Analysis: Cause-related marketing - A stated amount - and a fair share

Charities that strike deals to have their logos on consumer goods hope to be rewarded with a cut of sales and publicity. But are the arrangements always fair and legal? Sophie Hudson reports

Cause-related marketing
Cause-related marketing

In the fiercely competitive world of fast-moving consumer goods, a charity logo on the packaging can be good for business by tempting shoppers to buy a product on the grounds that it will help a good cause.

The right deal with the right company can also raise significant sums for charities for relatively little effort. Charities such as Unicef say that partnerships with major brands such as Pampers can significantly raise global awareness of issues in a way that would otherwise be impossible.

So good cause-related marketing deals are highly sought by both partners. But do the arrangements always comply with charity law, which says that the amount to be given to charity should be clearly stated on the product? And in their efforts to win deals with companies, are charities selling themselves and their brands too cheaply?

The letter of the law

Cadbury contributes from the sale of its Wishes chocolates to the children's charity Make-A-Wish Foundation, which helps terminally ill young people. But it does not state the amount of the contribution; instead, the small print on the packaging says that 10 per cent of Cadbury profits from the sale of the chocolates will go to the charity - and there is no easy way for consumers to find out what those profits are.

Andrew Studd, a partner in the charity team at Russell-Cooke solicitors, says that in order to comply with the Charities Act 1992 in relation to the so-called "notifiable amount" for "commercial participators", companies must state either a monetary amount from the sale of each product that will go to charity or, if this is not possible, an estimated total amount that will go to charity from the entire arrangement.

Studd says companies can sometimes get caught out by stating on the side of a product the percentage of profits, rather than of the sale price, that will go to charity. "It's got to be an amount that the customer can relate to," he says. "A percentage of an undefined profit is not a notifiable amount." But Cadbury says it is satisfied with its agreement with the Make-A-Wish Foundation.

Rosamund McCarthy, a partner at the law firm Bates Wells & Braithwaite, believes that major brands comply with the law on this matter but some companies, such as those that enter into Christmas card deals, are not complying. "The requirement to comply is on the company," she says. "So the offence is committed by the company - but reputationally it is the charity that is at risk." So far, no company has been prosecuted for not complying with the law, as far as McCarthy is aware.

What's the percentage?

There is little doubt that the deal between Pampers and the children's charity Unicef complies with the law. The manufacturer, Procter & Gamble, gives $0.07, or 4p, to the charity every time it sells a product branded with the charity's logo. But the deal applies across the nappy manufacturer's range of products, regardless of their sale value. So the charity still only receives 4p even if the consumer buys a £12.99 bumper pack of nappies - far less than 1 per cent of the sale price.

Pampers defends the deal, arguing that the high volume of sales has raised enough money since 2006 to buy - at prices that have varied - 300 million vaccines for children in developing countries. A spokeswoman for the brand says it is very proud of the partnership and that it has been a much admired corporate partnership over the years.

Douglas Rouse, corporate partnerships director at Save the Children, believes charities need to be careful not to agree to very low percentages when striking cause-related marketing agreements. "There's a general consensus that 5 to 10 per cent of the sale price should go to the charity," he says.

"It needs to be a sensible donation to show consumers that the company is genuinely making a difference to the cause. The consumer market is very cluttered."

He says the figures he gives came originally from Business in the Community, the charity that promotes responsible business practice. But there is a reluctance among others in the sector to name figures. Sue Adkins, author of Business in the Community's cause-related marketing guidelines, says: "We never recommend a percentage - it's dangerous. The ratio is about what's appropriate for that market."

Louise Richards, director of policy and campaigns at the Institute of Fundraising, says that it does not recommend a set percentage for such agreements. Neither does the Charity Commission set a benchmark proportion of proceeds that a charity should receive from a cause-related marketing partnership. A commission spokeswoman says that it would be for trustees to decide.

However, the Charity Commission's CC20 fundraising guidance does say that charities should "obtain the best return possible from any commercial links", and failure to conduct "proper oversight and control of fundraising in their name may constitute misconduct or mismanagement".

Alistair McLean, chief executive of the Fundraising Standards Board, says some members of the public are concerned about cause-related marketing deals. About 15 per cent of complaints it received from the public last year were about commercial partnerships. He says: "The fact that we're getting complaints means there's evidence out there that adequate disclosures are sometimes not being made."

He says charities run the risk of reputational damage by failing to strike fair deals with companies. "Charities may have donors who stop giving because they don't believe they've got a good enough contract, or feel there is no transparency."


 

CASE STUDIES - THE FINER DETAILS OF FOUR CHARITY PARTNERSHIPS

Make-A-Wish and Fairy

Fairy's Make-a-Wish campaignFairy and Make-A-Wish Foundation are in the eighth year of their partnership this year. In the months of November and December, some Fairy products are branded with the Make-a-Wish logo. Last year, the products carried the message that a total of £163,500 would be donated to the foundation, with 92 per cent of that amount going to Make-A-Wish UK and 8 per cent to Make-A-Wish Ireland. Karen England, director of fundraising at Make-A-Wish, says that Procter & Gamble, the company that owns Fairy, also runs a TV campaign about Make-A-Wish to promote it further. "We know our public profile goes up significantly as a result of the partnership," she says.

Make-A-Wish and Cadbury

In this partnership, now in its third year, Cadbury donates part of the profits from its Wishes chocolates to the Make-A-Wish Foundation. The small print on the packet says: "10 per cent of the profits made by Cadbury UK and Cadbury Ireland from the sale of this pack will be donated to Make-A-Wish Foundation, making more wishes come true." At least one lawyer believes the statement does not comply with the law because the figure for the profit is not given, which means the consumer is unable to work out how much is going to the charity (see main article). Karen England, director of fundraising at Make-A-Wish, says that before the partnership began Cadbury was asked to estimate how much would be raised for the charity in the first year, and "in the end it was significantly more". A spokesman for Cadbury says it believes the wording used on its Wishes packs is satisfactory.

Age UK and Innocent

Innocent's Age UK campaignThis partnership, which has been going for eight years, involves Age UK volunteers knitting little hats for bottles of Innocent drinks. During November, the charity receives 25p of the recommended retail price of £1.83 for every bottle with a hat. In 2011, this totalled more than £200,000. More than £1m has been raised over the past eight years. Paul Farthing, director of fundraising at Age UK, says the deal raises not only money, but also awareness. "What's good about this partnership is that it reaches across all ages," he says. However, it does require the involvement of more than 100 local Age UKs. "Organising the hats is a labour of love - it's our volunteers making them," says Farthing.

Save the Children and Thorntons

A year after the 2010 earthquake in Haiti, Thorntons launched a cause-related marketing deal with Save the Children to raise money for the charity's education work on the island. For each bar of the company's limited-edition Mango Chocolate Block, 91p of the recommended retail price of £1.79 was donated to the charity. Douglas Rouse, corporate partnerships director at Save the Children, calls this one of the best cause-related marketing deals it has been involved with. What was particularly important about it, he says, was that there was a link between the product, which was made using Haiti cocoa beans, and what it was raising money for. "There needs to be a logical fit," he says. "They also gave the deal real prominence in stores."

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