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Commercial Relationships

Rachel O'Leary and Carmen Vandenabeele
LLLI Board of Directors Commercial Relationships Task Force
Assisted by the "Funding from Companies?" Community Network discussion group
From: LEAVEN, Vol. 42 No. 3, July-August-September 2006, pp. 50 & 71

Abstract: Any Leader who has taken a donation from a business has been part of a commercial relationship in her LLL work. LLL accepts funding from for-profit companies if they are appropriate for us. How do we decide if they are right? This is the first in a series of articles and therefore begins with definitions and comments. What challenges do you face with accepting funds from businesses? Please write to Jane Tuttle at jane.tuttle at gmail dot com.

Have you ever had a conversation like this:

"Our Group is having a sponsored walk and I've arranged for Brown's to give us some prizes, isn't that great?"
"But Brown's is the store that sells formula at cut prices in our town....We can't take that money!"

Or how about this conversation:

"Our Area Conference received a donation from Green's, isn't that great!"
"Well, no, Green's sells alcohol to underage drinkers."
"Is that our concern, as La Leche Leaders?"

A commercial relationship is one in which there is some agreed on material or financial benefit to both parties. A commercial relationship is doing business -- an exchange of benefits that have material value.

Worldwide, for-profit companies are hoping to team up with charities. It is part of their marketing strategy. The good reputation of the charity enhances the brand name of the for-profit company. It increases brand loyalty among customers. Cute imagery and emotional responses transfer themselves from the good cause (wildlife, babies, people caring for each other) to the product. This cause-related marketing is a growing trend. It can reap great rewards for both the charity and the for-profit company; however, caution is needed.

Many parts of La Leche League have relationships with commercial companies, including LLLI. It's often hard to work out what's a good source of necessary funding and what might have a negative impact on our image. Throughout LLL, we are seeking new sources of funding to support our activities; at this moment we are taking a close look at relationships between our non-profit organization and for-profit companies.

Non-profit organizations need to be very careful to guard their name and reputation to ensure that any relationships they establish with companies are in the best interests of the people they serve. In our case, the people we serve are mothers and babies. This viewpoint can help us keep our perspective when we are dizzy about the prospect of "easy" or "free" money!

Breastfeeding is the gold standard for infant feeding. La Leche League represents the gold standard for mother-to-mother breastfeeding support. We are a well-established non-profit organization with a reputation for excellence in the field of health. We have a positive track record and a very targeted audience: breastfeeding mothers and babies. Our reputation and the people we serve make La Leche League an attractive partner for collaboration. Like many non-profit organizations, we take care to ensure that our commercial relationships are appropriate for us: this makes us slower to respond to requests than many businesses. We have found some business people are delighted to work with us because they support our cause; others may be more motivated by the potential sales they anticipate from the collaboration.

In this article, we define the various types of relationships that non-profit organizations can have with for-profit companies and comment on the advantages and potential challenges of each one. We would like your help, too. In your part of the world, what are the challenges you face when considering accepting money from commercial sources?

This article is the first in a series considering different aspects of this fast-changing social practice. Please tell us what is a "hot topic" for you and what questions you have about commercial funding.

Please contact us with your thoughts and experiences of commercial relationships (email Rachel O'Leary at ROleary at llli dot org and Carmen Vandenabeele at CVandenabeele at llli dot org), or join the "Funding from Companies?" discussion group on the Community Network

Special appreciation to members of the LLLI Board Commercial Relations Work Group 2005-2006: Edie Boxman, Martina Carabetta, Betty Crase, Jenn Hopkin, Nan Jolly, Sue Ann Kendall, Ellen Shein, Jane Tuttle, Stephanie Weishaar, Carole Wrede, Susi Yermishkin, and Heidi BK Sloss. Thanks also to participants in the Community Network discussion "Funding from Companies?"

Definitions

Definitions of types of relationships between for-profit companies and non-profit organizations, listed from the most distant relationship to the closest.

  • Donation or contribution: the gift, promise, or pledge of cash or other assets with nothing expected in return. A "charitable contribution" is a tax-deductible donation given to a non-profit organization. In some countries, charitable contributions reduce a company's or an individual's tax liability. Contributions can also be made by forgiveness of debt or by donating in-kind goods. Generally, contributions are made in response to a solicitation by the organization or one of its supporters.

    Donations may be "unrestricted" for the general purposes of the organization, or "restricted" to purposes designated by the donor. Donations can be anonymous, or the donor's name can be made public at the donor's choice.

    Non-profit organizations recognize and thank donors publicly in various ways if they do not wish to remain anonymous. The simplest is a listing in the Annual Report. If commercial donors require a particular form of public recognition, is this perhaps in reality a type of advertising?

  • Affinity marketing is collaboration between two or more companies/organizations to recruit and retain customers. Affinity programs are everywhere. One of the oldest programs is still popular: an organization's logo on bank checks or credit cards.

    Affinity marketing on the Internet is a way to increase Web site visibility, drive traffic to the organization's site, and boost sales on the site. Instead of acting on their own to broadcast the same message to millions, organizations team together to attract customers with similar interests. The challenge in sharing Web site banners or links from one organization's site to another is finding suitable partners as neither organization can dictate to the other the content of the Web site.

  • Corporate sponsorship is "a relationship between a non-profit and a company where the non-profit receives monetary support, goods, or services in exchange for public recognition of the company." (This definition is from Board Source, a resource center for non-profit boards in the USA.)

    Sponsorship goes beyond advertising in that it aims to enhance the audience's connection with the event or service, and it hopefully provides added value to the customer's experience at that event. A simple way to think about sponsorship is to consider it a more effective way for the company to advertise to a niche market.

    Sponsorships make good marketing sense, but they have to be appropriate to the organization and the event and they have to be well planned. Sponsorships need a contract or detailed letter to lay out what the benefits and responsibilities are for each party.

    Sponsorship agreements affect the entire organization. Just as a sponsorship agreement at the international level could strengthen or weaken the La Leche League International brand, a sponsorship agreement at an Area Conference or event could affect the LLLI brand and the whole organization.

  • Endorsement: Unlike sponsorships that can be one-time events, endorsements are long-term relationships that increase a brand's credibility. They can come from a well-respected or well-known individual or from a non-profit organization. There is an exchange of value: the good reputation of the celebrity or organization boosts sales of the product and they receive funding in return. It is estimated that the average American is exposed to between 247 to 3,000 (depending on which report you read) advertisements per day. Without sounding or looking like an ad, endorsements help to grab the attention of consumers and influence them to buy.

    Endorsements are approached in different ways by different non-profit organizations. Some research the products themselves; some employ laboratories to perform the research. Some authorize exclusive endorsements; some enter into endorsement agreements with all the firms whose products meet their standards. For example, the American Dental Association endorses many products and has a system for verifying the quality of products.

    Endorsements are bound by legal contracts, which spell out the responsibilities of and benefits to both parties.

  • Licensing agreements can be between any two companies where one allows the other to use its name and logo -- perhaps to sell an item, product or service, or perhaps to ally itself with the good image represented by the name and logo. Increased recognition of the name and logo in many more settings is one advantage for the company licensing its use. Non-profit organizations can allow their names and logos to be used by a for-profit company with conditions about how the arrangement will work and with an agreement about revenue to be paid to the non-profit organization. An example of this from the UK: the National Trust (a large charity that looks after ancient buildings and landscapes) licenses its logo for use on woolly hats, backpacks, and picnic rugs. Sometimes an agent works for the non-profit organization, finding out about companies and introducing suitable candidates for discussions.

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