Canadian corporations spend $1.2 billion each year sponsoring sporting and charitable events, along with other community-oriented endeavours. Some very well might be done out of the goodness of corporate hearts; more likely these efforts are designed to boost a company’s reputation with consumers. But many of these good deeds are failing to register with people, and that means companies are not seeing a financial return on them.
“If I were a shareholder of that company, I’d be pissed,” says Andrew Grenville, chief research officer with Angus Reid Strategies, a market researcher based in Toronto. In a recent study, Angus Reid compared companies with good reputations (as determined by measures such as the Jantzi Social Index and Corporate Knights magazine’s list of the 50 best corporate citizens) to its own Corporate Reputation and Sponsorship Index (CRSI), which measures the standing of 217 brands with the public. It turns out, corporations that rank highly on measures such as the Jantzi do not necessarily have the best reputations with the public. Indeed, more than 83% of the companies in the CRSI are not being fully recognized for their efforts, says Anu Bhalla, senior vice-president at Angus Reid. “It’s great to have that reputation, but unless you’re leveraging it to the full extent, you’re wasting money,” she says.
Make no mistake, philanthropy can improve a corporation’s reputation, and, when done correctly, lead to financial gain. But many companies are unfocused when it comes to such initiatives. Angus Reid has dealt with clients who dole out meagre amounts of cash to hundreds of diverse causes, making it difficult to develop a consistent message. “To be clear about what you’re actually doing when talking to your customers can’t be done when you have 600 causes,” Grenville says.
That’s one reason Tim Hortons tops the CRSI index. The company promotes its Children’s Foundation camps and minor sports program as its primary charitable endeavours. McDonald’s, another top-ranked company, is equally concentrated on its children’s charities. Successful companies also brand their activities and link them to their corporate identities. For example, Tim Hortons’ causes are related to the outdoors and sports, which suits its Canadiana image.
But companies also need to overcome what Grenville refers to as “false modesty,” and aggressively promote what they do. Tim Hortons, McDonald’s and Canadian Tire advertise their efforts in every one of their stores, yet there is little danger of overloading consumers. “It won’t result in fatigue if you can make it real,” Grenville says. “The more corporations can build a sense of trust and citizenship, people are going to respond to it.”
The results can be powerful. Companies at the top of the CRSI are so closely associated with charitable activities that some consumers believe they are involved in causes they, in fact, have nothing to do with. A halo that shiny is invaluable during a recession. “Corporate reputation speaks to resiliency,” Grenville says. “People will stick to you if you’re a good guy.” Furthermore, he adds, a good reputation increases the likelihood a customer will recommend a particular corporation’s products or services to friends, and that boosts sales.
Willingness to recommend is also known as the Net Promoter metric, a measure of loyalty developed by American business author and consultant Fred Reichheld, who claims it is the best predictor of a company’s growth. But the link between how many people recommend a company and revenue growth “has not been subjected to rigorous scientific scrutiny and peer review,” wrote researchers in the Journal of Marketing in 2007, who found Net Promoter to be no better than other measures of customer satisfaction.
Other researchers have found a good reputation leads to higher financial performance by weakening the competition, allowing for premium pricing and attracting talent. Regardless, only the coldest of hearts would argue against philanthropy simply because effects on the bottom line have proven elusive. But if you’re going to engage in these activities, you may as well do it right — and get full recognition.