Management consulting · Marketing Communications

1 Product Purchased = 50% Profits Donated. Effective or Not?

Honeybee Full-service agency

November 13th, 2018

Does the concept of donating 50% of profits to charity for every product purchased drive purchase intent for consumers? Or is this business strategy ineffective in driving customers to buy the product?

Pete Francomb Digital product designer, bootstrap entrepreneur

November 13th, 2018

As Paul has alluded to, I suspect it's all about the story you tell and how well you tell it - and so how much people believe you. There are, of course, specific skills involved in telling a good story but the core asset here is how much you believe it yourself. In other words, if you're genuinely passionate about supporting the charity, if "success" for you, in your bones, would be how much you've been able to give to that charity rather than how much profit the business has made, then you'll have a far bigger chance of success. If it's just a business tactic, I'd say don't bother.

Dane Madsen Organizational and Operational Strategy Consultant

November 13th, 2018

If people do not want your product, charity will not make them want it. If they want your product, and you give a part of the spend to a charity, they they will like you on top of the product. It is the product that drives this, not the charity.


Bombas and TOMS started as philanthropy projects; they did not just adopt them. And even then, TOMS is virtually bankrupt because the LBO firm destroyed it with too much debt. Even charity cannot save it.

Paul Garcia marketing exec & business coach

November 13th, 2018

For some consumers, yes. So the question is do the typical consumers for your product care about charitable works? What story does your product tell that aligns with the charitable giving intent?


I am reminded of the company FLEX WATCHES that had 10 watches, each of the 10 styles was dedicated to a specific charity. Now they only donated 10% to charity, but you can buy a watch thousands of places. It was the specific story that each watch told (related to the charity) that drove their sales.


The completely opposite way of looking at this is to have a successful company that generates a lot of profit. And then you can decide that you want to give any amount of money to charity because you have financial freedom with a high income.


It all depends on the story you want to tell with customers. 50% of profits to charity is extraordinarily high. Does your company still make enough money to reinvest in the business and continue to grow when you give away that much?


Charity-linked sales is not a business strategy. It's an emotional lever, a tactic. Don't mistake the two for being the same thing.

Eric Kaufman Managing Director, Acumen Business Advisors,llc, Startegic Advisor to startups and small businesses

November 14th, 2018

Siviwe,

Aside from your main question, are you retaining enough profit to sustain your business and, more importantly, to fund its growth? Even if "giving" is your main mission, you still need a "financially healthy" business to fund it.

Honeybee Full-service agency

November 13th, 2018

Thank you so much for your input. Your insight is appreciated. It seems lately that a lot of emerging businesses are using the whole '50/50' or one-for-one business model as a business strategy to differentiate in the market by tapping into a social aspect that resonates with customers. An example of such social enterprises would be TOMS and BOMBAS. The strategy of donations would appear to work for some organisations like the ones mentioned. However, this is not universal. What would you say are the main factors that differentiates those businesses that make it from those that do not while using the same/similar model?

Carlos Sava Value creator. Small Business Advisor. Finance and Accounting Expert.

November 13th, 2018

REI and Patagonia have similar missions - tied to environmental preservation - and that makes sense for many of their products are to be used in nature. Sneakers are very expensive - but a lot of that margin goes towards marketing in fancy magazines or celebrities and athletes, so an affordable pair where shoes will also be donated can be a compelling case. But Tom's designs and pattern were unique on their own. The same goes for glasses. The product needs to stand no its own. Why spend $50 for something I don't want, if only $10 is going to charity - I may as well just donate my $10 to charity.

There are two more important considerations. Connecting your product with a cause. Selling fashion tee-shirts and using the money to buy vaccines is great, but there is no clear connection. You want to make that connection clear for it to be compelling. Second, you want to be intelligent with the philanthropy spend and contribution so that it has the best impact. Maybe simply passing on the proceeds from sales to a group or cause that is already established it best. Or your own business' skills could be the most valuable. Understanding how to make the greatest impact is just as important as how to make it the most profitable business.

Tony Dykes CEO at NovolBio

November 13th, 2018

As the others have mentioned, it can be a compelling factor in the right situation.


I would just like to point out that a strict formulation of 1 product = 50% of profits donated is far from the 'buy one give one' as practiced by many companies. I wouldn't cripple your profit margin permanently like that unless it was for a specific product line (ie the RED aids funding schemes).


But also 'one' what? Buy a pair of Warby Parker glasses and give an identical, stylish pair made under first world production conditions to someone in need? That is not what they are saying and I don't think its about brevity.