When is charitable giving by firms more of a marketing ploy?
Thanksgiving is here, which means that we are now on the cusp of the giving season.
Or is it the marketing-of-giving season?
You are about to be inundated with corporate pledges to donate X dollars to a good cause for every Y dollars you spend with them or every Z product you buy. Some companies — American Express, for instance — even allow you to vote on which charities should be so endowed.
This is known as “cause-related marketing.” It’s inescapable at yuletide, but it has become so essential an element of all consumer marketing that it’s hard to avoid year-round.
There’s the Product Red campaign, through which manufacturers that issue red-branded products — from Starbucks coffee cups to iPod Nanos — funnel a small piece of the purchase price to charities fighting AIDS and other maladies.
And don’t overlook the ubiquitous pink ribbon, through which all sorts of commercial entities (even the National Football League) associate themselves with the Susan G. Komen for the Cure’s campaign against breast cancer.
Make no mistake, these are worthy goals and responsible organizations. And it’s uplifting to see major corporations take serious steps to devote some of their wealth and influence to good works.
“Increasingly people are looking to the private sector, and big brands are responding — because their consumers want it, and because it’s good for their business,” says Simon Mainwaring, a former corporate advertising executive who now consults for companies on social responsibility.
There has been a long-running philosophical debate over what role, if any, social responsibility should play in corporate management. A few years ago, Reason Magazine published a memorable debate on the topic between John Mackey, the socially oriented founder of Whole Foods, and T.J. Rodgers of Cypress Semiconductor, as hard-nosed a businessman who exists in this hemisphere.
The dispute turned on whether you make charitable donations because it’s the right thing to do, and you profit from your improved reputation as a collateral benefit (Mackey), or whether you do so to enhance your rep and therefore make more money, with the social benefits a lucky add-on (Rodgers).
The funny thing is that both companies spent a lot on charity for whatever reason, so the discussion ended up being mostly rhetorical.
Yet all sorts of questions arise when corporate giving gets wrapped up with consumer marketing. Consider the recent dust-up involving Santa Monica-based Toms Shoes, which integrates philanthropy into its business model, and Manhattan Beach-based Skechers USA, which has, shall we say, a different business model.
Toms was founded by entrepreneur Blake Mycoskie in 2006 after he encountered extreme poverty on a trip to Argentina. Toms started out marketing a simple slip-on called an alpargata (it now offers scores of styles) with the idea of donating one pair of shoes to children for every pair it sold. It says it donated its 1 millionth pair in September.
Mycoskie says that Toms would not have been founded were it not for the philanthropic impulse, but he isn’t shy about the marketing aspect of the Toms donations.
“If you did a survey, you’d probably find that 50% of our customers say that what got them to buy our shoes was that it was really helping someone, and 50% would say they like the style,” he told me. Its online catalog doesn’t hit you over the head with the charitable aspect of buying from Toms, but it doesn’t make it a secret, either.
Skechers picked up on Toms’ model this summer, announcing it would donate two pairs of shoes for every sale it made in a new line of soft shoes it calls Bobs. Skechers makes its donation through Soles4Souls, a Nashville footwear charity. The charity says Skechers has committed to delivering a minimum of 1 million pairs over the coming year.
Skechers’ announcement got it intensely flamed by bloggers who accused the company of merely ripping off the Toms program (and its shoe design), as a marketing stunt. (Skechers points out that it participates in a lot of different philanthropic ventures.) Lalia Helmer, a Silicon Valley philanthropy consultant, mentioned the Skechers case on her blog as an example of “how not to do business philanthropy,” to wit: “Make everyone question whether it is a marketing ploy.”
Skechers didn’t get back to me this week to discuss its Bobs campaign. But a spokeswoman told The Times last month that the company found the Toms example “inspirational” and thought it could reach even more children. Mycoskie told me he chose to take a “neutral approach” to Skechers’ act of, er, flattery.
The chance that donations will seem cynical is only one drawback of cause marketing. Another is that the most money tends to flow to the best-marketed causes, which are not necessarily the most deserving or neediest.
Angela M. Eikenberry, a philanthropy expert at the University of Nebraska, is troubled that the Komen organization’s successful pink ribbon campaign may mislead people into thinking that breast cancer is the leading cause of death in women (that would be heart disease) or the leading cancer-related cause of death in women (it’s actually lung cancer).
Another downside is that people who make charitable donations automatically at the point of sale don’t have much incentive to scrutinize the charity receiving the donations. If your footwear-related charitable giving begins and ends with buying a pair of Bobs, you probably aren’t taking a close look at Soles4Souls.
That’s too bad, because then you’re not noticing that the organization’s chief executive, a former footwear executive named Wayne Elsey, was paid more than $500,000 last year.
Does that sound high to you? Here’s a yardstick: Helene D. Gayle, the CEO of the global charity CARE, only earned $406,000. In 2008-2009, Soles4Souls reported revenue of $38 million. CARE reported revenue of $692 million.
Talk about things that make you go “Hmm.” If you were examining Soles4Souls for the purpose of making a direct contribution, Elsey’s pay package might lead you to take your money elsewhere. (Soles4Souls says Elsey’s pay was set by its board after it examined salaries at comparable organizations.) By the way, Toms says it makes its donations through nongovernmental organizations working on the ground in needy countries, not through a U.S. intermediary.
I’m always a bit suspicious when big corporations try to enlist me in their charity campaigns. My feeling is that if they’re inclined to be generous, good for them, but leave me to my own philanthropies. That way, there’s no confusion about when they’re being genuinely good-hearted, and when they’re just faking.
Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.