As I mentioned in an earlier post, I’m serving as a graduate student instructor for the UGBA10 class this semester. Last week in section, the students had a lively discussion about the benefits and shortcomings of embedded philanthropy as a marketing tool and as a sustainable source of revenue.
Embedded philanthropy is basically a marketing strategy in which a charitable action is linked to the sale of an unrelated good or service to increase sales volume. In layman’s terms, whenever you buy something, the company does something good for somebody else.
When I asked my students to name some examples of embedded philanthropy, two names immediately came up: (PRODUCT)RED and TOMS Shoes.
Earlier in the week, I was prepping for class with my fellow GSIs and researching examples of embedded philanthropy on the internet. I came across the same two brands.
I was already very familiar with (PRODUCT)RED because companies like The Gap and Apple do a good job putting the brand front and center. Whenever consumers purchase a (PRODUCT)RED item, a portion of the sale is donated to Africa to fight TB and AIDS.
However, I had never heard of TOMS Shoes before looking it up on Google. Apparently, it’s a Santa Monica-based company that was founded in 2006. I guess I don’t buy enough shoes.
TOMS Shoes promises to donate a pair of shoes to someone in need whenever a shopper buys a pair of their overpriced shoes. I guess shoppers are technically buying two pairs of shoes, one for him or herself and another for the poor, barefoot recipient, so it justifies the high cost. What I’m not so sure about is whether TOMS donates the exact same shoe or if they just have a stack of generic donor shoes on hand. I shudder at the thought of the homeless man who will be given a pair of the leopard-pattern flats that my girlfriend bought today.
TOMS sounds like a good idea in theory. I’m interested to learn more about the logistics. But now that I’m aware of the TOMS brand, I see them everywhere!
In class, we discussed some of the reasons why embedded philanthropy works so effectively as a marketing tool. In short, Americans are by and large nice people who enjoy giving what they can to help the less fortunate. Case in point, Americans donated over $300 billion dollars to charities last year. Embedded philanthropy makes the entire donation process more convenient.
Furthermore, embedded philanthropy benefits consumers by making them feel good about themselves. Growing up, my parents always talked about “those poor kids in Africa” as a way to convince me to be frugal (and also to eat every last grain of rice in the bowl). As a consumer, the thought of poor African children haunts me whenever I spend over $100 on anything. Knowing that a portion of the sale goes to help these faceless kids makes me feel a little bit better. Yes, I know it’s purely psychological and selfish for me to think this way. And yes, I know that companies like Ethos Water are criticized for only donating $0.05 for every bottle sold. But hey, the psychic benefits drive sales.
Above all, I think philanthropy makes a particularly appealing fashion statement. When you wear a pair of TOMS Shoes, you proudly display the TOMS logo for all to see. “Gee, this person must really be a good person,” people will whisper as you walk by.
Actually, I don’t think people care about how charitable you are. But we all have big egos and would like to think the world revolves around us. Maybe at the end of the day, embedded philanthropy works because we’re all just so damn smug. Or maybe I’m too cynical?
Well, at the very least, the practice seems like a win-win. Consumers get to feel good about themselves. Companies enjoy a boost in sales and please their shareholders. Somewhere out there, we hope the poor person we’re trying to help ends up with some of the benefit too. (I hope.)