The smart money is on the Millenials — the 80 million folks born in the 1980s and 1990s. Members of this generation spend roughly $200 billion each year — and that number will only go up as their earning power increases.
To reach these influential consumers, some companies are tailoring their advertising to new outlets like Facebook and Twitter, while others are relying on young, high-priced spokesmen. But the most effective way to reach Millenials might be through a strong program of charitable giving.
Unfortunately, such Corporate Social Responsibility (CSR) initiatives are often among the first items firms trim from their budgets. That’s a mistake. Not only are CSR programs the right thing to do — they’re also good business.
Nearly two-thirds of Millenials consider a company’s social commitment when deciding where to shop, according to the 2006 Cone Millennial Cause Study. In fact, 83 percent place more trust in a company that is socially and environmentally responsible, and nearly nine in ten would switch brands based on their perception of a company’s commitment to CSR.
Corporate Social Responsibility initiatives are also emerging as effective ways to gin up word-of-mouth advertising. Researchers at the Boston College Center for Corporate Citizenship and the Reputation Institute graded U.S. companies on a 100-point scale and found that a 5-point improvement in a company’s reputation score translated to a 6 percent increase in the number of people who would recommend that firm.
To see this dynamic in action, consider Boston-based insurer Liberty Mutual. A commercial featuring a series of strangers who witness a good deed and are inspired to pay it forward served as the launching pad for the company’s CSR efforts.
The insurer started a website called The Responsibility Project and began making charitable contributions. For instance, the company’s Coach of the Year Award honors college football coaches for their “sportsmanship, integrity, and personal responsibility” and makes donations — nearly $1 million in five years.
Those investments seem to be paying off. Company revenues have grown steadily over the past three years, in the teeth of the recession.
Liberty Mutual’s CEO, Ted Kelly, believes that his company’s CSR effort will pay further dividends down the road. “We are price-competitive, but we’re selling more than just price, and in the long run we’re convinced that will pay off in terms of long-term growth and gains in market share.”
Retailer Payless ShoeSource is another company that has done well by doing good. Through its Payless Gives Shoes 4 Kids program, the company provides $1.2 million in free shoes to needy kids each year. In conjunction with Greater Horizons — a provider of charitable giving services– Payless partnered with hundreds of local nonprofits nationwide to ensure that shoes arrived for those who needed them most.
Liberty Mutual and Payless aren’t the only examples of “conscience capitalism.” American businesses account for more than $15 billion in donations annually — or about 5 percent of the country’s total giving.
This year, dollar donations dropped for the first time since 2003, but many companies are maintaining their charitable commitments in other ways. In a recent survey, the Chronicle of Philanthropy found that 54 percent of companies were encouraging more employee volunteerism, and 16 percent were making more donations of products and services.
Even in the face of declining revenues, firms have recognized that a strong commitment to CSR is critical to staying competitive and protecting their brands.
But the benefits of CSR may not show up on the company ledger for years. So how can company leaders get the most bang for their charitable buck?
A cogent plan is a must. If executives, HR staff, and the marketing team aren’t on the same page, they’ll have no way of measuring whether their CSR programs are working.
To formulate that plan, companies should undertake a comprehensive inventory of their existing philanthropic activities. Managers should approach their charitable efforts with the same eye for cost and return as they do their business pursuits.
American consumers — and Millenials in particular — no longer believe that profits and conscience are mutually exclusive. Companies that don’t demonstrate a genuine commitment to CSR will struggle to earn their business.
But as the recession has proven, firms also can’t afford to spend recklessly. In order to have the highest charitable — and financial — impact, business leaders must ensure that their CSR dollars work smarter, not harder.
Laura McKnight is President and CEO of Greater Horizons (www.greaterhorizons.org).