If you want to get a whiff of the seamier edge of corporate philanthropy, check out the new charitable marketing scheme by 5-Hour Energy®. The company has undertaken an advertising blitz to explain that when people buy special red, white, and blue bottles of their new cherry-flavored energy drink, a portion of the sales will go to a nonprofit called the Special Operations Warrior Foundation.
I confess that I’m not a big fan of 5-Hour Energy. Like me, you’ve probably seen the product near the cash registers at gas stations: little not-quite-two-ounce bottles of foul-tasting caffeinated syrup that, for $2.99 apiece, give you the oomph you need to get through an afternoon at the office or a long nighttime drive to Altoona. I’m not a caffeine guy, but when I partake, I go for coffee. It tastes better than 5-hour Energy, contains vastly fewer chemicals, and doesn’t come in plastic bottles that end up on the side of the road.
But I digress.
What 5-Hour Energy is doing is a classic example of the trend that Mara Einstein describes in her book, Compassion, Inc.: Cause-related marketing. You see, in the old days corporations would rely on philanthropy committees or departments to evaluate charitable opportunities, and they would then cut outright checks to nonprofits. Some corporations still do that, of course, but more and more the charitable decisions are overseen by corporate marketing departments, and increasingly that giving is tied directly to the sale of a product.
The most well-known example of charitable marketing tie-ins is the breast cancer pink ribbon trademarked by Susan G. Komen For the Cure. There are fully 20 pages of Komen-related items on Amazon, from pink Swiss Army knives to be-ribboned New Balance running shoes. As Einstein explains, this form of marketing works: customers prefer buying the item with a charitable tie-in, rather than the competitor’s brand without the pink ribbon or other cause-related branding. Buying detergent or lipstick or socks somehow becomes a charitable act, for the consumer and the manufacturer, both.
But here’s the core question: How much money from these purchases actually goes to charity? Usually, corporations don’t specify the amount or the percentage. I have to give 5-Hour Energy credit, because they come right out and say how much they’re donating to the Special Operations Warrior Foundation from each sale of their new cherry-flavored bottles: a nickel.
If you’re doing the math, those five cents amount to 1.6% of the retail price.
That’s hardly a gusher of charitable largesse for a company that Forbes Magazine estimates as having $1 billion in annual sales, and which is owned by a man who ranks 311th on the Forbes 400. Living Essentials, the parent company of 5-Hour Energy, has pledged a minimum gift of $75,000 for this project. At a nickel apiece, assuming sales go well, $75,000 will be the charitable spin-off from the sale of 1.5 million bottles at a total retail price of nearly $4.5 million.
I admit that $75,000 is not a small amount of money, but it’s hardly transformational for an organization like the Special Operations Warrior Foundation, whose annual budget is about $4.7 million. More to the point, this initiative is clearly driven by the opportunity to market a new product and to align it in the public mind with a patriotic cause (scholarships for the orphans of fallen Special Operations personnel). Living Essentials has a chance to get a new flavor of 5-Hour Energy into the hands and bloodstreams of consumers, and their wager is that these customers will buy their product again and again, long after the nickel-to-charity promotion has run its course. And they’re probably right.
I wrote to the folks at Living Essentials and asked them to reveal their advertising budget for this promotion, but after a first chirpy exchange, their public relations person failed to get back to me and answer the question. Given the regularity with which I’ve seen the television ads promoting this endeavor, I can only guess at the lopsided ratio of advertising dollars to philanthropic impact. And because Living Essentials is a privately-held company with a secretive reputation, we’ll never know.
I’m picking on 5-Hour Energy, I confess, because I find their product so unappealing and their motives so transparently self-serving. But again, 5-Hour Energy is hardly alone in using charity for shameless self-promotion and brand positioning. Meanwhile, according to Giving USA, corporate giving overall is dropping: charitable gifts in 2013 were only 0.8% of pre-tax corporate profits, or half of the level thirty years before. And in a year when charitable giving in general rose significantly, corporate giving dropped nearly 2% from 2012. Corporations are giving less, and it is increasingly rare for them to give without a product tie-in.
I imagine some of you will think I’m piling on. After all, there is charitable benefit from all of this. And ours is a capitalistic society, so the corporate donors are right to expect some sort of return for their gift. This, many of you may say, is a classic “win-win” situation.
I understand all of that. But when the corporate marketers’ win is so much bigger than the benefit to the nonprofits they are officially supporting, and when vastly more is spent in promoting the effort than in actually funding the cause, that bugs me. And if it bugs you as well, try to resist feeding the beast. Keep in mind that buying an item branded with a charitable logo does precious little to help the nonprofit. If you care about that nonprofit, don’t feel that you have to buy a specially-marked pair of shoes or a box of detergent or, especially, a small plastic bottle of caffeinated syrup.
No: there’s a simpler way to show your affection and caring. Send the charity a check.
Copyright Alan Cantor 2014. All rights reserved.