The Surprising Reason That Family-Owned Companies Are More Successful

When a business is family-owned, you may be wondering if it makes sense to let customers know about that fact, perhaps because you worry that it would make your company seem small. However, it turns out that there are some distinct advantages to letting customers know that your company is owned and run by a family. Are you curious why? Read this blog to find out!

How Do Customers Perceive Family Businesses? 

When you see advertising for a company that claims to be family-owned, does that affect your perceptions of the company, and if so, for good or ill? Marketing research has uncovered quite a few associations that people tend to have with family-owned businesses. For one thing, family-owned businesses are perceived as striving for noneconomic goals and being good corporate citizens. This includes being more employee-friendly and socially responsible than other kinds of businesses. 

Family-owned companies are also considered to be more trustworthy and customer-oriented. They are rated higher on brand authenticity, which is strongly associated with higher purchase intention. There is an assumption that family firms are not just interested in short-term profits, perhaps at their customers’ expense, but instead have a long-term orientation in consideration of building something of value for the family’s next generation.

Why Do People Have These Associations? 

A recent study published in the journal Psychology & Marketing strove to find out why consumers have all these positive feelings about family-owned businesses and what this means for companies in a practical sense. The researchers theorized that maybe the reason that consumers feel this way is because they subconsciously take their positive emotions for their own families and project that onto the family-owned business and its products. 

Of course, love, warmth, happiness, care, and support are critical characteristics for well-functioning families. To see if this translates into a perception of the company’s products and services being made with love, they designed an experiment. They created two print ads for a fictitious chocolate manufacturer, one that said “a family firm” and one in which that was omitted. One group was shown the family firm version and a control group saw the other ad. Afterwards, they were all asked if they felt that the chocolates were “made with love.” The group that saw the ad that stated that the company was a family firm was 12% more likely to think that the product was lovingly made compared to the control group.

Willingness to pay is the most comprehensive measure of brand equity. So next, the researchers asked participants in each group to say how much money they were willing to pay for the chocolates. The people who thought that the company was family-owned were willing to pay a premium of 10% more than the control group, showing the tangible value of communicating that the firm is owned by a family. One reason for this is that being produced by a family-owned business is seen as a unique characteristic of a product, ascribing it additional value.

Love Is in the Air

The reason behind this is that people subconsciously humanize the firm, translating the emotions and qualities of the family into their perception of the company. It is well-known in the field of psychology that people recognize the love of producers for the products they create and that this is a key motivator, explaining why customers prefer products that are hand-made or made in small batches. When it comes to family firms, consumers might assume that the family members are closer to the production of the products and thereby transfer their love and care into the products. This love and care is bound to create a higher quality product.

But what about those whose family experience is not so happy and loving? The researchers found that the positive effect is mostly seen when consumers have positive emotions connected to their own families. However, importantly, negative experiences with the family do not lead to a more negative perception of family firm products, just less of a positive boost to perceptions. This is because though not all family dynamics are warm and supportive, overall, the concept of family is a positive social construct.

Action Steps

Capitalize on the love customers feel is inherent in your company by letting customers know that the business is family-owned. Include something in your marketing such as “A family-owned company” or “From our family to yours,” or even in the name of your company such as “XYZ & Daughters.” You can also highlight your family’s role by including photos of different generations of your family working in the business on your website and social media platforms. Putting the family front and center in your customer outreach can pay big dividends in total sales, an expanded customer base, and maybe even a higher price point.