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 a 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.
I had to take my sunglasses off to read the post, Joe.
That chocolate story makes a powerful point, doesn’t it? And you’re point about businesses ALWAYS ALWAYS choosing that which is familiar is really useful to remember.
So thank you. And keep receiving checks (and protest less just like Bono).
Thanks for the comment, Paul. And to my readers I hope you’ll take a moment to visit Paul’s site B1G1.com. Thanks for writing and introducing yourself, Paul!
Ooops, the auto fill copied my email address into my name before. Sorry about that!
Thanks for confirming my instinct — FREE does work, even though it can be confusing to potential partners. We will continue to be passionate and bold.
As Chris Anderson writes in his cover story, “Free! Why $0.00 Is the Future of Business,” in the March 2008 Wired magazine:
“People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that’s the difference between a great market and none at all.”
“The huge psychological gap between “almost zero” and “zero” is why micropayments failed. It’s why Google doesn’t show up on your credit card. It’s why modern Web companies don’t charge their users anything. And it’s why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.”
That’s from Chris Anderson’s article in the March 2008 Wired mag.
Fair enough for the for-profit folks. But is ‘free’ sustainable or even possible for organizations that are already not-for-profit?
Many of you thought for a moment and answered, “Well, yeah. In fundraising nonprofits use ‘free’ all the time. And it works great.”
I’ve got a drawer full of proof at home.
* In my desk at home I have a drawer full of free-to-me address labels from perhaps a half-dozen nonprofits. I’ve gotten pens, bumper stickers, key fobs, notepads, and more.
Nonprofits send out those giveaways because experience clearly demonstrates that an envelope with something free in it generates more than does an empty envelope.
* In the United States the public radio and television are both supported by periodic public appeals that draw heavily on premiums. Donations in a certain range come with valuable items like books, tapes, meals, lodging stays, events with celebrities, and more. The telethon producing charities do much the same, especially at the local level.
* Paper icons, usually priced at $1 in North America, sometimes come with price-saving coupons. And so the purchase price might bring $5 or more dollars in coupon savings. Some charities do much the same with calendars.
* A few months back I went to a free performance from best-selling author and humorist Andy Andrews that was sponsored by a nonprofit as a ‘friend-raiser.’ A few months later Andrews returned to a larger venue for another friend-raiser, also free.
In fact, notwithstanding business cases like Gillette (where since the company’s founding in 1903 Gillette razor handles typically cost a pittance, but the blades are a pretty penny) nonprofits have been using the concept of free longer and with greater success than most for-profits. ‘Free’ is baked deeper into the DNA of nonprofits than it is in any flavor-of- the-month tech company.
Nonprofits understand better than most companies that ‘free’ doesn’t mean ‘no expense.’ Nonprofits know that in their fundraising they can and should give stuff things away to boost their fundraising.
And finally, nonprofits understand that among the many things they can give away free the most important may be the feeling that their supporters are doing something good for the world!
Read more: http://causerelatedmarketing.blogspot.com/search?q=anderson&submit=Search#ixzz0K26BFma3&C
I think you nailed it. Small businesses don’t seize the power of cause marketing because they are unfamiliar with it, and are skeptical because it is “FREE.”
In a marketing world of SPAM/SCAM emails and ponzi schemes, “Free” is no longer a trusted word. “Free” is sometimes attached with “but” — it’s free but…
Advocates and mentors like you (this is where you pat yourself on the back and say “Damn, I’m good”) are shedding the light on cause marketing and the win-win results for both the for-profit and non-profit organizations.
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Joe,
In terms of cause marketing, have you found that “free” enables you to implement easier with sponsors? Or do they perceive other “risks” associated with a cause marketing campaign?
John
The biggest roadblock for many sponsors, John, is that cause marketing never gets out of their stores. This is in the case of point-of-sale programs that happen at the register. Sure, they reach existing customers, but store owners want to reach out to PROSPECTIVE customers as traditional media offers. This is why we tie in cross-promotion and events with most of our cause marketing programs. Halloween Town is our best example of this.
We find that when we couple “free” with a broad marketing program that reaches existing customers and potential customers, cause marketing is really a no-brainer, especially when compared to marketing you have to pay for.
Hi Joe, Go to http://www.winwinconnections.co.nz and see how we do it down here in New Zealand. I started this to help my kids school and sports club. It’s now grown into a programme that’s managed via the EFTPOS network at the point of sale. And it’s FREE for retailers and community groups to join and use. I’m now looking for finance to take it to the next level so more people can join and get bigger retailers on board. I’ve given up my day job milking cows to focus on this. I find your site helps me stay focused. Thanks.
Wayne
Hi,
the quote from the study comes from Dan Ariely’s book Predictably Irrational. (http://www.predictablyirrational.com/)
Kind regards,
Hannes
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