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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 21st Century?Madhu Viswanathan

University of Illinois, Urbana-Champaign

Overview

• Who are the stakeholders of the 21st 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

Marketing and Management in Subsistence Marketplaces

Consumption and Entrepreneurship Across Literacy and Resource Barriers

Literacy, Poverty, Cultureand Psychology

Consumer and Entrepreneurial Literacy Program

- India

Nutrition Education Materials - USA

Sustainable Prod. & Mkt. Dev. forSubsistence Marketplaces

Social Initiatives

Research

Sustainable Businesses for Subsistence Marketplaces

Teaching

Sustainable Marketing Enterprises

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.htmlhttp://www.geography.learnontheinternet.co.uk/topics/popn1.html

Lack of Knowledge or Expertise with

Subsistence Contexts

Lack of Personal Connection to Subsistence

Contexts

PreconceptionsAbout Subsistence

Marketplaces

Characteristics of Businesses

PRODUCTS

Betterment of Life Circumstances

Resource constraints – Lack of affordability

(Make or) buy or forgo decisions

Immediacy of basic needs

Characteristics of Subsistence Marketplaces

RELATIONSHIPS

Emphasis on the Human Dimension

Resource constraints - Interdependence among individuals

1-1 Interactions and strong word

of mouth

Development of consumer skills

MARKETS

Negotiation of the Social Milieu

Varied group influences

Resource constraints – Lack of mobility & dependence on groups

Fragmented, small and myriad

differences

Sustainable Market Orientation

Purposeful Understanding of

Subsistence Marketplaces

Addressing Customer Needs and Welfare

Implementing Business Plans through Social Good

Business Implications Fairness and trustworthiness

Emphasis on individual and community welfare

Business Implications Understanding life circumstances

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

Business Implications Working with diverse groups

Social good as common denominator

Doing Well

Doing Good For Doing Well

Business

Doing Good

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

Source: http://franklycsr.wordpress.com/2008/02/04/sustainable-supply-chain-initiatives-booming/

• Has launched a host of sustainable supply chain programs

• Implemented a new supplier packaging scorecard on February 1 that formally rates suppliers on 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 sustainable products

• Collaboration with GE to use fluorescent lights

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

• Adopt 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 KorschunDrexel 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)

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Tenets of Received Wisdom

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Companies form relationships with stakeholder groups by allocating resources in ways that meet the diverse interests of each group

Tenets of Received Wisdom

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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

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?

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Corporate Social Responsibility:A Source for New Insights?

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

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 Social Responsibility:A Source for New Insights?

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CSR

Strate

gy

Corporate Strategy

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)

The Received Wisdom in Practice: An Example from a CSR Report

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Stakeholder Example Metric

Investors Operating Earnings ($1.3 bln.)

Consumers Number of new low sodium soups (32 in U.S.)

Employees Number of children in day care at HQ (80-100)

Community Cumulative donation of food through “Stamp Out Hunger!” (900 M pounds)

Tenet 1:Assess Stakeholder Initiatives by Expenditures

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

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Direct Route

Tenet 1:Assess Stakeholder Initiatives by Expenditures

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

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Direct Route

Tenet 1:Assess Stakeholder Initiatives by Expenditures

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

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Indirect Route

Tenet 2: Stakeholders Reside in Groups

Stakeholder groups not homogeneous

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Individual Stakeholder Company

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)

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Individual Stakeholder Company

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)

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Individual Stakeholder

Consumption

Investment

Employment

Company

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)

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A Shift in Thinking

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Traditional Approach

Assess by expenditures

Analyze at group-level

Advance interests

Recommended Approach

Understand stakeholder psychology

Analyze at individual-level

Encourage expression of values

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