March 31, 2011

Buying Products Tied to Charities Depresses Giving, New Study Finds

Fund raisers have long worried about a possible downside to corporate-charity marketing deals—that people who buy a special brand of yogurt or computer or stuffed animal because a retailer promises to give a small percentage of the purchase price to a good cause will figure they have met their charitable obligation and not give as much in direct donations.

It turns out the worries are warranted, according to new research from the University of Michigan's Ross School of Business.

People who buy so called cause-related products give a lot less in direct contributions, according to Aradhna Krishna, a professor of marketing at the school.

"If two consumers have equal preference for a product, which is offered at the same price to both, but one of them buys this product as a cause-marketing product, her charitable giving will be lower than the other's," Ms. Krishna writes.

In addition, Ms. Krishna writes that cause marketing warps consumers' minds into thinking that they're contributing more than they actually are, since "people may mentally assign their cause-marketing expenditure as their charitable giving."

What's more, "they have no idea what amount goes to the charity, typically," she says. Some marketing campaigns do not report what portion of the proceeds was given to the cause, some have limits on total donations and so keep the rest of the money, and some count the donation as part of profits that often go unreported.

Ms. Krishna warns charities to consider whether they get enough from a corporate deal to make it worth forgoing some charitable donations. "Before causes join up with companies, they should be a bit more careful," Ms. Krishna says.

The study is scheduled to appear in the July issue of the Journal of Consumer Psychology. Ms. Krishna conducted the study among 300 college students.

Here's an example of a cause-marketing campaign: