What’s in a Charity’s Name?

Nonprofit groups are measuring how much their ‘brand’ is worth

In two years, Habitat for Humanity International has more than doubled the amount it raises annually from companies that provide sponsorship fees, building supplies, and proceeds from the sale of products, and run marketing promotions for the charity.

The key to expanding such donations to $41-million last year was not hiring more fund raisers to approach companies or designing new sponsorship opportunities. Instead, the critical factor for Habitat has been a single figure that fund raisers present to companies they are soliciting: $1.8-billion.

That’s the value assigned to Habitat for Humanity by Interbrand, a New York consulting agency that analyzes how much corporate brands are worth.

Habitat asked the company to perform a similar evaluation of its “brand,” but to adapt the corporate analysis to fit a charitable organization. The company based its evaluation on the amount that Habitat puts into building houses for the needy, after overhead and other costs are deducted, forecasts of future income, and the loyalty of Habitat’s donors. It also analyzed how the charity’s work could be affected by events such as an economic downturn.

Such brand valuations, as they are called, “place a dollar amount on how much your good name is worth,” says Jeff Parkhurst, managing director of valuation at Vivaldi Partners, another New York company that assesses corporate and charity brands.

Billion-Dollar Estimates

If the estimates are accurate, charity brands are worth quite a lot. United Way of America’s brand has a value of $34.7-billion, according to Interbrand, enough to fall just behind the top four multinational companies on a ranking of corporate brands issued last month by the consulting company and Business Week. If charities were included, United Way would be ranked after Coca-Cola, Microsoft, IBM, and GE and just ahead of Intel and Disney.

The Public Broadcasting Service brand is worth $5.4-billion, enough to place it just ahead of Kodak and KFC.

United Way and PBS are among a handful of nonprofit groups that have conducted such analyses — and several others are in the process of doing so. American Cancer Society has already analyzed its brand, but declined to say how much it was worth, and AARP expects its valuation to be completed in a few weeks. Others — such as the Easter Seals Society, American Red Cross, and the YMCA of the USA — are looking into whether it makes sense for their organizations to have their brands assigned a dollar value.

Dealing With Tough Times

The interest in estimating the worth of a nonprofit brand marks a new phase in the growing sophistication of marketing efforts under way at the nation’s charities. Since the late 1990s, many nonprofit groups have borrowed the techniques of corporate marketers and emphasized their “brand” in an array of ways, such as replacing public-service announcements with paid advertising and trying to create consistent messages that aim to fulfill donors’ wishes and expectations.

The turbulent economy has also prompted many charities to seek ways to demonstrate their value to business leaders.

“We used to get calls from companies that wanted to give us money because we do good work,” says Tony DiSpigno, Habitat’s senior vice president for resource development. “Now they call us and want to be an international partner. In an economic downturn, if you’re just seen as a philanthropy outlet, you will be dropped. But if you offer more in terms of helping them leverage their own brand to earn more and demonstrate corporate social responsibility, you will not be dropped as easily.”

That certainly has worked well for Habitat. As soon as it got the $1.8-billion valuation, the charity doubled the minimum amount it had been charging companies that pay to be affiliated with Habitat through sponsorships and other marketing deals. And corporations didn’t back away from the increase; indeed the charity’s income from such companies has soared, from $16.4-million in fiscal 2002, when the analysis was conducted, to $40.9-million in fiscal 2004, which ended June 30.

The brand figure, fund raisers say, has also opened doors to top executives at companies who have shown new respect for Habitat. “If you are Mercedes Benz, you want to run with other Mercedes,” says Habitat’s Mr. DiSpigno.

Not for Every Group

While brand valuations enable some organizations to attract corporate support, they are not appropriate for all charities. Small groups that solicit local companies probably have little need to undertake a valuation, marketing experts say. Not only are such groups difficult to value, but the figures would probably not carry much weight with small businesses.

Even at big household-name charities, some fund raisers are doubtful that brand evaluations would mean much to companies they approach or would be worth the $100,000 or more they would have to spend on such analyses.

Joe Fay, vice president of marketing and communication at the American Lung Association, says what impresses corporate officials most are market studies of American Lung Association donors, showing that they are more inclined to buy certain products if the manufacturers support the lung association’s work. “I am just not convinced a brand valuation would do us any good,” Mr. Fay says.

Consultants who estimate the value of an organization’s brand admit that the figure they come up with for any organization, whether it be corporate or charitable, is partly subjective, since it is based on assigning dollar values to uncertain factors such as consumer loyalty and future income.

To figure out how much a charity’s brand is worth, consultants look at a charity’s income and forecast its revenue over the next five to seven years. Then they adjust the total by deducting several costs, including overhead and the effects of inflation. The experts also analyze a charity’s name recognition, its stability, geographic reach, and ability to appeal to diverse audiences. In addition, they use research to uncover reasons donors support the charity and whether and how support for the charity is likely to increase over time.

Experts on corporate sponsorships caution that, regardless of how reliable an estimate is, attaching a brand value to a charity’s name can bring only so much influence to bear on attracting corporate sponsors to a cause.

Jim Andrews, of IEG, a Chicago company that tracks sponsorship trends, says fund raisers should not be too concerned about vast differences in the brand valuations because companies consider many other factors in selecting charities to support.

“If I’m on the corporate side, there is a whole host of other things I’m looking at when deciding who to partner with, like who I’m trying to reach and what causes my employees care about,” he says. “A company will factor in brand value, but I do not see it as being the deciding factor.”

Keeping Corporate Donors

But for large charities, using brand estimates to increase corporate support may be less important than other benefits. Some organizations are using the valuations to help retain sponsors who might be tempted to support other causes, persuade local affiliates to rally around efforts to market a charity’s work consistently, and measure their success over time in improving fund-raising and other operations.

Concern about retaining corporate supporters was one big reason why United Way of America spent nearly $100,000 two years ago to hire Interbrand. United Way on-the-job drives are in a precarious position at many companies, some of which are included in the Business Week rankings. Scandals at local United Ways, increased competition from other employee-giving groups, and layoffs by many big corporations have caused fund-raising challenges in many companies that have long run United Way drives.

“We needed an objective valuation that these corporations would understand and respect, so that we could say, ‘This is why you should maintain a relationship with United Way, relative to all other charities,’” says Cynthia Round, United Way’s executive vice president of brand strategy and marketing.

The charity’s brand value has helped executives at companies that run United Way campaigns explain why they do so, says Ms. Round. “When their colleagues say, ‘I don’t understand why we keep running this campaign every year,’” she adds, “this gives them something to say.”

Len Roberts, chairman and chief executive officer of RadioShack, which runs a United Way campaign for its employees, said that he was surprised and impressed by United Way’s $34.7-billion value.

“It did help us realize that the United Way brand is very important and has a high recognition value in our employee-giving campaigns,” he says.

But the desire to retain supporters like Mr. Roberts of RadioShack, who also serves on the United Way of America board, wasn’t the only reason the charity had its brand appraised. The organization is using the brand estimate to persuade United Ways to work more closely and uniformly. Ms. Round makes a point of telling affiliates, who have considerable independence from the umbrella group, that Interbrand said United Ways could raise 20 percent more.

That United Way image, she says, goes beyond just using the same logo and promotional language. She and her colleagues hope the brand valuation will persuade local United Ways to see the potential dollar value of changing their approaches so they will be perceived as problem solvers who raise and distribute money to deal with a community’s most important causes — and steer away from activities that suggest the organization cares simply about raising more money ever year.

The $34.7-billion figure, Ms. Round says, “gets their attention and helps galvanize them around the importance of focusing on the new direction.”

Appealing to Donors

Other charities believe that brand valuations help them better appeal to donors of all types — even if they can’t yet translate such achievements into hard results.

The Public Broadcasting Service is using its $5.4-billion brand valuation to encourage 349 local member stations to use more consistent messages in their programs and station promotions.

The analysis, conducted last year, found that viewers are drawn to PBS partly because of its national scope and role in creating high-quality educational programs. But the analysis also said stations were missing an opportunity to attract donors by not consistently identifying themselves as PBS stations in their programs, logos, taglines, and advertisements.

Viewers were confused about whether many stations were even part of the national organization, something PBS officials suspected but had never objectively measured, says Lesli Rotenberg, senior vice president of brand management and promotion at PBS.

“The brand valuation has motivated stations to add the national PBS brand to their communications,” she says, “and this was our first priority: internal alignment.”

Ms. Rotenberg and other PBS officials say they expect to see a corresponding increase in viewership and fund-raising returns.

Measuring Results

A desire to track how effective “branding” techniques are over time prompted AARP to hire Interbrand to conduct repeated brand valuations for the organization in coming years.

For AARP, the analysis “is another tool for us to see how the money, time, and effort we are pouring into branding is paying off,” says the group’s associate executive director, Christine Donohoo. The group wants to know how well its efforts are working to improve relations with its members, corporate supporters, policy makers, and others.

Ms. Donohoo says other large charities could reap many benefits by undertaking brand evaluations. Ms. Round of United Way agrees: “We should understand the financial impact we command with our brands. It is even more important to nonprofits than to companies.

“We are trading on our good name rather than a product.”