Creating a better understanding of how profit is made and the role it plays in delivering for consumers, and ending its use as a dirty word are important parts of this.
Despite public support for profits as a “good thing”, they continue to be demonised widely. In a YouGov poll of more than 2,000 UK adults for the Great Business Debate, 70 per cent of people agreed that profit is a good thing. But just as many believed that consumers lose out when profits are made, with 71 per cent agreeing that companies put profits before the needs of consumers. I want to change that thinking.
Profits are the result of, and the motivation for, businesses getting it right for consumers.
When markets work well, profits are made by pleasing consumers, not at their expense. The best businesses deliver for their customers and reap the rewards in sales and profits. And profits make employing people and investing in new products and services possible, bringing huge long-run benefits to consumers.
Just look at Apple. This year, the company announced the biggest quarterly profit in history at $18bn, and people love its products. The products made the profits and allowed the company to spend $6bn on research and development in 2014 to take those products on to the next level.
But how do we stop profits being demonised by default?
For one thing, greater transparency is vital. Consumers want to know that the companies they use are making money in a responsible way.
And we need to make it easier for consumers to vote with their wallets through the choices they make. People must have the freedom and ability to choose who they buy from so that the threat of losing customers is real for businesses if they don’t perform.
To see that working, just look at the link between falling food prices and the ease with which shoppers swap from one supermarket to another in search of the best value.
Or in banking, consider the effect of the “seven-day switching service”, which is making it easier to change provider. The businesses that do the best job of serving customers will reap the rewards. It’s right that they should.
Now, the voice of business and the voice of consumers are coming together to fire-up the conversation. The CBI is joining with Which? for a live event today which will ask what business should do to increase consumer trust.
While, on its own, making profits doesn’t guarantee continued success, not making profits comes close to guaranteeing ultimate failure – for business but also for consumers.