Boosting Charitable Giving Can Also Boost Profits

Giving, when done right, is the ultimate marketing incentive, drawing shoppers and increasing consumer spending.



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As we head into the final weeks of 2021, many nonprofits across the country face an important question: Will corporations step up their donations to charity, or continue last year’s slide? In 2020, as the pandemic swept across the world, giving by individuals went up substantially, with Americans donating $471 billion, a 5% increase from 2019 levels. Giving by foundations spiked 19%, to $89 billion. But corporate giving fell by 6%, to $17 billion.

The Lilly Family School of Philanthropy, which gathers data for its annual Giving USA report, explained that “corporate giving was affected by declines in aggregate GDP and corporate pretax profits.” In 2020, corporate giving accounted for only 3.6% of total contributions to charities, “the lowest recorded value in the last 40 years.” While the pandemic certainly played a role in the decline, corporate donations had already started to become a smaller fraction of the total in previous years. Between 2017 and 2019, corporate giving did go up, but donations by individuals and foundations grew more quickly.

The differences between individual and corporate giving reflect a problem with the way businesses view charitable donations. Rather than seeing them as opportunities to do good when profit margins are high — as well as to get some positive PR and enjoy a tax write-off — corporations should take a whole new approach to charity. It’s time to recognize that giving, when done right, is the ultimate marketing incentive. It draws shoppers and increases consumer spending.

When Customers Choose Charities, Spending Surges

As brands compete for holiday shoppers, they would do well to learn this lesson: Charitable donations can boost sales and profits. Numerous surveys have shown that corporate donations attract customers; Mintel, for example, found that charitable giving affects nearly three-quarters (73%) of Americans’ spending decisions. Half of the consumers surveyed said they would switch to a company that supports a cause they believe in, including 61% of adults age 41 and younger.

These donations can come in different forms. Businesses can choose where to donate, or they can allow individual shoppers to choose a charity — say, as a portion of each sale. Researchers at the University of Miami and the University of South Carolina conducted multiple experiments to determine which of these systems is most effective.

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https://sloanreview.mit.edu/article/boosting-charitable-giving-can-also-boost-profits/

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