Thursday, April 24, 2014

The Upside Of Anger: The ROI Of Telling Some Customers To Shove It

Sometimes, it pays to tell some customers to shove it.
Photo: Jelle/Flickr
In the last six months, the internet has exploded with positive, affirming depictions of America's rich social, cultural, and racial diversity. The internet has also simmered with negative reactions to those ads, with invective and vitriol flying at brands on social media.

Some brands, like Honey Maid and Chevrolet (below), owned it. For others, bravery is more elusive.

Damage control tends to focus on how to calm the angry, on how to make sure they aren't so mad that they stop buying.

But how many customers might a brand gain by effectively telling some customers to just shove it? Is there an "upside of anger"?

Quantifying The Upside
During the Sochi 2014 Opening Ceremonies, Chevrolet ran a commercial for the new Chevy Traverse that featured gay dads, among other diverse couples. Predictably, the company came in for some vocal criticism on social media and blogs.

According to Pew, as of March 2014, 54% of Americans are in favor of same-sex marriage and 39% oppose it (the rest don't know/have an opinion).

But the distribution of that support is very uneven: 68% of millennials (18-33) are in favor of gay marriage (including 61% of young Republicans), 55% of Generation X (34-49), 48% of Baby Boomers (50-68) and 38% of the so-called Silent Generation (69-86).

But generation size matters a lot. After all, how many people is this? 

In America, there are about 79 million Millennials, 70 million are Generation X, and 79 million Baby Boomers (source). Almost all of these folks are still alive. The "Silent Generation", those 50 million "lucky few" born during the Great Depression, are approaching, or at the end of, life expectancy. About 41 million of this generation are still alive.

This means that gay marriage is supported today by about 54 million Millennials, 39 million of Generation X, 38 million Baby Boomers, and by about 15.5 million of the Silent Generation. In other words, same-sex marriage is supported by roughly 147 million adult Americans, 89% of whom are still working.

Of the about 123 million Americans who oppose gay marriage, more than 25 million are effectively retired. Just 98 million (or about 80%) are still working and buying cars. But of those still working, some 41 million - or 42% - are Baby Boomers, who are themselves at or nearing retirement. Just 32 million are of Generation X, and only 25 million are Millennials. 

This means that within 20 years, the vast majority of those currently opposed to gay marriage will be out of the labor force.

The Math Is Clear
Americans buy about 10 new cars in their lifetime. So, assuming you get your first new car at 16, that works out to something like one new car every six years. 

Taking the mid-point of each generation, it's fairly safe to assume that Millennials will buy nine more cars in their lifetime, Generation X will buy another six, Baby Boomers might purchase three, and the Silent Generation will buy only, at most, one more new car. 

This means that those opposed to gay marriage today will probably buy no more than 565 million new cars. 

But those in favor of gay marriage today can conservatively be expected to buy about 850 million new cars over their lifetime - 50% more than the anti-gay marriage group.

Where brands should stand on same-sex marriage should now be obvious.

So, What About Chevrolet?
But isn't it better to anger no one, and sell cars to as many people as possible? Certainly, but emotions cut both ways. What angers one customer, might entice another.

In 2013, carmakers sold 15 million cars new in the United States.

Now, for the sake of our argument, let's say that Chevrolet's Traverse ad angered a huge proportion of the population opposed to gay marriage - say 5% of the total, car-shopping population -  and made them so angry that they refused to consider a Chevy this year. That works out to about 750,000 vehicles not sold by a Chevy dealer near you (this assumes that every one of these people would have eventually bought a Chevy, which is, of course, unrealistic).

But of those 750,000 cars, about 157,500 would have been bought by people buying their last car, and another 247,500 by Baby Boomers buying one of their last three new cars. Generation X car buyers could be expected to buy 195,000, and Millennials just 150,000. Assuming these people are so mad that they never consider Chevy again, this ad resulted in Chevrolet forfeiting a maximum of about 3.42 million potential future lifetime sales.

Now let's assume that the ad caused 4% of car shoppers to consider a Chevy (remember, 8% of Americans - and car shoppers-  are LGBT). That's 600,000 potential sales that are a net gain from the ad.

Statistically, about 222,000 of these sales would be to young Millennials, 162,000 to Generation X customers, 156,000 would be to Boomers, and just 66,000 to the Silent group. Projecting into the future, this means that the ad generated a maximum of 3.50 million potential future lifetime sales.

Then There's History
So, based on our (very conservative, very broad) set of assumptions, brands have everything to gain and nothing to lose by embracing diversity. The immediate sales impact is effectively a wash (actually slightly positive), and the long-term gain is undeniable. Also:
  • Those most opposed to same-sex marriage are quickly moving into a low consumption phase of life, and there's no reason to assume that the generation following Millennials will be anything less than totally accepting of same-sex marriage. 
  • The widespread legalization of gay marriage, which looks likely to happen within this generation, will mean that depictions of gay couples in ads will be non-controversial. However, this also means that these depictions won't generate much positive consideration in the future either. It will just be the way it is.
  • Boycotts have a very poor track record of success, so my assumption of 5% negative reaction is probably very high. It's even less likely that a young customer would maintain this boycott over their entire lifetime.
  • It's also hard to maintain a boycott when every brand angers you. It's easy to fathom a future when all car brands (and all brands) actively court LGBT customers. 
  • On the other hand, there is strong evidence that people buy from brands that align with their values and reflect their families in advertising. Gay and lesbian Americans are estimated to make up 8% of the population (and thus 8% of car buyers in any given year), so a positive 4% consideration might be low. 
In closing, some of the most powerful, endearing ads ever created put a stake in the ground and speak to brands' core values. You're going to make the ad anyway. Be brave.

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