Shopping and Charity: What's Next?

Tuesday, July 31, at noon, Eastern Time

Phoebe Campbell, a consultant who helps charities make deals to license the use of their names on corporate products.

Ben Davis, a marketing executive and founder of Buy (Less), a campaign to urge charities to provide consumers with more information about marketing deals.

Kristian Darigan, vice president for cause marketing at the Cone consulting company, in Boston.

A transcript of the chat follows.

Peter Panepento (Moderator):
    Welcome to today's online chat about product licensing for nonprofits. We're pleased to have three excellent guests with us today -- cause marketing expert Kristian Darigan of Cone in Boston; licensing consultant Phoebe Campbell of Campbell Associates in Tarrytown, N.Y.; and Ben Davis, a marketing executive in San Francisco who has raised questions about the amount of public disclosure that should be required for charity-related licensing agreements. Please feel free to submit your questions to members of our panel -- and enjoy the discussion. We'll be getting started shortly.

Question from Amber, Corporate non-profit:
    Are there any good "rules" for success when creating a charitable licensed product program when licensed products with similar branding already exist in the category? For example, GAP branded t-shirts vs. Product Red GAP branded t-shirts. Should you focus on communicating a statement or sentiment on the actual product, rely on marketing and advertising to communicate the difference. Are there key ways to grow the entire program instead of trading dollars from one bucket to the other?

Phoebe Campbell:
    I think the best thing is to start by looking at what big-picture goals, you want to achieve, and then marry your strategy to that...

To use your GAP example, (and I am just making a wild assumption...) they may have determined that appealing to a young, socially conscious demographic would help them increase store traffic overall. Therefore offering the co-branded RED line in addition to similar products was not trading dollars--it was a strategy to bring in NEW dollars. In fact, the customer may not even buy a RED shirt, but still be compelled to choose GAP over a competitor as RED told her that their values are aligned with hers.

Many of our clients--the Red Cross and ASPCA for example, license carefully chosen, well established manufactures and then fully brand licensed products that are "brand extensions"--seamless reflections of their mission.

From the non profit's perspective, the products become a means to encourage the public to take tangible action on mission-related messaging--being prepared, taking better care of one's pet etc., as well as a way to increase awareness and raise funds...

Our licensing partners' name does not even appear on the product, other than in the fine print. Instead they license the brand to meet any number of strategic goals--additional market share, entry into new product categories, etc. As a matter of fact, the "feel good" may not even be the main reason they come on board.

Question from Fraser Alexander, university of Auckland:
    I suggest NFP's spend too much time on CRM and sponsorships when they should be encouraging corporates to form Philanthropic trusts and foundations who's giving is motivated solely by humanitarian need?. my reasoning is that cost effectiveness is compromised when charities enter CRM relationships as shareholder influences lead to greater resource commitments from the NFP.

Ben Davis:
    Cost-effectiveness is important, but even more important is being clear about your mission, and not letting corporate interests start to dictate decisions and actions. I like the old-fashion notion of NPF's being pure of heart and compassionate. Efficiency is not the only measure of success.

Question from Jan Schultz, Texas Nature Project:
    I started an educational nonprofit a year ago. We will be offering one-semester, twelve credit hour internships in nature and eco-justice studies for college students in our state. We have not found any other organization doing what we are doing. In fact, we are in the process of getting a trademark for our idea. My question is this, what is the most effective way to market such an innovative concept?

Kristian Darigan:
    One of the most effective ways to market an innovative or first-of-its-kind concept is through use of a highly-targeted campaign directed at "early adopters." Early adopters embrace new products and services before most other people do. In your case, you might be best served to run promotions with and through existing with eco-minded nonprofit organizations and college clubs to maximize ROI.

Try to avoid the urge to do a general marketing campaign to raise awareness. Even if you had unlimited financial resources it is extremely difficult to breakthrough in a meaningful way trying to reach "all people" or broad sub-sectors of the market.

In seeking sponsorship or philanthropic support of your nonprofit, very similarly, narrow down your initial field to those companies that will be interested in reaching your target beneficiary market (use your org as a channel) and/or are closely aligned with the issue from an business or philanthropic standpoint.

Question from Christopher Lytle:
    I understand the concerns about cause marketing and sponsorship related to charities being used, getting too little for the "credibility" they bring to a product promotion compared to the huge profits reaped by the brands, etc. However, I've also worked in Europe and as the only American in the room whe news stories of the homeless, incarcerated, poor in America were being broadcast. I would be asked "if you really care about these people, why don't you raise taxes and really handle it like we do." Good point, from a socialist perspective. That said, in our market driven capitalist society, it would seem consistent that every brand and product should benefit a charitable cause and that the marketplace, the only source of sufficient scale to really deal effectively with larger social issues, will channel funds from everyday purchases, rather than requiring separate decisions for buying decisions and a whole separate, and expensive, decision making process for charitable donations. How can it be wrong to integrate charitable funding of good works with daily life. Let my buying decisions reflect my values...what could be more American?

Ben Davis:
    I'm with you on this. Let every dollar count. I think a world of "causeumers" has great potential. I would prefer we find a way to accurately judge companies on their day-in-day-out corporate behavior rather than on associations with unrelated causes.

We are not anti-RED nor anti-cause marketing. We just think their ought to be a few better rules and guidelines in place.

Question from Amber, Corporate non-profit:
    How do you avoid co-venture licensing deals when certain states require the manufacturer/vendor to become licensed in a state to sell products. If the vendor is distributing the products nationally - who is responsible for registering and absorbing the cost of registering?

Phoebe Campbell:
    In most cases, the onus is on the licensee to register. In fact, a good contract stipulates that it is the licensees responsibility to be aware of--and abide by, any relevant laws or standards.

Question from Esther Brenner, HOPE Foundation:
    What fundraising works best for a very small local 501(c)(3) with the specialized mission of providing group professionally-led counseling to adults with bereavement issues?

Phoebe Campbell:
    If you are very small and local, I would recommend more traditional fundraising such as benefits, local events etc. Anything you can do to both raise funds as well as ensure you have a good profile in the community.

It may also be possible to engage a local business such as a retailer to do a transactional campaign--give you a percentage of sales on a certain product they want to promote...or even tie the sales of a restaurant entree to supporting you...

Question from Peter Panepento:
    Ben, you mentioned the need for better rules and/or guidelines. What do you have in mind?

Ben Davis:
    Simple stuff.

Be transparent. Let the same rules that govern NFP extend to cause marketing efforts like RED.

Be clear. Let people know exactly how much goes to charity from each purchase and get rid of "Percentage of Profit" models.

Make it easy to give directly. Don't whip up a 14 year olds passions about AIDS in Africa and then have the only way to help be to buy something. Let people give directly at stores and websites without requiring a purchase.

Question from Kerri Feazell, Union Rescue Mission:
    What are your thoughts on cause-branding that does not necessarily involve products but focuses more on creative advertising venues for corporations to tie their name and endorse nonprofits while getting charity-endorsed publicity?

Kristian Darigan:
    There are many forms of cause branding, not based on product sales that are very successful. Joint public awareness campaigns can go a long way towards building brand equity for both the nonprofit and for profit organization. PNC Bank's Grow Up Great program is a terrific example of this. As is Whirlpool's sponsorship of Habitat for Humanity.

Peter Panepento (Moderator):
    Jesse, a spokesman from Red, has written in to reply to an earlier comment from Ben Davis.

Here's what he had to say: "I will go through Ben's statement from just now in caps: "Simple stuff. Be transparent. (RED) IS COMPLETELY TRANSPARENT. IN FACT, NOT ONE DOLLAR (RED)'S PARTNERS RAISE GOES TO (RED), IT GOES DIRECTLY TO THE GLOBAL FUND. Let the same rules that govern NFP extend to cause marketing efforts like RED. Be clear. Let people know exactly how much goes to charity from each purchase and get rid of "Percentage of Profit" models. THIS COMMENT IS SIMPLISTIC AND SHOWS A COMPLETE LACK OF UNDERSTANDING OF BUSINESS. WHAT BUSINESS IN THEIR RIGHT MIND WOULD DISCLOSE PRIVATE PROFIT NUMBERS TO THEIR COMPETITORS. THIS IS WHY (RED) ISN'T A CHARITY, IT'S A SUSTAINABLE BUSINESS MODEL TO HELP COMPANIES DO GOOD AND MAKE MONEY. Make it easy to give directly. Don't whip up a 14 year olds passions about AIDS in Africa and then have the only way to help be to buy something. Let people give directly at stores and websites without requiring a purchase. ANOTHER MISLEADING STATMENT. PEOPLE CAN DONATE DIRECTLY TO THE GLOBAL FUND ON (RED)'S WEBSITE."

Peter Panepento (Moderator):
    We've moved past the halfway point in this live discussion. Thanks to everyone who has submitted questions so far. If you have anything you would like to ask one of our panelists, please click on the "ask a question" link above and follow the instructions.

Question from Peter Panepento:
    One issue that seems to be creeping into the discussion is "cause clutter" -- the idea that as partnerships between companies and charities increase, consumers are becoming almost de-sensitized to the meaning of these partnerships. To what degree is that happening? Are there concerns that such deals are becoming ordinary in the minds of consumers?

Kristian Darigan:
    Great question - cause marketing has come of age and there is clutter in the marketplace. We have seen evidence of this most recently in our 2007 Cone Cause Evolution Survey (can be found on our homepage www.coneinc.com). Specifically, there has been a 30% drop in "word of mouth communications" about a product or company after hearing about a company's commitment to social issues.

Consumers (83%) expect companies to support social issues, and companies have responded in a variety of ways, from multi-year, multimillion dollar commitments. Those that have not identified issue or causes to support that have the most relevance for both their target stakeholders and business have struggled to be seen as authentic. Moreover, it is important to recognize the evolution of "cause marketing" itself. It has been 26 years since American Express coined the term with their sponsorship of The Statue of Liberty-Ellis Island Foundation and their efforts raise funds to restore the Statue. And, it's been 14 years since Avon showed the world what multi-faced "cause branding" was. Just as macro trends change every 7-to-10 years, so too has the field. We've seen it grow from a focus on charitable gift giving; to a vehicle for driving sales and raising funds; and then to a mechanism to deeply engage stakeholders (through advocacy, volunteerism, pro-social investment, etc.). While all of these approaches remain in place and are very relevant today, we are seeing the field take a step toward greater synthesis and a driver of overall for-profit and nonprofit business models.

Specifically, there are two emerging directions that we have observed for companies:

I. Cause as an extension of the brand:

• Involves developing a signature cause program and outreach infrastructure
• Approach includes volunteerism, grants and content communications
• Small, separate marketing communications budget
• Limited proactive public relations support the issuance of grants
• Activities build corporate reputation, employee pride, stakeholder relations and permission to operate, while driving social impact

II. Cause as part of the Brand DNA

• A true differentiation strategy emphasizing customer experience, building community and heart connects with stakeholders on emotional levels
• Cause is part of the brand persona and used to communicate the human and personal qualities that the corporate or product brand embraces
• Cause is a factor in appropriate business decisions
• A greater portion of marketing resources and communications resources support the signature cause
• Business results include aforementioned plus increased sales, customer loyalty, consumer switching/sales person overrule and consumer acquisition

Nonprofit cause marketing and branding has evolved as well. There is a current drive toward positioning cause programs as part of a greater movement to provide greater strategic and emotional context. In addition, we are seeing causes fully integrated throughout the organization, rather than in fundraising, communications and programmatic silos.

Question from Peter Panepento:
    Ben, have you seen any examples of licensing or cause-marketing efforts that you think are models in terms of transparency and promoting social good? If so, what makes them work?

Ben Davis:
    I always appreciate it when there is a genuine connection between a cause and a product. For the RED CROSS to endorse preparedness products, for instance, suggests they bring some expertise and a level of product testing to the equation.

Question from Peter Panepento:
    Phoebe, what does a nonprofit need to bring to the table in order for it to be a good candidate for a licensing program?

Phoebe Campbell:
    A company enters into a licensing agreement with a non profit (or any brand) because it believes that the licensed brand will help it to achieve certain goals, usually increased sales and market share.

In today's competitive retail environment the "feel good" alone is not enough to compel a consumer to buy one product over another. He or she must feel that the product is relevant to them, is compelling in its own right etc. At that point, the cause association may act as the "tipping point" that drives the choice

Therefore for non-profit licensing to work, the organization must bring to the table specific assets that the licensee can actually use to develop and/or market its products better than it could without the non-profit brand...

For example, does your organization have high public awareness and respect? Is your mission aligned with an issue the public is very concerned about--and extends logically onto consumer products in a particular market sector? Do you have experts that can help a licensee improve their products? etc.

Question from Davon,:
    I work for a public entity which is looking at CRM on multiple levels. How do you balance the need for resources with the need not to seem coopted. What tips can you provide working with the public or to change public opinion that CRM's can be good, and not the co-opting of our shared resources.

Phoebe Campbell:
    The first thing that you should do is create a comprehensive strategy that addresses what type of CRM you want to engage in, what your guidelines and criteria for partners will be etc. (for example--if you are concerned about public opinion, do you want to look for opportunities that are less visible to the general public such as workplace giving campaigns etc.) This provides a framework to keep you clearly in the driver's seat.

That said, part of this process should also an evaluation of what you can offer a potential partner--and this is where the concern about co-opted resources may come into play. However, it is my experience that the best CRM relationships are where both sides benefit and neither party feels "used".

In terms of public opinion, there again I think it is important to only enter into partnerships that feel "true" to who you are as an organization, and also where you can respond to nay-sayers with a clear list of how the partnership helps you achieve your own goals and hopefully further your mission

Peter Panepento (Moderator):
    I'd like to offer Jesse the opportunity to explain how the Red model works, since the question has been raised and there may be some questions. How do you determine what money goes to the Global Fund -- and please explain to our readers the fee that the corporate partners pay to Red.

Comment from Jesse, (RED):
    Thanks, Peter. (RED) is a sustainable business model whereby companies can do good and make money at the same time. We work with each partner to determine what amount or percentage of each sale goes to the Global Fund. As I said before, the money goes directly to the Global Fund, it never goes to (RED). For some of our partners - such as Motorola and Apple - identifying an exact number for each product sold is easy. Both of those partners sell one (RED) product, and a flat number is an easy calculation. Motorola gives $8.50 to the Global Fund from the purchase of each (RED) Moto RAZR. Likewise, Apple gives $10 for each (RED) IPod Nano. However, some of our partners - like The Gap and Converse - sell many (RED) products. The Gap, for instance, has a line of over 200 products. For that reason, as well as the realities of retail, it is impossible for them to put a dollar figure for the donation for each product. Instead, they give a percentage of Gross Profits - in the case of The Gap, 50 percent. The important part of the equation here, and the thing many people forget in abstract conversations about marketing, is the importance of what the Global Fund does and how the work of (RED) has contributed to that. We have been able to raise over $35 million directly for the Global Fund in less than a year. This is seven times what the private sector gave to the Global Fund in its entire history. That money is currently at work in Swaziland and other countries in Africa, where it is helping people right now. The licensing fee that partners pay to (RED) has nothing to do with their contributions to the Global Fund. It is a one-time fee that varies for each partner depending on the size of the marketplace they are in. What is most important is that the licensing fee has nothing to do with the revenues generated by (RED) products. Instead, it is an upfront fee separate from everything else. As I said above, the key here is engaging the corporate world and individuals to lend a hand where they can, and doing it in a sustainable way that can provoke real and lasting change.

Question from Legal Aid of WV:
    Do you have any suggestions for Legal Aid and other business partnerships?

Kristian Darigan:
    I have to admit that I am not as familiar with your organization as I'd like to be. It appears that you are offering legal services to those who otherwise cannot afford it and are funding your organization through individual contributions (mainly local attorneys) and perhaps through LSC/other sources of national funding.

If your question is about how to reach out to businesses to for corporate partnerships, I might consider several options, including:

- Using your board to reach out to their business contacts to make an initial introduction.

- Targeting those businesses that would like to reach attorney's and use support of your organization as a way to build report and business with them.

- Reaching out to businesses who have a history of supporting the issues that drive your beneficiaries to your service. Perhaps they support domestic violence prevention, financial literacy, child abuse, etc.

I might also look deeper at what assets you have that might provide benefit to a potential sponsor. Do you have expertise, content, perhaps reach through a newsletter or gala, public service campaigns, etc. that a company might be interested in utilizing? Look for the shared value. Common audiences. Common issues. Common objectives and values.

Question from Sandy, newly formed non-profit:
    As a newly formed non-profit (we have only been around for about a year) convincing licensees to produce, market and sell products promoting our cause has been a challenge. Do you have any suggestions on proposals to make to manufacturers more interested in creating products for us that would not require any upfront commitments or out-of-pocket expenses to us?

Phoebe Campbell:
    To be honest, you need to start by asking yourself "what is in it for the manufacturer?" Why should they share their profit margin with you--as I have said before, for licensing to work you need to offer more than just a great cause.

Can you demonstrate to the potential licensee how you have unique value that will help them sell more products or enhance their brand image? Can you deliver access to a new consumer base? Product development resources? Celebrity spokespeople even?

As a new organization,licensing can be a challenge as your "brand equity" may not be fully established ... Before you try licensing, you may want to look at other more traditional forms of cause marketing and fund raising.

Question from Amber, corporate non-profit:
    Is there a standard amount that a non-profit should ask a manufacturer to commit from the sale of products? With a smaller non-profit organization, we obviously can't expect a licensee to be willing to commit $5 on a $10 price point item. Since the theme is now to move away from Percentage of Profits, how should we look to craft our deals to receive the most back on product sales?

Phoebe Campbell:
    First off, it is not that the theme is moving away from "percentage of profits" it is just that the benefit to the cause needs to be transparent and in keeping with BBB guidelines. In licensing, the royalty is usually a percent of wholesale sales (the price the retailer pays) The percentage of the RETAIL price (what the consumer pays) needs to be clearly disclosed at point of sale

In terms of what the guidelines should be, it depends on several factors. For our clients, we ask prospective licensees to provide us with a lot of information up front--sales projections, price per item, retail channels, number of items they want to use the brand on etc.

The rule of thumb is that the royalty is proportional to the projected volumes, price of the item etc. It is also helpful to have an understanding of what the licensees profit margin is--the higher the margin, the higher a percentage you can ask for... You can also ask for min, guarantees to ensure the return reaches a certain threshold...

Question from Amy Jo Stark, Masters of Philanthropy Candidate, IUPUI:
    Do "Viral Marketing" techniques play a role in the success of a cause related marketing deal,(e.g. Product Red)?

Kristian Darigan:
    Viral marketing is considered the holy grail of marketers as it engages people in becoming natural brand advocates. "Other people" are the leading source of information on several topics today, in fact in NOP World, The Anatomy of Buzz, we are told that 92% of all people valued word of mouth more than advertising (50%) and editorial promotion (40%). Not only is it credible, but it is often less expensive than other means of communication. Therefore, it can be an extremely important component of cause marketing campaigns. It certainly can drive awareness, but it also then drives engagement and the most loyal become evangelists n powerful stuff.

Peter Panepento (Moderator):
    Well, we've passed to 1 p.m. mark, but I'm leaving the conversation open for another couple of minutes in case there are any last-minute comments to address. Thanks to everyone who has participated in this lively discussion. Thanks especially to our panel of guests -- each of whom brought some interesting points to the table.