Defending a Socially Conscious Brand: A Q&A with Professor Tülin Erdem

A brand that resonates with key audiences in part because of its positioning on socially conscious dimensions can be harmed when issues arise that allegedly contradict or threaten that positioning.

Many businesses choose to adopt socially conscious marketing practices – adapting communications and positioning their brands to engage with social, political, or cultural debates. To explore how marketing experts might assess the potential for brand harm in litigation contexts, Principal Laura O’Laughlin spoke with academic affiliate Tülin Erdem, a Leonard N. Stern Professor of Business and Professor of Marketing at the NYU Stern School of Business.

Professor Erdem is widely recognized for her innovative research in brand management and brand equity, consumer choice, customer relationship management, decision making under uncertainty, econometric modeling, and pricing. She has also applied her research to develop expert testimony in litigation involving brand perceptions.

How do perceived contradictions in a business’s socially conscious positioning pose a risk of harm to its brand?

Unsurprisingly, an event that drives a wedge between brand identity – or what a brand aspires to be – and brand image – or how a brand is perceived – can result in harm to a brand. There are many examples. For example, there are reports that The Ellen DeGeneres Show left the air in part because allegations of bullying directly contradicted Ellen’s “nice” on-air persona.

The potential for harm can be significant enough to pose a litigation risk. Some companies that make ESG criteria [Environmental, Social, and Governance] – which are standards related to the ethical impact of a company – a core part of their values may face shareholder lawsuits if there are actions, real or perceived, that contradict these values.

Other disputes centered around events that create or widen a gap between brand image and brand identity may also wind up in court, especially when a company targets a product or service offering to specific consumer segments or demographics. So, for example, a clothing manufacturer or a food producer may tout socially or environmentally responsible sourcing practices.

Can you give us an example of how these types of issues might end up in litigation?

As we know all too well, the #MeToo movement held any number of formerly powerful people to account for sexual harassment and abusive conduct. So let’s say a company that has worked hard to foster a socially responsible brand terminates a senior executive for cause following allegations of harassment. While the company might feel its actions were necessary in order to protect its reputation with both customers and suppliers, the employee could end up suing for wrongful termination.

In a case like this, a judge or jury will need some way to objectively evaluate the different harms being claimed. This is the type of case where I’ve found a branding framework that I developed in my academic work to be especially useful.

What is your framework? How have you applied it in litigation?

I have, in fact, been hired on engagements that have revolved around the question of termination of employees who were facing allegations of bullying or harassment. In such matters, I have used my branding framework to opine on the ways that allegations about an employee’s actions can put the employer’s reputation at risk.

Essentially, I use the framework to evaluate how well a company’s brand identity (what the brand aspires to be) aligns with its brand image (how people perceive the brand). This branding framework can be used to assess the degree to which consistency on the two dimensions, identity and image, increases a brand’s credibility and builds strong brand equity over time, or conversely how having them be at odds undermines brand value.

So, for example, a company may claim to be socially conscious, and may even be working very hard to raise awareness internally on discrimination or other socially relevant topics. The question of harm comes into play if the external perception of the company is inconsistent with its intent and practices. In fact, a socially conscious company can be at risk of harm to its brand in ways that would not exist had it remained agnostic on social issues.

This could happen if an employee’s alleged behavior is seen to be the antithesis of the employer’s carefully crafted and maintained brand. The company may even actively promote its socially conscious values through its mission statement, policies, training, and sponsorship of employee affinity groups or support of certain nonprofits. The public perception may then be reflected in various surveys, testimonials, and social media posts.

By examining these types of records, I can assess whether a company’s brand identity and its brand image are closely aligned. If they are, then the company’s positioning is credible and has a high brand equity, and allegations of serious misconduct against an employee may threaten to disrupt that alignment.

Does brand misalignment manifest itself in other ways?

Yes, for example, in cases like Ehlers v. Ben & Jerry’s Homemade, as well as a shareholder derivative suit that the Employees’ Retirement System of Rhode Island filed against Pinterest. While I was not involved with either case, in both of them the issue of harm can be examined through the lens of whether the companies’ brand images were misaligned with their brand identities.

 

The issues at the heart of Pinterest were similar to those cases I have worked on. Shareholders had sued Pinterest over the behavior of its executives, alleging that they ignored claims of discrimination based on race and sex, and consequently “the company’s financial position and its goodwill and reputation among its largely female user base (which Pinterest’s success depends upon) were harmed and continue to be harmed.”¹

A different example would be Ehlers v. Ben & Jerry’s Homemade, in which a proposed class sued the ice cream maker for using “happy cows” and “Caring Dairy” representations on their packaging, allegedly leading consumers to pay more for these products because they appeared socially responsible. The plaintiffs claimed that the labels misrepresented the company’s actual sourcing practices.

Although ultimately the charges were dismissed, Ben & Jerry’s ended up changing its label to be more in line with its practices. Essentially, for this particular product the company elected to modify its packaging and, in some sense, tweak messaging that could potentially influence its brand image rather than change its supplier.

What other risks might a socially conscious company face in trying to keep brand identity and image aligned?

For one, these kinds of socially conscious businesses have a heightened need to maintain control over their brands. For example, in another case I’ve read about, Cosmetic Warriors sued Pinkette Clothing over alleged trademark infringement for Pinkette’s use of the LUSH brand, which Cosmetic Warriors claimed was aligned with “environmentalism, humanitarianism, and philanthropy.”² Cosmetic Warriors said that the potentially infringing use of its LUSH brand risked undermining the ethical image it had cultivated over the years.

Although Cosmetic Warriors [CWL] ultimately was unsuccessful, the appellate court did find that an infringing use of the LUSH brand “harms CWL by diminishing its control over its brand. CWL markets itself as a socially-conscious and environmentally-friendly company, and Pinkette’s infringing use undermines CWL’s control over that message.”³

How would you operationalize this type of brand analysis?

There are several ways to translate my branding framework into a quantifiable measure of harm. For example, in cases where a disclosure or a news leak contradicts a company’s socially conscious positioning and risks harming its performance, I could run an event study, which is an econometric model that allows me to determine if there is an impact by an event on company performance. By comparing sales data, such as Nielsen or IRI data, before and after the event, it may be possible to isolate the impact of that event on sales after controlling for other market factors.

In cases similar to the Ben & Jerry’s case, where a product label claiming ethical practices was allegedly misleading, I could determine whether or not the at-issue label would have a material impact on purchase intent by fielding an online survey asking respondents to determine their intent to purchase on a probability scale in a test-and-control setting. Many times, the price premium consumers are willing to pay – or not – for these socially conscious labels can be measured using experimental techniques.

These are just a few examples of potential analyses, but the appropriate approach will ultimately depend on the assignment, the at-issue allegations, and whether the analysis is from the perspective of a plaintiff or a defendant.

Given all these risks, what factors should a brand consider when weighing socially conscious positioning?

Despite these risks, socially conscious positioning offers benefits not only to society, but to the companies themselves as well.

For example, I have analyzed how brands’ commitment to supporting refugees affects consumer perceptions both in the US and in Europe. Overall, we found that brands benefit from helping refugees – our research shows that, in general, consumers are more likely to buy from brands that support refugees (and by extension, likely other humanitarian causes).⁴

Although social positioning can expose a brand to risks not faced by more agnostic brands, the risks can be avoided by making sure the brand identity of the company aligns with its brand image, which in turn allows the brand to enjoy the benefits of that positioning. ■

 

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Sources

1. Complaint, The Employees’ Retirement System of Rhode Island, derivatively on behalf of PINTEREST, INC. v. Silbermann et al., United States District Court Northern District of California San Francisco Division, Case No. 3:20-cv-08438, November 27, 2020, at 1.
2. Complaint, Cosmetic Warriors Ltd. v. Pinkette Clothing, Inc. et al., United States District Court Central District of California, Case No. 2:19-cv-00534, January 23, 2019, at 9.
3. Pinkette Clothing, Inc. v. Cosmetic Warriors Ltd., United States Court of Appeals, Ninth Circuit, Case No. 17-55325, April 12, 2018, at 12.
4. Erdem, Tülin, et al., “How Helping Refugees Helps Brands: Europe,” Tent, June 2019, available at https://www.tent.org/resources/helping-refugees-helps-brands-europe/; Erdem, Tülin, et al., “How Helping Refugees Helps Brands: United States,” Tent, December 2018, available at https://test-tent-site.pantheonsite.io/wp-content/uploads/2018/12/TENT_HowHelpingRefugeesHelpsBrands_Report_FINAL.pdf.