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Give and Receive

When done right, corporate charitable giving can boost company morale and exposure--as well as your bottom line.
November 1, 2005
URL: http://www.entrepreneur.com/article/80490

To many entrepreneurs focused on keeping costs down and milking every cash-flow dollar, corporate giving programs sound like a luxury they just can't afford. But in today's competitive environment, corporate charitable programs and partnerships may be the cheapest strategic competitive edge you can get--not to mention the satisfaction they can bring.

According to the "2004 Cone Corporate Citizenship Study" conducted by Cone Inc., a Boston-based strategic marketing firm, 8 in 10 Americans say corporate support of causes helps earn their loyalty to a business; that represents a 21 percent increase since 1997. The study further found that 90 percent of respondents would consider switching to another company's products or services because of illegal or unethical corporate behavior. And younger Americans, ages 18 to 25, were significantly more likely to consider a company's corporate citizenship when deciding whether to buy from, or work for, that company.

While most of the talk surrounding brand loyalty tends to focus on bigger companies, the underlying trend is equally significant, if not more so, for small businesses, says Mary Fehlig, president of the Fehlig Group, a Washington, DC, consulting firm that helps companies implement socially responsible business practices. Says Felig, "If 8 out of 10 people say they'll switch vendors based on a company's reputation, that's as true for the local corner store as it is for Coke."

The Goodwill Advantage
When executed strategically, doing the right thing can directly boost a company's bottom line. Eight years ago, Steve Cohen, third-generation owner of Jason's Music Center in Pasadena, Maryland, saw that local public schools were short on funding for their music programs and could ill afford the new instruments their students needed. Cohen struck up a deal to lend the schools new pianos, free of charge, for one year, and then replace them at the end of that time. In return, the schools hold a well-advertised liquidation sale, where the used pianos are sold at a discount. Jason's also receives free advertising in all the schools' music programs and gets the added benefit of the press the music program garners.

"In that first year, we did about $150,000 worth of business that was directly attributable to the program," says Cohen. His program is now operating in six different counties, and Cohen estimates the company is pulling in an additional $1 million annually thanks to the program. "Plus, we've cut our advertising budget in half," he adds, noting that new customers routinely claim they've chosen to buy from Jason's because of Cohen's support of the public schools.

Business philanthropy can also translate into employee satisfaction and better recruitment and retention, says Chris Patterson, president and COO of Austin Grill, a seven-restaurant chain in the Washington, DC, area. Austin Grill has a program called First Mondays, which allows the restaurant's general manager, with help from employees, to select a local charity to which they donate one-third of sales from the first Monday of each month. In addition to boosting employee morale and giving the company a tax break on the portion it donates, says Patterson, "It gives credibility to the brand. We get a lot of repeat business just because we're out there trying to be good corporate citizens."

The key to the goodwill advantage, says Fehlig, is finding strategic ways to donate time, money or product so that the program is enhancing the business rather than depleting it. If, for example, you're trying to launch a new product or service, donating it to a local charity can give you publicity and the opportunity to do a bit of market testing, she says. "You really need to think of it as an investment in the business," says Fehlig.

That investment can pay off for smaller companies, which have a hard time competing on price. Stephen Jordan, executive director of the U.S. Chamber of Commerce's Center for Corporate Citizenship, notes that companies short on cash or product can achieve similar gains through volunteerism. And it's a natural fit. "The community is their customers," he says, "Being good neighbors is part of their [survival]."

C.J. Prince is executive editor of CEO Magazine.