Commentary: Cause Marketing – Good for Business, Not Always for Charity

When a business affiliates its brand with a beloved charity, it’s good for the company’s bottom line. Countless studies have conclusively shown that consumers are far more willing to spend money at a business if they know a percentage of their purchase is going to a nonprofit organization they respect.

Unfortunately, evidence is mounting that what’s good for business is not always good for charity.

These kinds of business-charity relationships are called “Cause Marketing” (or “Cause-Related Marketing”). It’s when a restaurant donates 10 percent of sales to charity this weekend. Or a bar donates $2 whenever a particular cocktail is sold on Friday night. These are easy ways for a business to affiliate its brand with a respected nonprofit while also generating a few dollars for the nonprofit organization in the process.

While every charity should recognize and honor the spirit behind these generous offers, handled improperly, Cause Marketing has the potential to offend some of an organization’s existing donors and can actually diminish overall giving.

Problem 1: It’s Potentially Disrespectful to Existing Donors

Consider, for instance, the owner of ABC Café. She loves and appreciates what her favorite charity does for Door County and thus makes a very generous contribution of $10,000. There are no conditions on this gift and she has no expectation of any special treatment.

Then the owner of XYZ Bistro offers to donate 15 percent of all dinner sales on Friday night to that same charity. He says that the total contribution might be as large as $1,000. However, in exchange for this gift, he expects that the charity publicly encourages its donors to eat at XYZ Bistro.

The concern is that when a charity encourages its donors to spend money at XYZ Bistro, at the very least, this is disrespectful and unfair to the owner of ABC Café who made a far larger gift without any expectation of free publicity. At worst, this kind of Cause Marketing relationship might even offend the owner of ABC Café and result in the loss of a generous friend.

Problem 2: It Can Reduce Overall Donations

Imagine that a company, Acme Lawn Maintenance, announces a Cause Marketing event in which 10 percent of every new annual lawn treatment contract will be donated to a Door County nonprofit. The nonprofit thus decides to promote this offer to its database of donors. As a result, one of its existing donors who typically makes a charitable donation of $250 every year decides to sign up with Acme Lawn Maintenance. The donor thus spends $1,000 on a new annual lawn treatment contract.

Later, when the nonprofit sends its annual fundraising letter, that same donor concludes he’s already given enough this year because he spent $1,000 on lawn maintenance to benefit the charity. In fact, the donor feels as if he’s made a larger contribution than in years past because he’s out $1,000 when in reality his purchase only generated $100 (10 percent of $1,000) for charity. That results in a net loss of $150 to the organization.

Rather than making both a purchase and a subsequent direct donation, people are increasingly considering their purchase as their donation. The researchers refer to this as the Cause Marketing Paradox. Consumers think of their purchase as a charitable act and decrease subsequent charitable acts. This can result in a net reduction in total donations from an individual donor.

Suggested Cause Marketing Guidelines

Every charity should honor the generous spirit that drives business owners who want to donate a percentage of sales, but nonprofits must also be mindful of the pitfalls of entering into a Cause Marketing relationship. Here are some simple guidelines that organizations can use when partnering with a business.

• The charity should be appreciative of businesses that wish to host a Cause Marketing activity but generally refrain from promoting the activity itself. If a restaurant wants to donate 10 percent of sales on a particular night and promote the event to its own customers, the charity should be deeply thankful for this generous act. However, the key here is that it is the business promoting the event to its own customers. The charity plays no formal or public role telling its own existing donors to eat at a particular restaurant.
• The charity should generally refrain from publicly encouraging its donors to purchase goods or services at one for-profit business rather than another. A respected charity will receive contributions from individuals and businesses all across a community. Inevitably, its donors will include businesses that are in direct competition with one another. The charity can and should publicly thank its business donors, but it is normally inappropriate for a charity to encourage its donors to shop, eat or otherwise buy services at one business over another.
• The charity’s public recognition of a Cause Marketing relationship should be generally consistent with how it publicly celebrates any donor that makes a similar size contribution. For instance, if the restaurant’s commitment to donating 10 percent of sales generates a $1,000 donation, then the charity should recognize the restaurant as it would any donor of $1,000. If the charity publicly celebrates its $1,000 donors in its newsletter and social media accounts, then it makes sense to do so for the restaurant as well. However, it is normally unfair to publicly celebrate the restaurant any more – or any less – than the charity would do for another donor who made a gift of the same size.

Adopting simple guidelines like these will allow a charity to celebrate and thank the generous business owners of Door County in a manner which is both fair and respectful to all concerned.

Bret Bicoy is president and CEO of the Door County Community Foundation. Contact him at [email protected].