Do Donations Increase Sales?

You’ve probably heard that doing good for the world is good business. Today, it’s not just a nice idea; it’s critical if you want to compete in the modern market. (Your B.S. detector going off? Bear with me.)

Many point to American Express as giving birth to the term cause-related marketing in 1983 when the company donated a penny to restoring the Statue of Liberty every time someone used its charge card. Not only did the campaign raise over $1.7 million to spruce up the Green Lady; but Amex card use rose 27%.  Since then, Toms, Warby Parker and Newman’s Own have become household names in giving back as a profitable strategy.

Now, more than ever, consumers care how brands behave socially. In a 2019 survey by Teneo, for example, 77% of consumers said they’d be more willing to buy products or services from companies that show they’re making a positive impact. In fact, 71% of Millennials will pay more if they know some of the proceeds go to charity, according to a 2020 Consumer Culture Report. 

The big difference today? Simply giving to a charity isn’t enough. Modern consumers are looking for brands that support their own personal causes—whether that’s climate change, rescuing animals or helping refugees. In the 2020 report, 88 % of 18-34 year olds  said, “It is important to me that companies I buy from align with my values.” Social media native and community centric, Gen Z in particular looks for companies that represent their individual social passions. They want their brands to help them change the world.

Using candy and calculators, researchers at the University of Miami and University of South Carolina put this all to the test. The idea was to explore cause-marketing campaigns where companies let customers direct the donation—for example, giving a percentage of the sale of each product to a charity selected by the shopper.  

One experiment took place at a roller skating rink. As adults approached the concession stand they were told that if they bought a popular candy, all of the money would go to the charity. The customers would decide how much they wanted to pay for it. Half the customers were allowed to select which particular charity the candy money would go to. The other half were told that the rink would pick it. 

What happened? The customers who could choose the nonprofit, paid three times as much for the candy. 

In a second study, university students were told about a company that was giving 5% of proceeds from each calculator sale back to the community. Some of the subjects would be given the choice to choose the charity; others not. 

When the students were then asked if they’d buy a calculator, the group with the option to choose their charity were more likely to say yes. 

In our own tests at Sparo, we also show that letting shoppers direct a company’s donation increases sales. The Sparo ecommerce plugin enables brands to donate a percentage of each sale and let shoppers choose from hundreds of vetted charities where it goes. In a 20-day pilot with Staples®, even with only 20% of the customer base participating, the brand saw an additional $2.5 million generated in sales among those shoppers. That meant a donation of $50,000 to the charities shoppers chose.

Interestingly when the researchers in Miami and South Carolina looked deeper, they found that it wasn’t the particular charities that inspired the customers to spend money; it was the act of choosing that enhanced their personal role in helping the cause. In other words, not only did they get a lift from shopping; the experience made them feel good about themselves. 

At a time in the world where so many things seem to be getting worse, what better way to make people want to come back to buy more?