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Tuesday, April 13, 2010

Societal Marketing: Mcdonald's

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Societal marketing: McDonald's
Business executives are often perplexed by the continuous expansion of society's expectations of corporations. For example, in the corporate world, numerous laws and extensive government regulation affect virtually every aspect of business activities. They touch "almost every business decision ranging from the production of goods and services to their packaging, distribution, marketing, and service" (Carroll, 1979, p. 98). Thus, not only are companies held responsible for maximizing profits for the owners and shareholders and for operating within the legal framework, they are also expected to support their employees' quality of work life, to demonstrate their concern for the communities within which their businesses operate, to minimize the impact of various hazards on the global environment, and to engage in purely social or philanthropic endeavors..

Among researchers, this issue has provoked an especially rich and diverse literature investigating the role of business in society. Research in this area has followed two major streams. The most popular of these studies have focused on the relationship between a firm's social responsibility and its financial performance (McGuire, J., Sundgren, A., & Scheeweis, T., 1988, p. 858). The other stream of studies has examined the effect of board members' demographic and non-demographic characteristics on their individual corporate social responsiveness orientation (Wood, 1991, p. 389).
Since the societal marketing involves some kind of corporate response to social demands, the first step is to identify and classify the numerous social needs. There are three categories of such needs. First, survival needs consist of the various needs that are necessary for individual members of the social segment to survive, such as food, shelter, and the preservation or restoration of one's health.
A second category is concerned with safety needs. These are the needs that are necessary to protect the members of the social segment from external and internal threats. Not only do nations have defense establishments for protection from external threats, but they also enact and enforce laws to protect individuals and groups from others in society. Such laws cover numerous areas ranging from environmental protection to safeguarding individual liberties.
The third category is composed of various growth needs which, in turn, can be broken down into material needs and spiritual needs. The former are concerned with the enrichment of the social segment through economics (the allocation of limited resources) and technology (the use of tools and techniques to generate wealth). Spiritual needs are related to the spiritual growth of the social segment; they include metaphysics, education, science, arts, and entertainment.
Social segments expect different agents to fulfill these needs. These agents can be an individual (e.g., a parent who supports a family), a group (e.g., political parties and interest groups who represent their members), a business organization (e.g., a corporation which supports inner city revitalization), a not-for-profit organization (e.g., a hospital that provides services to the community), and government (e.g., for protection from external threats). Both the type and extent of the needs to be fulfilled and the agent who is expected to satisfy these needs will depend upon the social segment's culture and ethics, the legal environment, and the degree to which the members of the social segment perceive that such needs are not fulfilled.
As a key member of society, a corporation should take into account the societal needs that are expected to be met by business. These needs constitute a social demand. Thus, social demand incorporates not only demand for a firm's products and services, but also extends to the fulfillment of other societal needs. With this framework in mind, it can be stated that the scope of a business organization, i.e., what products and services it provides, is determined both by the organization itself and by society's expectations. In other words, it can be said that a given firm operating in two different social segments has, in effect, two different scopes. Failure on the part of an organization to understand and satisfy the various demands of the social segments within which it operates will lead to its rejection by society and its eventual demise. Consequently, a firm's mission and objectives should not only address traditional organizational concerns such as profitability and markets served, but should also be concerned with determining and meeting various societal expectations.
One of the aspects of the societal marketing includes alliances that have arisen between environmentalist groups and businesses in the last decade. The new relationships have been described as path breaking and innovative (e.g., Long & Arnold, 1995; Wasik, 1996). Typically, they are distinguishable from the prior charitable (e.g., donations to or sponsorships of environmental causes) and commercial relationships (e.g., calendars, T-shirts produced for environmental groups) because they engage the expert knowledge of the environmental group and involve it, to varying degrees, in joint problem solving or strategic decision making with the corporate partner (Clair, Milliman, & Mitroff, 1995, p. 188). In this category are green product endorsements, audits by environmental groups of business programs or practices, and joint projects of the type engaged in by green alliance between McDonald's and Environmental Defense Fund, where the corporate partner's business practices are evaluated and improved according to ecological criteria.
Green alliances also function rhetorically in a more complex way than traditional business-environmentalist relationships. Here I follow Levy who has pointed out that environmental management - that is, corporate practices to reduce the ecological harm of economic processes - serves symbolic and political purposes by helping to construct business as green and thus to legitimate its role as manager of the natural environment (1997, p. 127). Green alliances, a strategy within corporate environmental management, also have symbolic and political value - for both partners. The corporation borrows not only the environmental expertise, but also the credibility, of the ecology group, which by its allegiance implicitly or explicitly endorses company actions - e.g., producing earth-friendly products and services or operating in pollution-free ways (Ottman, 1994, p. 86). The partnership also brings corporate actors into the group of those to be entrusted with the work of saving the earth.
McDonald's is the leader of the fast-food industry, with worldwide operations employing approximately 500,000 people in 11,000 restaurants and serving 22 million customers a day. At the time Environmental Defense Fund (EDF) approached McDonald's, its entanglement in controversy over its packaging frustrated the company. From EDF's perspective, McDonald's leadership position, its problematic history of waste management, and the iconic value of waste management as an environmental issue made the company an attractive candidate for partnership. EDF saw significant opportunity for both environmental action and a major, high visibility, opportunity to test its innovative approach to environmental problem-solving through corporate partnerships.
With environmentalism on the rise among the general public in the 1980s, consumer-driven businesses were particularly subject to and sensitive about public pressure (Livesey, 1993, pp. 2-4). Plastic had been demonized by several environmentalist organizations including the grassroots groups Greenpeace and CCHW. The use-and-dispose philosophy at the core of McDonald's business and its distinctive plastic clamshell sandwich boxes, which helped to make the company one of the largest single users of polystyrene in the United States, had made McDonald's a continuing target of ecology groups (Livesey, 1993, p. 4).
Throughout the late 1980s, McDonald's instituted and publicized a number of environmentally positive steps in its domestic operations. It reduced consumption, for instance, by using lighter weight paper in straws, paper bags and other items and recycled paper and cardboard packaging. In 1987, it switched from polystyrene (used for the clamshells) blown with CFCs, the family of chemicals which destroy the ozone layer, to plastic foam that used hydrocarbon blowing agents (Annual Report, 1989, pp. 10-15). In 1989, the company instituted a pilot program in 450 New England stores to recycle its plastic clamshells (Livesey, 1993, pp. 12-14). In April, 1990, it committed $100 million, or one quarter of the company's annual building and remodeling budget, to buy recycled materials for restaurant construction, remodeling, and operations under a program called "McRecycle" (Livesey, 1993, pp. 13-14).
In 1989 and 1990, McDonald's bolstered its environmental management practices with a proactive public relations campaign. The centerpiece was the 1989 Annual Report, which highlighted the issue of the natural environment. McDonald's also offered in-store flyers to educate customers about the company's environmental management practices, policies, philosophies, and positions on particular issues such as rainforest beef and the ozone problem. Brochures on environmental topics, including packaging, were available from its public relations department. In addition, McDonald's worked with several different environmental and nonprofit groups (e.g., the World Wildlife Fund and the Smithsonian Institution) to coproduce elementary school materials on the environment.
McDonald's 1989 annual report represents an aggressive attempt by the company to manage the public discourse around the company's role as an environmentally responsible corporate citizen and construct itself as green. The report belongs to the category of epideictic advocacy, the discourse of praise and blame that is commonly used to establish or consolidate value premises, especially in corporate issue management campaigns; such discourse often serves as a basis for later persuasive efforts (Cheney & Vibbert, 1987, p. 183). Epideictic rhetoric works by building on shared premises and borrowing from values and beliefs embedded in the common culture. In this case, given the new ecological awareness of the public, McDonald's positions itself as having concerns ecological and practical, social as well as economic.
As described by the media, the 1989 Annual Report looks "more like an Audubon Society brochure than a financial statement" (Horovitz, 1991, p. D2). Nature pictures, poetry, and quotations from national and international figures prominent in the environmental movement (e.g., Gro Brundtland) are interspersed throughout the report, along with product and financial information. The cover contains a four-page foldout picture of the Northwest American forest with a quotation from Chief Seattle about man's proper relationship to the earth. The report itself is "dedicated" to a "discussion of the [environmental] challenges which lie ahead" (McDonald's Annual Report, 1989, p. 2). The discussion is contained in a 10-page supplement.
The themes of dialogue, rational discourse, pragmatic solutions, the value of individual effort, and stewardship or shared social responsibility for the earth that are played out in the supplement are initially articulated in the shareholders' letter. This letter is as notable for what it omits as for what it says. It at once implicates the reader, inviting dialogue, and yet leaves the situation ambiguous, particularly vis-a-vis the company's responsibility and intentions.
The supplement contains several distinct parts: an answer to a letter from Dan Getty, an 11-year-old boy who calls for responsible action from McDonald's (Annual Report, 1989, pp. 7-8); a general outline of McDonald's philosophy and historical commitment to "responsible [environmental] conduct," including company founder Ray Kroc's mandate to crews to clean up litter near McDonald's restaurants (p. 9); three sections addressing facts and expert opinions about solid waste management, resource conservation, and recycling (pp. 10-15); and a collective call "to Help [sic]" in solving the challenge of the environment (p. 16).
The letter of response to 11-year-old Dan Getty illustrates several of the rhetorical strategies McDonald's uses to achieve a symbolic identification with its customers and the general public. First, McDonald's constructs itself as a naive, non-expert, and innocent individual actor. Like Dan Getty and "people of all ages," McDonald's is "asking questions about our environment" and learning that the answers to environmental issues are "complex" (Annual Report, 1989, p. 7). It eschews inaction in the face of complexity: "It's easy for each of us to claim we're not responsible for these complex forces. But then we have to ask, 'Who is?' "(p. 8). At the same time, it sounds a cautionary note: It is important "to do what is environmentally sound, when the responsible course of action becomes clear" (p. 7). Who or what will provide clarity leading to action is left ambiguous.
Second, McDonald's positions itself as one of a community of stewards of the earth: "Each of us, knowing what we have at stake, must make a commitment to a course of action that will preserve and enhance the environment we hold in trust for future generations. . . . You can count us in" (p. 8). Through appeal to the words of Gala theory originator James Lovelock - "It's personal action that counts" (quoted in McDonald's, 1989, p. 8) - and founder Ray Kroc's dictum - "None of us is as good as all of us" (quoted in Annual Report, 1989, p. 8) - the boy's call for help from McDonald's is transformed into a call for everyone to act. The actions and identification that it invites are personal. Identifying with its customers, McDonald's asks that they identify with it. McDonald's puts itself on a level with the 11-year-old. Thus, through rhetorical sleight, of-hand - in Cheney's (1992) words "the sheer juxtaposition of images . . . as a substitute for reasoned discourse, for argument" (p. 174) - McDonald's equates natural persons with the corporate persona, and power differences - the differences between producer and consumer, corporate giant and small child - are made to disappear: The people at McDonald's, no different from people everywhere, must act to save the earth. Of course, at one level, McDonald's people are like people everywhere and, like them, probably hold a range of opinions about the problem of the natural environment. However, at another level and at the same time, McDonald's people constitute a corporate body.
McDonald's defends its environmental record by listing specific actions that it has taken to manage waste and conserve resources by reducing, reusing and recycling materials. It cites experts who support its position on plastic packaging and who point out the small contribution of the entire quick-service restaurant industry to America's waste. It also criticizes "the 'Not In My Back Yard' syndrome - or NIMBY" (for instance, people in McDonald's communities who opposed company incinerators in their neighborhoods) as posing barriers to responsible waste solutions (Annual Report, 1989, p. 11).
Also, McDonald's emphasizes individual personal action: Plant a tree, switch off a light, recycle a clamshell. Yet, it also describes itself as a proactive corporate actor looking for opportunities to work with individuals, public officials, and other companies, as well as with the communities we serve.
The more McDonald's constituted itself as "green," the more it was required to accommodate environmental issues affected by its business practices. McDonald's attempts at recycling, resource reduction, incineration, and the like were not simply symbolic. The company was both the subject and the object of its own eco-discourse. The emerging storyline it constructed had positive environmental effects at the material level, in addition to opening the company to potential dialogue with EDF.
In April 1991, the McDonald's-EDF joint task force released its final product, a corporate waste reduction policy and a comprehensive waste reduction action plan with 42 initiatives. Many real environmental improvements were generated by the task force. For instance, environmental criteria were integrated into corporate packaging decisions which before had been driven by quality and cost criteria (see McDonald's Final Report, 1991). The media mostly praised the results of the alliance (Reinhardt, 1992, p. 14), and the story was recycled over several years (e.g. Gutfeld, 1992). Ultimately, the partnership entered the green business literature as a milestone marking a change in the relationships between business and
environmental groups (Long, F. J., & Arnold, M. B., 1995, p. 80).
Thus, McDonald's steps in managing environmental issues are the examples of societal marketing. People become increasingly aware of the damage that can be caused to the environment by products, packaging, by-products and production processes. They may gradually learn to adopt more environmentally friendly products and, in particular, reject throwaway products. Green issues are increasingly seen as important by consumers and this is being reflected in the types of products consumers want to use. Organizations have to change the nature of their products to meet these requirements. Many companies appear to possess a social conscience or see the benefits of meeting the demands of green issues; this is the case with McDonald's.
The belief that environmental responsibility is now a corporate function is based on research indicating that consumers want such changes and will theoretically repay industry investments by accepting higher prices. In a survey by Dagnoli (1990), 82% of the respondents claimed to have changed their purchasing decisions because of environmental concerns. Seventy-seven percent of those surveyed also reported that a company's environmental reputation influenced their choice of brands. Environmentalism is enough of a concern that 78% of the respondents said they would switch to an environmental container if it were priced 5% higher than a less-environmentally friendly container. Another 47% said they would pay as much as 15% more for environmental packaging.
Businesses currently involved with the environmental movement have noticed the increasing number of markets influenced by environmentally concerned consumers, and naturally are hoping this trend can boost their companies' long run profits. Proactive companies like McDonald's are attempting to take leadership roles in the area of environmentally friendly products in order to gain a competitive advantage (Smyth, 1991, p. 70).
For McDonald's, environmental marketing has become one of the primary societal marketing tools. Although much confusion still exists concerning the specifics of green marketing, one thing that has been learned is that consumers will not always pay more for green products (Winski, 1991, p. 3). Despite consumer claims to the contrary, the initial sales of environmentally friendly products and packaging have been slow (Reitman, 1992, B1). Recent trends indicate a lack of willingness to actually pay premium prices for such products (Wasik, 1992, p. 17).
Thus, today's market for environmentally-friendly goods is greater than ever. To capitalize on this movement, managers and marketers, as McDonald's case shows, must promote the environmental benefits of their products and maintain prices in a range near that of their competitors that do not emphasize environmental concerns. Promoting the environmental friendliness of products will be most attractive to some customers, while attributes aimed at convenience will be attractive to others. Although these aspects of the product mix are important, competitive pricing of environmentally-friendly goods may be the key to capturing a significant market share. Once high market shares are reached, cost reduction programs should allow producers to increase profit margins from green products.

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