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From the Fall 1999 Watchdog Report

Don’t Be Mislead by Deceptive Business/Charity Marketing

The names and logos of nonprofit organizations are showing up more frequently in advertisements and packaging for a plethora of products from ice cream bars to nicotine patches. A 1997 study conducted jointly by Roper Starch Worldwide and Cone Communications reveals why – 76% of consumers would likely switch from their current brand to one associated with a charity, if the price and quality of both products were equal. On the plus side these commercial/nonprofit arrangements can result in significant new revenue and visibility for a charity; but on the minus side consumers can be misled and a charity’s image can be seriously tarnished.

AIP recently participated in a public hearing on business/charity marketing partnerships convened by 16 state attorney general offices, which in April released the report, What’s in a Nonprofit’s Name? Public Trust, Profit and the Potential for Public Deception. At this hearing, AIP expressed its strong concern that business/charity marketing is too often vague and misleading and that charities must be careful to avoid being exploited by business interests.

Imagine that you are in the cereal aisle at the supermarket and you are trying to decide which type to buy. If one of the many varieties displayed the logo of the American Cancer Society on its box, would you think that this cereal was healthier than any other variety and would reduce your family’s cancer risk? According to a study commissioned by the Society, 44.5% and 60.4%, respectively, agreed or agreed strongly with these statements.

Other studies have shown that consumers jump to false conclusions about commercial products that are promoted with a nonprofit’s name or logo. Many people wrongly assume that whenever a charity’s name is used to market a product, the charity is endorsing the product and the product is superior to those of competitors. Consumers may not be aware that charities often enter into exclusive licensing partnerships with companies. Such a charity’s logo may then appear on a product not because the charity has undertaken research to demonstrate that the product is superior, but because the company has paid a licensing fee to the charity for the right to use the charity’s name or logo in its marketing. AIP believes that it is hypocritical for charities that have policies not to endorse specific products to allow corporate marketers to give consumers the impression the charity is making such an endorsement through general licensing arrangements.

In December of last year, SmithKline Beecham Consumer Healthcare, L.P. (SKB), which had entered into a licensing agreement to use the American Cancer Society, Inc’s (ACS) name and logo to promote the sale of nicotine patches and gum, agreed to a $12.5 million settlement with 12 state Attorneys General. The settlement arose in part because of the way SKB marketed these products, which the A.G.s felt “had the tendency and capacity to mislead, deceive and confuse consumers.” According to the A.G.s, the advertisements, which included the name and logo of the ACS and the line “Partners in Helping You Quit,” gave the impression that the ACS endorsed these products. Contrary to the perception that the A.G.s and many consumers got from these ads, the ACS had not endorsed these products and has a policy against endorsing specific commercial products. The ACS did not conduct any clinical research that demonstrated that SKB’s nicotine patch was any more effective than any other nicotine patch, and no study shows that one patch is more effective than any other, according to the A.G.s. As part of the settlement, SKB agreed in the future “to disclose clearly and conspicuously” in its ads when it has entered into an exclusive licensing agreement with a charity for the use of its name or logo, and that the charity has not endorsed the advertised product. The ACS, which was to be paid $1 million during the first year of its agreement with SKB, has adopted new policies to “guard against inappropriate uses of its name and logo” and to discontinue exclusive marketing arrangements in the future, according to the A.G.s.

AIP believes that the public counts of nonprofit health groups for unbiased information on medicines and medical treatments, and questions whether it is ever appropriate for a health charity to participate in marketing that allows a business to use its name to market a medical treatment that it does not endorse without clearly disclosing this fact. AIP applauds the American Cancer Society’s new policies and encourages other charities to adopt similar ones.

Businesses like getting the extra sales and improved image from the use of a charity’s name. Charities like the extra revenue and visibility. But charities should think long and hard about whether it is worth the extra revenue and visibility to be so closely identified with the interests of a for-profit company. Businesses represent products and may be willing to change a blue product to green if it will result in more sales. Charities represent missions and those that stray from their mission in pursuit of short-term licensing fees may eventually lose their credibility with the public.

More and more corporate marketers are claiming that they will contribute to a charity each time a particular product is purchased. This is referred to as cause-oriented marketing. Consumers that wish to take into account the degree to which a product marketer is helping a charity when making a purchasing decision may first wish to answers to the following questions:

  • What portion of the purchase price will the charity receive?
  • Is the amount a charity receives dependent on a company’s profits or net income of the promotion? No profits may mean no contributions to the charity.
  • When will the charity receive its portion of the purchase price?
  • Has the cause-orientated marketing promotion expired? If yes, the charity will not receive additional benefits from your purchase.
  • What is the maximum that the business will donate to the charity and has this amount already been reached? If the maximum has already been reached then your purchase will not benefit the charity.
  • Is there a minimum amount that must be raised before a charity can receive its share of the purchase price? If the minimum is not reached then the charity will not benefit.

Warning – this information can be difficult to obtain from product marketers, who most likely are not set up to address the concerns of donors.

Participating companies and nonprofits claim that the purpose of cause-oriented marketing is not only to sell products but also foster public education and awareness. In addition to the concerns raised above, AIP hopes charities will not inflate the amount they report spending on program services by counting corporate marketing costs as donated public education services. AIP believes doing so would be improper, and will exclude such amounts in its independent calculation of program service expense ratios.

AIP’s recommendation for consumers/donors – buy the best product at the best price regardless of the advertising. If you save money on your purchase, donate the savings to the charity of your choice and give yourself, rather than a corporate marketer, the tax deduction. Only let cause-oriented marketing influence your purchasing decision if you have reason to believe there are significant overall benefits and the relationship between charity and seller is clearly and completely disclosed.

 
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