Consumers are not so much wearing their altruism on their sleeves these days as on their wrists. From the office corridor to the city streets to the gym locker room, one can barely turn a corner lately without coming face to face with those bright yellow, Lance Armstrong "Live Strong" bracelets, denoting one's support of cancer research. Americans are embracing charity—once a discreet, personal choice—with all the subtlety of a Live 8 production.
In the wake of 9/11, the Asian tsunami and Hurricane Katrina, citizens have proved time and time again that they are generous souls. Likewise, corporate America—tainted by corrupt regimes like Enron and fat-cat oil executives boasting record profits while gouging consumers at the gas pump—is adopting pet causes at a dizzying pace.
U.S. companies will spend $1.3 billion on cause-related marketing this year, a 20 percent increase over last year, according to IEG, a Chicago-based market research firm. A key reason for the dramatic uptick: research indicating that it is increasingly important to consumers, from teens to boomers, when companies align themselves with a cause. When corporations link up with charities, the public says, that motivates them to buy products or services from those marketers. A 2003 survey by the American Association of Retired Persons found that 45 percent of respondents signaled that support of social causes was a characteristic of their favorite brands.
And while cause-related marketing's actual impact on sales is anybody's guess, what's certain is that it has boosted charities' bottom line. Today, the smartest causes are bypassing the shallow pockets of corporate foundations and heading straight for the marketing department, where ingenious minds are finding ways to marry a company's products or services with just the right charitable cause.
But just how much of this spurt in corporate generosity, one has to wonder, is altruism—and how much is pure marketing?
Jim Armstrong, founder and creative director of Good for Business, a Madison, Wis., communications firm that specializes in social responsibility, says that when it comes to displays of corporate charity, consumers know whether they're being snowed. "Most people pick up on the intent of the message and know immediately if it is a marketing ploy," he explains.
Elva Lewis, associate director of direct marketing and promotions at Procter & Gamble, says cause-related marketing has a direct link to consumers' purchasing decisions. "If faced with a purchase decision between two similar products, a majority of consumers tell us that they would break that tie by choosing the brand from a company that contributes to, and does good things with, a community cause they believe in," she explains. "We make and globally market products that we believe help to make consumers' lives better in small, everyday ways. We also want to go beyond thatcore mission, to do good things in the communities in which we operate. And yes, we want to do that in noticeable ways that help consumers learn who we are, and help us win those purchase ties whenever possible."
While corporate giving certainly predates the high-profile corporate scandals over the last few years, there's little doubt they've had an impact on companies opening their coffers for charity. Cause-related marketing "is a manifestation of the increased scrutiny that companies are under," says David Hessekiel, president of the Cause Marketing Forum, based in Rye, N.Y. Adds Richard Steckel, president of AddVenture, a social marketing boutique in Littleton, Colo., "There was a repulsion about the greed in the Enron story and the Arthur Anderson story. What is different now is consumers say, 'If companies treat me right, I will help them make money.'"
Establishing a partnership between a company and a cause that taps into what people care about—and that does not smack of outright exploitation—is critical if consumers are going to buy into the idea, however, says Marc Gobé, chairman and CEO of Desgrippes Gobé, a brand consultancy in New York.
As the citizenry has become more charitable, they expect corporations to follow suit, says Gobé. Consumers support brands that "they can trust," he says, "and they want those companies to be socially responsible."
Laying out a buck for a Lance Armstrong bracelet or snapping up one of the dozens of copycat rubber baubles connected to an array of charities may seem a frivolous fashion statement, disconnected from the very real causes that spawned them. But, brand consultants say, such products of cause marketing actually represent a meaningful statement to the consumers who don them.
"There is a desire for purpose and meaning in people's lives, and the opportunity to purchase something and make a difference is a simple way to operationalize that yearning," says Steckel. "So they buy the Lance Armstrong wristband and wear it proudly."
The concept of cause-related marketing has come a long way since two decades ago, when American Express raised more than $1.7 million to help restore the weather-worn Statue of Liberty. Experts say sponsoring such random charitable events is no longer the best approach. Instead, more companies are integrating altruism into an overall corporate strategy that affects every aspect of the business. Using cause-related marketing, companies are further differentiating themselves in an increasingly competitive world.
"It's the difference between corporate social responsibility and corporate opportunity," says Nicky Amos, corporate social responsibility director at Corporate Culture, a London-based agency that creates campaigns designed to deliver corporate as well as social benefits. "If we take a more strategic view of community investment and we build a program that engages our employees and our customers, then the company wins, the charity wins and the cause wins," she says.
As the Lance Armstrong bracelet demonstrates, celebrity has become a potent tool in cause-related marketing. Take U2 frontman Bono's recent announcement at the World Economic Forum in Davos, Switzerland. Bono and Bobby Shriver, of the Kennedy clan, aim to turn currency from green to red to signal the growing emergency of HIV/AIDS in Africa, where 7,000 people die every day from the virus. Marketers like American Express, Converse, Gap and Giorgio Armani threw their weight behind the cause by creating new products such as red T-shirts and sunglasses, red sneakers and a red AmEx card called Product Red, with a portion of each sale going to the Global Fund to Fight AIDS in Africa. Through such arrangements, corporations make their own dollar and pass another to a worthy charity—all the while raising their image in the eyes of consumers with priceless P.R.
Corporations have found that charity need not be incompatible with a profit motive—although the marriage of the two can be tricky. "We had to give companies a way to invest and make money on the idea [by creating new product lines]," explains Shriver, CEO of Product Red. "And that took some salesmanship, because the first reaction of companies was, 'I don't want to make money off of Africa or off of the sadness of AIDS.' I pointed out that the fact that you feel that way is part of the problem. You want to make a contribution and go back to your business. We want to become your business."
The multicorporation AIDS initiative is just one example of the new corporate giving. For the first time in its 169-year history, Procter & Gamble has developed a global strategy around its charitable investment, which will involve linking its scores of brands with various charities.
P&G's corporate strategy, called "Live, Learn and Thrive," focuses on children in need, up to age 13. Crest's "Healthy Smiles" program works with dental clinics to give poor children free or low-cost dental care. It works with the Boys & Girls Clubs to bring toothbrushes, toothpaste and dental education to schools. P&G also makes a water purifier used in poor countries.
"We should be doing the right thing," Lewis says, "and it should be a price of entry with the consumer for all corporations."
Corporations' charitable contributions have been anything but chump change. Home Depot has poured $25 million into KaBOOM!, a group that builds and refurbishes playgrounds, but has gone one further by linking its support of that charity with every event it sponsors. This month, the home goods mega-chain will publicize the Washington, D.C.-based charity in its stores. Next year, it plans to launch an ad campaign spotlighting the group. General Mills' Yoplait yogurt has linked with the Susan G. Komen Breast Cancer Foundation, raising $11.5 million for the charity with a goal of collecting another $3 million this year. The packaged goods giant also sponsors a campaign using cereal boxtops that supports local schools. Starbucks peddles Ethos Water, donating five cents of every sale to help children around the world get access to clean drinking water. It aims to raise $10 million by 2010. And, Whirlpool has donated nearly 70,000 new refrigerators and stoves to Habitat for Humanity, putting $34 million worth of appliances in every home the group has built in North America since 1999.
In some cases, corporate altruism has more to do with a broader social statement than a single charitable partnership. Chiquita Brands now produces only organic bananas and has established more equitable labor practices.
In fact, a company's charitable image goes far beyond simply how much money it throws at the United Way or cancer research. After all, even the since-disgraced Enron invested in charities promoting women and diversity in the workplace.
"For it to really work, it can't be a footnote, where a company says, 'Let's do a corporate social responsibility report and call that goodwill,'" says Eric Friedenwald-Fishman, president and creative director of the Metropolitan Group, a Portland, Ore.-based strategic communications firm whose clients include ShoreBank in Chicago and New Seasons Market, a Portland grocery store chain. "You have to say, 'How do we design and market our products, how do we manage our supply chain, how do we treat our employees and how do we act in the community?'"
Last year's hugely successful partnership between Nike, Lance Armstrong and cancer causes captured the attention of brand managers who hope to come up with the next "Live Strong" campaign—a charitable cause that also resonates with the public in a major way. Since the "Live Strong" initiative started in May 2004, the sale of those eye-catching little rubber bracelets has raked in more than $53 million in aid of cancer charities.
While "Live Strong" has become iconic, its success was anything but guaranteed, points out Rosemary St. Clair, Nike's director of U.S. brand initiatives, who says she lost sleep wondering how the company was going to sell 5 million bracelets at $1 a pop. "Wearing the wristband could mean you wanted to show support for Lance as he went for his sixth Tour de France, or it could mean you were showing support for a cancer survivor," she says. "The buck made it accessible for everyone."
Even though consumers responded favorably to the Nike campaign, and research would seem to affirm the importance of corporate charity to the consumer, not everyone is convinced of the reliability in the U.S. of what the Brits call the "conscience consumer." AmEx actually launched the Product Red card in the U.K. first because its research indicated that there are 1.5 million conscience consumers there, a number that is expected to grow to 4 million by 2009, says John Hayes, chief marketing officer at AmEx.
Asked why the card is not available in the U.S., Hayes says, "We would like to roll this out globally and we are giving consumers the chance to vote, but we still have to prove the case. We were able to more easily identify the market in the U.K., where awareness of the AIDS issue was higher than in the U.S."
Sources say some members of AmEx's management team in the U.S. are skeptical that such an idea would work here.
Getting a charitable idea right can be a struggle. At General Mills, earlier Yoplait promotions were "all over the board," says David Fisher, director of consumer promotion marketing. A Yoplait tie-in with the 1993 movie Jurassic Park brought only "so-so" results, he reports, while a link-up with the U.S. Olympic women's hockey team didn't deliver the expected return. It was Yoplait's link-up with the Komen Breast Cancer Foundation and the "Save Lids to Save Lives" campaign, created in 1998, that "really struck a chord with our consumers," Fisher says.
Hessekiel, of the Cause Marketing Forum, says less-than-stellar charitable efforts often fail the "three-second rule," explaining, "If the customer can't see the connection in a snap, then it doesn't work. Once upon a time, there was a naive notion that simply attaching a cause to your product would create a blip and consumers would respond. Maybe that worked in the early days, when this was a novel concept. But today we live in a noisy environment, so you need to create a well-executed program to be successful. You can't slap a nonprofit logo on your product and expect a huge return."
Scott Beaudoin, a vp at Cone, a Boston-based brand strategy firm that has worked with General Mills on the Yoplait campaign, says companies now are willing to spend more money on brand strategy and cause marketing. "We are being asked every day to come up with solutions outside of advertising to reach consumers and drive business," he says.
Some companies will even spend money on ads to tell customers about their values, says Corporate Culture's Amos. The agency has collected examples of what it calls "trust related marketing," which include an Avon print ad encouraging people to speak out against domestic violence and a Dove ad featuring "real women."
Whirlpool learned from its own research that although customers had a high level of satisfaction with its appliances, they were not particularly loyal to any one brand. "We had to go out and understand what loyalty meant," said Jeff Terry, Whirlpool's senior manager of corporate commitment and strategic relationships. "We are an old manufacturing and engineering company that is very rational, but we learned it was important to emotionally connect with consumers. And through our work with Habitat [for Humanity], we realized we had a great story to tell."
Terry says the company's 2004 "Join Us" campaign, featuring a 60-second ad with singer Reba McEntire and designed to promote the Habitat partnership, benefitted both the company and the cause.
Not only do companies have to find the right partner—nonprofit causes now are asking companies if they are socially responsible, says Kevin Martinez, director of community affairs and president of the Home Depot Foundation. "Your reputation has to be strong in labor practices, in ethics, in supplier code of conduct and in sustaining a good environment," he says. "It is not just about how [much product] you sell, because the nonprofit needs to make sure that what we are selling is built with good labor practices."
Darell Hammond, co-founder and CEO of KaBOOM!, says the right partnership takes time to build, and nonprofits don't always realize that. "It is a lot like dating," he says. "Nonprofits need to keep the momentum built on the longer-term relationship instead of just one promotional cycle. The cause needs to drive the marketing, so don't fall into the habit of doing a movie premiere promotion because the movie is going to go away."
In the end, companies can no longer afford to ignore cause-related partnerships, argues Amos. If corporations can just determine which causes their consumers care about, then all sides will benefit. "It is no longer sufficient to have the right products at the right time at the right price and delivered with the right customer service," Amos says. "Companies realize they have to do something else to set them apart from their competition."