What is Brand Transparency and Why is it Important?

Author: Helene Edelgarde | Date: July 1, 2022 | Campaign Stage:

According to a Label Insight poll, 94% of consumers are loyal to transparent brands.

In the past decade, marketing has known a lot of changes. We went from a mass consumerism era to connected consumers, educated and sometimes ready to raise their voice on social media or in the streets when a brand goes wrong.

Transparency in business was created in 1933 with Open Book Management - a management approach that communicates the company's strategy and accounts to its employees - and is now essential and used everywhere.

Let's see what brand transparency is, how to adopt it, and its limits.

What is brand transparency?

Brand transparency is about "openness" and honesty towards consumers and employees concerning:

  • How it works: brands have to communicate their prices, incomes, raw materials, management, and values: in short, why and how they do business.
  • Its errors: there is no perfect company, and being transparent in admitting mistakes is the norm expected.
  • Its changes: companies must explain their choice of a new strategy or management policy to establish a trust relation dedicated to reassuring and retaining customers. The ultimate goal is to have a good image.

Nowadays, despite Ferrero's polemic concerning the use of palm oil, this company is the first ranked by WWF. Indeed, the brand Ferrero has been through a business and ethical predicament with palm oil. Numerous consumers boycotted Nutella due to the Palm oil scandal in 2016.

Nutella generates about 2 billion euros yearly, approximately 20% of Ferrero's company sales. Nutella marketing portrays the chocolate spread as essential to a nutritious and balanced breakfast. In 2016, The European Food Safety Authority warned that the use of palm oil could increase cancer risk for consumers when refined at high temperatures; Ferrero went public and guaranteed that its palm oil was safe to eat.

Furthermore, it insisted that replacing Palm Oil with a substitute could be more harmful to the health of its consumers, ending up with a lower quality product. It's interesting that Ferrero uses approximately 185,000 tons of palm oil annually to produce Nutella. Since 2016, the company has been actively engaging with honesty and transparency toward the public.

More and more clients are also worried about the consequences of palm oil production on the local economy and ecosystems. Palm oil farms employ young children in Indonesia or Malaysia that would be better at school. Nonetheless, deforestation and pollution of air and water affect endangered species. Here are essential questions that manufacturers are expected to offer to the public clarity.

Even though every company is unique, there are two significant brand transparency trends: defensive and native strategies.

Defensive Strategy

A defensive strategy is often used by notable brands such as McDonald's, Fleury Michon, or even Nutella to face controversies like using harmful raw materials for the environment and health (ex: palm oil, GMO, pesticides). These brands decided to launch information campaigns about their products to be transparent and thus, to cut rumors off.

For example, Nutella chose brand transparency to get back their customer's stop the "Nutella bashing." They now have a more sustainable supply to prove that it is possible to produce palm oil without deforestation, thus, without affecting the environment.

Native Strategy

A native strategy is primarily used by start-ups and small and medium businesses with a plan of including transparency in their business, starting from their brand DNA.

They answer a social dilemma such as environment, recycling, low carbon footprint, or "body positive." Vinted or The Social Closet endorses second-hand products and are perfect examples of such businesses.

Vinted was created in 2008 in Lithuania when Milda Mitkute had to move out but had a problem: she had too many clothes. She decided to develop an application to sell second-hand clothes with her friend Justas Janauskas. Nowadays, Vinted is an online marketplace that allows people to sell, buy or exchange second-hand products such as clothes, accessories, decorations, games, books, etc.

3 Very Good Reasons to Adopt Brand Transparency

According to a Forbes study, more than 90% of consumers declare themselves influenced by brand transparency when buying. Irish people choose to buy from "brands that think," that is to say, brands that take action for the environment (61%), for example. Moreover, most people need transparency in business.

Yuka, an application created in 2017 that aims to search and assess products, has already charmed 21 million people. There is a strong need for brand transparency in business.

Here are three crucial reasons to adopt brand transparency:

  1. Brands do not control anymore what is being said about them.
  2. Customer expectations have changed. They buy products from brands that contribute positively to society.
  3. Consumers inquire about brands thanks to control and communication tools that can either praise them or tarnish them.

Adopting transparency in business is not a strategy to differentiate yours but a necessity to survive.

According to an Irish Times survey, 75% of Irish people would rather buy locally produced goods than international products. Irish consumers "pay more" "o if a b" and has an appealing image, 57% will buy even if it is more expensive.

How to improve brand transparency?

Even though there is no easy way, and marketing is evolving very fast, some trends about brand transparency in business seem to prove their worth to retain customers, improve their image, and thus increase their incomes.

5 tips to improve brand transparency:

Communicate about personal data storage

For a long time, no one knew what happened to our data: where were they stored? How are they used? Some consumer associations and legislators addressed this issue. In 2016, the European Union voted on the General Data Protection Regulation (GDPR), which compelled brands to be transparent about using personal data.

Taking an explicit stance on this question by guaranteeing collected data security through clear communication is an efficient brand strategy that answers a current problem and shows that the company is avant-garde and trustful.

How much is your data worth? An immense value for companies. Indeed, they sell your data to advertisers, and you become the product.

Explain any price change

The question of purchasing power and inflation is more topical than ever. Consumers wish to understand why the prices of their favorite brands are rising. For example, Netflix sent their subscribers a message of explanation after raising the cost of their monthly subscription. It was done with complete transparency, and their consumers received this price change well.

Involve consumers from the development stage

This co-creation strategy offers an internal view of a company. Consumers are taken seriously, and brand transparency is active through social media, influencers, or even employees who are usually pretty good ambassadors.

For instance, the Waze application created in 2008 by an Israeli researcher Ehud Shabtai was purchased by Google in 2013 and then expanded internationally.

Waze developed a community with the contribution of people. Users can alert others about accidents or almost anything happening on the road, and they can also add pictures and comments to give more details about the situation.

What to do for your business :

  • Offer coherent storytelling: every brand has a story. Its past, creation, and development offer consumers a clear vision of the company's goals. Telling your own story is a reliable and honest way to get people to trust you.
  • Bet on quality interactions: no one wants to be spammed and receive unwanted communication. Having fewer interactions but more qualitative ones by customizing them leads to a trustful relationship with clients. For example, communication transparency can be translated into letting customers choose to receive newsletters, promotions/special offers, and join loyalty programs.

Common Communication Mistakes Brands Should Avoid

Even though brand transparency seems to be well-intentioned and in a wish to apply the current trend, it has its limits:

Green or social washing

Brands that want to rely on the environment or social media at all costs without being correct to their DNA and without any tangible actions have a considerable risk of failure. Wanting to do good is not enough. Customers are not foolish. Frauds are now quickly unmasked by activists like Sea Shepherd, Human Rights Watch, or consumers themselves.

Lack of authenticity

Authenticity is an essential part of successful marketing strategies. However, some brands forget that they are addressing human beings.

According to a new Youth Work's survey, 82% of young people say that they want to avoid fast fashion.

Unquestioningly trust certification labels

In theory, certification labels guarantee a strict and transparent remit/specifications. For example, B-Corp, Fairtrade / Max Havelaar, or Oeko Tex.

However, some of these certification labels have been pointed out by associations like 60 millions de consommateurs in France and the Federal Trade Commission in the United States.

Transparency has a price

Even if you have to pay to adopt brand transparency, we must remind ourselves that it has a price.

With increasing expectations and a lack of legislation concerning the environment or working conditions, companies find themselves right in the middle of a transition, complicated to implement without thinking about it.

Small and medium businesses are the ones that struggle most to face the costs of transparency. For example, for an organic and hand-crafted beer producer, using recycled glass bottles that cost 1$ is more expensive than acquiring some for only 0,15$. Moreover, without the authorities' support, they can't afford recycling equipment.

Some companies work with minimum stocks to avoid waste, like Cruel Pancake or Blk Ink Apparel, but it takes time, creativity, and organization and is still a significant budget.

To conclude, brand transparency has become essential. Nowadays, the values consumers seek are honesty, authenticity, and even commitment. "Tell me what you buy, and I'll tell you who you are" is the new motto of consumerism. As a company, it is necessary to position yourself in this niche by informing yourself correctly to avoid traps.

Author Bio:
Helene is the founder of Ohma Digital, a Marketing Agency and co-founder of the Black Hat, a community about tattoos. Helene is passionate about Marketing and Business. She lives between Dublin, in Ireland, and in Nice, in France.

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