Consider some recent retail news stories. In the battle to secure consumer loyalty, Sainsbury’s finally launches its own card scheme offering cash back for regular customers. It also starts to audit the ethical and employment practices of its 14,000 own-label product suppliers. Meanwhile Oxfam is campaigning to promote higher employment standards in the clothing industry, with boycotts for those who don’t make the grade. Now Business in the Community has looked at how companies use ’causes’ in marketing, with research into consumer attitudes to follow.
With disposable income at a record high of ?425 billion and 85% of spending on food now concentrated in just seven big grocery chains, the power of purchasing to do good or ill is greater than ever.
Definitions and examples
But what is cause-related marketing? BITC’s report1 defines it as any activity by which a company with an image, product or service to market builds a relationship or partnership with a cause or number of causes for mutual benefit. In the UK the top three causes are schools and education, the arts, and children’s charities. Some recent examples include:
Tesco Computers for Schools: a voucher promotion generating ?22 million worth of equipment over three years to 12,000 schools; this achieved customer loyalty, increased sales and raised corporate profile in community;
BT charity Christmas phonecards: 10p to St Tiggywinkles wildlife hospital from four special edition phonecards; ?100,000 was donated and the cards sold out three weeks earlier than expected, with extensive PR and press coverage;
Nivea and Fashion Targets Breast Cancer: sponsorship of a campaign using figures from the fashion world to promote action against breast cancer, through media coverage, advertising, T-shirt sales and product sampling.
Sales or reputation?
Cause marketing is sometimes seen simply as a way to boost sales. This is too simplistic. BITC’s survey shows the overwhelming reason is to enhance corporate reputation (87%). Only 21% count building and increasing sales as an objective. Other reasons are:
to achieve press coverage/PR – 49%;
to raise brand awareness – 42%;
to increase customer loyalty – 41%.
This picture is reflected in measures of success used by companies, with media coverage the most used and sales output figures least. It is also confirmed by the latest Cone/Roper research2 from the United States, based on responses from 70 leading companies: 93% spend money on cause marketing to build deeper relationships with customers and 89% to enhance reputation and image; this compares to half who cite sales as a reason. (That survey also shows education as the top priority, as in the UK, followed by health issues).
Current and future trends
We need to put the UK position into perspective. The average community affairs budget of respondents to the BITC survey is ?1.6 million, while their cause-related marketing spend averages just ?275,000. Even though more than half of chief executives say that cause relate marketing is fairly or very important to achieving company objectives, their marketing directors give it just one percent of their budgets. However big majorities seems confident of future growth: 59% of chief executives, 70% of marketing directors and 67% of community affairs managers.
Such confidence begs the question why? Are there underlying factors which will change previous slow growth? The answer is a cautious yes:
it is increasingly hard to differentiate between products that compete equally on price and quality: a cause can give the edge;
the cost of conventional marketing, especially on TV, is rising, while fragmentation of audiences results in lower pay-back: marketeers are searching for alternative ways to reach audiences cost-effectively;
marketing is increasingly seeking to achieve and maintain customer loyalty, not just short term sales;
a product’s strength rests increasingly on the reputation of the company as well as the brand, so marketing must stress shared and enduring values as well as the price/quality mix;
consumers’ concern about social issues is growing, and a minority are becoming ‘vigilantes’: companies must have a response at that level too.
That is the good news. However cause marketing is not a soft, easy option. Quite the reverse: it is risky and can be dangerous. Identification with a good cause immediate invites questions about how ‘good’ the company and product really are and accusations of double standards. Campaigners and the media are quick to point out hypocrisy by a company or its suppliers, whether on employment terms and conditions, environmental issues like pollution, waste and unsustainability, or other responsibility issues.
In terms of risk, cause marketing is a quantum leap above charitable donations, which can always be explained as a little extra on the side, if difficult comparisons are made. Accusations of exploiting a cause to boost sales are harder to dismiss, even if the real reason companies undertake cause marketing – image, reputation, loyalty – are not that different from ordinary community and charitable contributions.
Ethical retailing
So far we have considered cause marketing in terms of individual products, but what about ethics in retailing as a whole? The ultimate in ethical marketing are shops which bring values into the way they are run and the goods they stock. Most developed in the UK is Out of this World, a small but growing national chain of stores owned by members. Launched last year, three are now open (Bristol, Newcastle, Nottingham), turning over about ?2 million pa, with a target of 14 by 1998. Predominantly a food retailer, goods are selected because they demonstrate a concern for one of five issues:
fair trade: bought from suppliers who respect basic rules of human welfare in the workplace;
environmental sustainability: for example minimal packaging;
community development: supporting local enterprise and local produce, especially from community businesses;
personal health: natural wholefoods, free from artificial additives, preservatives, colourings and flavourings;
animal welfare: reduced animal exploitation, with products that meet rigorous standards.
A common theme is detailed product information, to empower consumers, in recognition that the products stocked are not perfect, merely the best that can be found. The aim is not simply to change individual purchasing decisions and shopping habits, rather to permit a change in lifestyles – a far cry from mainstream supermarkets who have traditionally offered a ‘value-free’ choice.
Given its scale, the direct impact of Out of this World will itself be limited, but it does offer pointers to general trends, and pose some hard questions, which will influence the rest of retail sector:
consumer loyalty is crucial;
ethics concern not only individual products but the whole shop;
products make a contribute to a ’cause’, not only from a monetary share in sales but from their whole life-cycle, from manufacture, through consumption to waste disposal.
Out of this World builds loyalty through membership and cooperative ownership and makes a ‘holistic’ contribution. For others, will bonus cards and “1p to charity” promotions suffice or must retailers and producers relate at the level of values too?
The big question
This all begs the question of whether this really matters enough to consumers, or at least to consumers in critical market segments. Surveys regularly show ‘concern’. In 1991 Mintel found that fewer than one in five have no concern at all for ethical and environmental issues and fully 50% said they would boycott products tested on animals. The Soil Association reports 80% expressing a “preference” for organic food. In 1994, MORI classified 28% of the population as “green activists”.
This is easy to say when there is no price or quality trade-off. In its forthcoming survey of 1,000 consumers, Business in the Community must get behind glib assertions and probe the real potential – and limitations – of cause marketing.
In the meantime companies must think through the full implications before embarking on a cause marketing initiative: high rewards await those who bring integrity to the process. High risks await those who are insincere, think short term or hope to camouflage other problems.
Note 1: Cause Related Marketing; corporate survey report (BITC, 1996) is based on responses from 250 chief executives, marketing directors and community affairs managers from 128 companies out of 456 contacted from among BITC and Per Cent Club members. Research was carried out in spring 1996. Copies of the full research findings are available form BITC priced ?75 for members and ?95 for others.
Note 2: Cone/Roper II: a study of executive attitudes towards cause-related marketing. Contact Patricia Hurley on 00 1 617 227 2111.
For more information about BITC’s work, contact Sue Adkins on 0171 224 1600. For more information about Out of this World, contact Richard Adams on 0191 272 1601
Business in the Community is organising a conference on November 12 on cause-related marketing and also a seminar jointly with Burson-Marsteller on September 19 on effective communication of community affairs activities: see Diary Dates for details.
Business in the Community has turned its attention to cause-related marketing, but the Office of Fair Trading is saying charity endorsements distort competition. Who is right?
RESPONSIBLE MARKETING
Integrity, commitment and strict codes of practice are essential elements of cause-related marketing, according to Dominic Cadbury, Chairman of Cadbury Schweppes. Addressing the BITC AGM on December 7, he announced a new steering group to promote CRM, develop guidelines for good practice and research the benefits. His steering group includes representatives from BT, NatWest, GGT, Research International, Countrywide Communications and the Marketing Society. Contact Sue Adkins, BITC, on 0171 224 1600
DISTORTING COMPETITION
In a potential threat to cause-related marketing, the Office of Fair Trading has launched an enquiry into an endorsement by Age Concern of a particular funeral plan. Warning that competition is distorted if charities commend products which are not inherently superior, it is now developing a code of practice covering pre-paid funeral plans to prevent the offering of inducements to charities and other organisations in a position of trust such a nursing homes. Age Concern said the endorsement followed research that the product was good value and high quality. Contact Terry Larkin, OFT, on 0171 269 8901 or Hilary Franklin, Age Concern, on 0171 679 8000
BANKING ON POOR PEOPLE
The National Consumer Council has criticised the way people on low incomes are treated by banks and insurance companies. Published on December 5, Financial Services and Low Income Consumers reports the attitudes revealed in eight ‘focus groups’ run by MORI. Among the findings are that banks have lost their personal touch and insurance companies are slow to pay out claims. The NCC is calling for a free independent service of financial advice. Contact Melanie Wingfield, NCC, on 0171 730 3469
Comment
Business in the Community’s attention to cause related marketing is all the more welcome for being overdue. This is an area of practice fraught with difficulty. Got wrong, it is little more than cynical exploitation, damaging both the charity and the brand. At its best, it is a real win-win-win. Good for the profile and bank balance of the cause, good for sales, and good for the reputation of the company too – helpful reinforcement of good practice in the environment, with employees and among the community.
The Office of Fair Trading’s seemingly threatening intervention is in realitity a timely shot across the bows. Just as advertisers are increasingly called to account for over optimistic claims, so cause-related marketeers must be absolutely sure that charity endorsements are linked to objectively demonstrable factors, not the number of noughts on the cheque.
COMMENTS