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Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

Charity Add-on: Does it Work? Is It Real?

(Note: I posted this first on Small Business Trends, and I'm reposting it here for convenience of readers of this blog. Tim)

I got an email over the weekend from an online retailer asking me to post about its new offer of donating "5-10% of the company's profits to charity." A press release explains that there's a drop-down menu at the end of the online purchase process, offering a choice of charities including MADD, Teach for America, Doctors Without Borders, and so on.

Frankly, that's not news. Local supermarkets and such have been doing that for years. Other websites do it.

But it interests me, so I ask you: does it work? Are you going to seek out the online retailer that does it? Is this real, or is it just a ruse, as in a cynical attempt to spin?

I'm quite cynical about giving a percent of profits. I think it's kind of a ruse. I don't doubt that they actually do it, but "profits" and "percent of profits" is a deceptive term. I think it's often used to quietly trick people into thinking "percent of sales price" when it's really just a percent of that tiny bit that's left over after all costs and expenses are paid.

The whole illusory nature of profits comes to mind again after that annoying flap in the presidential debates. I'm sure a lot of people misunderstood how big a company has to be before it produces $250,000 of profits before tax. Profits sound like money, when they're really just the leftovers.

In my mind, after 30 years of running my own business, profits are third priority, after cash flow as first, and growth as second. Even in good years, giving even 10 percent of profits in most businesses means less than a penny per dollar of sales price.

Furthermore, I really wonder, aside from the profits gambit, how much do people take greater good into their purchase decisions? Do you?

And, if you do, are you going to seek out retailers who offer up a percent of profits, as opposed to goods made in developing nations, or not made in sweat shops? How are you going to sort through that?

And, if you do, are you still going to be doing that these days, when you're worried about your house value, or the threat of widespread recession hitting the sales of your own business?

  • jon

    I know this is a tactic that happens but I think it’s a little transparent at this point. And more than donating my money I’d prefer they cut the prices or just run a good operation.

  • Hey Tim,

    I'm usually fully in sync with you in 99/100 of your posts, but not this time.

    Social good shouldn't be a "charity add-on." If it is I'd consider it "good-washing," the equivalent of greenwashing, only with charitable causes instead of environmental ones.

    Personally, I'll work with a company doing social good over one that isn't every time. And yes, I'll pay a premium.

    Recent studies have shown the majority of consumers feel the same way. In fact, even in the current financial crisis, over 50% of consumers still want and expect the companies they are working with to continue their social good initiatives.

    It doesn't have to be just the largest corporations. My company, Outsource Marketing, is a small business.

    Along with buying carbon offsets, making monthly Kiva investments and donating employee time to local charities, we will give 5% to Doctors Without Borders next year.

    Outsource Marketing has thin margins and you're right, 5% of our profit won't be a check big enough to bail out GM.

    But it will be thousands of dollars, and as a team, we're rallying around the idea that the more profitable we are, the more we can donate. If we do well, we may very well exceed the 5%.

    So I guess you could say we're big supporters of investing a percentage of profits — especially if the people doing the investing have their heart in it.

    Keep up the great work. I'm sure I'll be in full agreement with you on you next 99 posts!

    🙂

    Happy marketing,

    Patrick Byers
    Outsource Marketing
    http://outsourcemarketing.com

    The Responsible Marketing Blog
    http://responsiblemarketing.com

  • gregor