More businesses than ever are linking their profit-making activity to philanthropic causes. But the contributions these companies make are often not as significant as consumers expect, we reported back in February. So why bother? Do for-profits engaged in so-called cause marketing—where they promise purchasers the warm glow of charitable giving by donating a portion of sales proceeds to charity—sell more product this way? A new working paper suggests not.
Criticism of the bottled water industry for its environmental practices could be making consumers question the companies' motives in donating proceeds to charity.
The paper, by a researcher from the University of Tokyo, looked at 2006-10 sales figures for three bottled water companies, FIJI Water, Nestle Pure Life Water, and Volvic, during different charitable campaigns the companies ran between 2008 and 2010. Fiji promised to donate one percent of sales to environmental projects; Nestle promised to donate 10 cents for each sale of its packs marked with a pink ribbon to fight breast cancer; Volvic donated, for every liter of water sold, five cents to UNICEF and five cents to the Rainforest Foundation. After controlling for each company's market share, as well as product characteristics like mineral content, pH levels, sodium, water hardness, and total dissolved solids in each company's bottled water, the existence of a "cause" connected to sales of a company's product negatively correlated with sales data. Price, obviously, was the strongest negative correlation, while water taste appeared to have the strongest positive correlation with bottled water sales; the biggest surprise here was that cause marketing was negative at all, let alone that it appeared to have a stronger negative influence on sales than cleanliness and sodium levels in the water being sold.
The author speculates that recent criticism of the bottled water industry for its environmental practices could be making consumers question the companies' motives in donating proceeds to charity. (You know it’s bad when even the nuns have turned on you, as some did a few years back when one group took issue with how much plastic waste the industry produces.) Or maybe as for-profits run more of these feel-good campaigns, buyers are becoming more suspicious about how much of their money is actually going to charity. Either way, the first empirical look at actual sales data from cause marketing campaigns—as opposed to surveys or laboratory modeling—makes one wonder if companies are actually doing all that much good for themselves, let alone for others.