Consuming for a cause

When you buy something that gives a portion of the sale price to a good cause are you really donating to charity?
 
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  • Updated:1 Sep 2008
 

01 .What is CRM?

Shopping bags

Cause-related marketing (CRM), is a business partnership between a company and a charity. While CRM can take many different forms, one of the most common is when a company allies itself with a charity and contributes a portion of the sale price of its product to that cause.

The first high-profile CRM promotion started in 1983 when American Express agreed to donate one cent from every purchase made with its card to the fund for the restoration of the Statue of Liberty. The partnership was a resounding success for both parties, raising $US1.7 million for the cause and increasing American Express card use by 28% and new card applications by 45%. Since then, CRM has increased in popularity, especially in Australia where products claiming to support charities have appeared all over the place in the last few years.

So what’s the difference between CRM and straight-out fundraising for a charity? Hailey Cavill, whose consultancy Cavill + Co specialises in company-cause partnerships, says the main difference is marketing. She thinks good CRM is an effective way to raise funds, promote the company and engage the consumer. In addition, she says it gives charities an opportunity to raise awareness.

“Many charities just don’t have a big marketing budget, so if they can jump on board a promotion that’s going to a million customers that’s great marketing, and then they get the money too," says Ms Cavill. "It’s about win-win but we shouldn’t pretend it’s anything more than a marketing strategy that makes everyone feel good.”

Please note: this information was current as of September 2008 but is still a useful guide to today's market.


Benefiting companies

For the companies involved, CRM has several advantages, if it’s done well. A cause campaign can increase sales as well as improve brand recognition, and help to develop customer loyalty. While many large companies may already have foundations that donate money to charity behind the scenes, CRM is a very public way of engaging the customer at the same time as enhancing the reputation of the company.

Paul Henderson, Acting CEO of The Smith Family, says CRM forms part of its overall fundraising mix, which includes appeals, donors and business partners. In March 2007, it worked with long-time partner Colgate to raise more than $100,000 to fund an oral health and healthy eating program.

The promotion was simple: for every tube of selected Colgate toothpaste sold, 10 cents of the sale price was donated to the Smith Family. Henderson says the promotion was a success because the cause was specific and a good match. “Most people are going to brush their teeth, and if they can buy a brand of toothpaste they like as well helping out disadvantaged families, then it’s a bonus.”

 
 

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While CRM is an easy way for many of us to make a small contribution to a cause, does it mean it’s competing for an already scarce fundraising dollar?

The experts we spoke to said ‘no’. Michael Walsh, executive director of charity researcher Givewell, says he hasn’t seen any evidence to suggest this is the case. “I get annoyed when I hear the ‘everyone is chasing the same fundraising dollar’ argument because there’s no basis for it. All the studies into fundraising in the last 10 years have shown that giving in Australia is on the increase, including individual giving.”

Leonie Walton of the National Breast Cancer Foundation says CRM only forms part of the organisation’s overall fundraising strategy but that it’s helped capture a market that wouldn’t necessarily donate at all. “We’ve found that our pink products capture ‘non-donators’ as well as younger people who may not feel that they have enough money to make a traditional donation.”

How does the money reach the cause?

Most CRM partnerships have an agreement in place to support the charity, independent of how much money is raised through product sales. Savvy charities will set a minimum guaranteed amount before the promotion commences and once the sales go above that amount, any additional funds are contributed directly from the company. Not unlike a sponsorship, the financial commitment is usually in place before the specially branded products hit the shelves.

For The Smith Family, its CRM programs contribute directly to a project within the organisation. Paul Henderson says of the Colgate promotion, “It was very specific, it wasn’t just putting money into a general fund. It was about funding a specific program around oral hygiene.”

Hailey Cavill says she insists that companies she works with agree to a minimum contribution before embarking on a CRM exercise. “I’m not comfortable with charities handing their brand over without a guaranteed return. If a company thinks it can raise a million dollars, then it needs to commit to that million. I won’t facilitate a CRM agreement for anything under $100,000 a year — anything under suggests to me that the company isn’t serious.”

What CHOICE readers say

  • “I tend to stick with the brands I know, but I'll support a product that’s associated with a charity I've had personal experience with. If I’m going to buy the product anyway I may as well choose the one that supports that charity.” 
  • “I feel more comfortable buying a product that meets my needs and separately supporting the charities I understand enough to give my support to.”
  • “I'm not swayed, because price and the quality of the brand are more important. However, if I have a choice between two identical products, I’ll choose the product that supports the charity. It makes less sense to buy a product that supports a charity that has no inherent link to the product itself. I’m generally cynical of such marketing ploys.”
  • “If it’s a product I normally purchase and a portion is going to a charity, it’s a bonus. However, I'm more likely to donate to a charity directly. I'm quite wary of how my charity dollars are spent and how much actually gets to the cause.”

Women on target

From jewellery to flowers and babywear to chocolate, it’s no coincidence that many products that donate to charity also appeal directly to women. CRM consultant Hailey Cavill says women are considered the ‘gatekeepers’ when it comes to shopping, choosing products for the whole family. As a result, many products and causes that work well in CRM are those that speak to women.

The latest research from the Eye on Australia 2008 by global marketing consultancy Grey Worldwide revealed the most powerful consumer in the Australian market today. Paul Gardener, Chairman of Grey Group Australia and New Zealand says it’s a “40-plus female who has reached her power summit through a combination of not just demographic weight but a growing proportion of earnings and, by inference, spending power.”

What are the advantages of CRM?

Michael Walsh, of Givewell, says that a good CRM partnership can improve a charity’s recognition among consumers. “To achieve name recognition is very expensive, and any cause-related marketing a charity can do that improves unprompted name recognition is obviously going to do better than other fundraising appeals,” he says.

Hailey Cavill says another advantage is that many causes need to raise awareness and educate the public. “A good example is breast cancer charities, such as the NBCF [National Breast Cancer Foundation]. I think they’ve been very smart recognising that with this disease women need to know how to take preventative measures. To reach those women you can either spend millions of dollars advertising in women’s magazines or you can align with companies that already have products that women are buying. It’s a perfect way to get your message out there and raise money at the same time.”

For companies, there’s increasing awareness that to be seen to be doing good is good for business. While many companies already donate funds to charities through foundations or workplace giving, CRM is a public way of communicating corporate social responsibility as well as having the opportunity to increase sales.

When CRM doesn’t work

Most of the experts we spoke to agree that there are two key issues to a good cause-related partnership — that it is long-standing and both the company and the charity have similar goals. If the company and the cause don’t have a good fit it’s usually the charity that comes off second best.

Michael Walsh says the main disadvantage of CRM is that the relationship between the charity and the company could be unequal. “If you have a company with a big budget and lots of expertise and then you have a charity that has a good brand but not as much in terms of resources, you’ve got an unequal relationship and the risk is that the charity sells itself too cheaply.”

While big national charities such as The Smith Family and the NBCF admit they are in a position to pick and choose which organisations they partner with, other charities may not be so fortunate.

The experts also agree that CRM won’t work for all charities. While causes that support children, breast cancer and the environment are always popular, lesser-known or what could be perceived as unappealing causes aren’t likely to be appearing on your supermarket shelves anytime soon.

Sue Anne Wallace, CEO of Fundraising Institute Australia, says that charities need to think carefully about choosing a partner. “If a charity loses its reputation either by something it does or by what its partner does, that reputation is harmed and could be irrevocably harmed. Reputation is the most precious thing a charity has.”

Hailey Cavill says that she sees a lot of companies choosing the wrong charity. ”Many are jumping on the green bandwagon right now just because it’s hot. I’ve had companies come to me wanting to do something environmental but when I’ve asked questions about their own practices they realise an environmental CRM would leave them open to public scrutiny. In the environmental space, walking the talk is critical.”

A pink explosion

Pink ribbon productsWhen you walk into shops in October, you might think some of them have been taken over by teenage girls, thanks to the mass of hot-pink products on offer. The National Breast Cancer Foundation (NBCF) has run the pink products promotion in Australia for the past four years, and in 2008, 60 pink-branded products will hit the shelves for the month.

Leonie Walton, Manager of Corporate and Campaign Marketing for the NBCF, says the pink products promotion raised $2 million for cancer research last year, thanks to cause-related marketing. The promotion greatly raised the profile of the NBCF, something it wouldn’t have the budget to do solo.

Although the foundation is quickly becoming famous for “pinking up” every October, Walton says the pink products promotion only forms part of the NBCF’s overall fundraising strategy. Other fundraising activities include the Mothers’ Day Classic run and volunteer days.

A tale of two bottles

When Mount Franklin water partnered with the National Breast Cancer Foundation two years ago to sell bottled water branded with pink lids, it was a sales success and the partnership has so far contributed $500,000 to the cause.

Early this year, Mount Franklin partnered with Landcare in a similar promotion, resulting in a $150,000 investment to plant 250,000 trees. Critics of the bottled water brand (owned by Coca-Cola Amatil) such as the Bottled Water Alliance blasted the two organisations with accusations of greenwash.

Coca Cola spokesperson Sally Loane says the criticism was unfair and that the project wasn’t greenwash. “We did what we said and donated 250,000 trees to Landcare. We weren’t pretending to be carbon neutral, we weren’t pretending to be green or pretending to do carbon offsets from our bottle emissions.”

Landcare National Business Development Director Scott Gibson says extensive research into the partnership was done before embarking on the project and still believes the $150,000 investment was a success.

In response to suggestions that the partnership encouraged people to buy bottled water, Loane says, “Clearly we are a company that sells bottled water, but we can enable our consumers if they want to buy bottled water to have money donated to breast cancer research or have trees planted, so there is an inbuilt extra.

“I find the criticism unfair as we’ve done the same thing with breast cancer, yet no-one accused us of pinkwash.”

While both organisations say the Landcare-Mount Franklin partnership will continue in some form, neither would confirm that a similar promotion is on the cards.

Good cause or are we being causewashed?

While the experts we spoke to agreed that many CRM promotions can help support a cause in a small way, they also agreed that not all partnerships are as good as they should be. So how do consumers know which partnerships are worthwhile?

Check the label. Legitimate product-cause partnerships should be transparent about how much is being contributed to the charity either as a product amount, percentage or total amount. On some high-volume products the actual amount contributed per item is very small, so these brands often talk about the total rather than the contribution per product.

Check the price of the product isn’t more than products of similar quality. There’s no point buying a bottle of water that costs $2 and contributes just 10 cents to a charity when another bottle of water costs $1. In that case, you’d be better off donating that dollar you saved.

Stop and think. Don’t let your concern for a cause encourage you to buy a product you don’t really want or need, or buy a product that could be detrimental to the cause it claims to support. Does buying bottled water that supports the environment fit with your environmental philosophy?

Ask the charity. Unless bound by confidentiality, most charities will be transparent about the contribution they receive from a partnership, so if in doubt check with the charity to make sure that the product is genuinely assisting it.

CHOICE verdict

CRM can't replace giving directly

While cause-related marketing promotions offer consumers the opportunity to make a small contribution to a good cause without having to leave the shopping aisle, this kind of marketing exercise can’t replace actual giving.

These promotions can be effective for charities, but it’s important to remember that CRM is still a business transaction. If you’re happy with the quality and price of the product, as well as the cause it supports, it’s a way to make a small contribution.

However, if there’s a cause or charity you feel strongly about, the best way to show your support is to donate directly to the charity.

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