Cause Marketing: Making Money by Giving it Away

The concept isn’t new, but it’s one of the hottest buzzwords in online retail for a reason.

“Cause marketing” is the term being used to describe all manner of cross-promotional efforts between for-profit businesses and non-governmental/non-profit organizations. Typically, it involves a portion of for-profit sales going toward a given cause. Today, more than 1 of every 4 retailers are promoting charities at some level — and the Web seems to be speeding that growth. In 2006, IEG reported that cause marketing sponsorship in the U.S. totaled $1.34 billion. (In 1990, that figure was only $120 million.) This year, cause marketing is expected to reach $1.44 billion in the U.S.

Is Cause Marketing Worth It?

64% say they have purchased from a brand because it supported a cause they believe in.
A 2001 survey suggested that 81% would choose one brand over another if a cause were involved, assuming price and quality were similar.
96% of women say it’s important, and 87% of both men and women say its important.
It enables highly effective market positioning and branding by connecting the company with the values of their customers. For instance, Target has been effective with its 5% donation policy.
MissionFish, the organization that powers eBay’s Giving Works program, reports that auctions that donate to charity can sell for much higher than similar auctions that don’t donate.
Cause marketing often builds customer and community loyalty while increasing employee pride and productivity.
Innovations from the likes of Google Checkout and Maatiam are bridging the gap between online retailers, consumers, and non-profit in ways that help everyone account for campaign performance and tax concerns.
Companies like Working Assets built donations as the main element of their business model.
In addition to the feel-good benefits, cause marketing tends to generate publicity, which can lower business costs, particularly in terms of customer acquisition. (Just make sure you’re doing it for the right reasons.)

Potential Pitfalls

As Holly explains, “Consumers are too savvy. They want to know who the charity is, what their exact involvement is, and how it fits in with your core brand.” In other words, people want to know their money isn’t going to a George Costanza-esque “Human Fund.”
70% of people want to see the company’s leaders participating in the cause.
The company’s motives may be called into question, particularly if it’s experienced years of negative press (e.g., Wal-Mart).
It must be accountable. Although there are often tax benefits for businesses engaged in cause marketing, it has to be a good deal for the non-profit as well. Not only must non-profits protect their own brands, they have tax concerns, too. As always, it’s important to look before you leap.
ROI is a must. It could appear disingenuous when a company is spending, say, 7 figures promoting a particular cause when the campaign is only netting a 5-6 figure return. That type of situation begs the question as to whether the company really cares, or if it’s just a branding or PR stunt. Otherwise, why wouldn’t they just donate the money they’re spending directly to the cause instead of spending it on promotion? (The Microsoft Small Business Center has some great tips on how to avoid these types of missteps.)

It looks like this trend is here to stay, particularly in the U.S., where the government continues to cut social spending and the gap between rich and poor grows each day. Consumers will continue to expect a greater involvement from the private sector to put money toward public causes and will reward the businesses that do so. As long as cause marketing is conducted in a transparent manner, it can benefit to both business and non-profits.

Technorati Tags: cause marketing, google checkout, maatiam, market research, non profit

Written by:
Ronald Patiro