On Purpose: The ROI of Purpose

Written By Afdhel Aziz

One of its major shareholders, Terry Smith, snarkily commented on one of their brands, Hellman’s Mayonnaise, that surely by now the purpose of mayonnaise was clear: to be a condiment used on sandwiches.

“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913, so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches).”

Let’s take a look at three aspects where the true ROI of Purpose needs to be evaluated on: decommoditization, multi-dimensionality, and longevity.

1. Decommoditization: Mayonnaise is a heavily commoditized category, where a brand like Hellman’s has private labels and smaller competitors nipping at its heels. The product is fundamentally the same and provides little or no opportunity for innovation.

In my book ‘The Principles of Purpose’ we talked about the three stages of brand affinity that we’ve seen through the ages. The first was when all brands had to do to win ‘Share of Mind’ was to have a differentiated and better performing product – think ‘Tide Washes Whiter’.

But as categories became commoditized, brands then tried to differentiate by winning ‘Share of Heart’ – by trying to create emotional affinity with consumers through advertising campaigns – think Coca-Cola’s ‘I’d like to teach the world to sing’.

Today, we are living in an age when all brands have reached saturation point with that strategy (not to mention a world where consumers are increasingly choosing to live in ad-free environments like streaming).

So in order to win, a great brand today not only needs to have a great product (to win Share of Mind), a great story (to win Share of Heart) but must also create great positive impact in the world (to win Share of Spirit).

That is what Hellman’s is attempting to do: to differentiate itself in a way that no private label or smaller brand would every have the resources to do. Here’s its Purpose statement:

“Hellmann’s purpose is to help people enjoy good, honest food, for the simple pleasure it is, without worry or waste.”

By using its resources to tackle the issue of food waste around the world, it is also appealing to people who want to see brands utilize their resources to make the world better.

Conny Braams, Unilever’s Chief Marketing officer hit back at Smith by pointing out that Hellman’s had double digit growth in 2021 (the brand was up 11%) as proof that the strategy was working.

She said: “For us there is no question, the business case is clear – purpose drives brand power and brand power drives market share and that drives growth. A business that isn’t a force for good at certain moments will not have reason to be any more.“

2. Multi-dimensionality: Next, we need to take into account how having a brand like Hellman’s in the portfolio can help Unilever in multi-dimensional ways. Let’s take the subject of employee retention for instance.

According to a McKinsey survey, 89% of workers want purpose in their lives – and 70% said their sense of purpose is largely defined by their work.

When companies get it right, the benefits are huge:

“When employees at any level say that their purpose is fulfilled by their work, the work and life outcomes they report are anywhere from two to five times higher than those reported by their unfulfilled peers.” (McKinsey)

‘This satisfaction has a direct correlation with increasing job satisfaction and reducing turnover which has major cost implications. According to Gallup, the cost of turnover is extremely high: it’s estimated that losing an employee can cost a company 1.5-2 times the employee’s salary.

Having shining examples of Purpose in a portfolio like Hellman’s makes Unilever employees feel good about working at the company – which leads to financial savings in the long run.

Similarly, when it comes to recruitment, the pandemic has been a major driver for people to re-evaluate their jobs through the lens of personal purpose and values.

Gartner surveyed more than 3,500 employees around the world in October 2021, and 65% said the pandemic had made them rethink the place that work should have in their life. Fifty-six percent said it made them want to contribute more to society.

There is no doubt that having purpose-driven brands burnish a company’s employee brand, leading to lower costs and better talent beating a path to their door.

3. Longevity: Finally, the other aspect that is missing from this analysis is time. This reflects the broader struggle between old-school ‘shareholder capitalism’ and new-school ‘stakeholder’ capitalism.

Shareholders like Terry Smith are only interested in short term returns, and are attacking purpose and sustainability because it seemingly threatens their short term profitability – completely uninterested in the long-term value it delivers to the company, whether it’s providing a social license to operate or driving employee engagement, customer loyalty or purpose-driven innovation.

By ‘future-proofing’ the company to take into account the needs of conscious consumers (especially Millennials and Gen-Z which will form the majority of consumers for the next fifty years), leaders are fulfilling their fiduciary responsibility to ensure that returns are going to be not only profitable but enduring.

So what should be the new normal when it comes to the idea of business being purposeful about making the world better? Professor Colin Mayer’s quote sums it up perfectly: “The purpose of the business is to produce profitable solutions to the problems of people and planet, not profiting from producing problems.”

As more and more companies adopt Purpose as a core strategy, I hope this article helps reflect how we need to take a more enlightened, multi-dimensional and long-term view to understanding the true return on purpose.