The Pitfalls of Marketing Social Responsibility, Part 3 of 4

Read Part 1 and Part 2.

This post talks about the following rule:

3) Don't pretend to be what you're not. This is the worst hypocrisy.

Anyone remember Pallotta TeamWorks?

It was an experiment in for-profit charitable giving, run by a charismatic, cultish CEO. This Los Angeles-based company produced a roster of events such as the Avon 3-Day Walk for Breast Cancer, the AIDSRide, and many others. Their well-honed marketing and PR machine created an appearance of a vibrant, tight-knit community of people across America that would take part in hardcore athletic activities to raise funding for hot-button medical initiatives that needed research breakthroughs. Their events were well-attended, well-run, and chock full of people who really felt they were making a difference.

I was one of them. I participated in the 2001 Avon 3-Day Walk in Washington, D.C., raising with my wife over $2,000. And at first, the event was a blast. I met a ton of amazing people and really pushed the limits of what I thought was possible for me to physically accomplish.

During the second day of the event, as we lounged in pain around the camp and chowed down on a lackluster spaghetti and tomato sauce, Dan Pallotta gave a speech about what his company wanted to accomplish as a whole. He painted a bold vision of us making a real impact in breast cancer research, complete with jingoistic music swelling up in the background to punctuate his responses. He showed us an events roster for the upcoming year, encapsulated in a gigantic brochure (probably 24" by 12", full color, dozens of pages) that would be mailed to us after the event. He hoped that we would take part in more Pallotta events and keep the flame for their foray into making the impossible possible.

As a marketing professional that had spent the past four years working with nonprofit clients such as American Diabetes Association, I knew that something was very, very wrong. Such a brochure would cost at least $8 to produce and mail -- a move that smacked of complete fiscal irresponsibility. Barring low participation in an event, the highest fraction of every dollar donated should go directly to the associated charity. Where was all this money coming from?

When I returned home from the event, I immediately found a groundswell of citizens and journalists on the Internet that were savaging Pallotta's for-profit basis and event performance. Pallotta's bold experiment was shaped around a mission that put the participant's transcendence of their physical limits (an epic bike ride, a 60-mile walk) before the actual results of those actions for the associated charities. In the AIDSRides, as an example, only 21 cents of every dollar raised went to charity.

When confronted with these numbers, the companies that had hired Pallotta to produce their charitable events immediately fired him. As a result, the company imploded and laid off all 250 of its employees.

If Pallotta TeamWorks was a non-profit enterprise and had carried traditional non-profit values, they might have operated on a shoestring and shown real results. Their core values were at cross-purposes with the core values of what charitable giving should be: a selfless sacrifice for a just reward. Their core audience of hardcore exercise do-gooders saw straight through their marketing hype and personal empowerment doublespeak into their lack of sacrifice.

This leads to the only corollary of the third law:

No matter where your company exists, it is a world citizen. Behave like one by giving back thoughtfully and not being voraciously greedy.

Pallotta created their own little world and ignored the big picture. People think about companies and brands like they think about people. They have a face and a voice and a history. Yes, they still need to bring in revenue. Just make sure you do so in a way that is mindful of your impact on the community and the context in which you create your gains, and be prepared to give some of it away in exchange for greater respect.

It sounds so easy in theory. But in practice, this is where almost every company falters. No matter how many contests you hold to encourage green citizenship or how much money you invest in promoting your investment in social responsibility, people will only ask why it took so long for you to get started. This leads me to my final corollary:

It's best to invest in social responsibility without promoting it. Unless you can create a legacy.

Unless you're Patagonia or TerraPass or any of a list of companies that have centered their entire business practice and brand strategy around sustainability, consider making incremental change without viewing each action as a marketing opportunity. Wait until there's a holistic story to tell that doesn't smack of opportunism.

Here's a good example. Within a period of months, Tully's Coffee switched their espresso to organic/Fair Trade, brought composting into all their stores, changed the engineering of their materials to make them compostable, and began bringing local/organic baked goods to support their coffees. By creating a legacy with their business choices across the board, they changed their stance in the market and even made Starbucks look a little weak in the knees. At least, until Starbucks fought back. What I find really interesting is that Tully's never heavily promoted the switch on their Web site... And didn't want to acknowledge the articles floating around regarding how Fair Trade is actually retarding the process of bringing better coffee on the global market?

Yet again, every step forward for social responsibility is on a slippery slope. I applaud companies like Tully's that are looking to renovate their business model, realizing that it's one of the only ways towards true sustainability and being responsible for their actions on society at large.

In my last post in this series, I'll talk about ways to approach spending money on marketing social responsibility, if you must...

Comments

[chris]

"If Pallotta TeamWorks was a non-profit enterprise and had carried traditional non-profit values, they might have operated on a shoestring and shown real results."

What in your mind are real results? Netting hundreds of millions of dollars for AIDS and Breast Cancer seem to reflect real results. It seems in my humble opinion that having development coordinators do simple admin stuff because there is no secretary and as a result raise less money for the cause, or having crappy 50-cent marketing books that no one wants to look at, are the result of a shoestring budget.

No one would dispute that PTW had failures but they also had amazing successes because of the things you claim are so evil. You want to throw the gauntlet down on PTW, all the while non profits are so proud of their efficiency but lack the ability to capitalize on scale, leave more and more money on the table and their hands are tied because of the desire for shoestring budgets which makes them unable to compete with the for profit world. Perhaps we need not to restrict non profits but instead ask these organizations to employ the same techniques as Coke, Starbucks, and Toyota to end the great social problems of the world.

Cheers,

Chris

[David Sherwin]

Thanks for your comment, Chris.

I agree with you, in reading my words as part of this post, that I am very harsh on Pallotta TeamWorks and the concept of for-profit companies producing nonprofit events as an intermediary. Five years ago, I felt that they were the great hope of nonprofit fundraising. Recently peeling back the detail on their financial statements and then cross-comparing it with how events like the 3-Day are being produced today governed much of my dramatic change in mindset.

I also agree that nonprofits have a long, long way to go in adopting successful marketing techniques that top brands use to market their causes and raise great funds, and could learn a great deal from Nike, Starbucks, etc. The lack of scale and grand ambition, which PTW had in great quantity, could have been game-changing.

In my mind, real results for a venture like PTW in 2008 would consist of the following:

1) Balancing the need for generating awareness and participation (which PTW was fantastic at) with the bottom-line goals of their sponsoring nonprofits. In PTW's business model, which was privately held, the nonprofits and the event participants were actually the shareholders, because they provided the rallying vision and the money to fund both the event and the cause.

With this in mind, ideally at least 65% of every dollar should go back to the sponsoring charity. Great, well-structured nonprofits can produce an event with paid support at around 70% or higher, and this is a more than fair metric. This guideline is the #1 reason why PTW lost their support.

2) The events must be produced in a sustainable manner, meaning that expenditures for online and offline marketing, PR, direct mail, and other avenues of promotion must be mindful in reach and expenditure. Sure, spending $8 on a brochure to get me to raise $2,000 for an event doesn't seem like an undue expenditure... at first. If you think about common nonprofit benchmarks for fundraising, however, it can take 100 to 150 fundraising letters or brochures sent into the world to get a single donation of any denomination.

When you run the math on $8 brochures or $2 mailers to prospective event participants -- and also factor in the costs of producing the actual events -- you can see what I mean about operating on a shoestring. Nonprofits don't have the flexibility of corporations to amortize their marketing expenditures across a volume of products or services. You can't "pay it forward."

Nonprofits need to solicit donations, grants, and establish foundations and other forms of recurring revenue that support the outlays necessary to support medical research, outreach, etc. Doing a global ad buy with heavy TV, radio, print ads, and direct mail for an event like the 3-Day is very, very difficult to manage without very stringent response and cost-per-participant goals. If you fail, then the money comes out of your hide.

So, think slim enough to make an impact and inspire participation from passionate supporters for your cause, but bold enough to gain attention in a crowded market. It's a fine line to walk, even for a corporation. That's why so many of them fail.

Oh, and I almost forgot including the last point...

3) Get out of the way of the charity. It's important to have a charismatic leader for your nonprofit concerns at the event and thank participants. Let them get the love.