In an effort to combine an uptick in sales with good will, retailers are jumping on the bandwagon with cause-related marketing. Although the term “cause-related marketing” has been in existence for more than 25 years, and there are debates about its specific meaning, in its purest form it is an agreement between a business entity and a nonprofit that is designed to raise money for a specified cause or charity.
Cause marketing can be approached from two distinct perspectives. The company can either: (1) select the designated charity; or (2) allow consumers to choose their preferred donation designees. Although most Americans surveyed in the 2010 Cone Cause Evolution Study would support a charity chosen by a retailer, 40% would rather support a company that offers them the option of choosing a cause their purchase will support.
While Cone survey participants said they want companies to inform them about the ways they are supporting a cause, “It is important, however, that the charity is not just the retailer’s foundation,” said Greg Buzek, President of IHL Group and Donor Trustee for the Retail Orphan Initiative (RetailROI), a charitable foundation under the umbrella of the Giving Back Fund. “It needs to be something recognizable that consumers perceive to be a fit,” he explained. Charitable efforts must focus on charities which coincide with the company’s mission and clientele.
Business Benefits Of Cause-Related Marketing
Cause marketing can present benefits for retailers beyond good will. It also can be a way to get rid of overstocks without running a full-fledged discount campaign. North American retailers carry more than $65 billion worth of overstock merchandise annually that often is discounted to the point of creating a loss, noted Buzek. “What’s worse is that most of the retailer’s labor at the store level is spent on re-pricing and re-doing signs for the items they are losing money on,” he explained. Instead, by donating the merchandise “the retailer gets a write-off, and the charities receive goods for children or families in need.” In fact, RetailROI has created a database of women and children at-risk charities around the country to help retailers donate those overstocks locally to their stores.
“Cause-related marketing heightens the public awareness of both the company and the charity,” added Debra Neville, Director of Marketing for J.D. Associates, in a blog post. Neville listed six business benefits for retailers who employ cause-related marketing:
- Directly enhances sponsor sales and brand;
- Cause-related marketing is a respected and accepted business practice;
- Heightens customer loyalty;
- Boosts a company’s public image and helps distinguish it from the competition offering materials a corporate PR officers;
- Helps build employee morale and loyalty; and
- Improves employee productivity, skills and teamwork.
Mother Knows Best, Even In Retail
According to the Cone study, mothers and millennials are the two most approachable and potentially profitable consumer segments for a cause marketing effort. “Mothers control approximately 80% of the household shopping and college-aged millennials have nearly $40 billion in discretionary income to spend,” according to the report.
Because millennials often are drawn to efforts around charitable donations, they typically already are aware of and have opinions about the different causes, which could potentially influence their purchasing decisions. However, the mothers group has household monetary control and socially minded youth influencing their buying decisions. Additionally, mothers are open to purchasing certain brands when they are connected to a cause. Most mothers (95%) find cause marketing acceptable; 93% are likely to switch brands based on a cause; and 92% say they want to buy a product that supports a cause.
Other key findings from the Cone study include:
- Americans believe companies should prioritize support of issues that affect the quality of life on a local, national and global level.
- Employees want to get involved in their company’s cause-related efforts mainly through matching grants.
Additional factors which trigger employee participation in a cause promoted by their employer include:
- Monetary rewards;
- Paid time off to volunteer;
- Information about volunteer opportunities outside of work;
- Company-sponsored volunteer days;
- Skills-based volunteer opportunities;
- Forum/opportunity for feedback; and
- Ideas and paid sabbaticals/extended time off.
Cause Marketing Programs That Work
The term “cause marketing” may be traced back to American Express — one of the first to introduce the concept nationally through its efforts to restore the Statue of Liberty in 1983. The three-month campaign gave customers the incentive to make purchases that would benefit not only the company but an outside source, which was to donate one cent from each of their purchases and $1 for every new account. American Express also launched a $4 million advertising campaign. The Restoration Fund raised more than $1.7 million and the American Express card use rose approximately 30%. New users increased 45% over the previous year. The company trademarked the term “cause-related marketing” which has become a phenomenon among retailers and their partners.
More recently, one particular type of cause marketing program that has seen significant success is called Purchase Plus. Purchase Plus campaigns take place during point of purchase and ask customers to add a specified dollar amount to their bill. These programs garner the greatest response during recent catastrophic events, such as natural disasters. Other types of campaigns include licensing of the nonprofit’s logo, brand and assets and social/public service marketing programs which enable retailers to use an organization’s logo on their products. The American Diabetes Association (ADA), for example, certifies products with the ADA logo to help steer consumers to the best products in order to decrease the health risks related to diabetes.
Purchase Plus works particularly well when it is promoted by store employees. A significant majority (70%) of Americans said they are more likely to participate in a cause-related purchase/donation if an employee recommends it. But 31% would still make the purchase with “insufficient information.” Less than 20% said they would choose another brand or seek information on the company web site or other sources for information. Only 15% said they would not make the purchase, while 8% said they would ask a store employee for more information.
Cause Marketing Campaigns That Made A Difference
Consumers often are more willing to purchase from companies who have been donating as a long-term commitment to a focused issue. A selection of examples of successful campaigns initiated by both retailers and the charitable organizations include:
- Soles4Souls gathers shoes from warehouses of footwear companies and consumers’ closets in an effort to help those in need. Since its inception, the organization has donated more than 14 million pairs of new and used shoes to people in more than 127 countries, including Kenya, Thailand, Nepal and the United States. Retailers who have partnered with the charity to donate shoes include Mandee, BOBS by Skechers, Nine West and shoes.com.
- One of the most well-known charitable organizations is the Susan G. Komen Breast Cancer Foundation. Each year, the charity raises more than $55 million during October and November. But according to Buzek, this particular charity should be wary of becoming over-exposed. “Everything is pink during that time,” explained Buzek. “No one is arguing with the mission and the need, however, even consumers get tired of everything being pink. So many retailers choose that one cause at the same time, there is no differentiation.” Retailers who have partnered with Komen for the Cure include Hanes, GUESS, Coldwater Creek, Payless ShoeSource, Pandora and Cartier.
- In 1994, PetSmart, a leading provider of pet services and solutions, established PetSmart Charities, an independent, nonprofit 501c3 organization to support programs that save the lives of homeless pets, raise awareness of companion animal welfare and promote healthy relationships between people and pets. The nonprofit organization has provided $134 million in grants and programs benefiting animal-welfare organizations. Additionally, more than 4.5 million pets have been saved through the PetSmart Charities Adoption Centers, available in every PetSmart store.
- Most recently, Macy’s ran its Shop for a Cause campaign during the fall of 2011, which allowed charities to sell coupons for $5 that enabled consumers to receive a 25% discount on their purchases. “The charities keep the proceeds for each coupon they sell, Macy’s gets the benefit of the increased traffic,” noted Buzek. “So that $38 million in charity has probably returned $600 million in sales benefit to Macy’s. It’s a win/win.”
Investing In Tomorrow Offers Retailers Credibility
Retailers that have invested in a cause often are deemed credible by consumers because they elicit strong emotions. With the growing need to differentiate one store/brand from the next, it is critical for retailers to educate their employees on the importance of cause-related marketing. Companies that have done so noted an increase in sales and have created customer loyalty based on their contributions.
Although some retailers are quick to utilize a cause to help promote brand awareness, there are others who are hesitant in partnering with a nonprofit organization. “Primary benefits [of cause related marketing] are a greater bond with consumers and the good will that comes along with the charity,” explained Buzek. “If that charity is doing great work and has a great reputation, the retailer benefits from that good will not only from consumers, but employees, etc.” It is necessary for retailers to partner with an organization that aligns with their corporate mission. Buzek suggested partnerships be targeted, specific to retailer’s consumers, and consistent as the charity becomes part of their branding.