Charities Advised to Ask Companies to Pay More in Marketing Deals

Many charities aren’t asking for enough money from companies when they enter into joint marketing deals, according to a new survey released here at a seminar held by IEG, a Chicago consulting company that conducts research and training on corporate sponsorship.

“Sports teams tend to overvalue their benefits to sponsors, but nonprofits tend to undervalue,” said Lesa Ukman, president of IEG, which has worked with dozens of corporations and charities to help them determine how much marketing promotions are worth.

IEG surveyed 145 nonprofit officials who manage their charity’s marketing deals with corporations. The survey found that only 23 percent of charities were charging “servicing fees” — over and above the initial fees they charge companies — to help recover administrative costs and other expenses that charities incur by participating, sometimes for several years, in joint marketing promotions.

For charities, overseeing such marketing deals with companies is almost always more time-consuming than seeking outright charitable donations from them, Ms. Ukman and other speakers said.

Nonprofit staff members must review publicity materials, grant permission for repeated uses of a charity’s name and logo, meet with corporate executives to create and carry out promotional events, and handle other tasks.

To cover such costs, Ms. Ukman recommended that charities add 15 to 25 percent to the fee they charge companies in a joint marketing deal. If companies are unwilling to allocate the amount of money charities seek in marketing promotions, she added, nonprofit groups can ask corporations to organize other means of obtaining funds, such as holding an employee-giving campaign for the charity.

Charity officials are aware that they may not be charging companies enough, the survey found. Uncertainty about what to charge businesses was by far the biggest challenge charity officials said they faced, cited by 72 percent of respondents. Other challenges were uncertainty about what benefits companies want from nonprofit groups (45 percent) and a lack of understanding among charity employees about the benefits of participating in marketing deals with companies (44 percent).

While many companies separate their marketing budgets from the grant-making budgets of their philanthropic foundations, a growing number of corporate foundation officers regard the two as linked and are requesting that their companies receive benefits such as credits on the charity’s brochures and educational materials and the right to publicize their charitable support in the company’s marketing efforts. Fifty-three percent of the survey respondents said that a majority of their corporate donors now request such benefits, and 87 percent reported that corporate donors’ interest in marketing benefits had increased markedly in the past one to three years.

Those trends make it wise for charities to create proposals for companies that include both philanthropic and marketing components, said Ms. Ukman. She also recommended that nonprofit organizations assign a high-level staff member responsibility for overseeing both marketing deals and grant-seeking efforts involving corporations. Such staff members, she added, should have titles such as “vice president for strategic alliances,” which indicate that their job duties go beyond winning grants.

A copy of the IEG “Strategic Philanthropy Study” is available on the company’s Web site, at http://www.sponsorship.com.

Charities that need additional staff members to manage marketing relationships with corporations can often get the companies to underwrite the cost, Susan Duchak, director of community relations at Sears, Roebuck and Company, in Hoffman Estates, Ill., told the meeting participants.

As an example, Ms. Duchak said Sears is providing money to help pay for an employee at the National Military Family Association, which assists service members and their families. Out of the $2-million that Sears has given the charity so far, a portion was used to hire a staff member to manage the two-year marketing arrangement, Ms. Duchak said.

Working with the association, Sears has helped send children of people serving in the military to summer camps it supports, and has sponsored research on the needs of military families and the services available to them. Most charities don’t realize that sponsoring research can be very attractive to corporations, Ms. Duchak said. She said Sears learned a lot about the concerns of many of its customers from the research it financed with the military-family association. In addition, she said, paying for the study “demonstrates to this community that we understand their issues and are committed to finding the most effective programs and services.”

Aside from helping a company’s image, fund raisers should keep in mind the other benefits businesses receive from ties to a charity.

For instance, Ms. Duchak said, “corporate sponsorships are a great way for us to reach government and business leaders.” Sears’s relationship with the military-family group, for example, has brought the company into contact with elected officials on two occasions: a Capitol Hill briefing on the military-family study for members of Congress, and a visit by local, state, and federal officials to a North Carolina summer camp it finances.

To determine how to provide companies with access to people they want to reach, Ms. Duchak said, nonprofit groups should examine the company’s advertising to see how it portrays itself. “Then,” she said, “position yourself in such a way that the company can see how you would help them get close to their stakeholders.”

Ms. Duchak and other corporate officials who spoke here said that an essential element in their marketing deals is the icon that instantly conveys a charitable cause to customers as they shop.

“You really need something that conveys your program at a glance,” said David Fisher, director of promotion marketing at Yoplait USA, which raised $2.5-million last year for the Susan G. Komen Breast Cancer Foundation’s Race for the Cure by sponsoring a fund-raising event and a marketing promotion.

As part of the marketing promotion, Yoplait prints a pink ribbon, a well-known symbol for the fight against breast cancer, on the lids of yogurt containers every September and October and gives the foundation 10 cents for every lid customers return. “I’ve been approached by causes that want to add a couple paragraphs to our yogurt container,” said Mr. Fisher, “but customers would never get that.”

Charities can help demonstrate through research that marketing deals with companies generate good will and financial returns for corporations, Ms. Ukman of IEG said. Many companies, she said, would willingly pay additional fees to measure what effects their marketing relations with charities have.

“This is a cost of doing business,” she said. “Show them something they got in return. That’s more than what 90 percent of nonprofits are doing.”

Most charities fail to track even easy-to-monitor aspects of joint marketing promotions, such as news-media coverage, the number of brochures or other promotional materials distributed, or the number of company employees who participate in events related to the marketing deals, Ms. Ukman said. She recommended compiling such facts to give to corporations at the conclusion of a promotion. Such information, she added, can become the basis for a renewed or extended commitment by a company.

Ms. Ukman outlined specific measurements that can be used to quantify the results of marketing deals. Among them:

• Changes in public image. Organizations can measure how much consumers know about a company and its good works before and after a marketing promotion, and whether positive or negative perceptions change after a marketing deal.
• Consumer spending habits. Companies also respond well to research showing that a company’s charitable support increases consumers’ willingness to buy a product, Ms. Ukman said. She cited a survey of 442 people who attended a golf tournament to benefit St. Jude’s Children’s Hospital sponsored by Federal Express. Seventy-five percent said that they would be more likely to use FedEx because of its support of the hospital’s work.
• Cost to acquire a customer. CIBC, a Canadian bank, Ms. Ukman noted, expanded an existing marketing relationship with the Canadian Breast Cancer Foundation when the bank wanted to get customers to try its new service: transferring money electronically. For each customer who made an electronic transfer, the bank offered to give $1.50 to the charity. The bank, which spent a six-figure sum to advertise the promotion, found that it cost less than $20 to recruit each of some 7,200 customers who made a transaction using the new service, far less than the $350 or more per customer it spent on earlier mailings touting the service.
• Employee participation. Organizations can measure employees’ attitudes toward their company’s support of a charitable cause, how much the workers give to it, and whether the company’s charitable support increases job satisfaction and reduces turnover, said Ms. Ukman.