Last Updated Nov 17, 2009 8:06 PM EST
Michael Norton, a marketing professor at the Harvard Business School, specializes in consumer psychology and social enterprise. Last week, he shared his research on what he calls "The Ikea Effect," which explains how getting customers more involved in a product or service -- often with their own labor -- can make them value it more. Today, he talks about how companies like Google use corporate giving to encourage customer and employee satisfaction and loyalty.
BNET: How did you get started looking into the effects of corporate philanthropy?
Norton: With collaborators from the University of British Columbia, I looked into the idea that money doesn't make people that much happier. People believe that increasing their income over time will make them much happier, and that is not necessarily the case. Money makes you happier--but only a little bit. We had the idea that maybe when people got their money, they didn't spend it in the right ways to make them happy. In our study, we made them spend money in different ways to judge which of those made them happy. As it turns out -- and it's a nice message -- the way to use money to make you the most happy is to spend it on other people. We've shown in a bunch of contexts that it makes you demonstrably happier.
Then we said, "If that works at the level of the individual, how can corporations use this knowledge to change the way they interact with their employees or customers?" Usually firms give money in a lump sum to charity hoping for some PR effect. But those metrics are difficult to evaluate. If a company gives its employees vouchers to give to charity, we can look to see if the employees are happier and have higher satisfaction and loyalty to the company. Our studies show that, in fact, is the case. So, companies can look at both the impact their contributions had on the world and also how good it was from a business point of view.
BNET: What companies have a great strategic approach in their corporate giving?
Norton: Google has been an innovator here. A few years ago, they gave their [advertising] clients vouchers for the nonprofit donorschoose.org, where teachers in the public school system post projects that their school systems can't afford. A teacher might post that she wants to provide her class certain books that aren't in her school's budget, and givers can choose to back that. Google's customers got to choose where the money went. It's a great example of a company engaging their customers in charitable giving in an effort to make their customers appreciate them even more.
BNET: So this covers writing checks, but how do companies encourage corporate volunteer efforts within their ranks? Do these programs also increase loyalty?
Norton: There are companies doing amazing things with volunteering. Volunteering is a strong predictor of how happy people are in general with their lives. I think the trick is that volunteering in general is hard. So, with many people, if their company gives them a day off to go build houses, it's not necessarily a positive thing. The nice thing about giving away money is that it's quick, people enjoy it a lot, and the company can get a lot of benefit from it.
Next week, we'll hear more from Professor Norton about corporate philanthropy, including his assessment of the well-known and sometimes criticized Product Red Campaign.