#Expert Insight: US Firms 20 Years Out of Date on Customer Diversity

Diversity, equity, and inclusion have steadfastly risen to the top of corporate agendas in the U.S. and elsewhere over the course of the last few years. From 2022, all 100 of the Fortune 100 companies had clearly-defined diversity, equity, and inclusion (DEI) initiatives outlined on their websites—good news for their workforce, suppliers, and distributors. But what about their customers?

A landmark new study by Goizueta Business School’s Omar Rodriguez-Vila finds that while intra-organizational DEI efforts are robust, many U.S. firms are lagging behind societal reality when it comes to fully representing diversity in their marketplace actions. Rodriguez-Vila finds that in terms of skin type, body type, and physical (dis)ability, actions by the top 50 American brands are a good 20 years behind the current demographic makeup of the country.

Rodriguez-Vila, who is a professor in the practice of marketing at Goizueta, has teamed with Dionne Nickerson of the University of Indiana’s Kelley School of Business, and Sundar Bharadwaj of The University of Georgia’s Terry College of Business, to measure brand inclusivity; a term that he and his colleagues have coined to describe how well brands serve underrepresented consumer communities. Inclusive brands, he says, are those that “enhance consumers’ perceptions of acceptance, belonging, equity, and respect through their actions and market offerings.”

To assess how well some of the biggest firms are doing in terms of this kind of marketplace inclusivity, Rodriguez-Vila worked with a team of full-time MBA and undergraduate students[1] to assess the 50 most valuable brands across 10 consumer-facing industries. Using machine learning and human coders they analyzed these brands’ social media posts on Facebook, Instagram, and TikTok, looking for patterns of representational diversity across four measures: skin type; body type; hair type; and physical ability. Altogether, they processed just short of 11,000 social media posts made between June 2021 and July 2022. What they find is stunning.

“We used our data to apply the Simpson’s Diversity Index (SDI) to the population of social media posts by the largest brands in the United States. The SDI is a commonly used equation to measure the diversity of a population,” says Rodriguez-Vila. According to the 2020 U.S. Census, the racial diversity index of the country is 61 percent, and has been consistently increasing over the past 20 years. Applying the SDI calculation to measure the diversity in social media messages is a novel idea and one that provides clarity on the state of inclusion in brand communications, he adds.

We found that the racial diversity index of social media messages by the top U.S. brands was just 41%. The last time the racial diversity index was in that range was in the year 2000.

Omar Rodriguez-Vila

In other words, the racial diversity these brands are collectively representing in their messages is 20 years behind the reality of the country. Interestingly, this lag between representation and demographic reality is common to brands in virtually all of the industries studied—from airlines to fashion, consumer packaged goods to financial services, hospitality to retail. The only sector that bucks the trend in any substantive way, he says, is beauty; even then this is likely only because beauty firms have come under fire for underrepresenting Black and non-white customers in the recent past.

“Brands’ social media is typically more nuanced and comprehensive than advertising, so it’s more telling as a measure of what they prioritize. And by this measure, we’re seeing systemic bias across a majority of industries,” says Rodriguez-Vila. “Some, like beauty, fare better than others, but then beauty arguably has the strongest business case for diversity.”

That being said, there is a robust business case for organizations across all industries to do better in marketplace inclusion. Not only does representational diversity have the potential to open up new markets, new customer bases, and areas for expansion, but “Feeling represented and included matters to everyone,” says Rodriguez-Vila.

“To understand the importance of inclusion to customers we used a discrete choice model where people made trade-offs between price and a collection of product features in order to understand the factors that motivated them to make a purchase,” he explains. “We tested a sample of consumers looking to buy sportswear, and we added representation of diversity and inclusion as a characteristic, to see if it had any impact on their choices.”

Again, the results are stunning. On average, 51 percent of customers took inclusion into account as a primary driver of athletic apparel choices. Inclusion was a priority driver of choice among 38 percent of consumers in historically well-represented communities—slim, white, able-bodied people. When Rodriguez-Vila and his colleagues expanded the analysis to other historically under-represented groups they found a significantly greater impact. Here, inclusion was a primary driver among 61 percent of plus-size, Black consumers and for 87 percent of consumers that identified as non-binary. In other words, inclusion can be a critically important factor to a majority of customers who are making decisions about whether to purchase products and services, or not.

The marketplace is changing, says Rodriguez-Vila, and brands need new ways of understanding their customer base if they are to avoid missing out on opportunities.

To this end, he, Nickerson and Bharadwaj are working with three of the firms in their study, piloting a range of interventions designed to accelerate marketplace inclusion. They have partnered with Sephora, Conde Nast, and Campbells to roll out specific practices both in the workplace and the marketplace—from advocacy to communication and commercial practices to things like greater diversity in marketing operations, and in talent recruitment practices. Early indicators are promising, says Rodriquez-Vila.

“Our work is set to deliver tools that will help firms normalize and institutionalize marketplace inclusion as a function of their day-to-day operations. And it’s exciting to see a shift in thinking about DEI—from an exclusive focus on the workplace and how you eliminate bias within the organization, to practices that are geared also to eliminating bias in the way you serve markets.”

Looking to know more?  Connect with Omar Rodriguez-Vila today.  Comply click on his icon now to arrange a time to talk.