Why cause-related marketing fuels problems it aims to solve, how Roche spotted swine flu coming, and the Harvard MBAs who swear on ethics

Does cause-related marketing carry a cost?

Take a charity. Add an attractive brand. Woo the buyer. And so a consumer-led solution to the world’s problems is born. That’s the theory behind cause-related marketing. What’s more, everything suggests it’s working. The cause-related marketing sector has gone from virtually nothing 25 years ago to an estimated $1.3bn a year, according to US-based market researcher IEG. But cause-related marketing is flawed and wrong-headed, this controversial paper argues.

There are plenty of critics out there who snipe invidiously at cause-related marketing for wasting resources, stimulating consumer cynicism or sullying the image of charity with the world of profit-making. Angela Eikenberry is not one of them.

Her arguments lie elsewhere, at the root of the movement. Part of her case rests on a belief that the act of buying more products carries negative consequences. “Indeed, consumption may very well create more of the kinds of problems that we had hoped philanthropy would fix,” she argues. By encouraging people to go out and buy more, one is creating a one-step-forward, one-step-back scenario. The fact that all parties – company, consumer and charity – seem to win is merely a short-term distraction from the longer-term issues, the author maintains.

More convincing is the second string to the paper’s argument. Consumer purchasing pushes us towards an individualist solution to collective and complex problems. The sense of the individual is meant both literally and philosophically. Market-transactions tend to hinge on one person: the buyer. And consumer markets survive by feeding off individual self-interest, not the public good.

Eikenberry calls in recent scholarship for back-up. Research suggests that monetising charitable endeavour tends to limit, not increase, charitable sentiment. Buyers feel that they have done their bit once they have bought a cause-related product. If anything, heading to the till is almost too easy. It divorces charitable giving from moral duty, which lies at the heart of philanthropy. And issues without consumer cachet risk missing out on the marketing wave.

The paper has a sting in the tail, pointing philanthropists towards an alternative to the market. Donors should look to give a voice to the recipients of their charity, it concludes. Why? Because when the aggrieved speak, the powerful listen and public perceptions can change. In essence, this paper serves as a clarion call for a “transformational model” of philanthropy, not a “transactional model”. Building meaningful relationships, not till receipts, should be the end goal of charitable activities. It’s a convincing case, and would be all the more so if cause-related marketing didn’t provide such a great quick fix.

“The hidden costs of cause marketing”, Angela Eikenberry, Social Innovation Review, Summer 2009

Trusting in trust

Trust is not just a modern preoccupation of business. Relationships of trust were fundamental to firms’ ownership in the early part of the last century, this paper reminds us. Owners knew each other and often lived relatively locally. The modern corporation is a different beast. A public company’s shareholders are diversely spread and, especially in the UK, much more numerous than before.

But some things never change, research indicates. Investors still show a bias towards buying investments in their own localities with common laws and common cultures.

It is generally assumed that shareholders tend to be more dispersed in regions where investor protection is higher. Historical data in the UK suggests otherwise, with ownership dispersion widespread before incorporation rules tightened from the 1950s onwards. In the past, directors gained trust by conforming to accepted norms of behaviour in the absence of explicit incentives or penalties to do so. “My word is my bond” runs the London Stock Exchange’s motto. As recent events in the City have shown, the need for trust in business is as necessary today as it was in previous centuries.

“Ownership and trust”, Julian Franks, London Business School, Working Paper, May 2009

Responsibility: not to be sneezed at

In 1999, when Roche launched its new influenza drug Tamiflu, it faced a difficult question: how much should it make available in the event of a worldwide flu pandemic? Fortunately, the Swiss pharmaceutical company asked that question before the current swine flu pandemic. (Tamiflu is the one of the few effective treatments of the virus).

Roche set up a worldwide manufacturing network with partner suppliers to ensure it could meet what, at the time, was just a hypothetical demand. In addition, it added an extra supplier in each area of the supply chain and granted sub-licences to companies in China and India. Finally, it busied itself stockpiling five million doses of the drug around the world. A great example to cite when company bosses are dithering about going the extra mile.

“Pandemic: examining the limits of corporate social responsibility”, Robert Goldsmith, Case Study, Insead, May 2009

On campus
About one in five of this year’s Harvard Business School graduates have signed an oath pledging to “serve the greater good” in their role as future managers. The MBA Oath commits them to act ethically and refrain from advancing their “own narrow ambitions” at the expense of others.

Yale University has awarded its highest honour to Bill Drayton, founder and chief executive of Ashoka, a non-profit dedicated to promoting social entrepreneurship. Drayton received an honorary doctorate for his work in advancing economic development, environmental sustainability and human rights.



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