Regulation is a vital means of ensuring high standards and best practice across the board. But while some might be seen as onerous red tape, businesses can’t afford to ignore it, particularly if new rules are linked to matters that their core audience feel strongly about.
If people feel certain limits and thresholds need to be in place, showing resistance won’t play well with them, and customers increasingly want to transact with firms who share a similar ethos and set of values.
It therefore pays for businesses to focus their energies not on opposing new rules, but on responding to them in innovative and eye-catching ways.
This Blue Paper looks at examples of brands that have done exactly this and left no room for doubt that they are positive, forward-looking companies that are keen to catch the mood of their target audience.
Businesses face many obstacles and pressures on a daily basis, and how they cope with these will determine their success and maybe even their survival. A recent government study found that 49% of SMEs consider competition their main barrier to success, while 33% feel held back by late payments. But regulations and red tape were also commonly cited as problems, with 49% identifying this as an issue. Sector-specific regulations were widely cited as being major obstacles, along with changes in tax-related rules and health and safety laws.
The Federation of Small Businesses responded to the findings by saying the listed issues are “all-too-familiar barriers that are acting as a drag on business growth.” Indeed, National Chairman Mike Cherry said these problems come up “time and time again in our own surveys.” As a result, he believes they need to be prioritised if smaller firms are to achieve their full economic potential. But the reality is still that regulation is necessary, and while the business community can lobby policymakers on what form it could take, it is not going away.
With this in mind, perhaps businesses could alter their mindset and see certain rules as a motivation to innovate and drive improvements, so they won’t be affected as much in the future. For instance, the government has given councils the right to introduce a late-night levy on licensed premises, which means they must pay if they wish to serve alcohol after midnight. Naturally, this hasn’t proved universally popular in the pub trade, but some premises have got round it by changing their opening hours and enhancing their daytime and evening offerings.
In other words, instead of simply complaining about the new rules, they have found a way to adapt and make it work for them. In the following section, we will look at a few specific examples of how leading brands and industries have responded to changes in the regulatory environment.
Britvic and the sugar tax
In 2016, then-Chancellor of the Exchequer George Osborne announced that the government would be introducing a tax on sugary drinks. This would raise more than £500 million that would be put towards sports in primary schools and other positive drives to promote child health. Britvic, the company behind the Pepsi, Robinsons squash and Fruit Shoot brands, responded to the news perfectly, saying it is already aiming to cut the calorie content of its drinks by one-fifth by 2020. Chief Executive Simon Litherland said this is “appropriate for the long term as consumers seek ‘better for you’ soft drinks” with less sugar and fewer artificial sweeteners, and means Britvic is “well placed” to deal with the new sugar tax.
While he still expressed disappointment with the government’s plan, arguing that a more holistic approach to tackling obesity would be more beneficial, his emphasis was clearly placed on what customers wanted, rather than how aggrieved he and his business might feel. Mr Litherland added that two-thirds of the drinks in Britvic’s UK portfolio now fall below the threshold at which they would be taxed, showing that it pays to be ahead of the game and in tune with what customers want before ministers get involved.
Dolmio and obesity
Earlier in 2016 Mars Food, the company behind Uncle Ben’s and Dolmio sauces took the highly unusual step of recommending moderate consumption of its products. The firm pointed out that since some of its sauces have high salt, sugar or fat content, they should only be consumed once a week. On the one hand, it was strange to see a company effectively telling customers to buy less of its products. But on the other, it was a clear sign that Mars Food feels strongly about ongoing public health issues such as obesity and wants to play a part in tackling the problem.
By being willing to engage with an issue that could conflict with its core business, Mars might have earned significant goodwill from consumers and health campaigners. Moreover, by showing a willingness to self-regulate, policymakers might be less inclined to impose strict new rules on its industry that might cause difficulties in the future. Fiona Dawson, Global President of Mars Food, Drinks, and Multisales, said: “Our Nutrition Criteria sets a very high standard for our products, and we also want to help our consumers understand the difference between ‘everyday’ and ‘occasional’ products within a balanced diet.”
Mars was roundly praised following its announcement, with Rikki Weir, Director of consumer brand PR consultancy Cirkle, saying the move is “brave”, “innovative” and “rooted in social responsibility,” “It informs consumers and leaves them with the choice of how often they consume the product,” she said. Tam Fry of the National Obesity Forum, also hailed Mars’ stance, saying it is “unusual and imaginative” and shows it is “putting their money where their mouth is” after saying some years ago it wanted to offer healthier products.
Rikki Jones, Director of PR agency GCI Health, added that she’d like to see more of the same across the commercial industry, saying it “most definitely has a greater role to play in tackling consumer food choice and obesity. “The more it can do to demonstrate self-regulation, particularly in the current environment, is only a good thing,” she commented.
Retailers and data protection
The European Union is introducing new data protection regulations, as the old rules were drawn up in an era before broadband, smartphones, social media and all the digital innovations we take for granted today. Under the new system, individuals will have more control over their data and firms must be more open about how personal information is handled. But there are concerns that some industries aren’t doing enough to prepare for the new General Data Protection Regulation (GDPR).
Of course, some will say that with the Brexit vote, complying with EU law doesn’t matter, but the UK is still a member state at present and therefore needs to be prepared. Furthermore, a company doing business in the EU will be expected to comply with the GDPR, even if the UK’s national laws are different.
Chris Combemale, CEO of DMA Group, points out that nearly half of marketers at retail firms believe the new rules will affect them and therefore need to act now, ideally by appointing or hiring a Data Protection Officer. He argued that since data is “increasingly at the heart of everything retailers do to engage customers,” those who are not preparing for the new legislation are “risking the very lifeblood of their business.” Retailers that are proactive in responding to the new legislation will not just be in a better position to protect customers – they’ll also be in line to take advantage of the economic opportunities opened up by digital transformation and big data. And data management is crucial to a brand’s reputation these days, as a firm that suffers a data breach can end up losing customers and see its share values plummet.
So on the one hand we have Britvic and Mars which are positively enthusing about making fundamental changes to their offerings, and on the other, concerns that the retail sector is dragging its heels on adapting to a law that will have a big impact on their operations and wider reputation. Which do you think will feel the weight of regulatory pressure the most further down the line?
What brands can do?
The key to responding to regulatory changes often lies in being proactive and seizing potential opportunities that might open up, rather than viewing new rules as an impediment. And this can be done in many ways.
Gauge customer sentiment
For all the complaints about the sugar tax in the soft drinks industry, it seems consumers aren’t actually against the idea of drinks being reformulated so they are less sugary. Indeed, a study by Marketing Sciences found that 77% of consumers feel manufacturers should do more to reduce the sugar content of their products – up from 72% two years ago. Similarly, the proportion of people saying they actively look for brands with lower sugar content has gone up from 47% to 52% during this time. So while consumers might oppose paying extra for a sugary drink as a result of the new policy, drinks manufacturers can both retain and attract customers by reformulating their product so it doesn’t get caught by the tax, and offering something that’s both more nutritious and more marketable.
Interestingly, public opinion on the sugar tax doesn’t appear to be very strong, with the Marketing Sciences study showing 35% agree with it and 36% are against it. But with two-fifths of respondents also saying they are worried about eating too much sugar, brands could seize this new policy as an opportunity to encourage behavioural change and establish themselves as socially responsible and forward-thinking businesses. Elaine Coppard, Research Director at Marketing Sciences, said: “Many consumers won’t change their habits, so the industry is in the front line to solve the problem.”
Show you care about what people think
Restaurant chain Leon was one company that responded to public concerns about sugar intake by introducing a sugar tax of its own. By charging a 10p levy on sugary drinks, the business expects to raise about £50,000 this year, which will be donated to the Children’s Health Fund. Not only might this encourage diners to pick healthier options, it will “help to improve the damage that has already been done.” Leon says this decision has not been made purely from a business perspective, as it is on a “mission” to make it easier for more people to eat well. As Kirsty Saddler, Brand and Marketing Director at the firm, says: “We should be making a positive difference to people’s health and nutrition and therefore what we may be offering them.”
As we said earlier, being willing to self-regulate on key issues can affect how policymakers deal with them. They might regulate with a lighter hand if they can see you already have an issue in your sights and are working to address it. And it also helps a brand distinguish itself for the right reasons from rival firms and show that it genuinely cares about its customers, rather than risk being seen to be forced to comply with new rules only reluctantly.
Obtain proper regulatory advice
If you are unsure how to respond to changes in rules that affect your industry, make sure you seek advice from a trusted source. A recent government report revealed the smallest businesses obtain regulatory advice from a variety of sources, but said not all this advice is accurate. Companies were found to turn to accountants, banks and HM Revenue & Customs for guidance on tax-related matters, and speak to trade associations on other issues and regulatory changes, if they were a member of any such body. But somewhat worryingly, some of the smallest micro-businesses were found to obtain much of their advice through “informal and non-authoritative sources, such as newspapers and personal networks.”
The report warned that these sources may have fuelled the culture of misinformation and over-compliance, particularly when it comes to health and safety. As a result, it really pays to obtain proper regulatory advice to make sure you aren’t being too overzealous. There’s no need to let misinformation from a seemingly reliable source or a lack of knowledge and understanding make you believe it’s costly and time-consuming to keep up with regulatory changes.
So make sure you find out what free support is available, as the government report showed many businesses are paying for advice when they don’t actually need to. For instance, one business owner was paying a bank £180 a year for regulatory updates that could have been obtained for free from the free to access Business Link website.
The key message to take away is that you need to find out what issues your target audience feel most strongly about, so you can respond proactively before the prospect of regulation rears its head.
Addressing potentially awkward issues independently could help keep the regulators at bay, or at least encourage watchdogs to impose less draconian rules as they know you are able to self-regulate and working in the interests of your customers first and foremost.
If the government or an industry regulator does get involved, you’ll then be in a strong position to show you were ahead of the curve and acting because you wanted to – not because you had to. And that can make all the difference when it comes to standing out in a crowded marketplace and being seen not just a compliant company, but also as a progressive, socially responsible brand.
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