Cause Marketing in the Age of Free

In Malcolm Gladwell’s book review of Chris Anderson’s Free: The Future of a Radical Price (which I learned of from one of my new favorite bloggers and twitterers @danblank) he shares this study from an MIT economist.

He offered a group of subjects a choice between two kinds of chocolate—Hershey’s Kisses, for one cent, and Lindt truffles, for fifteen cents. Three-quarters of the subjects chose the truffles. Then he redid the experiment, reducing the price of both chocolates by one cent. The Kisses were now free. What happened? The order of preference was reversed. Sixty-nine per cent of the subjects chose the Kisses. The price difference between the two chocolates was exactly the same, but that magic word “free” has the power to create a consumer stampede.

I’ve seen and tapped the power of “giving it away” in my own cause marketing efforts, and gone so far as to launch a Free is For Me program that guarantees our corporate partners do direct costs. None. Zip. Zilch.

The benefits of giving away cause marketing programs to businesses has three important benefits.

It moves you to the front of the line. Suddenly you’re that free Hershey Kiss that everyone wants to pick! In dealing with businesses that are constantly being pitched to pay for local radio, TV, print and other marketing vehicles, an opportunity that costs nothing but can deliver is quite attractive to business owners, especially in this economy. In short, free gets people’s attention.

It makes you competitive. Although cause marketing has been around since the early 1980’s, it’s still a new idea for many businesses, especially smaller ones. I’ve always said that if a business owner has the choice between paying for advertising or paying for cause marketing, they will always, ALWAYS choose advertising. Not because it works, mind you, but because it’s familiar to them. Giving cause marketing programs away to businesses dissipates the anxiety that comes from unfamiliarity and uncertainty and makes it easier for businesses to give it a try.

You tap the real money. Gladwell poses an interesting question: where will the real money be made on the iPhone, in selling the phone or the apps? Apple may ultimately decide that’s it’s better to give away the phone because they could make more money selling apps.

Up to now, most fundraisers look at corporate support through the narrow lens of philanthropy and sponsorship, both of which require money from the corporate checkbook. Cause marketing looks beyond corporate giving to a much more lucrative prize: the customers that patronize these companies.

There’s a story about U2’s Bono that when he went to speak to corporate leaders about Product RED they were so impressed they offered to write him a check on the spot. But Bono refused. He didn’t want the easy money. He wanted a product from which Product RED could receive a percentage. The risk was greater, but so was the reward. Last count, Bono had 130 million reasons why he chose wisely.

But, as Gladwell points out, free also has its drawbacks, and they certainly strike home with cause marketing.

“Free is not important to me.” A prospect said this in response to my Free is For Me program. She was right. Not surprisingly, people value the things they get for free less than the things they pay for. I’ve certainly seen this from less committed partners who signed on for a cause marketing program and then let it flop because they had “no skin in the game,” as my boss likes to say. That’s why it’s important to screen your partners carefully, and to make sure that they recognize the real, valuable benefits of the program–for both partners.

There are costs to free. It’s expensive to give it away and to recoup your money somewhere else. Gladwell points to Youtube, one of the most popular services on the web yet it will lose $500M this year. Cause marketing has its own expenses. In percentage-of-sales programs (i.e. pin-up, mobile, paper icon, etc.) there are design, printing and shipping costs just to name a few. This drives up the cost of executing a “free” program for a corporate partner that you’re relying on to reap a return from its customers. And because we also pride ourselves locally on extending additional benefits to our partners in the form of event sponsorships–at no additional charge–this layers on more expense. Never was free so expensive, or so risky.

Gladwell’s right in his summation that free isn’t the only way to do business. The New York Times gives away content on its web site but The Wall Street Journal has a million subscribers who pay for it. Network TV gives away programming and is suffering a slow death. Cable is doing better charging viewers hefty monthly rates. Free or paid, either can work, or not. I think this is true of cause marketing too. It’s striking the right balance in the given situation.

Free is a great way to get in the door and to start a conversation. But I’ve had many meetings end with a partnership that was sealed by a company check (despite my protests!). The important rule for every cause marketer is to be open, entrepreneurial and to exercise the discipline needed to seize the best opportunity for your organization.

Be like Bono. Be passionate. Be bold. Reach for the greater good. You can be the rock star of your organization. But please: don’t wear your sunglasses indoors.

Joe Waters is currently the Director of Cause Marketing for Boston Medical Center, an avid blogger and a rabid Boston Red Sox fan. Joe can be reached at [email protected] and followed on twitter at @joewaters and at selfishgiving.com. If you are interested in contributing your key learnings, send us an email at [email protected]