Cause Marketing: A Historical and Critical Perspective

EFFECTIVE EXECUTIVE SEPT.2009

SOCIAL CAUSE MARKETING

Cause Marketing: A Historical and Critical Perspective

-- Inger L Stole

One of the problems associated with cause marketing is its tendency to commercialize the philanthropic process. Many consumers now limit their philanthropic involvement to the cash register, believing that by purchasing products that generate charitable donations, they are doing enough to contribute to social causes. This makes nonprofits even more eager to get a piece of the action. One of the latest trends in the world of cause marketing is the presentation of workshops for training nonprofits in how to market themselves to potential businesses partners.

Since the 1980s, cause marketing has developed into a major mar- keting trend for business. An offer by American Express to help contribute to the cause of restoring the Statue of Liberty and Ellis Island by donating one cent of every transaction made on any of its cards and $1 for every new card issued during the last quarter of 1983 is generally credited as the introduction of this practice. In addition to collecting $1.7 mn for the restoration effort, American Express gained fantastic publicity in the form of news and television stories, and the resulting 28% increase in the use of its cards was obviously a major plus. Recognizing the potential, other companies followed suit, and by the early 1990s US businesses had undertaken cause marketing on a grand scale. Between 1990 and 1999, the amount spent on this form of marketing rose from $125 mn to $630 mn annually. Six years later, expenditures had increased to well over $1 bn. In 2009 it is predicted that $1.55 bn will be spent for cause marketing in the US alone. Although it provides philanthropic causes with much-needed funds, the guiding force behind the practice of cause marketing is not the needs of nonprofits or the amount of good such marketing does, but rather the ability to serve business in a public relations (PR) capacity.

From Corporate Charity to Strategic Philanthropy

For nearly a century, American businesses have relied on some form of PR. The overarching goal has been to defuse, impress, or evade critics in order to create a business-friendly atmosphere while the political objective has been to prevent laws or regulations opposed by businesses from gaining popular support. Public relations gained popularity in the late 19^th century, when rapid industrial growth and a wave of corporate mergers caused public uneasiness about big business and unregulated corporate power. An arrogant attitude among industry leaders combined with unwillingness to acknowledge the public's concerns fueled a view of American corporations as `soulless' and uncaring. Rather than alter their behavior, corporations turned to the emerging field of PR for help. They were advised to display their socially responsible side to the public – a recommendation that many have followed.

In 1953, the US Supreme Court ruled that corporations did not need to limit their charitable donations to causes that were directly related to their business profiles. This resulted in a dramatic increase in corporate support for the arts and education, but it also led to clashes between the management and stakeholders over the selection of philanthropic causes. Still, the 1960s and 1970s are considered a hallmark period for corporate willingness to engage in social issues. This trend was reversed during the economic downturn of the 1980s, when business leaders found themselves under constant financial pressure. In that tough fiscal climate, philanthropic activities did not contribute to the immediate goal of maximizing efficiency and increasing profits and dividends of businesses.

In order to encourage corporate giving, President Reagan initiated the Task Force on Private Sector Initiative, providing large tax breaks for businesses that voluntarily contributed to charitable causes. Businesses, however, were in no rush to take advantage of the program. Out of 400 large companies surveyed in 1982, only 6% planned to boost their charitable contributions, while several planned to reduce them.

Nonprofit and philanthropic causes suffered as a result, but their `rescue' came partly in the form of a rapidly growing marketing concept called `branding'. Marketing experts of the 1990s believed that in order to be successful, a brand must represent more to consumers than a physical product. The relationship between a company and its customers was not limited to a simple transaction of goods or services but also included an emotional component. When successfully carried out, this strategy could bolster a brand's equity and provide an open forum through which the relationship between the consumer and the brand might deepen. Businesses therefore began to strive for a marketing approach that would integrate branding with social issues of concern to their intended consumers. It is here that strategic philanthropy enters the scene.

Defined as "corporate giving that serves a dual purpose of contributing needed funds to charitable causes while simultaneously benefiting the firm's financial bottom line and enhancing business's political legitimacy," strategic philanthropy offered businesses a new approach. It allowed them to tailor charitable donations to social issues and causes that complemented their own products while simultaneously deducting the donations from their taxes. Adding to the benefits was a chance for businesses to expand their markets, increase sales, and build public goodwill that might serve as a bulwark against government regulations. As such, it was considered "a powerful tool to be used in a calculated program of public relations and long-term investing."

Cause Marketing: A New Trend

Strategic philanthropy comes in several forms. In what is known as `in-kind giving', a company donates goods and services to organizations in need. Another way to contribute is by donating employee time (through a corporate employee volunteer program) and expertise (through a venture philanthropy program) to nonprofit or community organizations. The publicly most visible form is cause marketing, also called cause-related marketing or joint-venture marketing. Defined as "a business strategy that integrates a social issue or cause into brand equity and organizational identity to gain significant bottom-line impacts," cause marketing merges corporate identities with nonprofits, good causes, and significant social issues through cooperative marketing and fundraising programs.

Facilitated giving is a popular form of cause marketing. This is where a business serves as an intermediary for customer donations to a charity (or to itself!). An ongoing effort by Illinois energy supplier AmerenIP exemplifies this strategy. Each monthly bill to customers includes a plea for donations to the company's `Warm Neighbors' program, established to help customers pay their utility bills and weatherize their homes. While AmerenIP itself contributes an unspecified amount, the program relies primarily on the generosity of its customers. Overlooked – or deliberately obscured – is the fact that those customers are helping other customers settle their debts to the company.

The most common manifestation of cause marketing, however, is purchase-triggered donations – the practice pioneered by American Express in 1983, in which a company pledges to contribute a percentage or set amount of a product's price to a charitable cause or organization.

Over time, the early practice of cause marketing arrangements between a single commercial interest and a single cause has given way to more elaborate schemes that feature prominent philanthropic causes and a host of major corporate players who are granted exclusive sponsoring rights in their respective service categories. Established in 1982 to "eradicate breast cancer as a life-threatening disease," the Susan G Komen Foundation has become one of the most visible fundraising organizations for cancer research, as well as a favorite charity for sponsors with an interest in cause marketing. Its annual "Race for the Cure" – a five-kilometer run/walk – is the largest ongoing sports/fundraising event in the country. More than most nonprofits, the Komen Foundation is actively involved in marketing its event to companies in search of cause marketing ventures. In 2009, more than 20 large companies, including Kellogg's, Yoplait, Pier 1 Imports, Re/Max Real Estate, and American Airlines (which recently rolled out the last and largest of eight aircraft displaying the special co-branded pink-ribbon motif that signifies the global fight against breast cancer), are members of Komen's Million Dollar Council Elite. The entry fee for the right to serve as an official sponsor of the annual race is $1 mn, and the companies also undertake separate efforts that showcase their connection to the cause. Yoplait, for example, donates 10 cents to the Komen Foundation for each yogurt lid it receives from customers, with a guaranteed donation of $500,000 and a cap of $1.5 mn. Not to be outdone, Wacoal, a maker of bras and shapewear for women, shares information about early detection techniques for breast cancer and donates $2 every time a woman is fitted for a bra during the company's Fit for the Cure events, with a promised minimum donation of $250,000. In addition to enjoying excellent exposure to a key consumer base, these companies can bask in the glory of being associated with a worthy cause and obtain valuable demographic information in the process.

Also partnering with Komen on the $1 mn level is BMW, which is donating 80% of the proceeds from its "Pink Ribbon Collection" of watches, T-shirts, bags, and notebooks to the Komen Foundation. Rounding out the Komen sponsor list are more than fifty other businesses that have each pledged $100,000 of financial support in exchange for being associated with the cause, as well as many businesses with lower contribution levels. Anyone who doubts the lure of breast cancer awareness as a marketing tool need only visit any department, grocery, or drug store during the National Breast Cancer Awareness Month each October. The sheer number of manufacturers who adorn their products with pink ribbons and offer to donate a share of their sales to the cause is astonishing.

As new technologies emerged, cause marketing efforts have followed. One example is the `giving malls' that have sprung up on the Internet during the past decade, catering to customers who prefer to spend their money with businesses that `do good'. For example, iGive.com, links customers with more than 700 affiliated merchants willing to donate anywhere between 0.4% to 26% of every transaction to over 24,000 nonprofit groups selected by registered iGive members. The chance to be associated with a good cause is not lost on retail giants such as Amazon.com, L.L. Bean, Barnes & Noble, Office Max, eBay, and Dell. During its first nine years of existence, iGive.com distributed nearly $2 mn to charitable causes. But, as iGive itself acknowledges, the arrangement is "more than shopping for a cause," because members have access to exclusive coupons, free shipping deals, and sales alerts.

Inger L Stole is an associate professor in the Department of Communication at the University of Illinois in Urbana-Champaign. Her research explores advertising-related issues from historical and contemporary perspectives. She is the author of Advertising on Trial: Consumer Activism and Corporate Public Relations in the 1930s (University of Illinois Press, 2006). She is currently researching the political and economic role of the American advertising industry during World War II and its post-war impact. Her articles have appeared in International Journal of Communication, Journal of American Culture Consumption, Markets, and Culture, Advertising and Society Review, and The Communication Review.

Although it is difficult to assess the level of consumer participation in the many cause-related efforts, consumers report a high degree of satisfaction. A Cone/Roper study conducted in 1993-94 found that 84% of respondents had a more positive image of a company if it did something "to make the world better." In addition, 78% of adults said that they would be more likely to buy a product associated with a cause they cared about, 66% would switch brands in order to support a cause they found to be important, 62% would switch retail stores to support a cause they believed in, and 64% thought that cause marketing should be a standard part of a company's activities. The impact of cause marketing was found to be strongest on people who had attended at least some college and earned more than $30,000 annually. A follow-up survey among young people conducted in 2006 showed an even stronger consumer endorsement of cause marketing, with 89% of those interviewed indicating a preference for a brand associated with a good cause if the product did not differ in price and quality from that of its competitors, and 83% claiming to have more trust in a company that came across as socially and environmentally responsible.

Cause Marketing: Who Really Benefits?

At first glance, cause marketing appears to be a win-win situation for businesses and nonprofits alike. The latter are able to obtain the funds they need, while the former get to reap the benefits of performing good deeds. Judging from the increase in cause marketing, it seems businesses have clearly embraced the concept, and few charitable organizations are turning the private sector away. This does not mean, however, that the practice of merging marketing and social causes is without problems. While cause marketing can do a wonderful job of collecting funds for the affiliated nonprofit organizations, it should not be forgotten that charities in desperate need of funding may venture into partnerships that are far from equal and may even have the potential to cause more harm than good. Because cause marketing is an attempt to increase a firm's return on its investment, it goes without saying that causes are not always selected on the basis of the potential good that can be achieved; rather, the focus is often on the free publicity and increased sales that a particular affiliation might bring to a company. In fact, and this is particularly true when it comes to business alliances with the larger nonprofits, cooperation can generate free publicity and many PR opportunities, thus saving advertising and promotional expenses for the business involved.

In their eagerness to reach and impress affluent consumers, companies have started to poll this group in order to determine their charitable preferences and, consequently, where to focus future cause marketing efforts. In February 2006, for example, the Luxury Institute, a research group that claims to be `the sole independent voice of the wealthy consumer', surveyed households with more than $5 mn in personal wealth and $200,000 in annual income to identify their favorite nonprofit organizations. Habitat for Humanity, America's Second Harvest, and St. Jude's Hospital topped the list, followed by numerous health- and research-related charities. Nonprofit groups that serve a valid social function but fail to fit a corporate profile or to appeal to the customer groups that businesses want to reach risk being ignored, while causes that serve as better marketing vehicles may receive a disproportionate amount of interest. Relying on a market-driven system in which support for social causes hinges on whether they can complement a sales message leaves much to be desired and gives business too much power. All too frequently, the true nature of a business's contribution is not explained to the public. How, for example, is "a portion of the profits" translatable into dollars and cents for the cause, and who benefits more from a transaction, the business or the nonprofit organization?

Product Red, a cause marketing campaign launched in the fall of 2006, illustrates some of the problems. The explicit goal behind the Red campaign is to raise money to alleviate AIDS, tuberculosis, and malaria in Africa through a British-based nonprofit organization called the Global Fund. As corporate partners in Product Red, companies such as Motorola, Armani, Apple, the Gap, and American Express have designed specific red or red-labeled products and donated some of the net profits from the sale of those items to the cause. While clearly helping the Global Fund, this strategy is also beneficial to the companies involved. Even with its donation of 50% of the profit from the sale of "Red" T-shirts and cashmere bikinis (priced at $100), the Gap clears a nice profit for itself, as do the founding partners who have pledged a lesser percentage of profits from the sale of their specially designed "Red" items to the Global Fund.

In October 2006, the musician and philanthropist Bono, a Product Red cofounder, appeared on the Oprah Winfrey Show to launch Red in America. For the better part of the hour-long program, viewers followed Oprah and Bono as they shopped at the Gap, Apple, Motorola, and Armani stores along Michigan Avenue in Chicago, where a gushing Oprah bought several items. Although it is impossible to estimate the publicity value of product placements on such a highly rated show, it is safe to say that the media exposure exceeded the cost of donating a percentage of the profits from Red product sales to charity. Within its first year, the campaign was reported to have raised a total of $18 mn for the Global Fund. This, however, paled in comparison with the estimated $100 mn that the Gap, Motorola, and Apple combined had spent to publicize their participation in the campaign. Although spokes-people for Red dismissed the numbers as inaccurate, they failed to produce convincing evidence to the contrary, and the Gap and Apple declined to comment. At the time of this writing, the Red campaign had raised more than $59 mn for its causes.

The Commercialization of Philanthropy

One of the problems associated with cause marketing is its tendency to commercialize the philanthropic process. Many consumers now limit their philanthropic involvement to the cash register, believing that by purchasing products that generate charitable donations, they are doing enough to contribute to social causes. This makes nonprofits even more eager to get a piece of the action. One of the latest trends in the world of cause marketing is the presentation of workshops for training nonprofits on how to market themselves to potential businesses partners. The Cause Marketing Forum, a leader in cause marketing circles, offers a step-by-step guide to help nonprofit organizations make themselves more attractive to business partners. Thus, it is no longer a matter of business looking to do good, but of nonprofits, desperate for funding, trying to appear good in the eyes of business. Adding to the challenge is the corporate quest for nonprofit partners that can deliver a demographically desirable audience.

Product marketers have traditionally sought an audience of (white) middle- or upper-middle-class women and have avoided controversy at all costs, acting on the assumption that certain emotions put consumers in a purchasing mood and others serve as deterrents. Following this line of reasoning, it is easy to see why a more controversial nonprofit group may fail to attract sponsors, while a well-established and less controversial cause may attract many. Few can deny that problems such as teen pregnancy, incest, child abuse, sexually transmitted diseases, drug abuse, and alcoholism are serious social problems worthy of attention. But while corporate sponsors flock to mainstream causes such as the Komen Race for the Cure and Product Red, few of the more controversial causes attract cause marketing partners. Quite often, however, those controversial charities conduct pioneering work of great importance.

Thus, it is wise to question whether the practice of hinging important social causes on the vagaries of marketing is a sustainable strategy and a tool for social change and justice. By transforming generosity, compassion, and charitable inclinations into a well-functioning branding strategy, companies have arrived at a very successful business formula. They will probably continue to use cause marketing as long as it proves politically and financially profitable. In fact – and this might be particularly troubling to those who question this approach to philanthropy – cause marketing works well within the legitimate parameters of corporate behavior, and any CEO worth his or her salary has an obligation to explore this form of marketing if it has the potential to benefit the bottom line. The best approach for critics is thus not to shame or scare individual companies away from using this approach, but rather to pick the uphill (but not impossible) battle of changing the laws that have transformed social causes into PR vehicles for business.

Note: This article is a revised and updated version of "Philanthropy as Public Relations: A Critical Perspective on Cause Marketing," International Journal of Communication, vol. 2, 2007.