The Unequal Effects of Partisanship on Brands

As an increasing number of executives use their company soapboxes to espouse values unrelated to the businesses they run, they must think carefully about how their actions align with the attitudes of their customers. Companies that engage in corporate activism risk taking stances that reflect the values of their management but alienate key segments of a politically divided customer base. And customers are more divided than ever. In 2004, 49% of Americans held a mix of conservative and liberal positions, according to the Pew Research Center; in 2017, only 32% did. From 1994 to 2017, the average partisan gap increased from 15 points to 36 points. That partisanship carries over to brands, our research and others’ suggests, as more and more consumers prefer to spend their dollars on brands that align with their political values. To better understand how political polarization affects brands, we surveyed 5,881 retail customers with strong political ideologies (Democrats and Republicans) and rated their likelihood to engage in positive and negative word-of-mouth for 45 retail brands. Brands that had a higher-than-average percentage of customers likely to engage in positive word-of-mouth were deemed secure. Those that had a higher-than-average percentage of customers likely to say negative things about them were deemed vulnerable. Brands with some customers likely to be positive and others likely to be negative were deemed dissonant. Those whose customers were unlikely to say anything — positive or negative — were deemed inert. (See “The Politics of Brands” for how the companies stacked up.) Next we mapped those results according to respondents’ political affiliations. We found a relatively low level of agreement between Democrats and Republicans, with their classifications matching for only 16 out of the 45 brands. For example, Apple, Starbucks, and Amazon were secure among Democrats, garnering high positive and low negative chatter. This is not surprising, since many of the activist stances taken by those companies align with attitudes associated with Democrats: Since Tim Cook took the helm at Apple, for example, he has publicly spoken out against religious freedom laws, casting them as discriminatory. In 2016 Starbucks chose not to use explicitly Christian messaging on its holiday cups, and in 2017, CEO Howard Schultz announced the company’s intention to hire 10,000 refugees. Amazon CEO Jeff Bezos granted $33 million in college scholarships to undocumented immigrant high school graduates with DACA status. Among Republicans, however, those three brands were polarized, garnering both high positive and high negative chatter, suggesting that while these consumers may not like the companies’ politics, they value the products and services these companies offer. These categorizations matter. When we looked at the relative increase or decrease in same-store sales compared with the previous period for each of the retailers for which public data was available, we found that some categories do better than others: Average Change in Same-Store Sales Secure: +2.4% Inert: +1.6% Dissonant: +0.5% Vulnerable: -3.1% We also surveyed 2,064 business-to-business buyers, who rated 38 supplier brands. We found more agreement in the B2B space than in retail — Democrats and Republicans agreed on 47% of the brands examined — but we still encountered plenty of divergent views. Consider Coca-Cola. The brand is valued by Republicans and is considered by some to be a symbol of American patriotism. And Coke’s political contributions have tilted in favor of Republicans over Democrats. Our survey shows how this bears out among customers: The brand is secure among Republicans but vulnerable among Democrats. Exxon, by contrast, has called for a carbon tax, a liberal-leaning position. But the company also is seen as a major financial supporter of government policies that maintain or expand drilling activities. Not surprisingly, it is dissonant among customers of both political leanings. As was the case with retailers, we found that B2B companies’ brand classification had clear implications for financial performance. When we analyzed quarterly earnings per share (EPS) and sales growth for the B2B brands, we found that: Average EPS Secure: $0.66 Inert: $0.53 Dissonant: $0.25 Vulnerable: $0.19 Average Sales Growth Secure: 9.02% Inert: 7.97% Vulnerable: 6.61% Dissonant: 4.54% So what does this mean for executives considering taking an activist stance? Our data suggests that they should think carefully about customers’ political affiliations and likelihood to engage in positive and negative word-of-mouth. Actions that push brands into vulnerable or dissonant territory are likely to hurt revenue and growth. Staying out of the political fray allows companies to avoid the risk of alienating customers, but may result in only modest financial performance. It takes a long time for companies to build successful brands, and mega brands have both Republican and Democrat customers. Failure to understand how corporate activism may affect their attitudes is a mistake. The Big Idea Contributors: Kyuhong Han and Jihye Jung are doctoral students at Rice University’s Jones Graduate School of Business. Yixing Chen and Biwoong Im are doctoral students at Texas A&M University’s Mays Business School.

The Unequal Effects of Partisanship on Brands

Partner Center