The Black Lives Matter movement and growing demands for corporate accountability have elevated minority ownership labels (e.g., “Black-owned”) as powerful tools for branding. These labels signal diversity and inclusion, but their impact goes far beyond surface-level representation. A new Journal of Marketing study finds that disclosing minority ownership can influence consumer behavior, particularly during product failures.
Our research team explores this phenomenon, which we call the “minority ownership awareness effect,” by analyzing 27,000 Google reviews of Black-owned businesses and conducting experiments with nearly 4,000 participants. We discover that when consumers are aware of minority ownership, they are more forgiving of product failures, especially from those who are motivated to avoid appearing prejudiced.
This effect stems from the narrative of the underdog. Consumers often perceive minority-owned businesses as facing unique challenges, which fosters empathy and leniency in the face of difficulties like delayed deliveries or product defects. However, we also find limits to this effect. Transparency about minority ownership helps mitigate product-related issues but does not extend to moral failings such as unethical behavior or discrimination.
The Power of Minority Ownership Labels
Our findings reveal how minority ownership labels create emotional connections with consumers:
- Fostering Empathy: Minority ownership labels highlight systemic challenges and social inequities faced by underrepresented groups. Consumers view these businesses as underdogs, which triggers emotional support and a willingness to overlook minor failings.
- Mitigating Product Failures: When customers encounter issues like poor quality or delivery delays, awareness of minority ownership softens their evaluations. For example, in reviews of Black-owned businesses, we found more forgiving language compared to reviews of non-minority-owned businesses with similar performance issues.
- Appealing to Consumer Values: Consumers motivated to avoid appearing prejudiced respond even more positively to minority ownership labels. These individuals may see supporting minority-owned businesses as a way to align with their values of fairness and equality.
Limits of the Effect
While minority ownership labels are effective in mitigating product failures, they have limitations. Transparency about ownership does not protect brands from ethical failures, such as cases involving workplace misconduct or discriminatory practices.
Consumers are unlikely to forgive these moral transgressions, regardless of the brand’s ownership status. This highlights the importance of maintaining consistent ethical practices alongside the use of minority ownership labels.
Practical Insights for Marketers
The study provides actionable insights for brands seeking to leverage minority ownership labels effectively:
- Use Labels Strategically: Labels like “Black-owned” or “Woman-owned” can differentiate a brand in competitive markets. These labels not only highlight diversity but also create stronger emotional connections with consumers.
- Build Resilience During Crises: Transparency about minority ownership can help brands navigate product-related challenges by fostering consumer empathy and trust. This approach is especially valuable during product failures, such as issues with quality or delivery.
- Focus on Authenticity: While labels can be powerful, they must be paired with genuine commitment to inclusion and ethical practices. Consumers will reject brands that use minority ownership labels as superficial marketing tactics without substantive action.
- Consider Consumer Values: Marketers should understand their target audience’s motivations. For consumers who prioritize social justice and fairness, minority ownership labels can serve as a strong signal of alignment with their values.
Implications for Policymakers and Industry Leaders
Beyond individual brands, the findings highlight the broader potential of minority ownership labels to drive societal change. By encouraging transparency about ownership, policymakers and industry leaders can foster more inclusive and equitable markets.
Lessons from the Underdog Narrative
The underdog narrative is central to the success of minority ownership labels. Consumers root for businesses they perceive as overcoming obstacles. By leveraging this narrative authentically, brands can build stronger emotional connections and foster long-term loyalty.
However, it is crucial for businesses to understand the limitations of this approach. While the underdog narrative can mitigate some challenges, it cannot shield brands from reputational damage caused by ethical missteps.
The “minority ownership awareness effect” reveals how transparency about ownership can transform consumer relationships. By highlighting diversity, fostering empathy, and aligning with consumer values, minority ownership labels offer a powerful tool for differentiation and resilience.
For marketers, the key is to use these labels strategically and authentically, ensuring they are backed by meaningful actions. For policymakers, the findings underscore the importance of promoting transparency and inclusivity in the marketplace.
This research offers a roadmap for businesses to navigate competitive markets, build consumer trust, and support a more inclusive economy.
Read the Full Study for Complete Details
Source: Esther Uduehi and Aaron Barnes, “The Minority Ownership Awareness Effect: When Promoting Minority Ownership Increases Brand Evaluations,” Journal of Marketing.
Go to the Journal of Marketing