A donation-with-purchase might not be the best way to support a charity

Should you buy a toy and save the whales?

Published: October 2014
Photo: Paul Sahre

The end of the year—which accounts for, on average, 41 percent of Americans’ charitable giving—is often a prime time for cause-related marketing: when companies push items with the promise that part of the purchase price will go to a nonprofit. Also known as cause marketing, this phenomenon has grown into a $1.78 billion, year-round way for companies to support charities using your dollars.

You've likely seen some of the pitches:

  • “A portion of proceeds” of adorable wild pony Christmas ornaments by Roost go to Return to Freedom, a wild horse sanctuary.
  • “A percentage of the proceeds” of sales of the Cellairis Swag collection of cell-phone cases benefits Pencils of Promise.
  • “One hundred percent of profits” of a special Smock card supports the Pesticide Action Network.

But is it really the best way for you to support your favorite cause?

Cause marketing has been around since at least 1983, when American Express offered to donate a portion of a particular credit card’s revenues to the renovation of the Statue of Liberty. Today, countless other companies link up with charities. Nonprofits “are always short of cash,” says Renee Irvin, director of the Nonprofit Management Program at the University of Oregon. “The need is always outstripping their resources.”

The highly regarded Breast Cancer Research Foundation has been particularly good at using cause marketing to raise funds. It works with more than 100 companies, including Ann Inc. (includes Ann Taylor and Loft), Bloomingdale’s, Estée Lauder, and Delta Airlines; 40 to 50 percent of BCRF’s revenue—$27 million in 2014—comes from those partnerships.

“BCRF is a nonprofit and not a marketing organization,” Christina Rose, its Chief Partnerships Officer, said. “We invest 91 cents of every dollar we spend in our core mission, which is breast cancer research and awareness. In working with national and global brands, we’re able to extend the reach of our message more than we’d be able to do on our own.”

The fight against breast cancer has widely benefited from those campaigns. “It’s highly universal,” Rose said. “It’s hard to find someone who hasn’t been impacted personally, or through family or friends.” Other well-known health-related charities such as the Make-A-Wish foundation and St. Jude Children’s Research Hospital are also popular for partnerships.

Make sure your donation counts by checking out how charitable organizations are rated by the watchdogs.

But as the number of cause-related campaigns has risen, so too has consumer skepticism. “The message of ‘think before you pink,’ has gotten out,” Sandra Miniutti, VP of Marketing and CFO of Charity Navigator, which assesses charities, said.

After all, companies don’t do cause marketing solely to give, but also to get more of your business. Surveys show that almost 90 percent of consumers say that given similar price and quality, they’re likely to switch to a brand associated with a good cause. (Case studies suggest that is actually what happens in stores.) And businesses get to bask in the warm glow of good PR. “Nonprofits are lending their good name to the business, and consumers are well aware of that,” Irvin said.

“Are you buying a $30 T-shirt from which $2 will go to the charity?”—Aradna Krishna, marketing professor, University of Michigan

That’s why consumers get upset when campaigns are not quite as generous as they seem at first glance. One source of dismay is the common practice of a company capping its total donation, no matter how many products are sold. “They’ll say, we’ll donate $10 per item up to $5,000,” Miniutti said. “If you’re the 501st purchase, nothing from your purchase is getting to the charity.” And you might object to your $10 ending up in the company’s coffers instead. (Conversely, some companies agree to a minimum donation, regardless of how many products are sold.)

Charities are subject to laws that forbid false or misleading advertising. And the Better Business Bureau includes, among its 20 standards for charities, one that addresses cause marketing. It requires disclosure at the point of appeal that identifies the amount of the purchase price going to the charity, if applicable, the duration of the campaign, and any maximum or minimum that will be donated. “The purchaser should know how much he or she is helping the charity by buying this product,” Bennett Weiner, chief operating officer of BBB Wise Giving Alliance, which reports on charities, said. “The concern is, if there is no disclosure, the consumer will believe there is much more going than is usually the case.” Charities violating BBB standards don’t receive their charity accreditations.

According to the Wise Giving Alliance, the three charities at the beginning of this article fail to meet the BBB’s standards because each doesn’t specify the actual portion of the purchase price going to the organization. Others violate the BBB’s guidelines by sending consumers to a website where it is difficult to find the disclosure or use vague language such as “net proceeds” or “some of our profits.” “How is the consumer supposed to know what ‘net proceeds’ means?” Weiner said.

The best way to give

Even if the donation-with-purchase charity is doing everything right, you still might want to reconsider that buy—especially because all of that in-store giving might actually cut into the amount that we, as individuals, allocate to our pet causes.

A 2011 study by Aradna Krishna, a marketing professor at the University of Michigan Ross School of Business, found that people gave less money in direct donations to charities when they made cause-marketing purchases. “People may mentally assign their cause-marketing expenditure as their charitable giving,” Krishna said. She also found that cause-buying had a tendency to decrease happiness, probably because we realize that buying, say, a $40 necklace, is more self-serving than donating $40 directly.

Think before using a product as a go-between, Krishna says. “Are you buying a $30 T-shirt from which $2 will go to the charity?" she said. "Or could you give $30 to the charity and do without the T-shirt?”

Another advantage to giving straight to the charity: A donation is tax-deductible, unlike a cause-marketing purchase, for which the company selling the product gets the tax deduction for charitable giving. “I have a philosophical problem with that,” Irvin said. “You’re essentially getting your customer to do your donations for you.”

“I’d encourage consumers to be passionate about their philanthropy and to keep it personal,” Irvin said. Though well-known charities often bring in lots of cause-marketing dollars, thousands of other, lesser-known causes—that will never see their name on a yogurt container—also need your support.

Remember, too, that all of those well-positioned yogurt containers still aren’t a charity’s bread and butter. “Despite the hyperbole, corporate giving to nonprofits is a very small portion of overall giving to nonprofits in the U.S.,” Irvin said.

So what should you do when you’re faced with a cause-marketing item at the store? “All other things being equal, buy the product that helps a cause,” Irwin said. “But all other things are not usually equal.”

4 awful charity campaigns

Company/charity partnerships can make for strange, embarrassing, or just bad bedfellows. Consider these groaners.

In 2011, a KFC in Utah donated a dollar from every mega-jug of soda it sold to the Juvenile Diabetes Research Foundation.

In 2013, a Walmart in Ohio held a canned food drive for its own needy employees.

In 2014, PornHub donated a tree for every 100 videos viewed in a certain (unprintable) category for its Gives America Wood campaign.

In 2014, the restaurant chain Chili’s planned a national fundraiser where 10 percent of each check would go to the National Autism Association, upon the guest’s request. Turns out the association was an anti-vaccine group, angering diners.

Editor's Note:

This article also appeared in the December 2014 issue of Consumer Reports magazine

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