Selling to the New Consumer: Ethical Supply Chain Practices & Millennials

A quick Google search on how to market to millennials returns almost 17 million results with headlines like, “The Struggle is Real: Marketing to Millennials,” and “Marketing to Millennials: You’re Doing It Wrong.” It’s become an accepted fact that reaching the millennial generation is the number one target for marketers and the companies they work for as we move towards the third decade of the 21st century. Having surpassed the baby-boomers in 2015 to become the largest living generation (a gap that will only widen as the years go on), the millennial consumer becomes increasingly more valuable by the day to companies and their brands. However, as the millennial consumer’s spending power grows, so too does the challenge of how to reach that consumer. Traditional means of telling your company’s story no longer have the same impact with the largest segment of the population, and even when you do reach them, the story itself no longer resonates in the same way.

In today’s marketplace, where many of the products have few tangible differentiation points, a product’s brand name often means far more than the features built in. Brand name can mean the difference between a quick sale and languishing on a shelf, gathering dust, losing value, and occupying capital that could be better utilized elsewhere. The millennial consumer looks at the brand and makes buying decisions based on the strength of that brand. Protecting the integrity of your brand is of paramount importance and few things can damage that integrity like being associated with irresponsible supply chain practices.

A 2014 study from Gartner subsidiary Software Advice found that consumers would pay, on average, up to 27% more for a product that would normally be priced at $100 if it was produced under “good working conditions.” The same study also showed that improved working conditions, reduced environmental impact and increased community involvement were the prime factors in driving consumer’s buying decisions. In the study’s report summary, it was explicitly noted that despite the survey results, consumers might not actually pay more for an “ethical” product, unless the product was explicitly marketed that way .

As a company focused on the marketing of its brand almost as much as the marketing of its products, it should come as no surprise that Apple was also at the forefront of promoting ethics within its supply chain while simultaneously addressing obvious gaps. 2016 saw the publication of Apple’s 10th annual Supplier Responsibility Progress Report , as well as the company devoting an entire segment of its iPhone SE launch event in March to highlighting renewable energy use at facilities and recycling efforts surrounding in their products and packaging. Apple COO Jeff Williams introduced their progress report by noting that the company is working to “…Raise the bar every year to improve working conditions, provide educational opportunities, push for higher standard of living and protect human rights.” Williams’ message showcases a clear understanding of supply chain ethics from a company with a market cap nearing $600B. Apple’s practices show that maintaining your supply chain in an ethical – and open – fashion is a sound business decision that can deliver tangible results.

In the 1990s, Nike provided a clear lesson on how supply chain ethics are made visible and can impact a brand. As part of Nike’s initial hyper-growth in the 1970’s and early ’80’s, Nike outsourced the assembly of its products to third parties in Asia in order to both drive efficiency and lower costs. When asked about possibly questionable business and labor practices with some of these third-parties, Nike publicly stated that they couldn’t be expected to be responsible for the practices its suppliers. Rather than successfully passing the buck and insulating the company from further criticism, this statement only served to sharpen the focus of the national media and activist groups in their attacks on the business practices of Nike suppliers – and by extension, Nike themselves.

Faced with falling sales, a plummeting stock price and a brand image in desperate need of repair, Nike was forced to act. The company became one of the very first international brands to introduce a Supplier Code of Conduct, which was launched in 1992 and opened for external audit in 1994. The code was desperately needed because, as Nike CEO Phil Knight noted in a 1998 speech to the National Press Club, “the Nike product [had] become synonymous with slave wages, forced overtime and arbitrary abuse.” By the time of Knight’s speech, Nike’s stock had more than doubled in value. The company has since gone from a virtual dead heat with rival Adidas (market caps of $3.97B and $3.59B, respectively) in 2001 to a position of dominance sixteen years later, with a market cap that has ballooned to over $86B vs. Adidas’s $17B.

These examples show that while millennials can be difficult to reach, they are responsive to “outside the box” messaging. New and existing entrants to the mobile ecosystem should ensure that they are working with supply chain partners who can help enhance their brand reputation with transparent, visible, ethical supply chain practices that resonate with the millennial consumer. With a buttoned-up supply chain that focuses on ethical practices, a market entrant can confidently focus on honing their marketing message, and highlighting business practices that millennials respond to.

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