Why integrate a social mission into your business?

You’re an entrepreneur with an idea and maybe a business plan, a small-business owner or the head of mid-sized company.  To expect you to add social purpose to your business just because it’s a good thing to do, is foolish.  You have a bottom-line and other obligations to meet.  You don’t have extra resources to allocate to ‘doing good.’

But doing good is a business strategy, not merely a moral argument or trend.  Businesses with a strong social mission have a competitive advantage.

1. People will talk. consumers, competitors, investors, suppliers and the press.
2. Increased productivity and employee morale.  People want to work for a greater purpose and want to know that their work makes a difference. Employees who are happier work harder and smarter because the work has become personal.  These type of employees are advocates for your company, not just employees of it.
3. Consumer preference. Consumers prefer companies that make a positive impact on the world.  Eighty-three percent of U.S. consumers want more of the products and services they use to benefit causes (2010 Cone Causes Evolution Study) and 62% of global consumers will switch brands if one works with ’good causes’ and the other does not (Edelman, 2010).
4. Innovation.  More companies like Nike, GE and Interface are using sustainability to drive innovation. Seventeen years ago, the late Ray Anderson, who served as Interface’s CEO, committed to becoming a zero-waste company by 2020. Since then, Interface has eliminated hundreds of millions of dollars in resource and waste disposal costs, increased sales by more than one billion and changed the way the entire carpet industry does business.
5. Influence.  Your company’s initiatives will be modeled as more companies realize the benefits of having a social mission.
6. Lower marketing costs.  Your mission will help your marketing. A line of grocery products founded and once produced by Paul Newman (Newman’s Own) is a somewhat banal story that merits only a mention in the press. The fact that the company donates 100% of profits to charity is a story that sticks, intrigues and encourages participation through purchase.
7. Talent recruitment.  People want to work for employees that care; a social cause is indicative of a favorable workplace.
8. Attract talent for less. Kevin Jones of Good Capital calls this “meaning premium.”   People want to work for a company that allows them to contribute to a greater purpose and are willing to be paid less for the opportunity (NB: this isn’t an argument for underpaying employees).
9. Attract young talent.  Teach for America is a top employer of exceptional college graduates. Last year 12% of  seniors at Ivy League schools applied to work with Teach for America, vying for one of the most challenging and low-paying jobs out there.
10. Talent retention.  When employees are part of a larger mission and feel their contributions make an impact in the world, they’re engaged, proud and motivated.
11. Savings in resource and disposal costs. You’ll save money by reducing energy, water and material consumption. Producing less waste and reusing water or materials costs you less to purchase and less to haul away.
12. Supplier advantage.  Stonyfield Farm pays its organic suppliers a floor price that won’t ever drop, protecting its suppliers from market swings and production hiccups. In return, when supply for organic milk or sugar outpaces demand, Stonyfield is first on the delivery list and is guaranteed a fair price because it’s built a relationship with its suppliers.
13. Risk management. Being in tune with your stakeholders alerts you to potential risks and helps you safeguard against them. An offshoot of this is that your company is better informed and positioned to identify new business opportunities.
14. Future-bound company.  Successful companies that others evangelize and model represent more than just a product or service. They represent a philosophy, culture or experience. When you channel this back into your business, you’ve made your competitive edge that much more edgier.
15. Fun.  Science proves what most of us know–making a difference feels amazing. We feel happy, enlivened and creative.

Your company (1, 5 or 200 employees) is the ideal size to run a purpose-driven business. Although larger brands get more attention for the resources they can bring to their campaigns your company holds an advantage.

1. You’re more agile. You can plan, execute, track and revise nearly on-the-fly. Less memos, less approval, less internal politicking diluting the programs.
2. You can take more risks with your social mission. You have less of a reputation to uphold. You can be a renegade, a heretic, recognized for your commitment to social change and your willingness to try new ideas.
3. You face less financial accountability. Smaller companies aren’t held to the same monetary expectations as larger ones. Your programs’ strength lies in their impact and effect rather than your company’s financial commitment.  A big brand cosmetic company’s one-time campaign cost $500,000 in an upfront investment to its partner charity, the cost of a micro-site and prize expenses, and delivered just a luke-warm impact. Your cosmetic company can affect people more directly by offering products and makeovers to women re-entering the workforce in partnership with a workforce re-entry program and your local Dress for Success chapter. Cost? In-kind only.
4. You have a fresher slate. Small companies are often seen as more personal, less greedy and less noxious. There’s less initial cynicism of your motives and choices.
5. You entice stronger non-profit partners. Smaller companies are rarely able to attract (nor should they try to) the top crust of non-profits.  With fewer wooers and less brand value, a regional non-profit will be more willing to commit time and labor to the project, as opposed to just a sliver of its name recognition.
6. You can galvanize your employees around your mission more easily. As companies need to convince consumers of their sincerity, they also need to convince their own employees. The smaller a company, the shorter this process. Employees help determine the social mission, shape it and execute it.
7. You have more of your customers’ attention.  Generally, the larger a company is the more we view it as a commodity and the less likely we are to see it as an educator or driver of good. Would you be more willing to support a pin-up campaign at Walmart or your neighborhood cupcake bakery? One of your advantages as a smaller business is the frequency of touch points that you have with customers. Use these opportunities to bring them into your mission through storytelling, contribution and advocacy.

Having a social mission is not a drain on company assets or a tangential program, it is a business strategy that yields a competitive advantage, which smaller companies can better leverage.

The Container Store's 'We Love Our Employees Day' falls on Valentine's Day

At The Container Store, employees are prioritized over customers and shareholders. It’s a core company principle that influences all business decisions. Full-time employees earn an average of $46,000 per year, which is 50-100% higher than the retail store average. They also receive an average o 260 hours of training in their first year, compared to the retail average of 8.5 hours.

But the company’s most ambitious commitment since the economic collapse in 2008 was to retain all of its employees. It’s a striking accomplishment given the atrophy of the retail industry. To compensate for the drop in consumer spending, most businesses cut costs by laying off workers. But Kip Tindell, co-founder and CEO of The Container Store, is a practitioner of conscious capitalism (which rejects the zero-sum view of business, viewing it instead as a web of connected stakeholders). To safeguard jobs, Kip froze salaries and 401(k) matches, brokered better deals with suppliers and worked with employees to help them reach their sales targets. His strategy relied on the company’s core asset–its employees–and drew on the foundation of trust between company and employee. And it worked.

“If you really and truly put the employee first, they’ll take care of the customer better than anybody else and ultimately the shareholders and other stakeholders benefit as well.”

Sales were down just half as much compared to other housewares retailers and the company met its usual 10% profit margin. The salary freeze has since been lifted and matching 401(k) contributions restarted.

REI made a similar promise to forgo lay-offs during the recession, focusing particularly on protecting part-time workers–typically the first to be pink-slipped. Rather than reducing pay, benefits or hours for part-time employees, the company asked all salaried staff to accept a pay freeze, or even reduction. This approach protected the most vulnerable in the company and divided the sacrifice equally among those who could afford it.

I’ve written before about Joie de Vivre (JDV) founder Chip Conley’s approach to business: Take your largest and most expensive asset, your employees, and use it to build your company. Like REI, Chip used salary freezes and pay-cuts for executives and managers to fund the wages for the housekeeping, maintenance and restaurant staff. When I asked Chip how he persuaded management to accept the cuts, he pointed to the strength of JDV’s culture.

”If you have a great culture, it leads to people being willing to do things they might not be willing to do in a different environment.”

In a recent interview with Fortune, Raj Sisodia, who heads the Conscious Capitalism Institute (The Container Store, REI, Joie de Vivre and Whole Foods are supporters) gives a critique-proof explanation of Conscious Capitalism:

“[It provides] a built-in mechanism to make sure that everybody prospers at the same time. Any exploitation of one element for the benefit of others in the long run is not going to work. It’s basic system theory. The system is only as good as its overall ability to function, and to be healthy all the components have to be healthy.”

Leif Nelson, an associate professor of marketing at the Haas School of Business at UC Berkeley, ran an experiment to test this hypothesis at a large amusement park. He tested 28,224 people against four conditions to gauge how much they would pay for an action picture of themselves on a rollercoaster.

The four conditions were: Would you pay the asking price of $12.95? Would you pay $12.95 if half went to a nonprofit? What would you pay if you could name your price? and What would you pay if you could name your price and half of it went to a nonprofit?

In Dollars and Cents
Nelson found that only half of 1% of rollercoaster riders who were offered the photo for $12.95 bought the picture, generating a profit of 6 cents per visitor. When half of the $12.95 was promised to charity, only slightly more riders bought it, generating about 7 cents per visitor. The philanthropic element did increase demand, but just marginally.

When riders were able to name their price, more people bought the picture (8.4%) but paid significantly less (92 cents on average, less than the production cost, which caused a loss).

When riders choose their price, knowing that a nonprofit would benefit, 4.5% chose to buy the picture. This figure is lower than the pay-what-you-want non-charity option, but higher than either fixed-price condition. But the thrill is in what riders forked up: an average of $5.33, or nearly 20 cents in profit per visitor (compared to 6 cents in profit at the fixed coast), as well as more money for the nonprofit.

In short, people will pay more when they can choose their price and know that a nonprofit benefits from their decision. This pricing and partnership model is the most lucrative for a company and also produces the highest funds for a nonprofit.

According to Leif, choice is key to the success of the model. Providing customers more choice–like selecting the nonprofit beneficiary–could earn even more dollars for the company and the nonprofit.

What Does This Mean For You?

• It’s worth trying! Although we’re seeing more companies adopt pay-what-you-want models, either in their entirety (One World Everybody Eats, Panera Bread or SAME) or in part (Radiohead’s “In Rainbows” album or Mixergy’s subscription option), the model is still fringe and viewed a bit as black magic.
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• Be clear about what you expect. Is it greater net profits? More consumers? A stronger mechanism for social impact? More effective nonprofit partnership? Per Leif’s research you won’t attract more consumers, at least not initially, but you will earn more profits and have a deeper social impact.
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• This study hinged on 50% of sales channeled to a nonprofit. I don’t know how it would work with a lower (or higher) donation amount, so be aware of varying results if you try different percentages.
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• Beware the paralysis of choice. Leif suggests that giving customers more choice might generate greater results. Again, it’s worth testing by offering a limited number of choices to the consumer. As in all marketing (even more so when it’s cause-related), keep it simple. Too many choices, contingencies and selling points is paralyzing to the consumer.

If you’ve tried something like this or know of other businesses who have (even companies that use a non-charity pay-what-you-want model), please let me know in the comments, on Twitter (@OKL) or through email, olivia[at]causecapitalism.com.

*”Shared Social Responsibility: A Field Experiment in Pay-What-You-Want Pricing and Charitable Giving” published by Leif and his colleagues appeared in the July 2010 issue of Science magazine.

1. 15 Social Venture Capital Firms That You Should Know About

2. 10 More Social Venture Capital Firms That You Told Me About

3. Will B Corp’s New Campaign Be The Death Knell For Cause-Washing?

4. The Fundamentals of Building an Employee Volunteer Program [interview with Chris Jarvis]

5. Trouble Brewing For Green Mountain Coffee?

6. Microsoft’s Organic Approach To Its $90M Employee Philanthropy Program [interview with Akhtar Badshah]

7. What Is Cause Marketing and Is It Right For You? [interview with Joe Waters]

8. 13 Benefits You Can Count on if You’re a Company with a Social Mission

9. The Woman Who Hires Do-Gooders [interview with Ellen Weinbreb]

10. The Best Kept Secret to Social Venture Funding?

11. Why Your Company Should Have a Social Mission

12. The Empty Suit: 5 Cause Marketing Mistakes to Avoid

13. 12 Ways To Convince Your Boss To Add Social Responsibility

14. Can You Crowdsource Your Sustainability?

15. This Is What Customers Want To Know About Your Cause Marketing Partnerships

Observations

• I do a mix of expert interviews, tactical/resource articles and thought pieces, which is fairly well represented in this list. Takeaway: Interviews take a heck of a lot of time so I’m glad to see they’re valuable.
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• This list represents three prime areas: funding, cause marketing and social mission. Takeaway: I’m pleased with the topical base, but am setting a goal to publish more on measurement and evaluation, hybrid models, consumer engagement and emerging markets.
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• I also pulled the 15 most tweeted posts (many of which aren’t reflected here). Takeaway: My content is seen by two distinct audiences–a social media audience and an information-hungry audience. The first is inclined to tweet interesting titles or favorite bloggers casually and rapidly. The second audience is hunting for specific information on how to engage employees or establish strong nonprofit partnerships, for example. This audience of entrepreneurs and employees connects with Cause Capitalism through search, reads the content and leaves (to implement the tactics and measure their impact, fingers crossed).

This piece was originally written for and published on Reach Students.

If 94% of Millennials condone cause marketing why do only 53% report buying a product that benefits a cause in the past year?  The first finding is compelling, the second certainly is not, particularly given that in many stores you’d have to struggle not to buy cause-related products. So what explains this gap and what can your company do to close it?

The gap exists because cause marketing is predominately used by companies as a short-cut to boost product sales and consumer good-will. So we typically see cause marketing campaigns developed in a stand-alone manner, rather than as one element in support of a company’s larger social mission. Instead, companies should look to influence their selected cause or issue through deep-rooted commitments and multiple points of engagement.

“Cause-related marketing, as we know it, is dead. It’s not about slapping a ribbon on a product any longer.…Americans seek deeper involvement in social issues and expect brands and companies to provide various means of engagement,” says Carol Cone,  managing director of Brand and Corporate Citizenship at Edelman.

Genius brands like TOMS Shoes, Nike and RockCorps Orange and Boost Mobile have closed this gap by building programs around their long-term commitment to an issue and giving consumers the opportunity to participate through volunteering, advocacy and education. Many of these companies’ initiatives aren’t even tied to product purchases. They understand that creating deeper and longer-term relationship with consumers is much more valuable–in terms of products sales and brand perception, visibility, sustainability and  social impact–than an immediate cause-marketing success.

Here are 7 strategies you can use to close the gap:

1. Define your mission.
   Before you think about how to create a smashing campaign, choose a cause that means something to your brand or consumers. Then be specific about who you want to benefit and what you ultimately aim to achieve, both in affecting social or environmental change and in impacting your company.
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2. Invest in the cause longterm.
   A long-term commitment to a cause or organization helps define what your company stands for, enables a greater social impact and makes it easier for you to measure this impact. The whole idea of engaging consumers in your social mission is to take them on a journey of awareness and participation, through which they begin to associate your brand with real impact, action and commitment to good. Switching up the issues you care about confuses your message, weakens your impact and leaves consumers rolling their eyes at another ill-fated attempt to influence what they buy by way of their heartstrings.
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3. Lead with impact, not branding or splash.
   A quick way to turn off consumers and taint your brand is to use customers as a pawn in a high-on-glitz-but-low-on-impact campaign in the name of doing good. RockCorps‘ partnerships with Orange and Boost Mobile, in the United Kingdom and United States, respectively, focus on community involvement and volunteerism rather than cell phone ownership and use.  ”You can’t buy a ticket, you have to earn it,” is RockCorps’ tagline and mission. These RockCorps partnerships organize A-list concerts with a unique ticket policy: tickets can’t be bought, only earned by volunteering for several hours at a community event organized by RockCorps. This model shifts the focus to giving back to your community, rather than who can and can’t afford which phone or a ticket to hear Busta Rhymes.
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4. Be specific.
   Sixty-one percent of consumers take the time to learn the details of a corporate-nonprofit partnership before deciding whether to support it. The more specific your commitment is, the stronger the appeal. A commitment of one donated vaccine for every t-shirt purchased is stronger than a commitment of 10% of sales (how much is that?), and 10% of sales is stronger than “a portion of the proceeds.”Here’s one suggestion from a 16-year old American woman, “On the label, [there should be] a little paragraph about why the product is helping the environment and how it is made differently. That is something a new, limited-time organic Target brand did and it was very neat to know what special process went into making the clothes,” (quote taken from Alcatel Teen Lab).
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5. Connect customers to the cause.
   While 81% of consumers still want to support your company’s cause through transactional purchases they also want opportunities to volunteer for the featured cause (72%) and to provide feedback on the product or campaign (75%), per Cone Inc.’s 2010 Cause Evaluation Study. TOMS Shoes is known for its transaction-focused buy-one-give-one model.  But the company has also done an excellent job of providing customers opportunities to act, for example, through Style Your Sole shoe painting parties and annual “One Day Without Shoes” events that mobilize thousands of students to go barefoot for the day.

   Nike has partnered with Ashoka’s Changemakers to run several online competitions that challenge young social entrepreneurs to develop ways to leverage sport for positive social change. The initiative is completely independent of product purchases. By separating its commitment to sports for social change from its products, Nike is using its brand to motivate change and empower athletes and entrepreneurs. In the longterm, this visibility and consumer association could translate into product sales, but product sales are only one potential outcome–the other being social impact.
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6. Don’t exploit the cause or your consumers.
   Your cause is indicative of the impact you want to have. Don’t play fast and cheap with it, which means no pictures of abandoned dogs and ravaged children. Instead, find ways to communicate the urgency of their needs with dignity. The same is true for your consumers. When reporting on the brilliant success of your campaign, stay connected to the impact you’ve had and the ultimate change you’re determined to make, not how your campaign spiked product sales or utilized a new technology.
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7. Report on impact.
   Seventy-five percent of consumers want to hear more about the impact of corporate-nonprofit partnerships. How much money was raised and who did it help? How many people were served? How were they specifically affected?  The desire for feedback means you’ve successfully involved the customer in the cause. They feel personally connected to it and are interested to know how what they stood behind made a difference to someone. As a company, this is the best part because you’ve created a unique opportunity for an individual, or a million individuals, to make an impact.