There has been a lot of debate about cause related marketing concepts like the RED campaign. Some people question how much money actually goes to charity and whether buying something with the agreement the seller will donate a portion to charity is a model that even makes sense.
I think that donors (and consumers) want to take greater control of the transactions they engage in. For instance, I use the Chase Perfect Card for my daily purchases. Instead of rewarding me with miles or some sort of gift, the Perfect Card simply rebates 1% of my purchase price in cash back to my card. Rather than having to deal with figuring out the various airline mileage schemes, I get pure cash that I can use in any way I want. There are charity branded credit cards but they 1) force me to donate all of my rewards to one charity and 2) often don’t offer very high reward rates.
This brings me to FreePledge.com. For a long time now, internet retailers have willingly paid commissions to members of their “affiliate” program. Anyone can put a link on their webpage to a retailer and if someone clicks on that link and purchases something, the “affiliate” gets a percentage of the sale. The trick of course for the affiliate is getting people to visit their webpage.
FreePledge seems to have developed a rather compelling model. They have aggregated 165 online retailers (including such mainstream stores as Amazon, Staples and Target) and created a shopping portal. All of these stores pay FreePledge a commission on sales generated through their site. The hook is that FreePledge consumers redirect about 70% of the commission to the nonprofit of their choice. This isn’t chump change. Many of the affiliate programs pay commissions of around 5-10%. This means that by buying an item from Amazon through the FreePledge site, 5% of your purchase price goes to the charity of your choice.
What would happen if FreePledge became a dominant online shopping portal? Suddenly retailers who wanted access to the shopping traffic would have to pony up big money to charity. Telling consumers that they would donate a small percentage of their purchase to charity (a charity chosen by the retailer) just wouldn’t cut it. Instead, consumer/donors would have a new benchmark by which to judge cause related marketing efforts. If the retailer wasn’t donating at least 5% and giving the shopper the freedom to choose the cause, their cause related offering simply wouldn’t be attractive.
FreePledge is a for profit company. To me they are an excellent example of a for profit social venture. Sure, they are keeping about 30% of the commissions. But think of it this way. If they have 20% profit margins that means they are earning 6% of the commissions. If they chose a nonprofit structure and did not demand a return on their investment, they could reduce their share of the commissions by 6% and give 76% rather than 70% to the end nonprofit. However, they would lose access to expansion capital, the ability to attract employees who want to work on the for profit side (they’re headquartered in silicon valley) and potentially would not have found the courage to take the risks involved in launching a startup if it was not for the potential monetary rewards.
I signed up today.