Customers will pay more for a product or service when a greater portion of the price goes to a cause. What else influences people’s willingness to pay?
A Look at the Causes, Products, and Prices that Work Best in Cause Marketing
A glance at the shelves of any retail or drug store today will tell you cause-related marketing is big business. From water bottles and gym bags to bumper stickers and Happy Meals, there are countless product lines that dedicate part of their profits to sending kids to camp, supporting breast cancer research, helping veterans and their families—the worthy causes are many.
But does having a pink ribbon on your company’s line of gym bags make consumers more likely to buy them? According to new research from Nicole Koschate-Fischer and Isabel Stefan of the University of Erlangen-Nuremberg, and Wayne Hoyer at the University of Texas at Austin—it depends.
The Larger the Donation, The More You Can Charge
Previous research has already shown that customers are willing to pay more for a product or service when a greater portion of the price goes to the cause (10 per cent of the purchase price versus five per cent, for example). But Koschate-Fischer and colleagues wanted to know what else influenced people’s willingness to pay for cause-related products. The researchers conducted four studies to examine consumer willingness to pay. They asked university students to assess actual products, including Corny cereal bars and Gerolsteiner mineral water, and actual charities, such as a group revitalizing a German river and a society for the prevention of cruelty to animals.
The More People Care, The More You Can Charge
The researchers found customers are willing to pay even more for cause-related products when they:
care more about the cause
feel a closer affinity with the cause organization
have a greater desire to help others
experience a “glow” at the thought of helping others
BUT! The Crucial Link between Your Company and Your Cause
The researchers found that customers’ sense of fit between your company and your cause affects how much they’re willing to pay for your products.
Surprising Cause + Low Donation = Low Price
When the link between your company and your chosen cause is weak and the donation amount is low—for example, a bottled-water company donating just five cents per sale to the prevention of animal cruelty—customers assume the company is exploiting the cause rather than sincerely contributing. In this case, they are not willing to pay very much for the bottled water.
Expected Cause + High Donation = Higher Price
In cases where there’s a strong link between the company and the cause—a bottled water company supporting a river clean-up—the customer’s willing to pay more.
Surprising Cause + High Donation = Highest Price
When there’s no obvious connection between your company and the cause you support but your donation amount is high, customers conclude that your company truly cares about the cause. And they’re willing to help pay for it.
Company-Cause Fit and Willingness to Pay
In Cause-Related Marketing, Utilitarian Products Are King
The researchers also discovered cause-related marketing affects customers’ price sensitivity for utilitarian products (water, facial tissues, toilet paper) more than for hedonistic products (cologne, jewelry, cosmetics). Consumers make hedonistic purchases with their emotions but utilitarian purchases with their heads. They’ll buy a great-fitting pair of jeans regardless of the cause the clothing company supports. But a large donation to breast cancer research will tip their decision about which toilet paper to buy.
To get the most out of your cause-related marketing:
Focus on utilitarian rather than hedonistic products. Think water bottles and toilet paper rather than cell phone covers and running shoes.
Support a cause people wouldn’t normally associate with your organization.
Commit to a high donation amount per unit sold.
Nicole Koschate-Fischer, Isabel V. Stefan, and Wayne D. Hoyer. 2012. “Willingness to Pay for Cause-Related Marketing: The Impact of Donation Amount and Moderating Effects.” Journal of Marketing Research, 49: 910–927.