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Cause-Related Marketing Definition

Introduction

Cause-related marketing involves marketing efforts that have social and charitable causes and which are not based on donations as do corporate philanthropy. The strategy, which builds on the blend of the hybrid between public relations and product advertising, can be used to achieve positive impacts on customers’ buying behavior, which the company can count on during survival at current economic challenges. In the twenty-first century, companies are realizing the importance of assimilating the commitment and concern for a cause to be a major recipe of a firm’s business strategy rather than just working together with a non-profit firm. The potential for success in the cause-marketing as a strategy can be highlighted in once reported 66% and 61% consumers’ ability to switch brands in 1999 and 1993 respectively, with the acceptability for cause marketing being 74% and 66% respectively in the United States (Cone, n.d.).

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With the market in the twenty-first century advancing in complexity and indifference in competing products such as credit cards, and the same products becoming too competitive, cause marketing may be used to create a progressive image that can provide a powerful marketing edge (Cause-related marketing, doing well by doing good, 1994). In addition, the customer has become more sensitive and discerning in the making of investment and the buying decision, with interest in transparency and accountability of the company operations making firms which may compel the organizations to comply in order to continue doing well compared to their rivals (Logan, 1997; qtd. in Verghese, 2009).

The government also has been said to have increased emphasis on collaborations with the corporate world through partnerships and alliances in order to provide social services and in its approach to social policy (McClure, 2000). There are also reports that this increasingly popular business strategy when companies contribute to charitable causes to improve brand, is not paid much attention to, in the widening literature relating economics of philanthropy (Andreoni, 2004; qtd. in Polishchuk & Firsov, n.d.). The views of corporate philanthropy were opposed by Friedman with an argument that corporations were supposed to put the obligations of the shareholders, law, and governmental regulations before corporate social obligations (1970).

There are many ways through which profit-making and charitable organizations can implement cause-related marketing, which can be tailored in the view of the current economic challenge to reap benefits. These ways include the following; the company can indulge in those donations that are “purchase-triggered” where it promises to contribute a particular percentage of the product price to a charitable cause, facilitating customer donations to the charity or themselves, promoting brand awareness through direct marketing in joint with a non-profit firm, using a charitable logo on the company’s products and services, helping by sponsoring a particular program or event, through public relations where the company can publicize its strategic partnership with a non-profit organization, and advertising a particular cause it has aligned itself to (Saha, 2007).

Successes with the application of cause-related marketing have been documented. An example is Coca-Cola’s 1997 promotion that took part in the over 400 stores that are owned by Wal-mart where the company gave a 15% donation (in every case bought) to Mothers Against Drunk Driving. The company’s sales increased to 490%. Another documented example is the case where usage of the American Express cards swelled to 28 percent with a 17% increase in new users after the company’s 1983 decision of donating a penny towards the Statue of Liberty’s restoration on every transaction that cardholders make (Saha, 2007). This latter example was the pioneer of CRM and more reports indicate that the company gained a 45% increase of new credit applications and a 30% swell in use of its credit (Adkins, 1999; qtd. in Polishchuk & Firsov, n.d.). The above examples highlight just a few examples of the benefits that can result from the usage of cause-related marketing.

How a company can benefit

Companies are said to drive CRM profitability from price discrimination and unlocking the barriers for transaction costs in this market for charity according to Polishchuk & Firsov (n.d.). although the company can expand its market share by being involved in CRM, this does not generate additional profit. The CRM as a business strategy spreads because of rent earned by firms that pioneer it. As the participation in CRM by firms increases, there is an increase in the exploitation of the ‘warm glow of the capacity of their customers leading to dissipation of profits (Vogel, 2005; qtd. in Polishchuk & Firsov, n.d.). The aforementioned authors posit that this could be the reason for the observation that those companies which are responsible (socially) in comparison to their competitors are not systematically worse-off, as well as an explanation to why empirical studies reveal no considerable positive relationship between corporate social responsibility (CSR) and corporate profits, as well as CRM (Vogel, 2005).

Global competition is becoming increasingly a reality that major companies need not put into consideration while marketing. While marketing is necessary to make sure that the company sells its product, the strategy of marketing determines the extent to which the company will market itself and its success. In this case, the company chooses to participate in cause-related marketing, and innovation of a strategy that is not only applicable but also in line with the business operations of the firm is very important. Goodwill (1999) posits that experts support the congruence of the mission of the non-profit organization and the product being promoted. A company that strategizes to utilize cause-related marketing can reap benefits among them community support because the company works for the benefit of the society, reinforce its mission statements because it can re-communicate corporate social responsibility of the firm to its various stakeholders, increased motivation and employee loyalty by rewarding their support to cause-related programs, reaching the niche markets through geographical outreach, market differentiation which can help the organization have a distinctive approach to brand advertisement, and attracting and retaining the customers.

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In order to ensure that there is support for the cause-related marketing, careful and proper planning, implementation, and communication of it are important. After resolving to apply cause-related marketing as a strategy, the company needs to begin with the assessment and planning which involves the definition of its market targets, capacity, and support for the cause-related marketing. This is followed by a development of a cause-related marketing design that is aimed at meeting the aforementioned objectives. The company then implements the decision and ensures continued support for it, communication, advertisement, and proofing success through measurement (Saha, 2007).

Positive change in consumer’s buying behavior can be attributed to success in sales for commodities such as the reported cases of increase in sales of the American Express and Coca Cola after the launch of cause-related marketing strategies because the latter influences positively the customer’s buying behavior. A positive correlation between the customers’ buying behavior and cause-related marketing was also revealed in 80% of the participants of a study that was undertaken to examine the relationship between the two. The condition to be met for this scenario is that there should be no difference in the quality of the product offered according to Saha (2007). A 2000 Cone/Roper Executive Study found that cause-branding can help in retaining and hiring the best employees in a highly competitive marketplace (Cone, n.d.). The branding can also serve as a source of pride, morale, and loyalty by the employees, in addition to strengthening the internal corporate cultures.

The company can compensate for the decline in corporate philanthropy where there is a decline in contributions (Cause-related marketing, doing well by doing good, 1994). It has been reported that corporate charitable donations declined by almost 15% of the profit in the United States in 2001 alone (Porter, Kramer, 2002). US corporations’ contribution to the nation’s gross philanthropy was 5% while the individuals’ contribution was 75% of the total (Giving USA Foundation, 2005). Companies have been indicated to have a choice to make between meeting their perceived (by customers) standard of social responsibility so as not to lose customers to corporations that are more sensitive to social corporate responsibility, and to meet governmental expectations to continue enjoying the related benefits such as governmental contracts, avoiding tighter scrutiny and regulatory control. Companies are said to reach a compromise between profitable and social responsibility by resulting in strategic philanthropy which results in alignment of social and economic goals with the companies investing in social causes and getting back payment through positive externalities created by the efforts to support the social causes (Polishchuk & Firsov, n.d.).

Although it has been argued earlier on that companies should place the interests of stakeholders before those of social responsibilities (Porter and Kramer 2002), it has been synthesized that the critique can be invalidated under two conditions, namely, if companies can have comparative advantages in philanthropy over donors and if they are able to advance their economic objectives by being involved in charitable events according to Porter and Kramer (2002; qt. in Polishchuk & Firsov, n.d.).

How charitable organizations benefit

While the participation of a company in a social cause by placing its resources to better the society is not philanthropic because the funds attributed to the CRM can be viewed as a marketing partnership and not tax-deductible donations, charitable organizations can utilize the partnership with these firms to better participate in the betterment of the society and advance in the course they have committed to (Entrepreneurs’ Foundation, n.d.). Charitable organizations work to improve the livelihoods of people or empower them through financial and material assistance, advice, education and training programs, and the creation of awareness among other channels. When charitable organizations join with firms in a certain program, they can benefit by having an expanded reach in places they would not have accessed because they have added finances.

The organizations are able also to serve more people with their products or services. A charitable organization can also advance its objectives by participating in a joint program with a profitable organization. This can occur if it links its mission with those of the company with which it has united or joined (Miniutti, 2004). Some donations of particular nature can be catered for when companies avail material support rather than financial support. This reduces the processes which would have otherwise been involved if cash was availed-for example procurements, ordering, transport, and related communication expenses. Whereas company managers and officials who authorize contributions may be the ones to feel a “warm-glow” at the expense of the shareholders, charitable organizations may feel it (Andreoni, 1990).

Conclusion

Cause-related marketing involves marketing efforts that have social and charitable causes but which are not taxable donations. Profitable organizations are compelled by societal needs, competitors within themselves, and governmental obligations and expectations, to participate in cause-related marketing. Although there has been an argument that companies should not give obligations of corporate social responsibility the priority ahead of the stockholders’ interests, it has been posited that the argument can be nullified if companies were to pursue financial interests in their participation in CRM and if they can have comparative advantages in philanthropy over donors.

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Charitable organizations can gain advantages in that they can have more access to funds which would help advance more of their agenda. The charitable organizations have a “warm-glow” feeling. The company can have its image improved on the social view. It has already been seen that the company may gain in terms of increased sales. The branding that is improved with the company’s relationship with non-profit organizations can serve as a source of pride, morale, and loyalty by the employees, in addition to strengthening the internal corporate cultures.

References

Adkins, S. (1999). The Wider Benefits of Backing a Good Cause, Marketing Andreoni, J. (2004). Philanthropy. The Handbook of Economics of Giving, Altruism, and Reciprocity, v. 2

Andreoni, J. (1990). Impure Altruism and Donations to Public Goods: A Theory of Warm Glow Giving. Economic Journal, v. 100, pp. 464-77

Cause related marketing, doing well by doing good. (1994). Responsive Philanthropy Newsletter. Web.

Cone Carol. Cause Branding in the 21st Century. Web.

Entrepreneurs’ Foundation. Cause Related Marketing. Web.

Epstein, K. (2005). How Today’s Corporate Donors Want Their Gifts to Help the Bottom.

Line, Stanford Social Innovation Review, Summer Giving USA Foundation. (2005). The Annual Report on Philanthropy for the Year 2004.

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Goodwill Bill. (1999). Cause Marketing Pros and Cons. Broadcasters and Non-Profits. Web.

Harford, T. (2005). The Undercover Economist, Oxford Univ. Press.

Hausmann, H. (1980) The Rationale for Exempting Non-Profit Organization From Corporate Income Taxation. Yale Law Journal, v. 91, pp. 54-100.

James A. F. Stoner, Freeman, R. Edward and Daniel R. Gilbert, Management, sixth edition, 2004.

Miniutti Sandra. (June 1, 2004). Hunting for Cause related marketing’s charitable impact. Web.

Polishchuk Leonid & Evgeny Firsov. Doing Well by Doing Good: An Industrial Organization Perspective of Corporate Philanthropy. Web.

Polishchuk, L. (2006). Businessmen and Philanthropists. Corporate Charity in Russia. (In Russian). To appear in Pro et Contra.

Porter, M., and M.Kramer. (2002). The Competitive Advantage of Corporate Philanthropy. Harvard Business Review. December 2002, pp. 57-68.

Saha Swaralipi. (2007). A study on the impact of cause related marketing on the consumer’s buying behavior. International Marketing Conference on Marketing & Society. Web.

Tirole, J. (1988). The Theory of Industrial Organization, New York: MIT Press Varian, H. Price Discrimination. In: R. Shmalensee, R. Willig (Eds.), Handbook of Industrial Organization, vol. 1, pp. 598-654.

Verrghese A. (2009). Partnerships and Cause Related Marketing: Building brands for the future. Web.

Vogel, D. (2005). The Market for Virtue. The Potential and Limits of Corporate Social Responsibility. Brookings: Brookings Institution Press.

Weisbrod, B. (1988) The Non-Profit Economy. New York: Harvard Univ. Press.

Wesibrod, B., and N. Dominguez (1986) Demand for Collective Goods in Private Nonprofit Markets: Can Fundraising Expenditures Help Overcome Free-Rider Behavior? Journal of Public Economics, v. 30, pp. 83-95.

Zadek, F. (2001) The Civil Corporation: The New Economy of Corporate Citizenship. Earthscan.

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