Don't let Good Deeds go Unnoticed: A Business Case for a Perceived Brand Purpose

Even though many organizations implement sustainable business practices, it often remains unclear whether their environmental commitment reaches consumers. If sustainability efforts are communicated too excessively, they can easily be perceived as a mere publicity stunt. At the other end of the spectrum, a genuine commitment to sustainability can even be a central part of a brand’s raison d’être, its brand purpose.

However, even a truly “green” brand purpose can only be translated into a competitive advantage if it reaches consumers and resonates with their values and attitudes. If it does not, managers may even be tempted to consider abandoning costly sustainability initiatives if their good deeds go unnoticed—and unpaid for—by customers. The interplay between a brand’s initiatives and consumers’ perceptions of the brand is illustrated in the matrix on the next page. Recognized green actors walk a fine line between wasting their hidden potential and greenwashing. This balancing act requires scrutiny and management of the perceived brand purpose. Yet, it’s challenging to manage what cannot be measured.

The term “brand purpose” is often used synonymously with a brand’s focus on sustainability. However, this definition doesn’t capture the entire essence of brand purpose. For a better understanding, a brand’s purpose can be defined by three distinct purpose dimensions. The first purpose dimension is financial success, which represents the conventional aim of achieving profitability. The second purpose dimension, labeled customer benefits, pertains to the unique value a brand offers, reflecting its dedication to providing the best product or service in areas like quality, experience, or pricing. Finally, the third purpose dimension reflects a brand’s intention to create positive (or avoid negative) third-party effects of its business activities, essentially highlighting its commitment to social and ecological challenges or, in simpler terms, its sustainability. This dimension can be viewed as a brand’s aspiration to adopt eco-friendly practices.

Building on this conceptual understanding of brand purpose, NIM researchers transparently validated a questionnaire to assess perceived brand purpose along these three purpose dimensions (Zürn & Unfried, 2023). This instrument doesn’t merely evaluate a brand’s actions but also delves into how these actions are perceived by consumers. In this exploration, we gain insights into the factors influencing consumers’ interactions with a brand and the subsequent impact on brand performance.

Potential is wasted when a brand’s purpose is not adequately recognized by consumers. To evaluate the extent of this potential, we tested the relationship between perceived brand purpose and brand performance. In a sample involving over 100 brands, we found a significantly positive link between a brand’s Net Promoter Score (NPS) and its perceived focus on customer benefits and third-party effects. However, the strength of these correlations varied depending on the consumer segment we examined. While infrequent users primarily based their recommendations (which are the core of NPS) on a brand’s perceived sustainability efforts and other third-party effects, regular users were more inclined to recommend brands that prioritize customer benefits.

We aim to relate customers’ brand perceptions to the actual items in their shopping carts. By doing so, we hope to uncover insights regarding the specific purpose dimensions that influence brand performance and determine the significance of purpose perception in directing real-life purchase decisions. Ultimately, our objective is to equip brand managers with knowledge to enhance their market presence and optimally align their brands with our defined purpose dimensions.

Our findings carry two significant implications for decision-makers concerned about their brand’s purpose. Firstly, despite the apparent inclination to focus brand purposes on sustainability and address socio-ecological challenges, brands should remember the old saying, “Stick to what you do best.” That doesn’t imply brands should neglect the third-party effects of their activities; instead, it advocates for a more balanced brand purpose that authentically caters to all stakeholders, ensuring sustainability in both economic and socio-ecological terms. Secondly, understanding the audience is key when brands are communicating their purpose. Adopting an authentic and provable environmental stance can boost brand performance, particularly when engaging with unfamiliar audiences or prospective customers. However, once these customers are convinced, it becomes crucial to demonstrate that the brand’s purpose extends to the satisfaction of their customers’ needs. To sum it up, “greenacting” must be recognized by consumers to be sustainable. Our three perceived brand purpose categories provide a conceptual framework to successfully implement the most suitable brand purpose and profit from its potential. A balanced and authentic brand purpose will incorporate generating value for shareholders, customers, and third parties. In future projects, we aspire to further our understanding of how brands can enhance their perceived sustainability and how such perceptions can influence individual purchasing decisions.

• UNDERSTAND: While brands have the power to control what they communicate, it’s the customers’ perception of a brand’s purpose that truly matters.
• MEASURE: Brands should take a holistic view of their purpose by assessing three dimensions: perceived emphasis on financial success, customer benefits, and third-party effects (i.e., sustainability). This can be easily achieved by surveying (potential) consumers using our validated measure.
• OPTIMIZE: Brands can refine their strategies based on these new KPIs. Being perceived as a sustainable brand is economically advantageous, but being perceived as a brand that genuinely serves its customers is of equal importance.