The recent earthquake, tsunami and nuclear reactor failures in Japan remind us that crises often spur cause marketing efforts.
Some of the efforts come from knowledgeable companies following best practices for cause-marketing contracts, transparency and legal compliance. Others are equally well-intentioned, but overlook basic requirements in the zeal to get to market. Finally, there are scam artists who seek to exploit every crisis for their own profit.
State and federal regulators often pay more attention to cause marketing in the wake of a crisis. Here are some key things to think about in times like these.
The Good. Many companies are poised to react quickly and responsibly to crises. They know the rules for contracts, transparent disclosure, and registering donation-with-purchase programs in applicable states. These companies are to be applauded.
The Bad. Some companies don’t know the rules, but want to jump on the bandwagon while the public’s attention is focused on the crisis. While these efforts often are well-intentioned, they often overlook some of the basics, including the following:
- Written Contract. A sponsor should have a written contract with a charity to use that charity’s name in advertising. Some states mandate particular provisions in such contracts.
- Per-Unit Disclosure of Donation Amount. At least 11 states (and the BBB) require disclosure of the exact amount of a purchase-based donation. Nevertheless, some sponsors make fuzzy promises to donate “proceeds” or a “percentage of profits” that a consumer can’t translate into dollars and cents.
- The Flat Donation . A company might donate a fixed amount to a charity, but then advertise that a portion of sales will help the charity. The problem here is that the donation amount is fixed regardless of sales, which can mislead consumers as to the effect their purchases will have.
- Failure to File. The company has a duty to register and/or post a bond in six states. This is often honored more in the breach than the observance.
The Ugly. No one wants to think about it, but there are unscrupulous scam artists who will exploit any situation for their own advantage. Common scams include false offers to donate money with purchases, or solicitations for non-existent charities. No one reading this posting is likely to engage in such practices. But fear of scams can put consumer-protection and charity-regulation agencies on high alert, and their extra vigilance can bring even well-intentioned programs under the regulatory microscope in times of crisis.
What to Do? Cause marketing is a powerful tool. It can help do a lot of good in times of crisis. Companies and causes should not be afraid of this tool. The good news is that it’s easy to do cause marketing right. The bad news is that it’s even easier to do it wrong. The ugly truth is that many companies (and causes) don’t know how to tell the difference. A little bit of homework and advance planning can go a long way to preparing you to act quickly in the face of the next crisis. You can then act with the confidence that you are following the law and best industry practices. If you don’t yet know the rules of the road, consult an attorney knowledgeable about cause marketing. An ounce of prevention . . . .
Ed practices in the areas of advertising, promotion, sweepstakes, intellectual property, internet and trade regulation law, including charitable promotions, protection and licensing of trademarks and copyrights worldwide, electronic commerce, and antitrust law. In 2008, he joined Greenberg Traurig’s Las Vegas office after 20 years practicing in Connecticut.