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La Piana Consulting Blog

Archive for November, 2006

Business as Unusual

By Michaela

Tuesday, November 14th, 2006

The New York Times reported on November 13 that “for stores, charity is no longer an option. It’s a requirement.”

But I wonder just how much “charity” is involved in all this “giving.” The article cites retailers ranging from Gap, Apple, and Motorola to Bloomingdale’s and MAC cosmetics, all of whom are developing products that tout a connection to a cause. The author traces the phenomenon to Lance Armstrong’s Live Strong bracelets of a couple years ago. Retailers saw them jump off the shelves and realized they could make a buck on this phenomenon — I mean they recognized an opportunity to contribute to philanthropy.

OK, so I have my doubts. For example, Neiman Marcus (Needless Markup), Barney’s, and Bergdorf Goodman offer an “Elton John scented candle,” for $50, with a small bit of the proceeds benefiting The Elton John AIDS Foundation.

Now, I am not sure I even want a candle that smells like Elton John — or anyone else for that matter. If I want to experience another person’s “scent” all I have to do is go to the gym. And come to think of it, I prefer the scent of Cody, my 12 week old Labradoodle, who is asleep on my lap as I write this. I can smell him for free any time I want, without contributing to global warming.

But my question about the charitable intent in all this “giving” comes down to this: Are these retailers actually giving anything up in order to make these donations?

Back to Elton’s $50 candle: Bath and Body Works recently announced a cheaper version at $16.95, with $2 going to the AIDS charity. So the same candle can be under $17 or $50. Maybe for the higher-priced version Elton personally rubs them under his armpit for a few seconds before they are packaged. If the high-end retailers wanted to sell a regular old candle (and I hope it’s a big honkin’ one for $50) without Elton, wouldn’t they have set the price at, say, a more reasonable $25 (I must confess, my only candle purchases are for stocking my emergency earthquake kit, and they cost about $2 for a set of 6).

After the election last week I am in an expansive mood, so let’s give the stores the benefit of the doubt and assume they would have priced their non-charitable, 100% filthy lucre inspired candles at $30. Only now, by giving 10% of the sale to the Elton John AIDS Foundation, they can sell the same candle for $50. Their net is $45, which is a 50% increase over the non-charitable price. As a Franciscan once said upon seeing the order’s oceanfront retreat center in Malibu: “If this is poverty, bring on chastity!”

I may be old fashioned, but to me philanthropy involves a sacrifice. You take something from your pocket and give it to another because the need you are addressing is powerful and your connection to it inspiring. What I am reading about in the retail world is just a new gloss on what we used to call “cause-related marketing:” trying to get a little of the profit to fall toward the nonprofit, in exchange for the company associating itself with a noble cause.

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Would You Recommend Me to a Friend?

By Michaela

Thursday, November 9th, 2006

I just read an interview with Jeffrey Immelt, the CEO of GE. One thing he said that struck me as simple, doable, and useful, is something he called the “net-promoter score.” This is a measure of how well an employee, a work group, or the whole enterprise, is doing in pleasing its customers.

You ask customers a simple question such as: “Would you recommend us to a friend?”

In GE’s case the customer’s friend might be a potential customer to whom GE would like to sell millions of dollars of services. In your case it might be a Mom who trusts you with caring for her preschooler, and would recommend the service to her friends. Different context, but it is the same simple — and powerful — question.

You calculate the score by taking the percentage of people who answer “yes” and subtracting from it the percentage who answer “no.” For example, if you asked the question of 100 customers/clients and 80% said “yes,” while 20% answered “no,” your score would be 80-20=60. Raising this score is a prime measurement of success. You could calculate the score annually for individual employees, for programs, or for the entire nonprofit.

Try it.

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