The Scrooge Effect

bad scrooge

I read The Economist, and I generally agree with their
point of view, especially on matters of business and finance. A couple
of months ago they did a special report on corporate social
responsibility, and they began by asserting the classical position that
a public corporation has no business pursuing any goal beyond
increasing shareholder value. I understand the principle–that the
shareholders, not managers, should decide how to spend the profits of
the corporation–but in my daily practice of looking at companies and
brands through the lens of story, I find almost the opposite to be
true. My experience suggests this:

A company that seems to have no purpose other than
making money for its shareholders will have an increasingly difficult
time making money for its shareholders.

This observation raises a very interesting question for me: Are
concerns about purpose or mission simply a part of the marketing and
public relations function–a way to wrap a mask of public interest
around a core of disinterested financial calculation–or is there a
deeper and more strategic connection between brand purpose and the
pursuit of shareholder value?

The way I see it, marketers are eager to develop a connection
between their brands and their customers that feels authentic and
emotionally compelling. Such a relationship is the only way to command
loyalty, and loyalty leads directly to lower selling costs and premium
pricing. For their part, most customers have no trouble understanding
that a company has to have a money story–a way of acting in the world
that generates profit and allows the company to survive and grow. But
the money story is not the place where customers are likely to connect
with a company or brand emotionally. The money story is all about the
rational transaction–the cost/benefit analysis. A company that seems to
have no purpose in the world other than to make money for its
shareholders will consequently fail to develop a deeper relationship
between its brand and its customers–and in today’s highly fractured
markets filled with an abundance of high-quality choices, that kind of
failure is likely to have a serious impact on the bottom line.

In the world of story, a character who pursues money for its own
sake is generally the villain. Ebenezer Scrooge is archetypal. The
essence of the Scrooge character is that he has no emotionally
satisfying relationships with anyone because everyone understands that
he loves only money. We call it “the Scrooge effect” when a brand’s
audience begins to suspect the same about a company.

Wal-Mart is a really interesting case in point. Sam Walton was a
driven, competitive individual who channeled his ambition into bringing
the material attributes of the good life to small communities that were
underserved and overcharged. He built the company around a very
compelling story powered by the conflict between service and
leadership. At its beginnings, and for many years after, Wal-Mart
seemed a kind of scrappy underdog character. But after Sam died and the
company became the largest retailer in the world, the service energy in
the story slipped away, and for a while the company seemed to be driven
by the idea of success for its own sake. From a story point of view, it
is not surprising that Wal-Mart seemed to transform from an underdog
into a bully, emerging as Scrooge in the larger category story.

In the past year and a half, Wal-Mart has made huge efforts to
recapture its role in the retail category as a “servant leader.”
Starting with a clear articulation of its story framework, Wal-Mart has
embraced the conflict in its story, used that story to find a sense of
purpose, and made strides on many fronts to bring that story to life in
everything the company does. As a result, in a very difficult economy
Wal-Mart’s stock price hit a 52-week high on May 1, up nearly 22
percent since the beginning of the year. And more important for the
long term, Wal-Mart has positioned itself to pick up market share
during the economic downturn and hold on to it as conditions improve.

I suspect that an intuitive awareness of the connection between the
character of a company and its profitability is behind the surge of
interest in brand purpose and the attention being paid to the nature of
the relationship between a brand and its audience. Of course purpose
and relationship are the province of story. Trying to find a larger
purpose and establish a meaningful relationship using the current
metaphors of marketing–war and science–is tackling the problem with the
wrong tools. Such an effort seems likely to end up as an exercise in
“taking the bird apart to see what makes it fly” unless the process is
firmly grounded in a deep, strategic understanding of the metaphor of

If you are responsible for building a brand, one way we’ve
discovered to approach purpose and relationship is to think of your
category in terms of story and ask yourself, what role does my brand
play in that story? What kind of character is my brand? What is its
objective? And how does it act in the world in order to achieve its
objective? That’s where you begin to get at an authentic purpose–the
thing (over and above making money) that the brand exists in the world
to do.

good scrooge

Most people remember Scrooge the miser–just as many people still think of Wal-Mart as the bully. But by the end of A Christmas Carol,
Scrooge found enlightenment and re-engaged with the world in an
authentic and compelling way. Wal-Mart, for its part, has done a lot
recently to embrace its conflict and find ways to live a more authentic
and compelling story. And its shareholders have a lot to be thankful
for as a result.

So, are having a higher purpose and increasing shareholder value the
same thing? Not exactly. But it’s clear that they are becoming more
powerfully connected. It’s also clear that the conflict between them is
the kind of conflict that might connect a brand to its audience and
power an emotionally compelling story.