All in a good cause

All in a good cause
Published: 
February 2014

Corporate sponsorship of charities is on the rise and offers benefits for both sides – though choosing the wrong partner can damage reputations. Now research has cast new light on what makes a successful sponsorship deal.

People should perceive a benefit from the corporate sponsor to the cause, other than the monetary gain.

Of the 700,000 non-profit organisations in Australia, the majority depend on donations – and while the Australian public is renowned for generosity, it is corporate sponsorship that keeps many of these organisations afloat.

Worldwide, the amount companies spend on sponsoring good causes has been growing. According to consultants IEG, the total amount reached US $1.7 billion in 2012, and was expected to rise to US $1.78 billion in 2013.

With companies keen to be seen as good corporate citizens, supporting a good cause is an effective way to enhance their image. In North America, corporate spending on cause sponsorship is now growing even faster than spending on advertising or sales promotion.

For non-profit organisations, corporate sponsorship is a valuable income stream at a time when competition for donor support is increasing and government funding is in decline. For both sides, it is an opportunity to raise their profile and reach out to different audiences.

However, not all sponsorship arrangements are successful. Well-crafted sponsorships can enhance the company’s reputation and the charity’s credibility, but poorly thought out partnerships can create cynicism amongst the public about the sponsor’s motives, resulting in unfavourable outcomes for both sides.

So how can marketing managers avoid these risks? Now research by UQ Business School on behalf of the Australian Red Cross Blood Service has shed new light on the factors behind effective non-profit sponsorships.

Dr Ravi Pappu, who led the research project, says that choosing the right sponsor is critical for non-profit organisations as they rely on goodwill to achieve their social goals. The Australian Red Cross Blood Service, for example, needs to attract 5,000 blood donors a month to maintain the nation’s blood supplies.

“Good sponsorships should help both partners achieve their goals,” says Dr Pappu. “The partnership should be seen as logical by stakeholders and the target market and should not arouse people’s suspicions of the sponsor’s intentions. People should perceive a benefit from the corporate sponsor to the cause, other than the monetary gain.

“It is good for the company if the sponsorship is viewed as a genuine effort to help the cause and not just an attempt to build market share or improve image. It is bad if people perceive that the company is doing it because of shareholder expectations, or even worse, to avoid tax or take advantage of the non-profit organisation.”

The project, which was supported by an Australian Research Council grant, found that perceived similarities between the partner organisations and the relationship fit -  how it would benefit the cause – influence how the sponsorship is viewed by the target audiences.

It is the first time that similarity has been considered in sponsorship research. “Previous investigations focussed mainly on the fit, and concluded that high-fit equals high benefit,” says Dr Pappu. “Another difference with our research was that it investigated two categories – blood donation and cancer – which very few previous studies have done.”

The team found that high-fit sponsorships between high similarity partners work well. “Similarity means whether the sponsor and the nonprofit have something in common,” says Dr Pappu. “For example, the Australian Red Cross Blood Service aims to improve people’s health through blood donations. If a company which is known for providing fresh, healthy food sponsors the service, not only is there a similarity but people can also see a clear benefit from the sponsor brand to the cause, therefore it is also a high-fit relationship.

“By contrast, fast food chains and non-profit organisations promoting health have less similarity as fast food may have an adverse effect on health. If a fast food brand, generally associated with junk food, sponsors the Leukaemia Foundation, this may be considered to be a negative benefit, hence it is a low-fit sponsorship.

“We found that sponsors and non-profits both have to take both relationship fit and partner similarity into consideration when considering sponsorships. If the organisations are viewed as very similar to each other, but the relationship is not high-fit, people can become suspicious of the company’s motive.

“This is particularly the case if there are aligned differences between the partners – in other words, they are seen as operating at cross-purposes. Low-fit sponsorships between highly similar partners can dilute people’s attitudes toward social sponsorships.”

The team suggests that corporates which want to improve their image and genuinely want to deliver in terms of corporate social responsibility may consider charities that are not similar and do not have aligned differences.

The research findings also suggest that it is not sufficient to enter in a sponsorship arrangement – both parties need to engage in marketing to communicate the rationale behind the partnership and the benefits to the target audience.

Dr Ravi emphasises the important role that non-profits play in Australia, not just in terms of the value of their charitable activities but also as a force within the economy.

“The biggest 41,000 non-profit organisations between them employ close to a million people, equivalent to 8.6 per cent of the workforce,” he adds.

“Many of these organisations rely on sponsorship. Our research has important implications for these and the private sector companies which support them.”