CAUSE MARKETING

NYAG

Protecting Consumers
Helping Charities


Across the county, companies market products with promises that a donation will be made to charity. "Cause marketing" today has grown into a billion dollar a year industry, and is a familiar presence in supermarkets, drug stores and other retail stores. More recently, cause marketing has embraced social media, such as Facebook and Twitter, with companies promising donations if a user "likes" or "follows" a company or product.

While cause marketing can result in substantial benefits to charities, it is important that consumers understand how the charity will benefit and that it will receive what has been promised. To protect consumers and help charities, Attorney General Schneiderman has issued Five Best Practices for Transparent Cause Marketing. Companies and charities are urged to adopt these practices in their cause marketing campaigns.

FIVE BEST PRACTICES FOR TRANSPARENT CAUSE MARKETING (PDF)

1. Clearly Describe the Promotion. Consumers should be able to easily understand before purchasing a product or using a service how doing so will benefit a charity. Advertisements, websites and product packaging used in the cause marketing campaign should clearly and prominently disclose:

  • The name of any charity receiving a donation, as well as the mission of the organization if it is not readily apparent by the name
  • The benefit the charity will receive from the purchase of a product or use of a service
  • Any flat donation, any minimum amount guaranteed to the charity, or any maximum amount or other cap on the donation
  • Any consumer action required in order for the donation to be made and any other restrictions on the donation
  • The start and end dates of the campaign

These key details should be displayed together in a clear and prominent format and size, and in close proximity to, the text used in marketing the promotion. Disclosing information separate from the principal marketing of the campaign does not promote transparency or allow consumers to make informed decisions at the point of purchase or use.

To provide maximum transparency, consider using a "donation information" label on products or websites used in the promotion:

DONATION INFORMATION
Name of Charity ABC Cancer
Donation Amount 10 cents Per Purchase
Limitations on Donation $500,000 Maximum Donation
Dates of Promotion 10/1/12 through 12/31/12
More Information www.product.com

2. Allow Consumers to Easily Determine Donation Amount. Vague terms like "profits" or "proceeds" are meaningless to consumers and prevent them from knowing how their purchase or use of a product or service will benefit a charity. Using and disclosing a fixed dollar amount - such as 50 cents for every purchase - in advertisements, marketing and product packaging will allow consumers to easily calculate their charitable donation. If it is not practicable to use a fixed dollar amount per item, use a fixed percentage of the retail purchase price.

3. Be Transparent About What Is Not Apparent. A company's or charity's brand is its most valuable asset. Nothing can damage the reputation of that brand more than when consumers or donors believe they have been snookered. To maintain public trust and confidence, err on the side of caution, and disclose what might not be apparent:

  • If a flat donation has been promised or paid to a charity, regardless of a consumer's purchase or use of a product or service, be clear that consumer action will not result in a contribution to the charity
  • If all or part of a donation to a charity is an in-kind contribution and not monetary, disclose the nature and amount of the in-kind contribution
  • If a ribbon, color, logo or other indicia commonly associated with a charitable cause is used in a cause marketing campaign, clearly and prominently disclose whether the purchase of a product or use of a service will trigger a charitable donation
  • If a purchase triggers a donation, but there is a cap on the amount to be donated to charity, do not saturate the market with products; limit the number of units distributed to a quantity that is reasonably expected to produce the maximum donation. On the other hand, if there is a minimum donation guaranteed, stock the shelves; ensure that enough products are distributed for sale so that the minimum amount can be sufficiently exceeded.

4. Ensure Transparency in Social Media. Increasingly, companies are partnering with charities through social media sites to promote their products and raise money for charities. Typically, companies will provide a donation if a Facebook user "likes" a company, or a Twitter user agrees to "follow" a company, or a Google+ user agrees to "+1" the company.

Companies and charities should be no less vigilant about transparency in social media cause marketing campaigns than they are in traditional product-based campaigns. Following the best practices described above, the terms of the social media campaign should be clearly and prominently disclosed as part of the campaign's on-line marketing, including the amount that will be donated to charity per action, the name of the charity that is the beneficiary of the campaign, the dates of the campaign, and if there is a minimum or maximum amount to be donated.

Companies should also have a system in place to track donations in real-time for the duration of the campaign, to make transparent to users the progress of the campaign. When the campaign ends, it should either be discontinued entirely, or it should be clear that any subsequent actions will not result in a donation to a charity.

5. Tell the Public How Much Was Raised. To further transparency, companies and charities should maintain on their websites key information about all active and recently closed cause marketing campaigns. At the conclusion of each campaign, the website should clearly disclose the amount of the charitable donation each campaign generated. Doing so will allow companies not only to showcase their generosity, but also to demonstrate their accountability to the public.

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ADDITIONAL GUIDANCE FOR CHARITIES

For charities, a cause marketing arrangement may seem like a good deal. However, before participating, a charity should know its rights and obligations:

  • Enter into a written contract. New York law requires that a commercial entity using a charity's name in its advertising must have a written contract with the charity spelling out the terms of the arrangement. A charity's name may not be used without its express written permission.
  • Ensure that the arrangement is in the best interest of your organization. The charity's officers and directors must ensure that the organization's contracts are fair and reasonable, that the charity's name will be used appropriately, and that the charity receives all funds due to it.
  • Fulfill any promises concerning specific use of the funds. If the marketing campaign states that the charity will use the funds in a specific way - for example, a charity that pledges to apply the funds to cancer research - then the charity must ensure the funds are actually applied to that purpose, and not diverted for other programs.
  • Make sure that your organization's name and logo are being used appropriately. The charity should retain the right to review promotional materials using its name and logo in advance of publication, to make sure they are not inconsistent with the charity's mission or reputation.
  • Get financial reports of the campaign. The business running the promotion must provide the charity with periodic and final accountings, stating the number of items sold, the dollar amount of each sale and the amount due to the charity.
  • Include information about your organization's commercial partners in your annual report to the Charities Bureau. Generally, charities based in New York or receiving more than $25,000 annually from New York sources (including through cause-marketing arrangements) must register with the Attorney General's Charities Bureau and file an annual report. A charity's annual report - New York form CHAR500 must identify its commercial partners and include a summary of each arrangement.

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TIPS FOR CONSUMERS

Store shelves are lined with products promising charitable donations. Some are easy to understand, while others are confusing and don't tell consumers where the money is going. Here are some basic tips for consumers looking to support charity with their shopping dollars.

  • Make sure the charity is named. You should be wary of products that promise to support charitable causes without identifying a specific charity. Products should clearly state the name of the charity or charities that will benefit. Otherwise, you have no way of knowing which, if any, charities will benefit, and whether they are ones that you would support.
  • Look for specific donation amounts. You should be able to easily identify how much the charity will receive from your purchase. Watch out for products that use vague terms like "profits" or "proceeds" to describe the charitable benefit. Good cause marketing will disclose a specific dollar amount or a percentage of the retail price that will be donated to charity.
  • See if any action is required. Some companies require you to take additional action after purchase, such as registering information on-line or mailing in a product label. Make sure you are aware of the steps needed to trigger the donation, and decide whether you are willing to take them.
  • Check if the campaign has ended. Cause marketing campaigns usually have a time limit. Check to see if one is mentioned and whether or not it has expired. This is especially important when buying clearance or discounted products.
  • Know that some companies donate a fixed amount. Understand that if a company has promised a fixed donation amount to a charity, your purchase typically will not result in a larger contribution. Although transparent cause marketing should make that clear, be on the lookout for language that the company "has contributed $X" or "will contribute $Y" to a charity. This language often indicates a fixed donation.
  • Remember the choice is yours. You can always choose another product if the charitable benefit is not clear.

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