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The Marriage of Hard Commerce
            and CSR
           Peggy Simcic Brønn,
          førsteamanuensis, BI
            Leder, Senter for
      Virksomhetskommunikasjon
Purchase-triggered Donations
• A type of cause related marketing
• Where a company pledges to contribute a
  percentage or set amount of a product’s price
  to a charitable cause or organizations
• A type of sales promotion
• Co-branding
• Alliances
• The amount is usually limited to protect the
  company in the event of extreme response
• ”A method of offering consumers two distinct
  positive outcomes for one price.”
                    – Strahilewitz and Myers (1998)
• ’Philanthropy is like hippy music, holding
  hands, RED is more like punk rock, hip hop,
  this should feel like hard commerce.’
                   Bono, BBC News, January 2006
Norwegian Experience:
           Organizations Surveyed

•   Body Shop            •   Stine Sofies Stiftelse
•   Norgesgruppen        •   Zulufadder
•   OmegaVita            •   Kreftforeningen
•   Gyldendal            •   UNICEF
•   Mesterbakeren/Rema
    1000
40 kroner fra hver solgte leppepomade går
direkte til Staying Alive Foundation som
arbeider med HIV/AIDS-forebyggende
tiltak ved å dele ut stipender til
grasrotprosjekter rettet mot ungdom
Bag for Life koster kr. 40,-, og 10 kroner
fra hver solgte bag går til Children on the
Edge
Conclusions
Strategy?
• Very little strategy regarding:
   – Partner choice (many based on personal contacts or
     coincidence)
   – Announcing donation amount
   – Evaluating the campaign (expenditures and customer
     response)
   – Selection of products for specific cause
• Strategy to come? Yes - apparently after a (few) trial
  round(s)
Announcing donation amount
• Very few have defined practices/strategy
• Some only publish result if it exceeds
  expectations/sales forecasts
   – (less is seen as embarrassing)
• Seemingly more sensitive issue for companies than
  for NPOs
• Exception: Body Shop - always publishes amounts;
  for them charity is a big part of the whole business
  strategy
Selection of products
• More coincidental than strategic: “natural” choice
  according to type of business (bread at
  Mesterbakeren, books at Gyldendal, etc.)
• Larger companies with wide range of products (e.g.
  Norgesgruppen and Body Shop)
Communication

• Decided lack of creativity in campaigns regarding
  product choice and communication
• Difficult to find campaigns on NPO and firm webpages
  – must do a ’search’
• Some information that is available is contradictory
• Little to no public information on donation amount
• Marketing communication nearly non-existent
Curious facts
• Majority had no exact account of expenditures
  (work hours, marketing-related costs, etc.) and
  some did not have enough overview to provide
  estimates either
• Strong belief in effect of campaigns despite lack of
  formal investigation (customer surveys, etc.) into
  reactions to/outcome of campaigns
Curious facts cont’d
• Many less hesitant to announce estimated costs than
  to announce donation amount.
• Stated openness vs. lack of information (e.g. on own
  websites) and hesitancy to provide exact numbers.
• A few cases of lack of clarity: who initiated the
  cooperation and involvement/responsibility of the
  parties (e.g. regarding advertisement)
• Communicating partnership message: The
  most important part is the effective
  marketing campaigns keeping in mind the
  target audiences.
If I know a firm supports a good cause or
shows active CSR:

                                          2009
                                     Neutral   Agree   1999
 It is more likely I will purchase   23%        58%     59%
 from them.
 There is a greater chance I would   34%        44%
 work for them.
2009
                                       Disagree Neutral   Agree 1999
Most corporate information on csr is    24%      33%      28% 30%
true. (packaging, internet and
advertising)
Most corporate information on csr is    30%      32%      27% 34%
designed to fool me.

I don’t believe what firms say about    26%      28%      37% 44%
csr
It’s better for consumers that csr       29      33%      29% 48%
information be removed from
corporate communication
Name a Norwegian firm that you know supports a good cause:

  40-100%     30-39%       20-29%     10-19%        5-10%
Practical execution
• Dependent on power distribution (size of NPO vs.
  size of company):
   – Large, well-established NPOs leave all activity (product
     development and marketing), expenses, and risk to
     companies (e.g. incorporates minimum donation amount
     in contract. Only activity: keep watchful eye to ensure
     alignment with cause and ensure quality of campaign)
   – Smaller NPOs involve themselves more directly and take
     on more costs.
Key Issues for Success
Identifying the right issue or cause: aligning with the company’s
   product or services, its market or its geographical community.
Selecting a right partner: a profit and a non- profit completely
   understand each other’s goals and objectives.
Establishing the relationship: clear understanding of the nature
   of the relationship of the two companies through a formal
   document which spells out how the funds are raised by the
   company and any limitations such as a maximum amount to
   be contributed.
Benefits and challenges: identify potential problems and make
   efforts to avoid them
Research
• CSR initiatives create benefits for companies appears to be by
  increasing consumers’ identification with the corporation, or
  customer–corporate (C–C) identification,
• Nonprofits should choose company partners that are
  attractive targets for Customer-Corporate identification and
  already are adept at prompting it
• A company partner should have a strong CSR record, and its
  organizational values should be widely perceived as consistent
  with the CSR initiative

                                 Lichtenstein et al. 2004
Previous Research Shows:
• Size of donation and product type can
  influence consumers' willingness to pay more
  for a charity-linked brand
• The donation and corresponding price
  difference should be relatively small
• Participants will choose a frivolous product
  linked to a large donation significantly more
  often than a practical product with a lower
  donation                 Strahilevitz, 1999
In other words:
• People are more likely to buy a higher-priced
  box of chocolates with a large percentage
  going to charity than a low-price bottle of
  water with a small percentage going to
  charity.
Motives for CSR Engagement
SUSTAINABILITY                 LEGITIMACY                    PROFITABILITY

        Why not?                Improve image                   Avoid regulation
It’s the right thing to do    Sociocultural norms           Give business a chance
  Personal satisfaction         Appear ethical               Shareholders’ interest
      Build networks         Long-term self interest        Viability of the business
    Gather knowledge                                            Problems can be
  Proactive rather than                                          opportunities
         reactive                                          Business has the resources




                                      Peggy Simcic Brønn                           39
Criticisms
• A lack of transparency with regards to the amount of money
  going to charity as a percentage of every purchase
• A retail middleman between donor and charity is
  unnecessary; donors should just give
• Product Red’s expansion into traditional fundraising
  techniques, such as art auctions, undermines its claim to be a
  different and more sustainable approach to raising money for
  AIDS
• The campaign profits by using diseases as a marketing vehicle
• Apple donated $10 of the sale of their $149 iPod during the
  initial stages of the campaign, and no longer discloses how
  much it donates. Product Red states on their website that they
  donate “up to” half of their gross profits.
Business Environment of RED
       companies (Ponte et al. 2008)
• High-profile branded manufacturers or providers of services
• All subject to extreme competition in their segment
• Many are under pressure to deliver higher volumes at lower
  prices
• Operations are often labor-intensive
   – Depend on low-skilled, low-paid workforce in developing countries
• All headquartered in US (not Armani) and on stock exchange
  (not Armani and Hallmark)
• Pressure to deliver shareholder value
• Stalked by activist investors
RED
• Re-focus on financial bottom line – nature of the
  problem (AIDS) demonstrates why business should
  provide resources for solving these types of
  problems
• RED stays focused on one issue
• Creates media attention and ’feel good’ around
  products
• May stimulate sales (66% of hits on RED website
  continued on to one product site in one week-end)
Communicating CSR: provides information that
  legitimizes an organization’s behavior by
  trying to influence stakeholders and society’s
  image of the company
Difficult:
  Can not be easily verified
  Projects often very long with no evidence of
    outcome
Paradoks
8. Generøsitet: Generasjon G (den generøse generasjonen)
   fortsetter å dele alt, ikke bare filer. G-erne elsker produkter
   hvor en del av inntekten går til gode formål.
MEN
6. Grønt: For å nå de mange miljømålene vil myndigheter og
   bedrifter føle seg stadig mer forpliktet til å gjøre det enklere
   for forbrukerne å leve bærekraftig.
7. Sporing og varsling: Følg produktene fra vugge til grav, bli
   holdt løpende oppdatert om reiser, postforsendelser eller
   fotballkamper.
Lykke til og takk for meg!

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Peggy Bronn

  • 1. Kjøpsutløste donasjoner The Marriage of Hard Commerce and CSR Peggy Simcic Brønn, førsteamanuensis, BI Leder, Senter for Virksomhetskommunikasjon
  • 2. Purchase-triggered Donations • A type of cause related marketing • Where a company pledges to contribute a percentage or set amount of a product’s price to a charitable cause or organizations • A type of sales promotion • Co-branding • Alliances • The amount is usually limited to protect the company in the event of extreme response
  • 3. • ”A method of offering consumers two distinct positive outcomes for one price.” – Strahilewitz and Myers (1998)
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  • 8. • ’Philanthropy is like hippy music, holding hands, RED is more like punk rock, hip hop, this should feel like hard commerce.’ Bono, BBC News, January 2006
  • 9. Norwegian Experience: Organizations Surveyed • Body Shop • Stine Sofies Stiftelse • Norgesgruppen • Zulufadder • OmegaVita • Kreftforeningen • Gyldendal • UNICEF • Mesterbakeren/Rema 1000
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  • 20. 40 kroner fra hver solgte leppepomade går direkte til Staying Alive Foundation som arbeider med HIV/AIDS-forebyggende tiltak ved å dele ut stipender til grasrotprosjekter rettet mot ungdom
  • 21. Bag for Life koster kr. 40,-, og 10 kroner fra hver solgte bag går til Children on the Edge
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  • 24. Strategy? • Very little strategy regarding: – Partner choice (many based on personal contacts or coincidence) – Announcing donation amount – Evaluating the campaign (expenditures and customer response) – Selection of products for specific cause • Strategy to come? Yes - apparently after a (few) trial round(s)
  • 25. Announcing donation amount • Very few have defined practices/strategy • Some only publish result if it exceeds expectations/sales forecasts – (less is seen as embarrassing) • Seemingly more sensitive issue for companies than for NPOs • Exception: Body Shop - always publishes amounts; for them charity is a big part of the whole business strategy
  • 26. Selection of products • More coincidental than strategic: “natural” choice according to type of business (bread at Mesterbakeren, books at Gyldendal, etc.) • Larger companies with wide range of products (e.g. Norgesgruppen and Body Shop)
  • 27. Communication • Decided lack of creativity in campaigns regarding product choice and communication • Difficult to find campaigns on NPO and firm webpages – must do a ’search’ • Some information that is available is contradictory • Little to no public information on donation amount • Marketing communication nearly non-existent
  • 28. Curious facts • Majority had no exact account of expenditures (work hours, marketing-related costs, etc.) and some did not have enough overview to provide estimates either • Strong belief in effect of campaigns despite lack of formal investigation (customer surveys, etc.) into reactions to/outcome of campaigns
  • 29. Curious facts cont’d • Many less hesitant to announce estimated costs than to announce donation amount. • Stated openness vs. lack of information (e.g. on own websites) and hesitancy to provide exact numbers. • A few cases of lack of clarity: who initiated the cooperation and involvement/responsibility of the parties (e.g. regarding advertisement)
  • 30. • Communicating partnership message: The most important part is the effective marketing campaigns keeping in mind the target audiences.
  • 31. If I know a firm supports a good cause or shows active CSR: 2009 Neutral Agree 1999 It is more likely I will purchase 23% 58% 59% from them. There is a greater chance I would 34% 44% work for them.
  • 32. 2009 Disagree Neutral Agree 1999 Most corporate information on csr is 24% 33% 28% 30% true. (packaging, internet and advertising) Most corporate information on csr is 30% 32% 27% 34% designed to fool me. I don’t believe what firms say about 26% 28% 37% 44% csr It’s better for consumers that csr 29 33% 29% 48% information be removed from corporate communication
  • 33. Name a Norwegian firm that you know supports a good cause: 40-100% 30-39% 20-29% 10-19% 5-10%
  • 34. Practical execution • Dependent on power distribution (size of NPO vs. size of company): – Large, well-established NPOs leave all activity (product development and marketing), expenses, and risk to companies (e.g. incorporates minimum donation amount in contract. Only activity: keep watchful eye to ensure alignment with cause and ensure quality of campaign) – Smaller NPOs involve themselves more directly and take on more costs.
  • 35. Key Issues for Success Identifying the right issue or cause: aligning with the company’s product or services, its market or its geographical community. Selecting a right partner: a profit and a non- profit completely understand each other’s goals and objectives. Establishing the relationship: clear understanding of the nature of the relationship of the two companies through a formal document which spells out how the funds are raised by the company and any limitations such as a maximum amount to be contributed. Benefits and challenges: identify potential problems and make efforts to avoid them
  • 36. Research • CSR initiatives create benefits for companies appears to be by increasing consumers’ identification with the corporation, or customer–corporate (C–C) identification, • Nonprofits should choose company partners that are attractive targets for Customer-Corporate identification and already are adept at prompting it • A company partner should have a strong CSR record, and its organizational values should be widely perceived as consistent with the CSR initiative Lichtenstein et al. 2004
  • 37. Previous Research Shows: • Size of donation and product type can influence consumers' willingness to pay more for a charity-linked brand • The donation and corresponding price difference should be relatively small • Participants will choose a frivolous product linked to a large donation significantly more often than a practical product with a lower donation Strahilevitz, 1999
  • 38. In other words: • People are more likely to buy a higher-priced box of chocolates with a large percentage going to charity than a low-price bottle of water with a small percentage going to charity.
  • 39. Motives for CSR Engagement SUSTAINABILITY LEGITIMACY PROFITABILITY Why not? Improve image Avoid regulation It’s the right thing to do Sociocultural norms Give business a chance Personal satisfaction Appear ethical Shareholders’ interest Build networks Long-term self interest Viability of the business Gather knowledge Problems can be Proactive rather than opportunities reactive Business has the resources Peggy Simcic Brønn 39
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  • 41. Criticisms • A lack of transparency with regards to the amount of money going to charity as a percentage of every purchase • A retail middleman between donor and charity is unnecessary; donors should just give • Product Red’s expansion into traditional fundraising techniques, such as art auctions, undermines its claim to be a different and more sustainable approach to raising money for AIDS • The campaign profits by using diseases as a marketing vehicle • Apple donated $10 of the sale of their $149 iPod during the initial stages of the campaign, and no longer discloses how much it donates. Product Red states on their website that they donate “up to” half of their gross profits.
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  • 43. Business Environment of RED companies (Ponte et al. 2008) • High-profile branded manufacturers or providers of services • All subject to extreme competition in their segment • Many are under pressure to deliver higher volumes at lower prices • Operations are often labor-intensive – Depend on low-skilled, low-paid workforce in developing countries • All headquartered in US (not Armani) and on stock exchange (not Armani and Hallmark) • Pressure to deliver shareholder value • Stalked by activist investors
  • 44. RED • Re-focus on financial bottom line – nature of the problem (AIDS) demonstrates why business should provide resources for solving these types of problems • RED stays focused on one issue • Creates media attention and ’feel good’ around products • May stimulate sales (66% of hits on RED website continued on to one product site in one week-end)
  • 45. Communicating CSR: provides information that legitimizes an organization’s behavior by trying to influence stakeholders and society’s image of the company Difficult: Can not be easily verified Projects often very long with no evidence of outcome
  • 46. Paradoks 8. Generøsitet: Generasjon G (den generøse generasjonen) fortsetter å dele alt, ikke bare filer. G-erne elsker produkter hvor en del av inntekten går til gode formål. MEN 6. Grønt: For å nå de mange miljømålene vil myndigheter og bedrifter føle seg stadig mer forpliktet til å gjøre det enklere for forbrukerne å leve bærekraftig. 7. Sporing og varsling: Følg produktene fra vugge til grav, bli holdt løpende oppdatert om reiser, postforsendelser eller fotballkamper.
  • 47. Lykke til og takk for meg!