Knowledge is a weapon. So please consider contributing to build our arsenal. We accept no corporate or foundation funding whatsoever. Please make a donation.
FLASHBACK | “Cause-Related Marketing”: Why Social Change and Corporate Profits Don’t Mix
July 14, 2006
by Inger Stole
In the 1980s, a new form of marketing was born: Cause-Related Marketing (CRM), a hybrid of product advertising and corporate public relations. CRM aims to link corporate identities with nonprofit organizations and good causes. As a tax-deductible expense for business, this form of brand leveraging seeks to connect with the consuming public beyond the traditional point of purchase and to form long-lasting and emotional ties with consumers. However, what might seem like a fair exchange between corporations in search of goodwill and non-profits in search of funds also raises a range of troubling social, political and ethical questions.
CRM is, first and foremost, a market-driven system. Therefore, a non-profit organization’s chance of obtaining CRM funding hinges on its ability to complement sales messages. However, it is often the case that vital social issues are only — or are best — addressed by “edgy” groups or by using controversial tactics.
For example, in 1983 American Express might have saved lives by highlighting HIV/AIDS, then considered a taboo subject because of its association with homosexual lifestyles. Instead, the credit card raised funds to restore the Statue of Liberty and Ellis Island. Today, companies “fight” breast cancer by selling pink ribbon pins, teddy bears or yoghurt, and donating some of the proceeds to research efforts. Imagine the impact if the companies instead, or in addition, advocated for a more equitable healthcare system. After all, inadequate health insurance keeps many women from detecting breast cancer in its early, and most curable, stage.
Markets Without a Cause
There are six main types of CRM arrangements. The first four relate to standard corporate practices. These are: advertising, where a business aligns itself with a particular cause and uses ads to communicate the cause’s message; public relations, where a business calls press and public attention to a strategic partnership between itself and a non-profit group; sponsorship, where a business helps fund a particular program or event; licensing, where a business pays to use a charity logo on its products or services; and direct marketing, where both a business and a non-profit raise funds and promote brand awareness.
A fifth type of CRM is facilitated giving, where a business facilitates customer donations to the charity … or to themselves! The ongoing effort by Ameren, an Illinois energy supplier, is a good example. In their monthly bills, Ameren customers receive a plea for donations to the corporation’s “Warm Neighbor” program, a fund established to help Ameren customers who are unable to pay their utility bills and/or weatherize their homes. While the energy supplier contributes an unspecified amount, the program relies on the generosity of Ameren customers. Lost — or deliberately obscured — is the fact that customers are helping other customers settle their debts to Ameren. Other utility companies use the same strategy. A few years ago, the telecom company then known as SBC Ameritech launched its “Bridge the Digital Divide” program, to provide people with basic computer knowledge using the same collection strategies.
The sixth and most widely used CRM practice is purchase-triggered donations. This is where a company pledges to contribute a percentage or set amount of a product’s price to a charitable cause or organizations. The American Express campaign to restore the Statue of Liberty, mentioned above, is credited as the blueprint. The company promised to contribute one cent for every card transaction and $1 for every new card issued during the last quarter of 1983. American Express not only collected $1.7 million for the restoration effort – there was a 28 percent increase in use of their credit cards, not to mention massive press coverage and free publicity. These results were not lost on other businesses. Between 1990 and 1999, American companies spent increasing amounts on CRM; the total annual sum has now passed the one billion dollar mark.
Sit Down, You’re Rocking the Boat!
Frequent benefactors of CRM campaigns, due to their largely non-controversial nature, are educational programs. Among the early and well-known national CRM efforts was Visa’s 1997 “Read a Story” campaign, where Visa pledged a donation to a group called “Reading Is Fundamental” for each cardholder transaction. Today, CRM efforts involving the educational arena have become more elaborate. Take, for example, Upromise, a program involving major companies like Exxon Mobil, Coca Cola, McDonald’s and New York Life Insurance. Each time a parent, grandparent or other caring adult patronizes one of the over 20,000 grocery or drug stores, more than 40,000 retail stores and services, more than 8,000 restaurants and over 350 online retailers affiliated with the program, rents a car from Avis, or buys or sells a home with an affiliated real estate company, he or she can request that a portion of the amount be deposited in a college savings account established in a child or grandchild’s name. The size of the contributions varies. While a few participants pledge as much as 10 percent of the purchasing price, most donate one percent. Thus, in order to earn $1,000 for college, relatives and friends must purchase $100,000 of goods and services, while providing the participating companies with a great deal of valuable demographic information.
Founded in 1982 to “eradicate breast cancer as a life-threatening disease.” the Susan G. Komen Foundation has become one of the most visible fund raising organizations for cancer research, as well as a favorite CRM charity. Its annual “Race for the Cure” is the largest ongoing sports/fund-raising event in the country. More than most non-profits, the Komen Foundation is actively involved in marketing its event to companies in search of CRM ventures. In 2006, some twenty large companies, including Kellogg’s, Yoplait yoghurt, Pier 1 Imports, Re/Max Real Estate, and American Airlines were members of Komen’s Million Dollar Council. In addition to paying a million dollars for the right to serve as official sponsors of the annual race, each company has separate CRM efforts that showcase their connections to the cause. Yoplait, for example, has pledged to donate 10 cents for each of the first 30 million yoghurt lids it receives from customers to the Komen Foundation. Not to be outdone, Kellogg’s promises to send a pink ribbon heart pin to every customer who donates five dollars to the Komen Foundation and mails proof of the contribution along with two purchase labels from specially-marked cereal boxes.
Also partnering with Komen is BMW. The automaker has developed an elaborate scheme to benefit the Susan B. Komen Foundation — and possibly itself. As part of a campaign called “Ultimate Drive,” BMW promises to donate one dollar for each mile of test driving during a particular period, and to donate a percentage from the sale of its “Pink Ribbon Collection” of watches, T-shirts and notebooks to the Susan G. Komen Breast Cancer Foundation. For anyone doubting the marketing power of breast cancer awareness, I recommend a trip to any department store during October, “the official Breast Cancer Awareness month.” The sheer number of manufactures who adorn their products with pink ribbons and offer to donate a share of their sales to the cause is overwhelming.
The Changing Face of CRM
Sometimes a company deliberately ties its identity so closely with its CRM efforts that it, by design or pure coincidence, appears to be a non-profit outfit itself. Working Assets, a for-profit company headquartered in San Francisco, is one example. As a self-described “socially responsible long distance telephone and credit card company,” Working Assets donates one percent of customers’ telephone charges and 10 cents for each credit card transaction it processes to nonprofit organizations working for peace, human rights, economic justice, or the environment. An annual ballot listing participating organizations is sent to Working Assets customers, to determine how the unrestricted general-support grants are allocated. During its first year in 1986, Working Assets donated $32,000 to non-profit organizations. In 1997, donations totaled nearly $3 million; by 2005 some $4 million was donated. Today, the company claims to have donated a total of $50 million to various causes through its CRM efforts.
As new technologies emerge, CRM efforts follow. One example is the “giving malls” that have sprung up on the Internet. Since 1997, iGive.com has offered customers the opportunity to shop from over 400 affiliated merchants and to direct up to 39 percent of every purchase (although the typical donation is three percent) to more than 18,000 nonprofits, often local chapters of large national non-profit organizations. The chance to be associated with a good cause is not lost on retail giants like Amanzon.com, L.L Bean, Barnes & Noble, Office Max, eBay and Dell. During its nine years in existence, iGive.com has helped distribute nearly two million dollars to a total of 30,000 charitable causes.
Looking a Gift Horse in the Mouth
At first glance, CRM appears to be a win-win situation. Charities get needed funds, while businesses get to bask in the glory of others’ good deeds. Judging by its popularity, business has clearly embraced the CRM concept and few non-profit organizations are turning the private sector away.
However, this does not mean that merging marketing and social causes is without problems. Although CRM may do a wonderful job in collecting funds for affiliated charities, it should not be forgotten that social causes, in desperate need of funding, may venture into partnerships that are far from equal. Sometimes, CRM partnerships hold the potential of harming more than helping non-profits.
The botched pact between the American Medical Association (AMA) and Sunbeam Corporation serves as a cautionary example. In the summer of 1997, the AMA agreed to endorse nine products in Sunbeam’s “Health at Home” line, including blood-pressure monitors and thermometers. In return, Sunbeam would pay a percentage of sales to the AMA in the form of “royalties,” to be used for the AMA’s research and education programs. For Sunbeam, the AMA seal of approval would provide a competitive advantage that could significantly boost sales.
But there was an immediate outcry both from consumer groups and medical professionals. The former questioned whether the AMA would evaluate honestly the efficacy of products. They were also uncomfortable with the organization encouraging consumers to buy products that might be more costly, but not necessarily better, than competitive products. Moreover, the ordinary consumer might see the AMA name on a product and think that Sunbeam was a philanthropic donor to the AMA, instead of a participant in a marketing deal. Others suggested that the AMA would be violating its own code of ethics by, in effect, recommending a product in which it had a financial interest.
Days after the deal was announced, the chair of AMA’s board of trustees revoked it, on grounds that it lacked board approval. Sunbeam’s chair responded by suing the AMA for breach of contract and the AMA ended paying Sunbeam $9.9 million for breach-of-contract suit.
“Good” Business As Usual
Because CRM is driven by the need to increase a businesses’ return on its investment, causes are selected not on the basis of the potential good that can be achieved but, rather, on the free publicity and increased sales a particular affiliation might bring to the business. Non-profits that do not fit a corporate profile or appeal to the customer group that businesses want to reach are ignored, even if they do vital work, while groups that provide good marketing vehicles receive a disproportional amount of interest. Working Assets is the exception that proves the rule.
In addition, CRM alliances with larger non-profits may bring so much free publicity and so many public relations opportunities that the business involved saves on advertising and promotional expenses. The business may also gain access to the non-profit’s clientele, staff, trustees, and donors, all of whom are potential customers. Such access makes non-profits with large memberships especially attractive to many companies.
Indeed, the commercial imperative behind CRM is well known in marketing circles. In February 2006, the Luxury Institute, a research group claiming to represent “the sole independent voice of the wealthy consumer,” surveyed households with over $5 million in personal wealth and $200,000 in annual income to determine which non-profit organizations affluent people liked. Habitat for Humanity, America’s Second Harvest and St Jude’s Hospital topped the list followed by many health- and research-related charities.
Generally, there is a tendency for business to focus on symptoms, as opposed to core problems. For example, while illiteracy is a frequent CRM cause, the more fundamental issues of poorly-funded schools or growing economic inequality are not. Likewise, while many businesses eagerly solicit funds for breast cancer research, they ignore links between certain industry practices and cancer and rarely, if ever, focus on the lack of affordable and adequate healthcare for women. In many instances, CRM may fairly be seen as a clever ploy to mask problems that the very same corporate forces are directly or indirectly responsible for. “As companies appear to fill the gaps they have helped create,” wrote columnist George Monbiot, “they can present themselves as indispensable vehicles for social provision, enabling them to argue for a further reduction in state services.”
By transforming generosity, compassions and charitable inclinations into a well-functioning branding strategy, companies have arrived at a very successful formula. Viewed from the public perspective, however, the future is far from silver lined. What will be the ultimate outcome turning the non-profit sector into a marketing tool for business? Non-profits have traditionally served the needs of people unable to obtain goods, services, and political redress. In a worst-case scenario, money-starved non-profits might change their approaches and services rendered to become more attractive CRM partners. Instead of risking such compromise, business should pay their fair share of taxes. Then, education, health care, research and other social priorities could receive greater funding, with no strings attached. But don’t expect that to happen any time soon. Right now, business is having its cake and eating it too.
[Inger Stole is a board member of the Center for Media and Democracy, an assistant professor at the Institute of Communications Research at the University of Illinois at Urbana-Champaign, and the author of the new book, Advertising on Trial: Consumer Activism and Corporate Public Relations in the 1930s]
- Adkins, Sue. Cause-related Marketing: Who cares Win (Oxford, Auckland, Boston, Johannesburg, Melbourne, New Delhi: Butterworth-Heinemann, 2000).
- www.ameren.com – accessed March 23, 2006.
- American Express, “American Express Launches National Campaign to Re-open the Statute of Liberty: Pledges Minimum of $3 Million with Cardmember Support,” Current News Release, November 25, 2003.
- Andreasen, Alan R. Ethics in Social Marketing (Washington D.C: Georgetown University Press, 2001).
- Bishoff, Dan, “Consuming Passions,” Ms. Magazine, December 2000/January 2001, pp. 61-65.
- www. causemarketingforum.com – accessed April 5, 2006.
- “Good deeds attract customers and workers,” USA Today, Vol. 128, No. 2651, August 1999, p. 15-16.
- www.iGive.com – accessed on April 7, 2006.
- www.komen.org – accessed on March 23, 2006.
- Monbiot, George, “Cause-Related Marketing is a new form of social control,” The Guardian, July 31, 2001, pp. 1-2.
- Polonsky, Michael and Greg Wood, “Can Overcommercialization of Cause-Related Marketing Harm Society?” Journal of Macromarketing, Vol. 21, No. 1, June 2001, pp. 8-22.
- Pringle, Hamish and Marjorie Thompson, How Cause-Related Marketing Builds Brands (Chichester, New York, Weinheim, Brisbane, Singapore and Toronto: John Wiley & Sons 2001.
- Ridge, Pamela Sebastian, “A Special Background Report on Trends in Industry and Finance,” The Wall Street Journal (Eastern edition), December 23, 1999, p. A1.
- SBC Ameritech, “Here’s How You Can Contribute,” solicitation included with bill to Illinois customers in 2002.
- www.upromise.com – accessed on March 14, 2006.