October 17th, 2016 | By: Brent Freeman | Tags: Product, Branding
Making a difference and making a profit don’t have to be mutually exclusive. In fact, in today’s environment, it’s now status quo to aim for both. Contrary to the viewpoint of our parents’ generation (make money first, then give back), today’s wave of entrepreneurs embed causes into their business models as part of the company DNA — not as an afterthought.
In 2008, I witnessed firsthand many of my peers launching innovative, socially conscious companies in genres such as fashion, retail, and e-commerce; each had a vision to make a difference in the world while creating a profitable business.
Unfortunately, I saw many of these business models fail due to an improper understanding of market forces, unit economics, or undifferentiated value propositions. No matter how inspiring your cause may be, if you don’t build a sustainable business model that solves a customer pain or engages your audience, you’re destined to fizzle out.
I founded Roozt.com with the vision of becoming the “Etsy for social entrepreneurs,” acting as an online megaphone to market stories, highlight cool products, and ultimately drive more sales. Before that, I worked for an online ad network that was rapidly scaling the pushing of not-so-socially-conscious products like diet pills and car insurance.
When I saw the power of properly harnessing digital media to drive traffic, however, I felt compelled to apply those forces to the companies that deserved them most.
At Roozt, we provided an online platform for small, socially conscious fashion brands to mass market their products and educate customers on how those products made a difference in the world.
We worked with thousands of passionate social entrepreneurs who all practiced cause integration, yet struggled to acquire customers online.
A study by Cone Communications notes that 85 percent of Millennials, presented with two brands of equal value, will select the one associated with a cause. It’s no wonder companies are adopting and integrating social good into their business models.
The question then becomes how to do it successfully. Here are some lessons we picked up that will help put you ahead of the pack:
Consumers can smell inauthenticity from a mile away. If you’re truly inspired by your cause, it will become part of your products, customers, and employees. At the end of the day, your customers are busy people constantly inundated by marketing stimuli, so your best sales pitch is the most cut-and-dried one. If the crux of your social good component requires more than one sentence of explanation, it’s too complicated.
We boiled it down to something called the Impact Formula: For every “X” purchase you make, “Y” impact happens. If you can distill your program to this format, you’re on your way. It will empower your customers with an easy-to-repeat one-liner that increases viral potential.
Remember, there’s a difference between cause marketing (a campaign with a beginning and end date) and cause integration (a fundamental embedding of your cause into the cost of goods sold and DNA of your business). Cause marketing can do a tremendous amount of good; cause integration creates a deeper connection with customers when done authentically.
If your cause is donating a portion of proceeds from every product sold to charity, make sure your business model accounts for that plan in a way that benefits your business in the long run. Build your cause into your COGS as a line item as you would for boxes, materials, or supplies.
Fundamentally embedding cause into your company’s DNA gives you a strong understanding of your margins. Once you properly embed your cause into your COGS, you can focus on scaling the profitability of your business while simultaneously scaling your social impact.
If you don’t tell people how a purchase affects the world, how will they ever know? It’s not enough to just bury it in an “About Us” page, either. Roozt referred to it as “closing the impact loop,” which integrates the Impact Formula from a customer’s purchase into all marketing materials, channels, and messaging.
Document the social good you do by taking pictures or videos of the donations you make in order to close the loop with your customers in a personal way. Done right, it will create a lifelong connection with your customers and inspire them to share your impact with their peers.
The best way to embed social good into the DNA of your company is to integrate your cause into your COGS and customer brand experience in an authentic way. Millennial shoppers are a purchasing force on the rise who are voting with their dollars every day for the companies they identify with — are you going to adapt your business to connect with them?
Do you have any success stories about integrating a cause into your company? Leave a comment below.
Brent Freeman is the co-founder and president of Stealth Venture Labs, and early stage venture lab based in Los Angeles and San Francisco that focuses on incubating and accelerating scalable ecommerce businesses using operational expertise, data science, digital marketing systems and compelling business models. Brent is also an entrepreneur-in-residence at Crosscut Ventures, a venture capital firm based in Los Angeles, where he advises on customer acquisition, digital marketing and consumer internet investments. He previously founded Roozt.com, the first online platform for socially conscious brands to connect with online shoppers.
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