It attracted more customers (around $150 million worth) because it aligned its business model with sustainability.

“Sustainability is at the forefront of our business model because of customer demand,” says Gap Adventures CEO, Bruce Poon Tip. A demand that Bruce seeded when he founded Gap Adventures 21 years ago. Beyond delivering authentic, sustainable travel experiences, Gap Adventures’ mission is to stimulate local economies. Tours use small-scale lodging and support local transportation and businesses. “A true sustainability model is about engaging local communities and the traveler, and delivers on the needs of both,” says Bruce.

Offering authentic, local experiences at local prices both supports Gap Adventures’ model and mission and positions it with new demographics. Instead of marketing to retirees looking for a port-to-port experience, the operator attracts younger travels at lower prices. A popular program is the company’s “You Only Live Once” tours, priced at $1,000-$1,500 for 12-18 days of remote, un-pampered travel.

Cause capitalism isn’t a trade-off. If you find yourself frequently faced with doing the right thing OR making a profit, make doing the right thing profitable by aligning it (i.e., your sustainability goals) with your business model and consumer base.

……………………………………………………………………………………………………………………………….

I’ll be speaking with Bruce on a panel about brand integrated social responsibility at Sustainable Brands on June 9. If you like his model and have questions for Bruce, email me at olivia[at]causecapitalism[dot]com.

About Bruce Poon Tip
Bruce founded Gap Adventures in 1990 off of two credit cards. Since then, Gap Adventures has become a world leader in adventure travel, offering tours on seven continents to more than 100,000 travelers a year. He founded the Planeterra Foundation to make a positive difference in the lives of people around the world.

Žižek argues that cultural capitalism (i.e., cause marketing, point-of-sale donations, fair trade and buy-one-give-one) is innocuous and naive. That this type of charitable giving leads both companies and consumers to undeservedly feel they’ve done something useful. That if we all truly cared, we would focus on system changes to eradicate poverty and leave our African-made recycled shopping bags at home.

It’s easy to take this as an argument against sustainable business–I did for a solid ninety seconds, until I thought about what it means to be a truly socially driven business. It’s not about charity. It’s about creating an environment, mechanisms and behavioral influencers that lead to sustainable change. This takes all forms: employee enfranchisement, ethical labor practices, community investment, waste reduction, environmentally sound supply chains, social investments, etc.

Žižek calls out Starbucks and TOMS Shoes for selling a diluted version of change and we, the consumer, for buying it. Surely we all agree that pink ribbons and reusable coffee mugs alone won’t turn Earth into utopia, but they can still alter behavior, priorities and resource allocation. To view this class of action as a roadblock or retardant to deeper change is lazy and short-sighted. While change sometimes looks sudden and instant (a flood wiping out a city) it’s brought on by incremental actions (each raindrop compounded with all others).

We need all manner of change–system changing individuals like Muhammad Yunus and carpooling recyclers who raise bake sale-organizing children (who grow into system-changing individuals).

Change doesn’t hinge on all or nothing. And Žižek knows this. While his critique of cultural capitalism is sincere and pointed, it’s also inspiring and serves to refocus us away from fretting about Earth Day activities to acting on our greater social mission.

HT @JohnCTownsend.

This is good news for socially driven businesses. Find your spot where market forces meet consumer values and start building.

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.
  .
• 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.
  .
• 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.
  .
• 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.

• Measurement
  Impact (the object of measurement) is the reason I write this blog. Although I grasp the framework of measurement and evaluation, I want to better understand how to predetermine, capture and evaluate social impact.
  .
• Technology in emerging markets
  Mobile technology in itself can change (or produce) education, health, entrepreneurship, financial access and governance.  When I attended the Mobile Health Summit in D.C. several months ago I was struck by the myriad applications for mobile technology and the intersections between sectors (Changamka in Kenya allows and incents pregnant women to make monthly micro-deposits to a health account to cover labor and post-natal care, ultimately improving the health of mothers and newborns and teaching the process and benefit of saving). .
  .
• Companies that make consumers better (drive positive consumer behavior)
  Last week Ikea stopped selling incandescent light bulbs. Consumers will either switch to energy-efficient bulbs or buy their bulbs somewhere else. And Ikea is okay with that. .
  .
• Hybrid business models
  Is there a set of principles that can be applied (or strategies that can be avoided) to create a sustainable hybrid business? What’s the long-term financial viability and social impact of hybrid companies, and does it vary if they are public or private? .
  .
• Learning from you
  I shared some of the areas I care about. What about you? What information and resources do you need to build a better company with stronger impact? I‘m setting up my interview schedule now for the next couple of months. Who do you want to hear from?  What industries or companies do you want insight into?

Photo credit: Andercismo