Monday, January 26, 2015

Double Down on Cause Marketing

“Cause marketing” refers to a business donating part of their proceeds to charity. The aim is to fulfill social responsibility and gain good will. Done properly, cause marketing adds to your profitability. For example, your occasional promise of a charitable contribution of $1 for each item purchased at the regular price has been shown to produce a higher average percentage gain in sales than offering a discount of $1 off the regular item price. Plus you’re helping the charity.
     Another angle on the “plus” here was explored by researchers at Temple University, Hanken School of Economics, and Sichuan University. What’s the effect on retail sales if you give a discount to the purchaser plus contribute part of the discounted sale price to charity? Inspiring their inquiry was the researchers noticing how Macy’s department stores have done this with once-yearly Shop-for-a-Cause promotions.
     Analysis of results from actual purchase decisions by 17,000 consumers showed that a moderate discount in this sort of situation works better than no discount or a deep discount. The moderate discount used for the studies was 30% and the deep discount was 50%. In discussing their results, the researchers say a discount in the range of 10% to 30% would be best for increasing sales.
     Why doesn’t a deep discount boost sales as much as a moderate one? Because the deep discount erases the motivation of feeling charitable. People are buying for the price alone.
     The higher effectiveness of the lower discount is fine for you. It’s easier to turn a profit with a discount of 10%-30% than with one of 50%. After all, in this version of cause marketing, changes in sales volume should be only part of what you look at. Doubling down with both discounts and contributions could cut into sales revenues even if the volume is up.
     Another way to increase the effectiveness is to make your offer of the discount-plus-donation for moderately popular products and/or brands. The percentage increase in sales for items that are already selling well won’t be as great as with less popular items, so don’t make the offer for items that are already quite popular. But because we’re talking about percentage increases, also don’t make the offer for products and/or brands that are not selling well at all. A 20% increase in unit sales of 100 is much less than a 10% increase in unit sales of 500.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Pair Contributions with Purchases 
Get Out of the Way of Individual Donations 
In Cause Marketing, Portray Effectiveness

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