go beyond benchmarks for ordinary retail.
“The ability to attract and retain talent is absolutely critical in any industry that deals directly with the final consumer. Building the right team of employees who can reflect the brand in every interaction and who live the message every day creates the whole experience,” Brown said.