Botton-Line Charity: Doing Well by Doing Good? by Romesh Ratnesar

January 6, 1997
The New Republic

Botton-Line Charity: Doing Well by Doing Good?

by Romesh Ratnesar

The images have become as cloyingly familiar as they are starkly beautiful: tightly framed, black-and-white shots of children and old people flash across the television screen in slow motion, their eyes gazing out at us with pain and longing. The sedate strains of John Lennon's "Imagine" loop in the background. The advertising pitchman's voice- over: "Imagine--if every time you bought anything with your American Express card, you helped feed someone who is hungry." The words "Charge Against Hunger," emblazoned on a white soup bowl, appear on the screen, and as the picture fades to the AmEx corporate logo, two more words pop up. "Do more."

As in spend more. The ad is a promotion for American Express' Charge Against Hunger campaign, which the company launched four years ago. It sounds elegantly simple. For every purchase made with an American Express card between November 1 and New Year's Day, the company has pledged to donate three cents on each transaction, up to a maximum of $5 million, to the Washington, D.C.-based anti-hunger organization Share Our Strength. It is, to all appearances, the consummate win- win marriage of altruism and profit: since 1993, this annual Yuletide charity drive has helped raise $16 million for hunger relief, while unapologetically encouraging card members to put more of their holiday purchases on plastic.

Not surprisingly, the competition is catching on. In November, Visa kicked off its own year-end promotion, promising a $1 million donation to the nation's largest children's literacy program, based on purchases made with Visa cards. In launching the "Read Me a Story" campaign, a roadshow-style, sixty-one-city bus tour, Visa executives told the press that this Christmas consumers would, given the choice, place literacy above hunger relief. "This message of children's literacy, " one company vice president boasted to Brandweek, "is more universal, more positive, and it will have a broader appeal."

Corporate charity is nothing new, but it has always been one of the less pure forms of giving. Businesses give on what might be called the biblical theory of commerce, figuring that casting a relatively modest (and tax-deductible) amount of bread upon the water will reap returns manyfold, in the form of free publicity and consumer goodwill. But in recent years corporate charity has become something on the order of a business in itself, a specialty filling its own market niche, where a CEO's philanthropic inclinations are focus-grouped, market-tested and hyper-promoted. The nonprofit partnerships established by American Express and Visa are only two examples of the tie-ins that bright marketing types have devised to promote a company's products by projecting a responsible, socially conscious image. And 'tis the season for ulterior motives--retailers of all stripes are luring in spendthrift holiday shoppers by appealing to their better angels. Sears plans to donate $200,000 from Sears Card transactions to Gilda' s Club, a national group that opens meeting places for cancer patients and their families. At the other end of the socioeconomic spectrum, Neiman-Marcus's holiday catalog offered its most conspicuous consumers the chance to put up a minimum $35,000 bid for a lifesize replica of a Star Wars jet. The store donated the difference between the minimum and the ultimate winning bid of $135,001 to Steven Speilberg's starbright foundation, which links up hospitalized children through the Internet.

PR executives have a telling name for this kind of self-interested goodwill: they call it "cause-related marketing" or, more honestly, "strategic philanthropy." This new, strategic way of giving began in 1983, when AmEx coined the first of these terms to describe its underwriting of the Statue of Liberty restoration project. In the mid-'80s, hip, progressive companies like Ben & Jerry's showed that beneficence sells. Other, larger companies followed, tying financial commitments to targeted social causes. Now companies carefully search for the next hot social cause, market it alongside their own products, and then proclaim their social conscience to any customer who will listen. "In the past, perhaps the wife of the CEO was particularly concerned about Alzheimer's, so the company would donate money to that cause," says Carol L. Cone, CEO of a Boston consulting firm that helps companies design cause-related marketing schemes. "The big sea change came when companies realized that this is actually corporate strategy. Now, the question about a charity is, can it support corporate business?"

These days, cause-related marketing is as valuable to many companies as a glamorous spokesperson might have been in the past. This year alone, American businesses spent close to $600 million on ads and events trumpeting their commitment to social concerns. And executives are unsentimental about what they want in return. A 1995 survey commissioned by Cone's firm asked company bosses to identify their chief motivations for conducting cause-related campaigns. Ninety-three percent answered "to build deeper relationships and trust with customers," 89 percent said "to enhance a reputation or image," and 50 percent admitted " to increase sales." Only 39 percent picked "because senior management believes companies must stand for something." And it's true, the new corporate charity can do wonders for business. A case in point: the fix-it-yourself warehouse chain Home Depot donated $250,000 in materials last year to a non-profit home-building group called Christmas in April. So grateful was the group that it subsequently spent twice that much on still more Home Depot goods. Meanwhile, American Express saw its fourth-quarter profits jump by 15 percent last year in the midst of its anti-hunger campaign. "We wouldn't continue to do it, " says company spokesman Gregory Tarmin, "if it wasn't good business....I feel absolutely comfortable saying that."

And why not? If corporate America has found a way to make generosity profitable, what's not to like? Nothing, really. But there is something a bit--well, humbuggish--about such ruthlessly methodical charity. For one thing, companies understandably steer their efforts toward fighting those social ills their customers regard as the most compelling. So some causes are more equal than others. In October--Breast Cancer Awareness Month--companies ranging from Avon to General Motors to Boston Market rolled out promotions that funneled a portion of proceeds to breast cancer research. Women, cause-related marketers believe, are more likely to develop affinities with particular companies based on their non-business activity. As in presidential politics, soccer moms are prime targets for corporate philanthropy's narrowcasting.

So are children. As part of a program it calls "Book It," Pizza Hut gives public school students coupons for personal pizzas when they finish reading a given number of books. Of course, even if Johnny can read, he probably won't come to redeem his coupon unaccompanied by a hungry adult. "It's been a blockbuster for them," says Cone. The same goes for Nabisco, which in 1995 changed the shapes of the cookies in its Barnum Animal Crackers boxes to those of various endangered species. The company donated five cents from the sale of every box, up to $100,000, to the World Wildlife Fund. "Since it was a learning tool, it seemed perfect," says Ann Smith, a spokesperson for Nabisco. "Kids and animals go together, and kids and cookies go together." Apparently, so do kids and profits. Sales of Animal Crackers jumped 20 percent over the course of the two-year campaign.

To be fair, profit motive isn't the only thing driving corporate do- goodism. Sometimes companies are motivated by an even more primal instinct: selfpreservation. Through association with a noble cause, the most blackened corporate image can be burnished. In April, U.S. Tobacco, maker of Skoal and Copenhagen smokeless tobacco, pledged to donate $1 million from snuff sales in 1996 to the National Volunteer Fire Council--a worthy but somewhat improbable bedfellow, especially since tobacco, when rolled in paper, lit and smoked, is a leading cause of household blazes. The Exxon Corporation, no favorite of environmentalists since the Valdez disaster, has joined with the National Fish and Wildlife Fund to create the Save the Tiger Fund and plans to kick in $5 million to the effort over five years. (The fund also helps another cause- -brand building--since the tiger happens to be the company's corporate logo.) Starbucks, the tentacular Seattle-based coffee chain, has won industry accolades for its partnership with care, an international relief organization that has, among other things, provided clean water systems to villagers in rural Guatemala. But as investigative journalists Jon Entine and Martha Nichols wrote in The Chicago Tribune in June, Starbucks began the campaign only after suffering from revelations in 1994 that the purportedly values-driven company was buying beans from Guatemalan suppliers who paid workers as little as $2.50 a day. Even American Express' holiday hunger-fighting drive arose in part to soften the negative image created by the company's battles with Boston restaurateurs in the early 1990s, when merchants irked over the card's exorbitant fee structure stopped accepting it. "The company realized it had to become more flexible," Tarmin says. "We were humbled by what happened in Boston."

And there is, finally, the matter of just how small all this largess really is. With retail business booming, even the most generous holiday campaigns amount to a minute fraction of what the biggest companies will take in this season. Visa's literacy campaign, for instance, is heavy on the marketing but a little skimpy on the cause. The company spent $10 million on an advertising blitz for the program that featured actor Danny Glover, which is $9 million more than what it plans to donate in the first place. The Saturday after Thanksgiving, Wal-Mart displayed the spirit of the season by donating the day's receipts to charity. What shoppers might not have known is that the giveaway lasted only from 7 a.m. to noon, when many turkey-stuffed patrons were probably just rolling out of the driveway.

And one last point: it's not altogether surprising that the rise in cause-related marketing has coincided with a decrease in traditional charitable giving by corporations. A recent report by the Conference Board, an association of businesses, found that corporate charitable contributions as a percentage of pretax income have fallen from 1.78 percent in 1987 to 1.24 percent in 1995. And if Americans spend as liberally this Christmas as they did in 1995--and there is every indication they will--then American Express' much-praised $5 million donation to Share Our Strength will amount to a paltry 1.3 percent of the firm' s total fourth-quarter earnings. Meanwhile, the company gets the same tax benefit it would have gotten had it simply given the money to Share Our Strength rather than building an advertising campaign around giving it: the entire sum of money the company donates as part of its Charge Against Hunger is tax deductible. For the socially conscious card holder who actually makes the charge against hunger, on the other hand, there's no such tax break to be had. Bah humbug, indeed.



January 6, 1997 The New Republic Botton-Line Charity: Doing Well by Doing Good? by Romesh Ratnesar The images have become as cloyingly familiar as they are starkly beautiful: tightly framed, black-and-white shots of children and old people flash across the television screen in slow motion, their eyes gazing out at us with pain and longing. The sedate strains of John Lennon's "Imagine" loop in the background. The advertising pitchman's voice- over: "Imagine--if every time you bought anything with your American Express card, you helped feed someone who is hungry." The words "Charge Against Hunger," emblazoned on a white soup bowl, appear on the screen, and as the picture fades to the AmEx corporate logo, two more words pop up. "Do more." As in spend more. The ad is a promotion for American Express' Charge Against Hunger campaign, which the company launched four years ago. It sounds elegantly simple. For every purchase made with an American Express card between November 1 and New Year's Day, the company has pledged to donate three cents on each transaction, up to a maximum of $5 million, to the Washington, D.C.-based anti-hunger organization Share Our Strength. It is, to all appearances, the consummate win- win marriage of altruism and profit: since 1993, this annual Yuletide charity drive has helped raise $16 million for hunger relief, while unapologetically encouraging card members to put more of their holiday purchases on plastic. Not surprisingly, the competition is catching on. In November, Visa kicked off its own year-end promotion, promising a $1 million donation to the nation's largest children's literacy program, based on purchases made with Visa cards. In launching the "Read Me a Story" campaign, a roadshow-style, sixty-one-city bus tour, Visa executives told the press that this Christmas consumers would, given the choice, place literacy above hunger relief. "This message of children's literacy, " one company vice president boasted to Brandweek, "is more universal, more positive, and it will have a broader appeal." Corporate charity is nothing new, but it has always been one of the less pure forms of giving. Businesses give on what might be called the biblical theory of commerce, figuring that casting a relatively modest (and tax-deductible) amount of bread upon the water will reap returns manyfold, in the form of free publicity and consumer goodwill. But in recent years corporate charity has become something on the order of a business in itself, a specialty filling its own market niche, where a CEO's philanthropic inclinations are focus-grouped, market-tested and hyper-promoted. The nonprofit partnerships established by American Express and Visa are only two examples of the tie-ins that bright marketing types have devised to promote a company's products by projecting a responsible, socially conscious image. And 'tis the season for ulterior motives--retailers of all stripes are luring in spendthrift holiday shoppers by appealing to their better angels. Sears plans to donate $200,000 from Sears Card transactions to Gilda' s Club, a national group that opens meeting places for cancer patients and their families. At the other end of the socioeconomic spectrum, Neiman-Marcus's holiday catalog offered its most conspicuous consumers the chance to put up a minimum $35,000 bid for a lifesize replica of a Star Wars jet. The store donated the difference between the minimum and the ultimate winning bid of $135,001 to Steven Speilberg's starbright foundation, which links up hospitalized children through the Internet. PR executives have a telling name for this kind of self-interested goodwill: they call it "cause-related marketing" or, more honestly, "strategic philanthropy." This new, strategic way of giving began in 1983, when AmEx coined the first of these terms to describe its underwriting of the Statue of Liberty restoration project. In the mid-'80s, hip, progressive companies like Ben & Jerry's showed that beneficence sells. Other, larger companies followed, tying financial commitments to targeted social causes. Now companies carefully search for the next hot social cause, market it alongside their own products, and then proclaim their social conscience to any customer who will listen. "In the past, perhaps the wife of the CEO was particularly concerned about Alzheimer's, so the company would donate money to that cause," says Carol L. Cone, CEO of a Boston consulting firm that helps companies design cause-related marketing schemes. "The big sea change came when companies realized that this is actually corporate strategy. Now, the question about a charity is, can it support corporate business?" These days, cause-related marketing is as valuable to many companies as a glamorous spokesperson might have been in the past. This year alone, American businesses spent close to $600 million on ads and events trumpeting their commitment to social concerns. And executives are unsentimental about what they want in return. A 1995 survey commissioned by Cone's firm asked company bosses to identify their chief motivations for conducting cause-related campaigns. Ninety-three percent answered "to build deeper relationships and trust with customers," 89 percent said "to enhance a reputation or image," and 50 percent admitted " to increase sales." Only 39 percent picked "because senior management believes companies must stand for something." And it's true, the new corporate charity can do wonders for business. A case in point: the fix-it-yourself warehouse chain Home Depot donated $250,000 in materials last year to a non-profit home-building group called Christmas in April. So grateful was the group that it subsequently spent twice that much on still more Home Depot goods. Meanwhile, American Express saw its fourth-quarter profits jump by 15 percent last year in the midst of its anti-hunger campaign. "We wouldn't continue to do it, " says company spokesman Gregory Tarmin, "if it wasn't good business....I feel absolutely comfortable saying that." And why not? If corporate America has found a way to make generosity profitable, what's not to like? Nothing, really. But there is something a bit--well, humbuggish--about such ruthlessly methodical charity. For one thing, companies understandably steer their efforts toward fighting those social ills their customers regard as the most compelling. So some causes are more equal than others. In October--Breast Cancer Awareness Month--companies ranging from Avon to General Motors to Boston Market rolled out promotions that funneled a portion of proceeds to breast cancer research. Women, cause-related marketers believe, are more likely to develop affinities with particular companies based on their non-business activity. As in presidential politics, soccer moms are prime targets for corporate philanthropy's narrowcasting. So are children. As part of a program it calls "Book It," Pizza Hut gives public school students coupons for personal pizzas when they finish reading a given number of books. Of course, even if Johnny can read, he probably won't come to redeem his coupon unaccompanied by a hungry adult. "It's been a blockbuster for them," says Cone. The same goes for Nabisco, which in 1995 changed the shapes of the cookies in its Barnum Animal Crackers boxes to those of various endangered species. The company donated five cents from the sale of every box, up to $100,000, to the World Wildlife Fund. "Since it was a learning tool, it seemed perfect," says Ann Smith, a spokesperson for Nabisco. "Kids and animals go together, and kids and cookies go together." Apparently, so do kids and profits. Sales of Animal Crackers jumped 20 percent over the course of the two-year campaign. To be fair, profit motive isn't the only thing driving corporate do- goodism. Sometimes companies are motivated by an even more primal instinct: selfpreservation. Through association with a noble cause, the most blackened corporate image can be burnished. In April, U.S. Tobacco, maker of Skoal and Copenhagen smokeless tobacco, pledged to donate $1 million from snuff sales in 1996 to the National Volunteer Fire Council--a worthy but somewhat improbable bedfellow, especially since tobacco, when rolled in paper, lit and smoked, is a leading cause of household blazes. The Exxon Corporation, no favorite of environmentalists since the Valdez disaster, has joined with the National Fish and Wildlife Fund to create the Save the Tiger Fund and plans to kick in $5 million to the effort over five years. (The fund also helps another cause- -brand building--since the tiger happens to be the company's corporate logo.) Starbucks, the tentacular Seattle-based coffee chain, has won industry accolades for its partnership with care, an international relief organization that has, among other things, provided clean water systems to villagers in rural Guatemala. But as investigative journalists Jon Entine and Martha Nichols wrote in The Chicago Tribune in June, Starbucks began the campaign only after suffering from revelations in 1994 that the purportedly values-driven company was buying beans from Guatemalan suppliers who paid workers as little as $2.50 a day. Even American Express' holiday hunger-fighting drive arose in part to soften the negative image created by the company's battles with Boston restaurateurs in the early 1990s, when merchants irked over the card's exorbitant fee structure stopped accepting it. "The company realized it had to become more flexible," Tarmin says. "We were humbled by what happened in Boston." And there is, finally, the matter of just how small all this largess really is. With retail business booming, even the most generous holiday campaigns amount to a minute fraction of what the biggest companies will take in this season. Visa's literacy campaign, for instance, is heavy on the marketing but a little skimpy on the cause. The company spent $10 million on an advertising blitz for the program that featured actor Danny Glover, which is $9 million more than what it plans to donate in the first place. The Saturday after Thanksgiving, Wal-Mart displayed the spirit of the season by donating the day's receipts to charity. What shoppers might not have known is that the giveaway lasted only from 7 a.m. to noon, when many turkey-stuffed patrons were probably just rolling out of the driveway. And one last point: it's not altogether surprising that the rise in cause-related marketing has coincided with a decrease in traditional charitable giving by corporations. A recent report by the Conference Board, an association of businesses, found that corporate charitable contributions as a percentage of pretax income have fallen from 1.78 percent in 1987 to 1.24 percent in 1995. And if Americans spend as liberally this Christmas as they did in 1995--and there is every indication they will--then American Express' much-praised $5 million donation to Share Our Strength will amount to a paltry 1.3 percent of the firm' s total fourth-quarter earnings. Meanwhile, the company gets the same tax benefit it would have gotten had it simply given the money to Share Our Strength rather than building an advertising campaign around giving it: the entire sum of money the company donates as part of its Charge Against Hunger is tax deductible. For the socially conscious card holder who actually makes the charge against hunger, on the other hand, there's no such tax break to be had. Bah humbug, indeed.