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Is branding good for charities?

Michael Sanders

This Saturday’s Financial Times[1] ran a column under the headline “Charity begins with a brand” (although I note that the online edition of the newspaper contains the more equivocal “can”). Title notwithstanding, the tone of the article is encouraging to the branding of charities, specifically when it comes to applying for companies’ CSR budgets, although the phenomenon is hardly limited in this way, with branding increasingly a common part of charities’ functions.

This may, as the column suggests, be the result of the rise of entrepreneurial individuals within charities (or at the helm of smaller operations) – as the author, Mike Southon, writes “Twenty years ago, the main ambition of university students was to secure a lucrative job in a merchant bank, Today, the social conscience of young people seems much better defined”. Although a straw poll of my students suggests that the desire to work for a merchant bank remains alive and well, there is no doubt that many charities are trying to learn from the tools used by private sector companies to sell their wares. Is this an unambiguously good thing, however?

There is no doubt that advertising and branding are powerful tools, but it isn’t clear with whom charities are competing. Research by the CMPO[2] and Cass Business School finds that giving as a portion of spending has been fairly constant since at least the late 1970s, despite a number of policies designed to increase it, and that charities are increasingly dependent on a shrinking pool of donors.

If the rise of ‘professionalism’ within fundraising, as well as a number of government policies to increase giving, have had little effect on overall giving levels, perhaps charities are not competing with private firms for donations but with each-other (we cannot observe the counterfactual world without these changes, and so cannot say for certain that giving would not have been far lower than it is without them, however). If this is true, branding may be good for some charities but bad for others. With the money spent on branding, it essentially boils down to a negative sum game.

It is possible however that the charitable giving sector is a natural monopoly and that charities enjoy considerable economies of scale, as we might easily imagine for the distribution of mosquito nets – if this is the case then the game need not be negative sum as well branded charities will increase in size and benefit from reduced costs, making the entire sector more efficient. It is also possible that professional branding and advertising make workers in an organisation more productive, and that output will rise sufficiently to compensate, even if significant redistributions of donations between charities do not occur.

It is equally plausible, however, that charities have committed themselves to a race to the top in their branding, spending ever more money to compete over a pot whose size does not change.

Neither of these are impossible, and there is not currently enough evidence to support either conclusion – until there is, the effect of branding and entrepreneurship on the fundraising side of charitable giving will remain ambiguous.

[2] Smith, Pharoah, Cowley and McKenzie (2011) “The state of donation: New evidence on charitable giving in the UK” http://www.bristol.ac.uk/cmpo/news/2011/505.html

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  1. November 22, 2011 at 10:53 am

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