The holiday spending season is over and while retailers are crunching the numbers, so are nonprofits. Companies joining charitable groups as a marketing ploy began in the 1970s and have grown exponentially ever since…and for good reason.
One of the first such joint agreements in 1979 was provided by lawyers for the famous Amos cookie company when founder Wally Amos became the national spokesperson for Literacy Volunteers of America. It was a perfect match for both the company and the organization. American Express coined the phrase “cause-related marketing” in 1983 when it linked its business to the Statue of Liberty Restoration Project.
More and more companies have joined charities for the many benefits available:
1. Exhibition. Both the nonprofit organization and the business gain positive exposure in markets they may not have reached before.
2. Returned. For the organization: the agreement between the organization and the company usually implies a certain amount of money for the organization (example: percentage of gross sales or net profit), while the organization agrees that the company uses the name and/or logo of the organization. For Business: According to the American Institute of Philanthropy in a 2006 consumer study, when faced with multiple products with similar features, value, and price, you will choose the product that also supports a cause, even over loyalty to another product brand.
3. Budget Considerations: The organization receives funds that it did not have to actively apply for. The company saves money on its advertising and marketing budget simply by adding the organization’s logo and name to current campaigns.
4. Consumers and Public Relations: Consumers can feel good about their purchase knowing that they have donated to a cause and generally feel good about the company’s involvement in the community.
5. Employees and Public Service: Employees often appreciate working for a company that is involved with the community.
There there may be some disadvantages to cause related marketing that should be considered:
1. The choice of charity is important. Since this is not a completely altruistic company, it is wise to choose a charity with which the management of the company has some affinity. Wally Amos chose Literacy Volunteers of America because he himself dropped out of high school and earned his equivalent degree while in the US Air Force. It would be pretty embarrassing if the company supported the American Society for the Prevention of Cruelty to Children. Animals when the press discovers that the CEO’s mother has 40 cats locked in her basement and is commonly called “The Cat Lady” by her neighbors.
2. Legal – It is a legal agreement that requires well thought out parameters for both the company and the organization. Avoid embarrassment and bad feelings in the future by having both parties represented by attorneys regarding the clarification of monetary expectations and the use of an organization’s good name.
3. Accounting: Cause-related marketing is not like simply making a donation to a charity. The company receives some benefit in exchange for the money. Check with the company’s accountant before making a final decision.
In general, cause-related marketing, or charity marketing, creates a win/win/win situation for the business, organization, and consumer, and as a result continues to expand, especially in our down economy.