When I went to Long Beach to hear Peter Singer at TED I had the pleasure of also hearing Dan Pallotta's talk: The way we think about charity is deadwrong. Of course Peter's talk was great – I knew it would be – but I did not know Dan and, therefore, I was pleasantly surprised and pleased by his message. In part, Dan was saying that non-profits, as a group, have demonstrated anemic growth rates because they do not use marketing strategies that have worked extremely well in the for-profit arena. These marketing strategies have contributed to very high compounded annual growth rates over many, many years for many, many companies. Based on my experience as Head of Marketing and President of a large retail company, Dan's message rang true to me.
An important challenge for effective international charities, including us at The Life You Can Save, is to demonstrate that marketing expenses are a critical element in raising significant incremental dollars for the fight against global poverty. I suggest that charities need to look at marketing the way a retail business does. After all, retail businesses use marketing to drive incremental margin dollars not just incremental sales volume, which means that they don't just look at the volume produced by their marketing, but at the net dollars after marketing and other expenses have been accounted for. If a company can sell a product for $25, and it costs them $15 to produce the product and get it into the hands of consumers, marketing will be profitable so long as marketing costs are less than $10 per additional unit sold. Yet as Dan points out in his talk, many donors who focus on simplistic metrics like overhead ratio punish charities that spend money on marketing, even when that marketing is “profitable”, resulting in more money overall for whoever the charities are trying to help.
Now imagine that the Against Malaria Foundation, the Fistula Foundation, or one of our other recommended charities ran a TV advertising campaign in New York City during the giving season that cost $125,000 for two weeks, but led to $350,000 in new donations. Would it have been worthwhile? Almost certainly (depending upon their normal rate of new donations from that area during the same period in previous years).
Some would ask if their campaign just took money from one effective charity and moved it to the advertised charity instead, such that very few additional dollars were actually raised for effective charities. That is certainly a possibility, but common sense would suggest that many new donors were brought into the market by the campaign. And specifically marketing effective giving options to people who don't give much and don't think much about where to give is likely to drive new money to effective charities.
All good retailers test their way into learning what is the best marketing strategy for themselves – content, creative, channel (TV, internet, newspaper, etc.), amount, and locations. Companies don't like to invest very much money until they have a pretty good idea about how profitable the investment is likely to be. So charities should do the same – test, test, test – in order to refine the key elements of their marketing strategies.
In any case, the public (and charities) must learn that marketing is critical to growing the number of dollars given to effective charities and to changing the culture of giving – increasing the number of people who believe that they have the means to fight global poverty and an ethical obligation to do so. As The Life You Can Save matures as an organization we hope to use mass marketing effectively to significantly increase the amount of money donated to effective charities and to help change the culture of giving. We urge other charities to do the same, as long as they use the same rigorous methods of evaluating marketing effectiveness that successful companies do.