A Yankelovich study a few years ago found that as many as two-thirds of Americans believe that businesses would take advantage of the public if those businesses did not think they would be exposed. As many as one-fourth of Americans agreed that there is literally nothing that business can do to recapture their trust once it is lost. ("State of Consumer Trust," 2004).
We live in a time of omnipresent scrutiny by citizen journalists, regulators, attorneys general, and virtually anyone with a computer and a point of view. The risks of shaky integrity have never been more real. Now would be a good time to measure how well a brand's marketing helps or hinders its perceived integrity, which is to say its ability to build and hold customer trust.
Metrics for a New Kind of ROMI
Most marketers may be honest in the sense that they do not habitually break the law, but the definition of "honest" is shifting to a higher plane, just as it has for stock-option grants and board directors' liabilities.
Marketers need to consider a new calculus: "return on marketing integrity"—that is, a new type of "ROMI"—which can lead to stronger business performance.
Traditional return on marketing investment is calculated using gross margin generated by marketing efforts (GM), minus the marketing investment (I), divided by that investment: ROMI = (GM - I) ÷ I. The calculation for return on marketing integrity is identical, except that investment is replaced with marketing integrity. Simple enough to explain, considerably more difficult to measure.
One of the advantages of an integrity metric is that the additional investment is not like any other factor that could confuse the calculation. Consequently, it may be difficult to extract the market impact of a specific marketing effort from the effects of sales development drives or unexpected distribution gains. However, integrity investments are unique and thus—at least in theory—should be more trackable.
For instance, if a company invests significant person hours and some out-of-pocket spending behind ensuring that every marketing claim is ruthlessly checked for accuracy, then any attitudinal or behavioral gains among customers can be at least partially credited to those investments.
Patagonia asks its people to continually check the earth-impact of its fabrics and to be certain that what it claims in its catalog is as accurate as it can be. Kiehl's Since 1851 does the same when it comes to its cosmetics lines. Herman Miller screens all its marketing materials through a simple filter suggested by a former CEO: "The truth is good enough."
These extra efforts cost resources and time, and some portion of what those companies reap in terms of positive customer attitudes and loyalty can be rightly attributed to such actions.
Exactly how much is attributable would be based on a weighted factoring system that could be established by the marketing teams, with the concurrence of other contributors to company/brand performance.
Why Integrity Is a Return Worth Measuring
Here's why measuring the impact of marketing integrity may be well worth the effort:
- Measuring the impact of integrity can help marketers learn some key reasons why customers may remain loyal, leading to increased profitability. Infosys is a Bangalore, India-based IT services company with a growth rate that is the envy of its industry. The 90% of Infosys customers who return year after year are there for one major reason: They can count on Infosys to deliver what they promise because they believe in the company's integrity, not just its past performance.
- Tracking integrity impact may yield new ways to attract more new customers than if the company had not adhered to such standards. Kiehl's, since 1851, has operated like a neighborhood apothecary, which means that the people of each store have a personal stake in what they sell. The products they serve and the service they provide are uniquely superior to so many other alternatives, and customers return because they know authentic integrity when they see it.
- Measuring a return on integrity can help build strong competitive strategies that could provide an edge in the marketplace. A competitor may gain some ground over the short term by stretching the truth or endangering its brand's equity, but this is an arena where what goes around tends to come around. Companies that demonstrate "disruptive integrity" stand out as organizations that customers believe, and which deserve their competitive advantages, as has been repeatedly demonstrated by Trader Joe's, W.L. Gore, and Timberland Shoes.
- By regularly evaluating integrity performance and its impact on the financials, a company may also be able to reduce or eliminate the unforced integrity errors that have cost other companies major brand equity and sales declines. For example, the business decline and fall of Guidant Corporation was prompted by alleged integrity flaws in its products, and the ultimate liabilities of those problems were gauged to be well into the billions. At last check, the Guidant brand itself was slated to be ash-heaped and, with it, an enormous amount of brand equity. A simple set of integrity metrics and measurements might have prevented such losses in both of these cases.
- Maintaining a measurable sense of integrity can protect brand equity when a company's integrity is under scrutiny. Hewlett-Packard has historically been a company that operates with exceptional integrity, but that ethos did not prevent members of its management from allegedly making serious ethical mistakes when investigating an information leak on its board of directors in the fall of 2006. On the other hand, when CEO Mark Hurd promised a Congressional subcommittee that such an integrity breech would not happen again, his promise may have carried a bit more weight because of the company's 68-year legacy of spotless integrity prior to the scandal.
The probabilities of such companies making serious integrity errors are much smaller than for other companies because they have committed to aggressive integrity through organizational and cultural honesty. That makes an enormous difference in how they create their products and services and how successfully they market them to their customers.
During a credibility crisis involving the troubled General Re acquisition, Warren Buffett once observed, "Berkshire can afford to lose money, even lots of money; it can't afford to lose...even a shred of reputation." If the Oracle of Omaha can't afford it, neither can the rest of us.
Whatever success a brand or company has in generating revenue with its marketing programs, that success will be enhanced and protected by aggressively cultivating and tracking marketing integrity.
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