Charity Marketing Or Cause Related Marketing – Pros and Cons

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The holiday spending season is gone and while retailers are crunching the numbers, so are the non-profit organizations. Businesses joining with charitable groups, as a marketing maneuver, started back in the 70’s and has grown exponentially ever since…and for good reason.

One of the first such joint agreements in 1979 was provided by attorneys for Famous Amos Cookie Company when founder, Wally Amos became the national spokesperson for Literacy Volunteers of America. It was a match made in heaven for both the company and the organization. American Express coined the phrase “cause related marketing” in 1983 when they linked their business to the Statue of Liberty Restoration Project.

More and more companies have joined forces with charitable organizations for the numerous benefits available:

1. Exposure. Both the non-profit and the company gain positive exposure in markets they may not have previously reached.

2. Revenues. For the organization: the agreement between the organization and the business usually entails some measure of money going to the organization (example: percentage of gross sales or net profit) while the organization agrees to the company’s use of the organization name and/or logo. For the company: according to the American Institute of Philanthropy in a 2006 consumer study, when faced with multiple products with similar characteristics, value and price, will choose the product that also supports a cause, even surpassing loyalty to another product brand.

3. Budget considerations: The organization receives funds it did not have to actively solicit. The company saves money on their advertising and marketing budget by simply adding the organization logo and name to current campaigns.

4. Consumers and Public Relations: consumers can feel good about the purchase they made knowing they’ve donated to a cause and they 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 in the community.

There can be some downsides to cause related marketing that need to be considered:

1. Choice of charity is important. Since this is not a completely altruistic venture, it does well to choose a charity for which company management has some affinity. Wally Amos chose the Literacy Volunteers of America because he, himself, was a high school drop-out, earning his equivalency degree while in the U.S. Air Force. It would be rather embarrassing if the company supports the American Society for the Prevention of Cruelty to Animals when the press discovers the CEO’s mother has 40 cats locked in her basement and is commonly referred to as “The Cat Lady” by her neighbors.

2. Legal: this is a legal agreement requiring well thought-out parameters for both the company and the organization. Avoid embarrassment and bad feelings down the road by having both sides represented by attorneys regarding clarification of monetary expectations and the use of an organization’s good name.

3. Accounting: cause related marketing is not like simply donating to a charity. The company receives some benefit in exchange for the money. Check with the company accountant before making a final decision.

Overall, cause related marketing, or charitable marketing, creates a win/win/win situation for the company, the organization and the consumer and as a result, continues to expand, especially in our down economy.

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