What Every Nonprofit Should Know About Cause Marketing
Though it's a relatively young concept, cause-related, or cause, marketing has grown into a multi-billion dollar industry, as businesses increasingly recognize that their consumers will reward purpose-driven companies.
For instance, the 2020 Zeno Strength of Purpose study found that global consumers are four to six times more likely to trust, buy, champion, and protect those companies with a strong purpose over those with a weaker one.
What Is Cause Marketing?
Cause marketing is a partnership between a business and a nonprofit organization that benefits both parties.
That partnership, in its most classic form, sells a product or service with part of the proceeds going to the nonprofit cause. The company enjoys increased sales and an enhanced reputation as a caring company, while the nonprofit receives money, and lots of exposure, sometimes on a national scale.
How Cause Marketing Started
There are a few early campaigns that vie for the distinction of being first, but the campaign most often cited was launched in the early 1980s when American Express partnered with a nonprofit group that was raising funds to restore the Statue of Liberty.
American Express gave a portion of every purchase through its credit card to the cause, plus an additional donation for every new application that resulted in a new credit card customer. The company also launched what was at the time a huge advertising campaign.
The results are now legendary: The Restoration Fund raised more than $1.7 million, and American Express card use rose 27%. New card applications also increased 45% over the prior year. All of this was accomplished with a three-month campaign.
Everyone involved was a winner. The charitable cause received needed funds, and American Express increased sales of its product and achieved a reputation for social responsibility. American Express is even credited with coining the term "cause-related marketing."
Cause Marketing Today
Decades later, cause marketing is more popular than ever. Companies have fully embraced doing well while doing good. Up until recently, businesses sought to partner with nonprofits (sometimes referred to as Nongovernmental Organizations or NGOs) to increase their trustworthiness.
However, the ongoing public health and economic crisis and the resulting tsunami of misinformation may have changed things. According to global communications firm Edelman's annual Trust Barometer, business is now the most trusted institution, ranking higher than NGOs, government, and the media. The study also points out 86% of consumers expect CEOs of companies to lead on societal issues, while 68% think that companies should step in when the government does not fix societal issues.
This heightened expectation for businesses is reflected in the causes of today, such as social justice and racial injustice. Using its recently launched "Purpose Tracker," communications firm Porter Novelli found that 71% of people in the U.S. want companies to do more about social justice, while 80% expect companies to address their own racial inequality issues.
One way to fulfill those expectations will be more cause marketing and partnering with nonprofits.
How Cause Marketing Works
A cause-related marketing program is not an anonymous or low-key donation to a nonprofit, but one that lets the public know that a corporation is socially responsible and interested in the same causes as its customers.
The funds may come from the community relations budget of the corporation or the marketing budget.
Cause marketing implies a more organic and comprehensive partnership between a charity and company for mutual benefit. That benefit might be money and publicity for the nonprofit and corporate social responsibility (CSR) cred for the company.
A common cause marketing model involves a product or service sold by a company that is tied to a cause and then channeling part of the proceeds to the charity. The endeavor involves the company's marketing department, rather than its charitable arm.
Cause Marketing Innovations
One might argue that the American Express Campaign represents this "classic" cause marketing. However, as the field has developed, creativity has taken over, and cause marketing can range from the classic to the innovative.
Cause marketing might include a nonprofit pairing with a group of companies to raise awareness of an issue. The World Wildlife Fund is particularly adept at this, partnering with dozens of companies to promote conservation.
Or, a company might create an issue and raise awareness about it (like Dove's Real Beauty campaign, for instance). A company may also sell a product and then match each item sold with another given to needy people. This is called "buy one give one" (BOGO), which is a model implemented and made famous by brands like Warby Parker, TOMS, and Bombas. The possible permutations of cause marketing are pretty endless.
Cause marketing can also be initiated by either a company looking for a nonprofit partner that fits well with their products or mission or both; or by a charity actively recruiting companies to partner with their cause.
Cause marketing today has turned into more than just a convenient way for a company to exemplify its social consciousness and has become a business necessity. Purpose-driven companies are much admired and enjoy a loyal consumer base. "Purpose" has become a competitive edge.
Types of Cause Marketing
Cause-related marketing campaigns can appear in a variety of forms and the list is evolving. Here are just a few of the most common types.
Think of the (Red) campaign, which brought together many companies to sell specially branded products (a Starbucks coffee in a red cup, or a red iPod, for instance), with a portion of the selling price going to the Global Fund for HIV and AIDS prevention. Similar well-known campaigns have included Yoplait's Lids to Feed America, in which the yogurt brand donated $.10 to Feeding America for each Yoplait lid scanned and submitted.
Also called "point-of-purchase," this popular campaign takes place at the checkout lines of grocery stores or other retail stores. Customers add a donation as low as $1 to their bill, and the store processes the money and gives it to a partner nonprofit. Promotion is low-key, but that makes these programs easy to set up. One of the best-known and long-running campaigns is McDonald's donation boxes in every restaurant.
According to Engage for Good, a cause marketing consultancy, checkout charity has been very successful. In 2018, a group of 79 point-of-sale fundraising campaigns raised more than $486 million and more than $5 billion over three decades.
Licensing of the Nonprofit's Logo, Brand, and Assets
Licensing runs the gamut from products that are extensions of the nonprofit's mission, to the use of its logo on promotional items such as T-shirts, mugs, and credit cards, to having the nonprofit provide certification or recommendation of particular products. An example of the latter is the American Heart Association endorsing products such as grocery store items that meet heart health standards.
Co-Branded Events and Programs
While co-branding is common between companies, it is even more powerful when a company co-brands with a charity. An example is "UNICEF Kid Power" with Target. Target accomplished two goals: encouraging kids to get fit with its products that promoted exercise, and using the proceeds to fight global malnutrition among children.
Social or Public Service Marketing Programs
Social marketing involves the use of marketing principles and techniques to encourage behavior change in a particular audience. An example is the American Cancer Society partnership with several companies over the years for the Great American Smokeout.
Pros and Cons of Cause Marketing
Nonprofit partner enjoys added income and expanded visibility.
Satisfies consumer demand for socially responsible businesses and products.
Helps address massive issues, such as the environment and social justice by pooling resources.
Can result in a mismatch and "bad" campaigns.
Regulations of commerical co-ventures varies across states. Little consistency.
May result in people giving less in direct donations to a charity.
Pros of Cause Marketing Explained
The for-profit partner gains credit for being engaged in a community or a social cause and may gain market share. The nonprofit partner enjoys added income and expanded visibility.
In a world where consumers are increasingly aware of societal problems and dangers (from the environment to racial inequity), companies find that being mission or purpose-driven is not a choice but a necessity.
For nonprofits, connecting with a company can expand its audience dramatically and help finance its programs. This is especially true for charities tackling big issues, such as the environment, animal rights, and racial justice. Having businesses involved expands the audience to match the massiveness of the issues.
Also, cause marketing has flourished and found myriad ways to tell the story of a cause. The field is wide open for creative and imaginative campaigns that can fit any budget, company, nonprofit, and mission.
Cons of Cause Marketing Explained
Critics of cause marketing can certainly find cases of "bad" cause marketing campaigns.
Perhaps the most memorable (or notorious) is the partnership between Kentucky Fried Chicken and the Susan G. Komen breast cancer research foundation. The company promoted pink buckets of chicken, each of which sent $.50 to the foundation. It brought in a lot of money, but was ridiculed since fried chicken seemed antithetical to breast cancer research.
There is also always the possibility that one of the parties involved in a cause-related marketing program does something to damage its reputation.
Because of their association, the other party may be perceived negatively as well. For that reason, corporations and nonprofits should choose their partners wisely.
Some concern also exists over nonprofits lending their good names to for-profit activities. For example:
- Does it weaken the trustworthiness of a nonprofit or cause donors to give fewer direct donations?
- Does it blur the lines between business and philanthropy?
- Could a nonprofit "sell out" by lending its support to products that are less than benign for the public?
These questions continue to hound both fundraising and marketing professionals.
Both corporations and nonprofits must comply with certain state laws. Those laws can be murky for both sides. For instance, who pays taxes? Is the charity registered for solicitation in that state?
Ellis Carter, a nonprofit attorney, suggests several best practices for companies and nonprofits that wish to partner for a cause marketing campaign. These include:
- Understanding the legal considerations. For instance, solicitations by charities are regulated by states. States also regulate "commercial co-ventures" to protect both charity and donors. Some states require a formal contract between the company and the nonprofit.
- Carefully vetting by each party. Nonprofits need to be careful about the company they partner with. Do its activities contradict the charity's mission? Likewise, companies should only partner with stable and worthy charities.
- Developing a contract that guarantees all the appropriate rights to each party and spells out exactly who is responsible for what.
The Bottom Line
There's no doubt that cause marketing campaigns can go wrong. However, as companies and nonprofits gain more experience, and consumers continue to demand that businesses participate in building a better world, cause marketing will likely persist. Great good can come from cause marketing campaigns when all parties choose causes and businesses well. And, as consumers continue to put their money where their hearts are, charities can look for opportunities to use cause marketing to further their missions.