It turns out that selling cause-related products might lead to less total giving according to a recent post in the Chronicle of Philanthropy.
People who buy so called cause-related products give a lot less in direct contributions, according to Aradhna Krishna, a professor of marketing at the school.
“If two consumers have equal preference for a product, which is offered at the same price to both, but one of them buys this product as a cause-marketing product, her charitable giving will be lower than the other’s,” Ms. Krishna writes.In addition, Ms. Krishna writes that cause marketing warps consumers’ minds into thinking that they’re contributing more than they actually are, since “people may mentally assign their cause-marketing expenditure as their charitable giving.”
What’s more, “they have no idea what amount goes to the charity, typically,” she says. Some marketing campaigns do not report what portion of the proceeds was given to the cause, some have limits on total donations and so keep the rest of the money, and some count the donation as part of profits that often go unreported.
I would like to see more research into this issue as companies like TOMS* are becoming more and more popular with big crowds and buzz at SXSW. What is supposed to be an easier way to 'make a difference' could be making philanthropic fundraising harder. If this is confirmed to be true, organizations will need to think of creative ways to get around this. One solution, which I would love to see, would be to have more openness as to how much of the money spent is directed towards profits, product costs and the intended cause. In follow up studies, it would be useful to try some ideas out to see what is most effective.
*I do not want to seem like I am only picking on TOMS lately. They are one of many examples, but they are popular as of late because of a big talk at SXSW, A Day Without Shoes and an upcoming announcement this June which will move the company in a new direction. If anything, I mention them because they do this better than just about anybody else. For that, they should be respected as they have done an exceptional job marketing and creating a consumption ethic where people feel good by spending money. Not only that, they have found a way to make money off of this model and deliver a socially-conscious service. I am not a sudden apologist for TOMS either, but they are an organization to learn from, not just criticize. Other notable examples are Starbucks and Project (RED).