Marketing

What QSRs stand to gain (or lose) by taking a stand

This year — more than most — there are plenty of issues up for debate, and many brands are choosing sides. New research shows this act of social responsibility can pay off big but only if executed the right way.

QSRs that take a stand on a public issue can see benefits in the bottom line. (Photo: iStock)

July 7, 2020 by S.A. Whitehead — Food Editor, Net World Media Group

Under the heading of "The more things change, the more they stay the same" comes evidence now that the age-old business proviso to "Know thy customer" has new meaning for today's world of socially active restaurant brands. It turns out that QSR brands' inclination to speak out on societal issues can be good for the bottom line, as long as the sentiments are well-aligned with that particular brand's customers' sentiments.

Recently published research in the "Journal of Marketing," for example, found that brands failing to know how their customers feel about societal issues, take huge risks when they speak out. In fact, the study was able to quantify how much a brand stands to gain on average if such actions are executed well, as well as how much it stands to lose monetarily when done poorly.

The study was co-authored by four assistant professors of marketing, including Texas Christian University's Yashoda Bhagwat, the University of Arizona's Nooshin L. Warren, the University of Oregon's Joshua T. Beck and George F. Watson IV at Portland State University. As a data set for their research, the professors looked at 293 instances of corporate activism between January 2011 and October 2016 from 149 U.S. companies. For the issues examined, the researchers chose from those published in the Pew Research Center's "2014 Political Polarization in the American Public" report and its Political Polarization and Typology Survey. Included in that list of incidents were examples of corporate activism ranging from the removal of Confederate flag merchandise from Amazon's website to the grocery giant, Kroger, issuing a statement supporting its policy permitting customers to carry firearms in its stores.

To glean public sentiment on the acts, researchers surveyed 1,406 people. Each labeled the activism in the example from "very liberal" to "very conservative." Then, in another survey of 375 people, participants helped researchers identify companies' typical customers as leaning either liberal or conservative. And finally, companies' political leanings were gauged through the analysis of U.S. Federal Election Commission data on political contributions, along with the political composition of state legislatures in the place where each company is headquartered.

The big shift in subjects brands now weigh in on

At the University of Arizona, Warren said the research revealed a shift over the last decade in the kinds of causes that purpose-driven corporate actions are focusing on. Ten years ago, she said the data indicates that less plausibly debatable causes like support for cancer research were the order of the day for businesses, like QSR brands, that took public stands on issues. Today, however, she said brands are increasingly taking stances on potentially more divisive issues, like gun control and LGBTQ rights.

Further, researchers said that shift has been accompanied by even more significant movement in activist brands' monetary value or stock market performance, based on how well any given brand's stance is in sync with their customers' views.

"In the past few years, we have reached the intersection of politics and doing societal good," Warren said. "Companies still have value systems and want to advance society, but the biggest difference, in this case, is that societal good is debatable, political and partisan."

"The strongest effects come from alignment with consumers' values, and consumers are obviously the most vital source of revenue for a firm. Punishment from a government can have a sudden and significant impact on a company as well. Employees, although very important, have less of an immediate impact."

How it can pay off in dollars … or not

In a five-day period around each incident of corporate activism studied, the researchers measured stock market value fluctuations and found those activist events that were poorly aligned with a brand's customers views preceded a 2.45% average drop in market value, when compared with market expectations from the Center for Research in Security Prices. Brands that got it right, however, saw a bump up of .71% in that same stock value.

Researchers said that the recent public sentiment expressed around racial strife and injustice has put the issue on the front burner for all brands, including QSRs.

"I wish racial equality was not a polarizing issue, but given that it is, firms should carefully identify their consumers, employees and other stakeholders, and resonate with their values," Warren said. "But it is important to stay authentic, as society is watching carefully and will hold firms accountable for their actions as well as for their silence."

5 pre-activism QSR considerations

The researchers also developed some pointers on what brands who wish to have a voice in societal issues should think about first to reduce problems and bottom line backlash. Those four areas are:

The messenger – Brands that want their stances to have the greatest impact will establish a company leader — especially one who is often in the public spotlight — as the voice behind the activism.
The actions – In activism of any kind, actions speak louder than mere words. As an example, Warren mentioned Target's provision of transgender-inclusive bathrooms as having a greater public impact in their LGBTQ-supportive stance than words alone.
The numbers – Brands that really want to make their voices prominently heard on any issue will look for ways to join with other companies in taking actions or voicing sentiment on any issue. In fact, this is one area that Warren said brands can actually use to help reduce the negative impact from brand sentiment misalignment with lawmakers. For instance, legislators are more more likely to take action against a single brand speaking out rather than an entire group of brands or an industry. So in this particular game, numbers count.
The beneficiaries – Brand messages that also specifically benefit the brand, its employees or customers can be viewed as less altruistic and more profit-motivated. As a result, the researchers advised brands undertaking some kind of public stance on an issue to also fully determine exactly who and what will benefit from that stance. If it's all about the QSR, it might be time to consider another approach.

About S.A. Whitehead

Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.