Markenartikel 10/2022 – Gutes tun und erfolgreich sein (German)


Three Dimensions of Brand Purpose: Creating Value for Shareholders, Customers and Third Parties


Consumer Perception of Brand Purpose and the Effect on Brand Success

“Purpose beyond profit” seems to have taken a front-row seat in many brands’ strategic thinking. However, whether a purpose beyond profit can actually improve brand performance is still an open question. Partially, the lack of a satisfying answer hinges on missing approaches to objectively conceptualize and assess brand purpose.

The German Supply Chain Act became law on January 1, 2023. It obliges companies to not only adapt their own business activities to ecological and social standards but to also comply with these standards along their supply chains. In addition to binding laws, there sometimes appears to be an intrinsic motivation to conduct business in a fair, sustainable, and responsible manner. In brand management, the purpose of a brand has become a central issue in recent years. Obviously, it is no longer enough to strive solely for profit. But it is much less obvious how such a purpose beyond profit can be conceptualized and empirically assessed. NIM has done pioneering work to solve this conceptual problem.

Key Findings

  • Purpose remains an important topic in brand management, but its conceptual and empirical treatment has so far been unsatisfactory.

  • Financial success, customer benefits, and third-party effects are the fundamental dimensions of brand purpose.

  • Financial success is perceived as the most important purpose dimension, while third-party effects are perceived as least important.

  • Brands that consumers perceive as focusing more on the impact their business activities have on third parties perform better.

Three Dimensions of Brand Purpose

NIM researchers have identified three dimensions in which brand purpose can be classified. A brand’s purpose can be conceptualized in terms of the importance assigned to each purpose dimension.

  • The first dimension concerns the financial success of the organization, essentially covering the traditional shareholder value approach.
  • The second dimension involves the customers as another group of stakeholders and focuses on the benefits a brand provides for them.
  • The activities of a brand not only have an impact on the organization and its customers but also on third parties. These externalities can be both negative (for example, environmental pollution) and positive (for example, providing services to the community) and represent the third dimension of brand purpose.

In the second step, the research group developed a questionnaire to empirically assess brand purpose. The questionnaire contained a selection of goals (each corresponding to a purpose dimension) for which the test subjects (n = 1,531) were asked to indicate how important they deemed these goals for a given brand. From the subjective impressions, the perceived purpose of more than one hundred brands was determined. The results confirmed that the newly developed measurement instrument has excellent psychometric properties and is therefore well suited for measuring perceived brand purpose.

A Clear Hierarchy of Dimensions

The studies showed that consumers see a clear hierarchy between the purpose dimensions. Financial success was seen as the most important dimension for almost all the brands studied, followed by customer benefits. Third-party effects was perceived as the least important purpose dimension. Moreover, brands perceived as more profit-oriented were perceived as less concerned with third-party effects. At the same time, brands that focus on the benefits for their customers tend to be perceived as also caring about the welfare of third parties.

Is Doing Good Also Good for Business?

With the systematic classification of brands in terms of their purpose, it is now possible to answer the initial question of whether doing good – in the sense of taking into account third-party effects – is also good for business. Therefore, the net promoter score (NPS), which is considered a key indicator for brand performance, was assessed for one hundred brands as well as their perceived purpose. The result: Brands that consumers perceive as focusing more on the impact their business activities have on third parties tend to have a higher NPS. This tentatively suggests that it economically pays off to design business models that are socially and ecologically sustainable.

The newly developed measure for brand purpose can certainly be used in further scientific investigations of the antecedents and consequences of brand purpose. It could also be useful in practice, for example, when evaluating the effectiveness of various branding strategies or for analyzing brand positioning in a competitive environment. NIM plans to supplement the explicit measure developed here, with implicit procedures for measuring the perceived brand purpose, and to further validate it using additional indicators of brand performance.