Monday Mornings with Madison

After Something Old and Something New…. Something Borrowed

Part 2 – Borrowing the Successful Business Strategy of Corporate Giving

The old English rhyme “Something Old, Something New, Something Borrowed, Something Blue, And A Sixpence in your Shoe.” was told to brides on their wedding day.  With a look toward 2012, we tried to apply this wedding lore to a bright business future.  We started last week by examining an old – but valuable – marketing strategy to promote brand continuity and investigated a new, related marketing trend that is helping customers connect to the business brand in a new way.

This week, we’ll look at ‘something borrowed’, symbolic of happiness borrowed from a new family.  We’ll borrow a wise business strategy – that of corporate giving – as a way to connect with the community, engage consumers and stand apart from the competition.  It is a strategy that has proven profitable for many companies, large and small… and even for one savvy start-up. 

One of the wisest strategies that a business might want to borrow from other successful brands is that of giving in order to receive.  Corporate giving to charities and philanthropic ventures is not new.  It is not even old.  It is ancient, dating as far back as the Greeks.  However, it wasn’t until World War I that corporate giving emerged as a powerful business strategy in the U.S.  When done properly, corporate giving can increase sales, improve employee retention, and increase a company’s visibility in the community.

One-for-One

Case in point.  It might pay to borrow a page from TOMS Shoes’ approach to business and giving.  In 2006, American traveler Blake Mycoskie befriended children in Argentina and found they had no shoes to protect their feet. Wanting to help, he created TOMS Shoes, a company that would match every pair of shoes purchased with a pair of new shoes given to a child in need. They called the program ‘One for One.’  Mr. Mycoskie returned to Argentina with a group of family, friends and staff later that year with 10,000 pairs of shoes made possible by TOMS customers.  They chose to give shoes because barefoot children are at greater risk of contracting soil-transmitted diseases, are more vulnerable to painful cuts and sores which can become infected, and are unable to attend school because shoes are required.

It didn’t take long for the world to notice Mr. Mycoskie’s unusual business model.  In 2007, only a year after beginning TOMS, the company was honored with the prestigious People’s Design Award from the Cooper-Hewitt National Design Museum, Smithsonian Institution. In 2009, TOMS was awarded the Secretary of State’s 2009 Award for Corporate Excellence (ACE) presented by Secretary Hillary Rodham Clinton. The award celebrates companies committed to corporate social responsibility, innovation, exemplary practices, and democratic values worldwide.  While running TOMS, Mr. Mycoskie also spends time speaking at campuses and conferences around the country, encouraging people to make tomorrow better and include giving in everything they do, from business practices to day-to-day decisions. His hope is to see a future full of socially-minded businesses and consumers.

Is this philanthropically-focused business model profitable?  According to the LA Times, the company has turned only a marginal profit so far. Mycoskie himself has said he will need to sell about 1 million pairs of shoes a year to be really profitable. As of September, 2010, TOMS Shoes reported having provided over 1,000,000 million pairs of shoes to children in need around the world.  Based on his one-to-one ratio, that equals an average of 166,666 pairs of shoes sold per year.  He hasn’t accepted any outside investors.  But TOMS was asked to work up lines of shoes for Ralph Lauren’s Rugby Collection, the first time Lauren has ever collaborated with another company.  TOMS also has 200 interns applying for their 15 summer intern positions annually.  So while not ‘really profitable yet,’ it is also not bad start for a startup business born during one of the worst economic recessions of the last century. 

Corporate giving is neither new or news to businesses.  According to a survey by the Better Business Bureau’s Wise Giving Alliance, it is a strategy that 90% of small businesses have already adopted to some extent.  Not all businesses give cash.  Many entrepreneurs – like TOMS — donate products, services, or even real estate.  According to a 2004 study by the National Federation of Independent Business, small businesses collectively gave some $40 billion to nonprofit organizations but it has declined since then.  Moreover, total corporate giving only accounts for 5% of all charitable giving.  While corporate giving has been affected by the economic recession, the savviest business people understand that increased corporate giving can be a sound business practice, especially at a time when people need it most. 

For those who may frown upon the idea of corporate giving as a marketing technique or business strategy, consider that the children who receive the shoes from TOMS likely do not care if the company benefited from the gift.  They likely only care that they have shoes that will protect their feet from hurt and infection and allow them to attend school.  The fact that it is a win-win doesn’t negate the short-term and long-term benefits to the children or their community.

Each business should consider ways in which they can engage in corporate giving as part of their business strategy.  It can be good for the community and good for business.  Then stay tuned next week as we look for some true blue business practices that have been tested over time and sure to result in customer loyalty and business success.  While the wedding expression may be sheer whimsy, the 10 business strategies we’ll examine next week are bound to generate more than a sixpence of profit for any business that adopts them.

Quote of the Week
“I suspect that many corporations have begun to understand that they have an important role to play in the lives of their communities, and that allocating funds to support local groups helps them discharge that function and also burnish their image.”
David Rockefeller

© 2012, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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