Constructing a Marketing Deal

Home Depot venture could be a sign of the future

Shoppers strolling the vast aisles of Home Depot stores will find among the offerings several products bearing the

National Wildlife Federation’s logo, including half-gallon jugs of Pro’s Choice Wild Bird Mix and bird feeders designed to keep out bird-eating snakes. On Saturdays, the environmental group’s volunteers don orange Home Depot aprons and go to the stores to provide customers with information about the 67-year-old wildlife group and advise them on how to choose indigenous plants, provide a safe haven for raccoons, or plant bushes to attract butterflies.

In addition to earning a portion of the proceeds from the sale of the products, which the wildlife group vets to determine whether they are environmentally friendly, the National Wildlife Federation received a $125,000 grant from Home Depot’s foundation this year. It also receives an annual fee for its part in other promotions the company is using to persuade customers and employees that it is a business with a strong commitment to environmental protection. And Home Depot is advertising the nonprofit group’s products in newspaper advertisements and catalogs.

The arrangement — which started last summer and pairs the second-largest retailer in the world with a major environmental group known for its campaigns to help to save endangered species, as well as its popular Ranger Rick children’s magazine — provides a good way for both organizations to advance their missions and expand their reach, say officials of Home Depot and the National Wildlife Federation. As the chain’s advertising supplements state: “Homeowners will discover that home improvement is habitat improvement, too.”

Although both Home Depot and the National Wildlife Federation pursued the deal enthusiastically and plan to continue it, they say it has been hard to measure concrete results, and some aspects of the arrangement have cost the charity more than it has received in return. It has also opened the federation up to criticism that it is too cozy with a commercial enterprise.

A New Arrangement

Fund raisers and nonprofit observers are keeping a close eye on the venture between Home Depot and the National Wildlife Federation because it represents the latest wrinkle in charity-corporate partnerships. Instead of involving a single licensing deal or marketing promotion, many of the deals being struck today have multiple facets that include advertising and other marketing efforts, charitable donations, and roles for both company and nonprofit employees. Such arrangements, often referred to as “cause branding,” can benefit both sides, supporters say, by strengthening the image of each and providing an edge over their competitors, whether it be to sell more products or win over more supporters to a charitable mission.

Howard Byck, director of creative enterprises and marketing for the anti-hunger group Share Our Strength, says establishing multiple ties to a company, including to the marketing department, to employees, and to the company’s foundation, helps “guarantee a steady revenue stream” for a charity.

Otherwise, he says, working with just one corporate department, “you’ve got all your eggs in one basket.” Share Our Strength, for example, has a deal with Tyson Foods that includes the company’s sponsorship of a nutrition-education program run by the charity; donations of the company’s products to food banks affiliated with Share Our Strength; and a fund-raising bake sale held by Tyson employees to benefit Share Our Strength. Tyson promotes its partnership with Share Our Strength with stickers on some packages of chicken it sells.

Ethical Issues

But critics of these kinds of arrangements worry that they only further muddy the distinctions between nonprofit and for-profit organizations. Also, because companies and charities often refuse to disclose many details of such arrangements, citing concerns about revealing too much to their competitors, some observers say the public has no way to evaluate whether the charities are truly getting enough of value to merit the risks they take on by lending their name to business ventures. Home Depot and the National Wildlife Federation, for example, won’t say how much their deal is expected to produce for the charity.

Environmental charities face particularly difficult ethical issues in marketing deals, since many types of businesses undertake multiple activities that prompt criticism from environmental activists.

Gary Ruskin, executive director of Commercial Alert, a nonprofit group that opposes corporate advertising in schools, churches, and other civic institutions, says charities that participate in sophisticated marketing partnerships with companies open themselves up to charges of “commercialization and corruption.” He adds, “Is it the proper role of an environmental organization to say that you ought to buy more stuff at Home Depot?”

Jaime Berman Matyas, vice president of Internet and cause marketing at the charity, says that National Wildlife program officials review each agreement, and disputes are thoroughly aired. The group has turned down some offers. “We really risk our credibility with members and the public if we do a deal that shouldn’t be done,” she says.

Despite the potential for controversy, interest in marketing deals has never been greater. Companies will spend $921-million this year on marketing deals with nonprofit groups, up nearly $100-million from 2002, according to IEG, a Chicago consulting and research company that tracks sponsorships and promotions. For example, Lowe’s, another home-improvement chain, is now unveiling a deal with the National Geographic Society similar to the one between Home Depot and National Wildlife. The chain will stock more than 30 birding products, including houses and feeders bearing the National Geographic logo, on 16 feet of shelf space in each store.

A New Market

In the charity world, National Wildlife is considered one of the more sophisticated groups in cause marketing, having been involved in such arrangements for the past decade. The nonprofit group’s marketing staff consists of eight people who oversee more than 40 corporate-marketing deals that bring in some $2-million annually, about 2 percent of the organization’s total revenues.

Home Depot first approached the National Wildlife Federation and several other national environmental groups two years ago, asking them to submit proposals for a marketing arrangement. The company wanted a way to show customers that it cares about the environment. The company’s own research showed that the environment was a popular cause with the company’s customers and employees.

National Wildlife Federation officials say they immediately saw the potential benefits of working with a corporation that has 1,500 stores and 300,000 employees.

“For us, it opens up this whole market of people who could become members and supporters,” says Linda Murphy, the nonprofit group’s director of cause marketing. “It’s a way to reach out to a new audience with our message.” The organization also saw an opportunity to influence the behavior of the huge chain by helping it to adopt more environmentally friendly products and practices.

But officials were also cautious. For years, environmental groups have criticized Home Depot, the biggest purchaser of lumber in the world, for contributing to urban sprawl and for selling wood products that had been harvested from old-growth forests.

National Wildlife officials say they ultimately decided to go ahead with their proposal because they felt the company had made good progress toward improving its environmental record, including its announcement in 1999 that it would stop selling wood cut from trees in environmentally sensitive forests.

Two-Way Deal

The federation offered an ambitious plan to Home Depot that included a wide range of products with the charity’s logo, such as decorative statues, a rain gauge, and a thermometer. It envisioned large sections within each store in which the products could be displayed under National Wildlife Federation banners.

Home Depot officials say they received proposals from three charities, although they declined to name the other two. The retailer decided to offer the National Wildlife Federation a two-year contract to promote “backyard habitat” products. Home Depot agreed to pay National Wildlife a portion of the proceeds on sales of products with its name, specifying both a minimum and a maximum dollar figure, though neither side will say how much. In addition, the company’s community-service department is paying the nonprofit group an annual fee for its other efforts.

“Even if we don’t sell anything, we’re not losing money on this,” Ms. Murphy says.

Among the deal’s provisions:

• The federation will license its name for at least five products and vet the products to make sure they meet its standards.
• National Wildlife employees from five regional offices will lead sessions at the stores as part of Home Depot’s how-to clinics, which usually cover topics like building a deck or tiling a bathroom, on subjects such as attracting butterflies to home gardens and how to care for wildlife in the winter.
• Home Depot will hold a kids’ workshop each April dedicated to a National Wildlife topic. (This year, children built a squirrel feeder using 115,000 squirrel-feeder kits bearing the National Wildlife Federation’s name.)
• On weekends, federation volunteers will station themselves in the garden section of Home Depot stores around the country to teach customers the principles of creating a wildlife habitat.
• Home Depot will promote the National Wildlife Federation’s mission and products in its advertisements.
• The company will buy advertisements in the nonprofit group’s nature magazine each quarter.
• The federation will use its publications to promote the habitat clinics at Home Depot stores to donors and others on its mailing list of four million people.

It is not clear how financially successful the venture has been. National Wildlife and Home Depot officials will only say that sales of its products are in line with projections. Company officials say they are watching to see whether the collaboration with National Wildlife is translating into better sales and more customers.

So far they say it has been hard to measure a direct connection. But they do say the charity’s employees have helped make store employees aware of the wildlife group’s presence in the store, and its mission there, which will not only enable them to sell the products and promote the clinics more effectively, but also could help it keep valued employees who want to work for a company they perceive to be a good community citizen.

However, both company and charity officials say the venture is about far more than money. National Wildlife officials say the charity’s volunteers meet dozens of shoppers each Saturday at Home Depot stores who express interest in the group or its programs.

One reason the company says it favored the federation was because it liked its plan to help educate customers about environmental practices. For example, included in the nonprofit group’s proposal was a promotion to encourage Home Depot customers to let National Wildlife representatives teach them how to provide the appropriate food, water, and shelter for specific kinds of wildlife in their backyards.

“They fit in with our brand in terms of the educational element,” says John D. Merrick, who was director of brand development for Home Depot when the National Wildlife deal was struck. “Home Depot has always been associated with providing advice and know-how. National Wildlife is similarly positioned.”

Working Out the Bumps

That similarity, however, is not enough to ensure that the deal has had no bumpy moments. For example, National Wildlife’s conservation experts rejected the initial version of a plastic form homeowners could use to create a pond in their backyards by filling it with water and stocking it with fish or aquatic plants. The problem: The steep sides meant that small animals could fall into it too easily and drown. Rather than reject the product outright, National Wildlife’s cause-marketing department asked Home Depot’s supplier to redesign it. The revised version features a gradual, ridged slope on one side.

More of a concern to the National Wildlife Federation, Ms. Murphy says, is that too few products with the charity’s name are available in stores and they are not displayed distinctively enough to make consumers aware of their presence. “We need to scream from the rafters that National Wildlife is in the store,” she says.

Weekend Workshops

The federation also says the weekend workshops have not been attracting very many participants. “We’re giving clinics to two or three people, and we’re paying an educator to do all this preparation, so it’s not worthwhile,” Ms. Murphy says.

She says the clinics may be too specialized and time-consuming for shoppers, noting that many people walk by the clinics and express interest, but don’t want to sit down for a whole hour. “The customers need something more basic,” she says.

Ms. Murphy says she is now trying to renegotiate the terms of the contract with Home Depot to replace the workshops, which are taught by paid staff, with well-trained volunteers who could provide basic tips on protecting wildlife and habitat. She says the terms of the contract allow either side to drop the clinics if dissatisfied.

Including such details in a marketing contract at the beginning can be critical, experts say, since a company’s interests may differ from a charity’s. For example, says Curt Weeden, president of the Contributions Academy, in Mount Pleasant, S.C., a training organization for corporate-giving officials, in the case of the Home Depot workshops, the company might not care whether anybody comes or not. From the company’s standpoint, he says, simply promoting that the clinics are available may be enough to “create the impression among consumers that you’re really a terrific store.”

Leadership Changes

Another stumbling block for the National Wildlife Federation has been that Mr. Merrick, the Home Depot employee who took the lead in arranging the partnership, left the company in May. Hugh Miskel, director of event marketing and community relations, has taken over Mr. Merrick’s responsibilities, but charity officials say it has sometimes been hard to reach Mr. Miskel during the transition.

Even so, Mr. Miskel says the company is open to finding ways to expand the charity’s product line and give it more prominence in Home Depot stores. “We’re taking a really hard look at our entire department to determine where the brand fits,” he says. “There’s a feeling that the brand can mean more than just food, water, and shelter.”

Despite the additional work created by an ambitious marketing venture, Ms. Murphy says it is worthwhile. “I would feel we weren’t doing as much as we could if we just had product in the store,” she says. “As long as we’re reaching people, we’re helping our mission.”