What Cause Marketing Can Do For Your Business
I recently bought a friend a Product Red t-shirt from the Gap as a birthday present. The price was more than what I would normally spend on a t-shirt, but I knew that the extra money was going to a good cause, so I got out my credit card. Apparently I'm not the only consumer who thinks this way.
New research from the Ross School of Business at the University of Michigan finds that, despite price increases, linking your company's products to social causes both improves your company's image and boosts profits.
Why it raises prices
"Cause marketing," or donating a portion of a product's proceeds to charity, often leads to price hikes. Researchers Uday Rajan, an associate professor at Ross, and Krishna Rajan, uncovered the very straightforward reason why: companies are making up for the money they give away on the product. Once their cause marketing efforts become successful, some companies may even raise prices on items that don't have a charitable tie-in.
How it boosts profits
If consumers resent the price increases on cause marketing items, they aren't showing it yet. Because charitable tie-ins increase consumers' positive associations with a brand or company, they will often buy more of the company's other products. The researchers say these increased sales across the board is the biggest reason cause marketing benefits companies.
According to Uday Rajan, "For public policy officials and consumers who may believe that cause-marketing firms are more caring firms and are genuinely interested in helping others, it may be insightful to understand that cause marketing also allows firms to increase their prices and profits."
Which brings about two questions: Will consumers come to begrudge cause marketing as just another profit scheme and ignore these products? Or, despite their awareness of companies' sometimes less-than-charitable motivations, will they still feel good about spending to support charity, ensuring the continued success of cause marketing?
T-shirt image courtesy of Gap Inc.