Why Cause-Related Marketing Can Be A Win-Win
Consumers have always had the power to vote with their dollars, and today, consumers are choosing the companies which project social responsibility. At a time where non-profits desperately need added revenue and companies are expected to support causes, it is a win-win to engage in cause-related marketing alliances.
For corporations, cause-related marketing is not philanthropy. In many cases, the funding for these campaigns come out of the company's marketing budget rather than a corporate giving or community relations budget.
The aim is to strategically position themselves as an organization attuned to the interests of their target market. In partnering up with a nonprofit organization, they hope to benefit from the nonprofit's image, that it will define, enhance, or even repair their own. This marketing technique aims to improve relationships with existing customers and to enhance their reputation.
So why does public reputation matter? This value is referred to as the 'Halo Effect' which explains a customer bias toward certain products due to a favorable characteristic of the company. It is often something that is not directly related to the product or service, but a characteristic that projects the company as positive. In a survey of almost 2,000 people aged 18 and over, 31% said that when price and quality are equal, a company's business practices influence their purchases. In the same study, 54% said they would pay a premium for a product that supports a cause they care about, and 71% said that cause-related marketing is a good means to solve social problems. It is clear consumers respond to this 'halo effect' with their dollars, so corporations want the halo to be on them.
A nonprofit partnership can offer more than its image, as the corporation will often save on advertising and promotional costs due to free publicity and countless public relations opportunities. The corporation will also gain access to the nonprofit's clientele, staff, trustees, as well as donors; all of whom have the potential to be customers. Therefore, nonprofits with larger memberships become especially attractive to many companies.
In this uncertain environment, nonprofits must seek new sources of revenue. This can be achieved through the explicit partnership of a cause-related marketing alliance with a for-profit corporation. The main advantage of the partnership would obviously be the financial benefit (depending on the form of the alliance), in addition to potential advisement, advertising, and support.
Prior to solidifying the arrangement, it is imperative that nonprofits conduct extensive research to assess the corporations' strengths and weaknesses to determine if they are a good fit for a potential long-term partnership. It is also important for a nonprofit to understand and properly convey the value they bring to such alliance, this should ensure they are not undervalued in the arrangement.
When a corporation and a nonprofit enter a cause-related marketing alliance, the corporation agrees to undertake a series of actions that will benefit both the nonprofit and the company. The three primary kinds of an alliance are transaction-based promotions, joint issue promotions, and licensing.
- Transaction-based promotions are the most common form of a cause-related marketing alliance. In such an alliance, a corporation donates a specific amount of cash, food, or goods in direct proportion to sales revenue.
- Joint issue promotions involve a corporation and one or more nonprofits agreeing to tackle a social problem through combined tactics, such as; distributing products, promotional materials, and advertising. In this alliance, money is not necessarily passed between the corporation and the nonprofit.
- Cause-related licensing can be brand extensions or promotional in nature. It can provide benefits of brand visibility, product credibility, appeal to conscious consumers, and can be a cost-effective solution.
It is important for nonprofits to recognize the risks associated with joining forces with a corporation in order to adopt a strategy to avoid them. The nonprofits could potentially see a reduction in donations if supporters think the nonprofit doesn't need their help anymore. This could make a nonprofit heavily dependent on the support of corporate funding as a result. A partnership with a tainted corporation could also prevent a nonprofit from carrying out its intended mission.The time and resources put into this alliance could also drain efforts from traditional methods of fundraising and produce lower returns overall.
Cause-related marketing done well can raise the public's awareness of a nonprofit and lead to increased donations. This is especially evident when the cause-related marketing technique is applied to online raffles. Corporate sponsors are able to seed or guarantee a pot for a nonprofit, ensuring that the pot does not begin at $0. This provides an incentive for purchasers right from the beginning to the end, resulting in higher ticket sales for the nonprofit and additional coverage for the corporation.