Zen and the art of cause-related marketing.
From frequent flier programs to affinity credit cards, loyalty programs are now a staple of business. It appears reassuringly simple: attract customers through their private interests and passions and build a relationship to bring them into your orbit.
But reaching out to customers to build loyalty and entice them to return amid the noise and clutter of information overload is not so straightforward. Hence marketers have attempted to affiliate themselves with professional sports, the arts, social causes, and education. American Express, a pioneer in the field with its affinity programs, launched many imitators. The phenomenon will continue to grow, according to Robert Shulman, founder of Copernicus, a Westport, CT-based marketing strategy group. "It's the tie-goes-to-the-dolphin effect," says Shulman. Faced with a choice of identical products, such as the array of brands of tuna in a supermarket, the one that advertises itself as dolphin-safe edges out its rivals.
At a time when many nonprofit organizations are themselves strapped for cash, a link-up with a corporate sponsor looks attractive. Michael Allen, CEO of the Allen Company, a strategy group, sees these marketing alliances in brand-building proliferating. "Companies want to be associated with idea generation," he says. "It separates them from the pack, who may by comparison appear to be only interested in profit."
In the following roundtable held in cooperation with BMW and New York's Solomon R. Guggenheim Museum, CE took the discussion to where the rubber meets the road - or at least the rotunda. BMW has been a lead sponsor of a Guggenheim exhibition, "The Art of the Motorcycle," in which the Manhattan museum showcased the motorcycle as both a cultural and design phenomenon of 20th century life. The exhibit, which broke all attendance records at the Guggenheim, was judged a success by both BMW's North American CEO Henner Heitmann and museum President Tom Krens, who shrugged off The New York Times criticism, which sniffed at the museum's reaching for the "lowest common denominator."
Krens claimed that while the German auto maker's support was invaluable, it did not influence the content of the show. Of the 96 vehicles built from 1868 to the present on display, "six were manufactured by BMW, but nine are Hondas," he said. Heitmann, who sometimes refers to himself as a "car salesman," was quick to point out that BMW saw the tie-in as a chance to build the brand, not to sell product as such. "It's a question of balance and confidence," he said.
But not all cause-related arrangements are said to be balanced. Coca-Cola's support of some school districts that receive snappy athletic uniforms in exchange for exclusive "pouring rights" has been criticized for being anti-competitive. Sunbeam's American Medical Association (AMA) endorsement for its home health care products backfired when AMA physician members condemned the endorsement as unethical. Sunbeam CEO Al Dunlap responded with a $20 million lawsuit for breach of contract. Ultimately, the AMA settled for $9.9 million.
Last summer, the National Parent Teacher Association (PTA) received an undisclosed fee for signing a deal with Office Depot in which the retail chain promotes itself as a "proud sponsor" of the PTA in newspaper and TV ads that feature the PTA name and logo. The promotion led to complaints about excessive commercialism from some of the PTA's 6.5 million members, as well as media attention. The PTA countered that the program does not advertise to students, nor market in the schools.
According to the Washington-based Capital Research Center (CRC), which tracks corporate ties with nonprofits, many firms support groups that paradoxically work against their sponsors' interests. Each year, CRC records Exxon's support of the Environmental Law Institute, the same organization that did the legal groundwork for holding Exxon criminally responsible for the Valdez oil spill. Atlantic Richfield and Chevron support the National Audubon Society, which strongly opposes legislation that would open the Arctic National Wildlife Refuge to oil exploration. "Increasingly it appears that U.S. corporations are funding nonprofit organizations that may be working against their best interests - and against the free enterprise system," observes Robert Malott, former CEO of FMC Corp. Clearly the balance and confidence to which Heitmann refers is a standard not all CEOs have attempted to meet.
Despite such pitfalls, United Way president Betty Beene says corporate sponsorship and cause-related marketing have been successful for a wide variety of organizations, including the Statue of Liberty campaign, World Wildlife Fund, and Share Our Strength anti-hunger organization. "The days of writing a check and receiving a handshake in return are over," says James Gregory, CEO of Westport, CT-based Corporate Branding, who points to Avon's link-up with breast cancer research as an outstanding example of a sound long-term commitment. "Companies should be inventive enough to find worthwhile synergies provided they don't overlook the fact that the marketing in cause-related marketing must make sense."
- J.P. Donlon
MARKETING WITH A CAUSE
Henrich Heitmann (BMW): When organizations make a telling case for why their particular cause is so important that you have to support them, you feel bad when you say no. Yet, in those cases where you say yes, you are sometimes attacked by the media or others for being a greedy opportunist.
So how do we grapple with such mixed feelings - on the one hand being involved with nonprofit organizations for a good cause, and on the other hand, being reported as trying to use an opportunity to promote our own companies? When you look at a simple situation where you gave money to a beggar, you simply felt good about that.
But when it's not your money, it's the money of your shareholders, you feel almost guilty when you spend that money not for commercial purposes, but for social purposes. How we can address this problem can be summarized in two words: balance and confidence. By balance I mean maintaining a balance between sensitivity and good taste, on the one hand, and the needs of the corporation and the needs of the shareholders on the other hand.
When we were approached by the Guggenheim Museum about whether we wanted to support [the motorcycle exhibit], we thought it was a great idea. The Guggenheim itself is an internationally recognized institution, which fits BMW's image. We could have put BMW signs all over. We could have asked the Guggenheim Museum to put not six BMWs into that museum, but let's say 20 out of the 96. We left that up to the museum. In the exhibit, there are six BMW bikes and a very moderate sign, "This exhibition is made possible by BMW," that strikes a certain balance between the museum's needs and BMW's needs - a kind of equilibrium.
The other word is confidence. We knew that both the Guggenheim and BMW would receive criticism, the museum for allowing BMW to be part of this exhibition and BMW for spending a lot of money on the event. But I felt that the relationship between the Guggenheim and BMW and the event the motorbikes - would create a certain confidence on our side that we could explain to everybody why we did it.
By combining those two - trying to both strike a balance and have confidence in what you are doing, you can combine your commercial activities with nonprofit activities of other organizations.
J.P. Donlon (CE): You imply that what you're interested in is not to move so many units of motorcycle or car, or whatever it may be, but to enhance the brand, the corporate brand or image.
Heitmann: It has nothing to do with sales - and very little to do with product. I think you enhance the brand. For us, previously a German manufacturer and now also an American manufacturer, it sends a message that we are part of the American society - a good corporate citizen. So it's brand enhancement. It's image building. And sales are far, far down the road.
Albert Bersticker (Ferro): I couldn't agree more. In the '70s, we were one of the sponsors of the Cleveland Orchestra, which traveled the world. It was great to support a wonderful organization, but from an altruistic point of view, it was also great for us. We invited all our customers to performances in Sao Paulo and Buenos Aires. And then we sent them a record afterwards, and it was not only great PR, but great customer relations.
I don't think we sold one more codeine or specialty chemical as a result - or if we did, I can't measure it. But when we sent the follow-up record, I got letters back. So I can't tell you whether we sold more product as a result, but I think we did.
Donlon: Is this something that a company can measure, or do you have to simply know it intuitively?
Heitmann: You can't measure it. Whatever measurement you try is a little bit artificial. You decide on the right thing to do, you do it, and that's it. And don't try artificially to prove to your internal auditors that it serves a good commercial purpose.
Arnie Pollard (CE): Can you give us an example from recent history, where a company and a nonprofit cause got together, and struck that right balance, and created that right confidence, and really mutually enhanced one another?
Heitmann: We support the Susan G. Komen Breast Cancer Foundation with a program that we call "The Ultimate Drive." We offer BMW test drives in more than 200 locations in America, and we donate $1 for each mile our cars are test driven. It would have been much easier for us to pay $1 million to the Susan G. Komen Foundation, but by doing it this way we create events in these 200 places - joint activities that involve our people and their people. At the end of the day, that enhances our image in the eyes of the public.
Again, we struck a balance between a good charitable cause and our commercial interest in promoting our business and our image. And again, I'm not going to ask how many more cars we sold.
Betty Stanley Beene (United Way of America): There can be short-term partnerships that drive sales in the organization, and benefit an organization financially. But more and more nonprofits are looking for long-term strategic partnerships that marry two brands.
We want to relate to organizations whose brands are complementary to ours. The people before me had the good judgment to decide that the NFL would be a good match. We're not viewed as much fun. They're viewed as fun. And there are obviously things we bring to that partnership that they don't.
So a lot of it is intuitive, and it's the relationships at the top of the organization, both at the nonprofit and at the company. Our research tells us that what drives that decision more than anything else is confidence in the management of that enterprise on both sides of the equation. You're putting the name of your enterprise at risk, and you'd better be certain that the company that you're connecting with has the same set of values.
When we engage in a national partnership, we try to marry the interests of both organizations. With our Delta Airlines and United Way Sky Wish Program, it was in Delta's interest to look at what they might do with frequent flyer miles. So they had them donated back to the company and United Way uses those miles to transport patients with life threatening illnesses to medical treatment.
John Guffey (Coltec): I'm a great believer in United Way, but to me "NFL The United Way" is a fake program, because not all of the football players who make pledges pay. We started this program, we'll finish this program, but I would point out that it's corporate America and not the football players that contribute most.
We're here as businessmen tonight. We're in a marketing game and you're in a marketing game. And you've got to be very careful with that game. I think we're on a cliff right now with the political situation. In the old days we used to take care of our own and that's coming back again. And you don't do it through the NFL.
Beene: For us the real value of the NFL is that they provide something we could never afford to purchase, which is $50 million to $60 million worth of advertising every year to get our story out. Part of that depends on our effectiveness in getting that story out. In fact, I just had a conversation with Spike Lee last week about the fact that it needs a new image.
Guffey: For years corporate America has been supporting United Way. It's an insult to me that you bring in the NFL and Spike Lee - what the hell has he done? Spike Lee will disappear tomorrow, and we'll be here forever. We're debating what's going to support nonprofits. It won't be Spike Lee, and it won't be the latest quarterbacks, believe me.
Beene: I believe that the important thing is to allow people to act on their philanthropic interests. The ability to democratize philanthropy is a great strength. Every year there are 28,000 new nonprofits born in the U.S. Today, there are 700,000 nonprofits in this country. So there are more and more nonprofits out there seeking these kinds of relationships with corporate America, and that calls on leaders of corporations to be more selective about partnerships.
There was a time when we used to say that corporate contributions came from money that was kept in a cigar drawer of the CEO. That's not the case anymore. Today, you're making sophisticated decisions about risking the thing you value the most - the brand of your company. So, due diligence is obviously called for.
Bersticker: That's the role that United Way plays. There's no way we can determine which of these so-called nonprofit organizations should merit our attention, so we depend on United Way to tell us that that money is going to a worthwhile cause.
Heitmann: Nobody else can help you make those choices, you have to do it yourself. We don't need any agency to tell us what we should and shouldn't do. That is a very personal decision of management.
Beene: With this proliferation, our friends on Wall Street tell us that we have to be able to do two things. We have to be able to honor the stock picker, the person who wants to direct gifts to a single cause, and through that screening process locally we really have to provide the mutual fund. There's a growing tendency to be overwhelmed by the amount of choices that face us.
John Vandewalle (Teva Marion Partners): We get together with a philanthropic organization we want to work with and ask them to show us their goals, mission, and values. We try to find a common ground and then we work out a plan to create a symbiotic relationship, because that's really what it is in the long term. We get together on a regular basis, review the plan, and say, "How are we measuring ourselves against each other?"
We don't look at it as being about money. We put more emphasis on people getting involved with the management of the philanthropic society, because we believe our people can deliver much more than the dollar can deliver.
Donlon: So where's the marketing in this?
Vandewalle: That all comes through in your value statements, and in theirs. It comes through when you create programs where you're there as a company and your values come through in your corporate name and your corporate image.
Donlon: Does this nonprofit have the same audience you have?
Vandewalle: They might or they might not. They may have the same audience if it's the community that your firm is established in. But the values have to be shared.
Carol Evans (CE): When I was working on finding sponsors for arts, the impetus often came from the CEO's heart - what he thought was an important cause or something that had affected his family or his community. But Oldsmobile came to us just looking for customer relations programs. Whether we had been selling the WNBA or Lincoln Center at the time wouldn't have mattered.
We created a program at Carnegie Hall for them, where if you had bought an Oldsmobile that year, you would get two tickets worth $1,000 each to an opening night event. It had nothing to do with the CEO or with the passion of the corporation, it was strictly marketing. And it was a revelation to the people at Carnegie Hall about how they might commercially sell - sell, rather than promote - their product.
John Whitmore (Bessemer Trust): My brother-in-law's company provided the skin for the Bilbao Museum. And he claims that his firm lost $1 million doing that.
Heitmann: Wow, that's intelligent marketing. [Laughter]
Whitmore: Their product - titanium - is used in aircraft and other places, but it's not used in construction. And he thinks that getting world-class attention in a museum as the product that covers the museum, should result in every architect in the world thinking about whether to use this product in architectural things.
There's an example of a firm making a product available that is quite successful in making this a unique building and at the same time the building comes to the attention of almost any architect in the world.
Tom Krens (Solomon R. Guggenheim Museum): But the problem is how do you identify in advance where the opportunities and the value are located? For example, it's customary for the museum to take full responsibility for the cost and for organizing the event. But with the recent retrospective of Rauschenberg's work, my guess is that that project will net Rauschenberg an additional $2 million a year in sales.
I was given an award last week by the American Motorcycle Association as the person who has done the most in 1998 to advance the cause of motorcycles. People came to the podium and talked about the fact that many people perceived this motorcycle exhibition as a breakthrough in the public's acceptance of motorcycles. With the tremendous publicity this exhibition has gotten, from my standpoint, I think that BMW was the lucky beneficiary. [Laughter]
My guess is that the reverberations of this project will be felt for years to come in the motorcycle industry. And if we put this on the road, which we're now doing, it will multiply. Yet, it was not evident to anybody that it would have this kind of impact. BMW wanted to do this, but they also didn't know it would be this good. For example, putting the chrome [walling] in was probably a $400,000 or $500,000 decision. It was hard to convince the marketing apparatus that we should, in fact, do this.
And the same thing with Bilbao. I could tell people, "This is going to be the greatest building of the 20th century, so you ought to give it to us not at a favorable rate, but for free." But does that ever really happen? Because there's always a skepticism about the evaluation of the process. From my perspective, the only thing that will minimize that inherent skepticism is a track record. You put three or four of these projects together, then you get the attention of the marketing people. I would argue that culture is an interesting alternative, because the traditional ways of using marketing events, such as sports events, are almost fully explored entities. This is unique. What happens here every week is wild. We have never had an audience like this. We've never had publicity like this.
Heitmann: You should be grateful to the motorcycle industry that they put their products in your museum. Suddenly you get quite different people into your museum - people who never would have come to the museum before. That's exactly the balance and combination of two interests. And it's not that one should be grateful to the other, it's an excellent balance and combination.
Whitmore: I work for a family-owned business, and some of the family members are among the biggest charitable contributors, while others are not very charitably inclined. So their preference is to have the money paid to them in dividends and allow them to decide how to give it away.
I think most businesses should make their charitable contributions out of their advertising budgets. Because if there's no advertising value added, then why shouldn't you pay that money to the shareholders and let them decide which charity they want to give it to, or whether they want to spend it themselves?
Klaus Dorfi (Atlantic Mutual): That's a difficult question. As you suggested, we're really fiduciaries for the capital of our owners. We think carefully about how we distribute that capital. We obviously make contributions in support of customer relations. But the most successful ventures we've engaged in have been those where we just gave for the sake of giving.
For example, the president of the company loved jazz, and he said, "I'd like to run this jazz festival." I said, "Hey, I grew up in New Orleans. I love jazz, too. Let's do it!" So we did it, and the benefits derived from something that we approached out of a personal love were much greater.
Krens: How do you measure the benefits?
Dorfi: They're anecdotal - letters, acknowledgement, and recognition.
Krens: Is that a personal satisfaction or a corporate benefit?
Dorfi: Both. Whenever you get tremendous recognition within a community for having sponsored an event, you can sell your product more readily in that community.
Krens: That analysis seems a little soft.
Dorfi: I suggest there is no hard measurement for what we're talking about here.
Beene: There may be soft measurements that matter. When you ask your employees how they feel about you as a firm, you may find that they feel good just because of that jazz festival. A lot of this has to do with creating an environment - particularly today when it's tough to recruit and retain top people - where people are proud to be affiliated with your company. But no one has a crystal ball; you don't know going into it if it will work. So you'd better be doing it for the right reasons.
Donlon: What about Philip Morris? They spent tens of millions supporting museum exhibits. Now - after all of this brand and image building, and good will, community development - when their product became a pariah, where were their friends? I haven't heard anybody from the art community come and speak a kind word for Philip Morris. In the final analysis they got no backing.
Guffey: Philip Morris was right in supporting the arts, and they were sincere. The media was wrong.
Heitmann: Where is the balance? How can Philip Morris sponsor an event where you cannot smoke? That's a balance that is missing. You and I may disagree on certain issues, but there has to be a balance and a common interest before we do something together.
Guffey: We used to have the worst safety record in America. And we started a program in our plants all over America that we would give $10,000 for one year of no accidents and $30,000 for two years with no accidents, and so forth. And we said that the employees of our plants could choose where we made those contributions, so we stand there and give out envelopes to organizations - from the local fire department to somebody taking care of dogs. That's America.
Donlon: So the ultimate is to push it down to the employee level?
Heitmann: Absolutely not. If somebody personally wants to support something, he should do that with his own money. If you then put in for each dollar that he supports, that's fine. But that has to be up to the individual. They should do what they think is right with their own money and not with my shareholders' money. This is America. Where you put your money is where your voice is.
Guffey: My point is that we can encourage charitable philosophy in our employees.
Bersticker: I don't agree either. The employees are going to have their own little pet projects. You can't support Joe's Corner Bar Softball Team. Well, you could, but it doesn't serve any purpose.
Evans: I don't see a problem with that. It's democratic.
Heitmann: It's democratic to let somebody else make the decisions? If you want to promote your company's image, you can't do that via your employees. The employees can change every day. You have to set the course of your company. You have to say what you think is right as a corporate citizen.
Evans: No, I'm talking about employee morale, which is marketing internally.
Guffey: If you make a decision, I'm going to give money to sell my product, you're going to lose right off the bat.
Whitmore: There are two types of philanthropy. There's philanthropy to make employees feel good and philanthropy in which a corporation gives away its shareholders' money. And there's no possible reason for giving away shareholders' money, except to enhance the image of your firm.
Donlon: Which could be construed as a shareholder benefit.
Beene: Constantine Micandros, the former CEO of Conoco, once said that he always hoped that the financial analyst would visit his company in the middle of his United Way campaign, because his employees were more energized in functioning as a team. There's a benefit in involving your people in something bigger than they are themselves.
Donlon: That's Peter Drucker's point: The for-profit should try to match the exuberance or feeling of commitment of the nonprofit. But to harness it in such a way as to deliver or to justify to the shareholder that you're getting some return. What does the CEO need to get this balance right?
William Adams (Agile Web): What I'm most interested in is bringing skills, abilities, and ideas together in a different way. If we look around this building, something unique was created by putting a series of manufacturers together in an art environment to tell the story of the evolution of the motorcycle.
What does that bring to BMW? Maybe nothing. What I saw was the evolution of the motorcycle and the interaction between man and machine. I've been riding motorcycles since I was nine years old, but this was the first time I heard the story behind what was going on here. And I think that was a beautiful match between different skills and different industries. How do you measure that? Well, I can measure it. I can feel it. There's an opportunity to create something new through new kinds of relationships, and this is a beautiful example of that.
Whitmore: We're learning that there are ways that corporations can participate in charitable activities and have a good justification to the shareholders that they've gotten value for their money, and the charity has not been raped in the process or forced to do something that they shouldn't do. That's the most interesting aspect.
Pollard: John analyzed what he thinks the logic of determining what's right is, and it begins with the clear definition of whose money you're spending, and ends, I'm sure, with a clear sense of objective on the grounds that if it's not your personal money, you have an obligation.
Vandewalle: I think that we should try to measure the value of donations as well as we measure the other things in the organization. I don't think we can, but I think we have a duty to try to do that.
Also, the longer that we at the highest level of the organization enhance the values of the corporation, the more the people lower down in the organization will align themselves with the values, and in so doing will spend their philanthropy resources in line with the values of the corporation.
Beene: Margaret Mead says, "Never underestimate what can be achieved by committed volunteers." The bottom line of this conversation is that there need to be volunteers at all levels, and it begins with the CEO.
A Who's Who Of Roundtable Participants
William M. Adams is president of Huntingdon Valley, PA-based Agile Web, a $310 million integrated multiphase source of manufactured assemblies involving electronics or electromechanical products.
Betty Stanley Beene is president and chief executive of Alexandria, VA-based United Way of America, the national service and training center of 1,400 member United Ways.
Albert C. Bersticker is chairman and chief executive of Cleveland, OH-based Ferro Corp., a $1.38 billion global producer of performance materials for manufacturers.
Klaus G. Dorfi is chairman and chief executive of New York City-based Atlantic Mutual Companies, a provider of property and casualty insurance with assets exceeding $1 billion.
John W. Guffey, Jr., is chairman and chief executive of Charlotte, NC-based Coltec Industries, a $1.4 billion manufacturer of engineered products for aerospace and industrial markets.
Henrich Heitmann is chairman and chief executive of Woodcliff Lake, N J-based BMW (U.S.) Holding Corp., the $6.9 billion marketing and sales arm of the automotive manufacturer BMW AG.
Thomas Krens is director of The Solomon R. Guggenheim Foundation and Solomon R. Guggenheim Museum, both of New York City, and the Peggy Guggenheim Collection, of Venice, Italy.
John Vandewalle is chief executive of Kansas City, MO-based Teva Marion Partners, a partnership formed between Hoechst Marion Roussel and Teva Pharmaceutical industries dedicated to enhancing the management of multiple sclerosis.
John R. Whitmore is president and chief executive of New York City-based Bessemer Trust Company, a bank holding company with assets under supervision of $18.4 billion.
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|Publication:||Chief Executive (U.S.)|
|Article Type:||Panel Discussion|
|Date:||Oct 1, 1998|
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