How inclusive brands fuel growth

Despite inclusion’s many benefits, there is a systematic lack of it in the marketplace. Researchers studied inclusion efforts across 40 companies. They found some of the most successful shared common traits.

Researchers have studied how inclusive companies grow. Photo: Bobby Doherty

Greta Gerwig’s Barbie grossed more than $1 billion at the box office in about two weeks. Only 53 films have ever hit that mark (adjusted for inflation). The 2023 movie, which features themes of women’s empowerment, multiculturalism, and inclusiveness, was a divergence from the narrow social and demographic representation of the original tall, thin, white doll that Mattel introduced in 1959.

Years before the movie phenomenon, leaders at Mattel had grown concerned that perceptions of Barbie were out of sync with the demographic trajectory of its domestic market. The company conducted in-depth research to understand how customers felt about the famous doll and to determine whether more-inclusive Barbies presented a strong market opportunity. The findings led to an expansion in the diversity of the dolls and in Mattel’s overarching customer strategy. In 2016, the company expanded the So in Style line of Black dolls to include more skin tones, eye colours, and hair types, and also introduced Barbies with a range of body types.

While adoption was slow at the start, Mattel’s leaders went on a road show armed with market data to help retailers create the right commercial environment for the more inclusive offerings – one in which diverse dolls were featured prominently, rather than on a bottom shelf. Eventually, the in-store environment began to change, and so did sales. Today, Barbie comes in 35 skin tones, 97 hair types, and nine body types. Mattel’s Hispanic, red-haired Barbie became a bestseller. The company also has dolls representing people with disabilities, both physical and cognitive. For example, it developed a doll with Down syndrome in collaboration with the National Down syndrome Society. Mattel’s inclusion strategy affected all areas of the brand – product design, distribution, and commercial activities – and coincided with a period of significant growth. Barbie revenues increased 63 per cent from 2015 to 2022 – before the boost from the film.

Barbie’s evolution illustrates that marketplace inclusion can help brands capture untapped markets. Mattel’s combination of market orientation, business practice transformation, and intentional representation is at the core of what it takes to become an inclusive brand, which we define as one that serves the needs of historically underrecognised communities (HUCs) in ways that help a brand win and make its customers feel seen. In studies we’ve conducted over the past two years, we found that the perception of inclusion can materially change customers’ likelihood to purchase and willingness to recommend products and services. For example, in one study of the sportswear market, purchase intent among Black customers increased from 17 per cent to 40 per cent as their perceptions of brand inclusion increased. We also found that perceived inclusion played a primary role in purchase decisions for 87 per cent of consumers who identify as nonbinary, 61 per cent of Black consumers and plus-size consumers, 63 per cent of Gen Z consumers, and 38 per cent of white consumers.

Despite inclusion’s many benefits, we find a systematic lack of it in the marketplace. We measured the level of inclusion in more than 10,000 posts on Instagram, TikTok, and Facebook by the 50 most valuable brands in the United States from 2021 to 2022, evaluating the extent to which different skin colours, body types, hair types, and physical abilities were present. The results revealed a consistent prevalence of people with lighter skin, smaller body types, straighter hair, and no visible disabilities – a representation that was consistent across industry sectors. We then applied the Simpson’s Diversity Index – which measures the probability that two people chosen at random will be from different racial and ethnic groups – to the people shown in the posts. The diversity index of the social media content was 41 per cent, a level similar to the diversity index of the US population in 2000, according to US census data. The 2020 census revealed a score of 61 per cent, meaning that the diversity reflected in our study was 23 years behind the makeup of the actual population.

Over the past three years, we have worked with Bridge, a trade organisation focused on operationalising inclusion, to study the journey of nearly 40 companies. We analysed the impediments and enablers they encountered and the business practices they adopted in making their brands more inclusive. Drawing on that research, we created a framework for increasing marketplace inclusion that focuses on three areas: seeing the market, which is about incorporating inclusion into market definitions, market intelligence, and strategies for growth; serving the market, which involves developing and adapting products, packaging, and other commercial practices to address the needs of specific underrecognised communities more effectively; and being in the market, which looks at customer experience and corporate advocacy. In this article, we explore how to use the framework to gauge your company’s level of marketplace inclusion, identify areas of strength and weakness, and define actions to expand inclusion in ways that contribute to growth.

Where Companies Go Wrong

To attract the interest of a so-called “general market,” brands commonly associate their products with cultural standards of beauty, success, and so on. We call this approach the exclusivity paradigm for demand generation. The positioning of Victoria’s Secret in the mid-2000s is a classic example. Its models, store experience, events, and product design were all focused on a white, Western standard of beauty. Using one cultural standard to appeal to a general market is often seen as more efficient than seeking to associate with multiple standards, and Victoria’s Secret used the strategy for many years to build a customer base among women who found that beauty standard relevant.

While simple to adopt, the exclusivity paradigm has major limitations. First, it alienates segments of customers who do not see themselves, their preferences, or their ambitions reflected in the products. The result is a self-imposed barrier to expansion. Second, the aggregate effect of brands’ adopting similar standards to compete results in the overrepresentation of some segments and the invisibility of others, which can damage the emotional wellbeing of underrecognised communities.

Marketplace inclusion is a different paradigm for competition that increases brand relevance for a diversity of people. Savage X Fenty, which was founded by Barbados-born recording artist Rihanna, is an example of achieving growth by adopting the marketplace inclusion paradigm. Fenty’s products, designs, models, and store experience feature women of a wide range of races, body types, and beauty standards and use realistic and unaltered photography that contributes to a more natural and accessible image. Fenty Beauty followed a similar path with products for all skin colours. Rather than focusing on one standard, it allows customers to find their own standard among its offerings, helping them feel understood, seen, and respected. From its launch in 2018 through 2022, Fenty reported annual growth rates of 150 per cent. In 2022, Victoria’s Secret countered by unveiling a new, more inclusive identity, product, and store experience.

The Brand Inclusion Framework

Our research into dozens of companies across industries, all of which actively pursue marketplace inclusion with varying levels of success, sheds light on the systematic and structural changes needed to become an inclusive brand.

Consider Sephora, a global cosmetics retailer. DEI was not absent from its management approach, but under the leadership of George-Axelle Broussillon Matschinga, vice president of diversity and inclusion, the U.S. team wanted to embed inclusion into the way it approached the market. In 2019 Sephora commissioned its Racial Bias in Retail study to understand the shopping experience of Black, Indigenous, and People of Color (BIPOC) customers across the industry. The findings were surprising. Three in five BIPOC customers did not feel welcome in many beauty retail environments, causing them to leave the stores. More than 60 per cent of customers said they would not return to a store where they felt unwelcome. BIPOC customers reported experiencing in-store discrimination at a rate three times that of non-BIPOC shoppers. Sephora used this research to define a specific goal for inclusion centred on transforming the experience of BIPOC customers.

Serving the market more inclusively required a broad organisational response. Sephora developed training programs on DEI, implicit bias, and cultural sensitivity to equip employees with inclusive skills. It also significantly increased the hiring of BIPOC store managers and staff to ensure that the shopping environment accurately represented customer diversity. The company pledged to buy 15 per cent of its products from Black-owned businesses, rebalanced its portfolio of offerings to increase the availability of products for all skin tones, and expanded its Accelerate program, which helps BIPOC-owned start-ups grow their brands.

Finally, Sephora adjusted aspects of its engagement practices to be more inclusive. It created guidelines for external communications, including new diversity standards for casting, social media content, production, branding elements, and partner selection, to ensure that the company’s engagement efforts were representative of and relevant to its diverse base of customers. Sephora shared the research at industry forums, which ultimately led to the signing of a charter by a coalition of 28 companies to create a more inclusive and representative retail environment. Collectively, the actions led to the adoption of marketplace inclusion as one of Sephora’s strategic imperatives. The results are telling: Sephora has seen a twofold increase in revenues since it started the initiative.

Let’s now look at the framework in more detail.

How to see the market

This area focuses on opportunity mapping, market intelligence, and market definition. To become an inclusive brand, you must make the needs of historically underrecognised communities part of the regular investigation and configuration of market opportunities. That requires a comprehensive understanding of the composition of your current customer base, the HUCs you want to target, and how the segments fit into your brand ecosystem. For instance, Yin Woon Rani, the CEO of the national program MilkPep, made inclusion one of the core values guiding its understanding of the market on behalf of the nation’s dairy farmers. She imposed strict sample quotas for conducting market research to ensure that market intelligence efforts facilitated an in-depth understanding of the needs of HUCs.

In defining your market, it is also critical to specify your brand’s inclusion goals. Inclusion can mean different things to different people, and organisations must be careful to avoid ambiguity that can lead to misalignment. Measuring how various communities perceive your brand’s level of inclusion can help. For example, we conducted a study of how historically recognised consumers (mainly white, midsize body type, and binary gender) perceived marketplace inclusion in the sportswear industry. We compared their perceptions with those of consumers from underrecognised communities: mainly Black, plus-size body type, and nonbinary gender orientation. The results show that even inclusive brands have areas where they can improve. Nike, for example, was considered one of the most inclusive brands in the industry, with 80 per cent of customers in our study describing it as an inclusive brand — but it fared significantly worse with customers in need of plus sizes, who reported experiencing lower levels of inclusion across all brands, including Nike. Findings like these can help brands define their specific goals for inclusion.

How to serve the market

This area of the framework focuses on the design, market execution, and measurement of products and services. We find it to be the most difficult step to take, but it is essential for brands that view inclusion as a source of competitive advantage. It involves designing new products, developing new services, and other commercial activities that improve your product-market fit with underrecognised communities.

Consider the market context that led to the creation of Bevel grooming products. Since the Gillette Sensor was introduced, in 1990, multiblade razors have been the standard for a good shaving experience. In the mid-2000s new competitors such as Dollar Shave Club and Harry’s raised millions to challenge Gillette’s leadership by disrupting the price of razors and the process of buying them. But they kept one feature consistent – multiple blades. And that’s a great option unless you are one of the millions of men globally who have coily or curly hair. For those customers, using multiblade razors creates ingrown hairs, leading to irritation and uncomfortable facial bumps. With each additional blade, the incumbent brands enhanced the shaving experience of men with straight hair and moved further away from the needs of men with other hair types. Still, Gillette frequently used men with coily or curly hair in its advertising. That amounted to diversity without inclusion, because those consumers did not get good results from multiblade razors. Their alternatives were suboptimal given that single-blade razors tend to be of lower quality and depilatory creams can irritate the skin and have undesirable side effects. Some male consumers simply grew beards and avoided shaving altogether, effectively exiting the market.

In 2013, Tristan Walker, a Stanford MBA, founded Walker & Co., the parent company behind Bevel, a shaving and skin care brand for men with coily or curly hair. Like many entrepreneurs, he saw a market gap where others did not. Like leaders of inclusive brands, he was motivated to reduce the inequity that resulted from the gap. With the launch of Bevel, Walker awakened the industry to the value of serving a historically underrecognised community. The brand he started and eventually sold to Procter & Gamble for close to $50 million acquired a deep following and cultivated a sense of respect and belonging among many customers.

Consider also the financial industry, which has a mixed record on serving HUCs. Some fintech providers are redesigning service offerings in ways that provide greater access to products among HUCs. Peer-to-peer lending (for example, LendingClub and Upstart), savings apps (Acorns and SoFi), and robo-advisers (for example, Betterment) are just a few areas that have increased market inclusion among lower-income communities by addressing barriers such as extensive documentation, high minimum-balance requirements, and limited access to financial-literacy education.

Serving the market is also about mass customisation of product features in ways that address the needs of underrecognised groups. For example, Microsoft, in collaboration with organisations such as AbleGamers Charity and the Cerebral Palsy Foundation, designed the Xbox Adaptive Controller to make the product accessible for people with limited mobility. Its success has led competitors such as Logitech to follow suit.

How to be in the market

The third dimension of the framework covers activities related to how a brand shows up in the market, specifically in managing the customer experience, communication channels, and brand advocacy efforts. These are often the most visible areas of action and the easiest to implement. They include redesigning stores, for example, weighing in on current events and social issues, and promoting the adoption of inclusive practices across an industry.

Although critical in creating an inclusive brand, these activities also carry great reputational or financial risk if they’re not designed in ways that reflect an understanding of underrecognised communities. Consider Target, a brand that has consistently embedded inclusion into many aspects of its customer experience. It is common to see models with Down syndrome and physical disabilities and diverse body types and races represented in Target stores. In its support for the LGBTQ+ community, the retailer has taken its inclusive engagement beyond simple messages of support – such as those often posted by brands during Pride Month – into the selection and presentation of offerings. For example, it stopped organising its toy products by gender and instead organised them by age and type of play. This change provided a more inclusive in-store and online experience for transgender or gender-nonconforming children and their parents.

However, the sale of some products directed at LGBTQ+ guests enraged a different segment of customers. In 2023, the company faced boycotts by conservative groups, and employees were threatened by shoppers who trashed displays and products specifically tied to Pride Month. During the customer backlash, Target experienced a 14 per cent drop in share value, and it attributed a 5 per cent sales decline in the second quarter of 2023 to the boycotts. To contain the situation, Target stores in more-conservative cities moved Pride displays to the rear aisles and pulled some gender-nonconforming merchandise from their shelves entirely, which angered LGBTQ+ activists. Lesson: Inclusive customer experiences require not only an understanding of the needs of various segments of your customer base but also preparation for and mitigation of conflicts among them.

In addition to designing more-representative experiences, inclusive brands find direct and indirect ways of promoting inclusivity across their industries. An example is the Delta Air Lines Faces of Travel program. Over the past several years, a team at Delta built a large database of inclusive travel images for use in marketing campaigns and materials across the organisation, driven by the realisation that the images available in stock photographs or search engines were not reflective of the diversity of today’s travellers. Delta partnered with Adobe Stock to launch the program with the goal of increasing the representation of people of diverse races, ages, sexual orientations, gender identities, religious beliefs, and physical abilities. Similarly, the marketing team at Google launched an inclusive marketing tool kit with a public-facing website that consolidates guidance on how to develop more-inclusive content across industries. Through those actions, Delta and Google are making initial strides toward provoking and enabling change in their industries.

To evaluate your brand inclusion when showing up in the market, consider these questions:

Is the development of customer experiences for your brand guided by insights, expert partners, and technologies that ensure effective representation of your target HUCs?

Do your goals for brand inclusion influence the selection of communication channels, influencer partners, publishing schedules, and algorithms used for media management?

Is your brand acting in the market, sharing its views, or designing new practices in ways that promote inclusion across the industry?

Many leaders have embarked on bold efforts to align their organisations more closely with their diversity, equity, and inclusion ambitions. However, many DEI actions, while essential, do not translate into higher levels of marketplace inclusion as experienced by customers.

Inclusive brands are intentional in defining their customer base, developing product offerings, and taking action in the market in ways that serve historically underrecognised communities. By serving the needs of HUC consumers, they unlock new sources of business value. At the same time, they cultivate inclusivity in the market and nourish a greater sense of representation, respect, and belonging in our society.

Omar Rodríguez-Vilá is a professor of marketing practice at the Goizueta Business School at Emory University and the academic director of education at its Business & Society Institute. Dionne Nickerson is an assistant professor of marketing at the Goizueta Business School. Sundar Bharadwaj is the Coca-Cola company chair of Marketing at the University of Georgia’s Terry College of Business. Copyright 2024 Harvard Business Review/Distributed by NYTimes Syndicate.