MS 2238 Marketing Management

Presentation Report

Case Study: Product (RED) Chapter 3: Ethics & Social Responsibilities

Madison Sheena Nazareno Vejerano (08B1904) June Shim Koh Ching (08B1706)

Bachelor of Business Administration Faculty of Business, Economics and Policy Studies UNIVERSITI BRUNEI DARUSSALAM

What is Product (RED)?

It is one of the best examples of cause-related marketing campaign established by many organizations, those profit oriented or non-profit oriented, with the ultimate and sole aim of raising fund for The Global Fund to Fight HIV/AIDS in South Africa. Global Fund is the main non-profit oriented organization involved in Product (RED), in partnership with famous business organizations like Gap, Armani, Apple, Converse, Dell, Hallmark, Nike, Starbucks, etc. It is a life saving campaign where all fund spent for the purchase of RED products are used to help HIV and AIDS prevention and treatment in South Africa countries. Product (RED) campaign is said to have helped 84,000 pregnant women receive treatment to help prevent transmission of HIV virus to their babies. RED generate funds to help eliminate AIDS in Africa by having the organizations involved directly contributing to Global Fund, which is then used to finance HIV health and community support programs in Africa, focusing on women and children.

CSR and its components

CSR, corporate social responsibility is generally defined as the business concern for the well being of the society, at the same time carrying out business activities and operations in lawful and legally accepted manners to generate profit for the business. CSR, however, has four different components, or the four different levels of commitment: economic responsibilities (being profitable), legal responsibilities (obey the law; law is the societys codification of right and wrong, play by the rule of the game), ethical responsibilities (being ethical in carrying out business activities, doing what is right, just and fair and avoid any harms to any other parties)

and philanthropic responsibilities (being a good corporate citizen, contributing resources to the community and society by improving the quality and standard of living). It is important to note that the economic performance, the first level, is the foundation of the three other responsibilities. If the company does not achieve favorable economic performance, then the following three responsibilities become questionable and debatable. As mentioned earlier, RED is a life saving charitable campaign. Hence, involving in this type of marketing event means the organizations are achieving and fulfilling all the four components of social corporate responsibilities. They pursuit business profit, in legal ways, taking justice and fairness into account, and being a good corporate citizen by contributing fund to the Global Fund for life saving purposes.

Cause-Related Marketing
It is one of the many marketing activities in which an agreement is made between profit making business entities and non-profit oriented organizations, working together to raise fund for a particular cause or purpose, which in the case of Product (RED), is the prevention and treatment of HIV/AIDS in South Africa. Participation in this type of cause-related marketing event circulates the cycle which benefits everybody. The organizations philanthropic responsibilities (the highest level on the CSR pyramid) achieved, letting the public (current and potential consumers) know that the corporation is socially responsible and is interested in the same causes as its consumers. This will have positive effects on the corporate reputation of the organization, which will in turn attract more potential consumers, increasing the market share, hence having increased revenue which again, can be contributed to the Global Fund.

Sustainability
It is the latest theory for social responsibility. It is the idea which suggests that business organizations which are more socially responsible will eventually outperform their peers, rivals or competitors by focusing on the worlds social problem and seeing them as the business opportunities to generate more profit and at the same time, help build the world into a better place to live in.

GAP, Product (RED) & CSR

Partnership with a cause-related charitable campaign such as Product (RED) will usually bring the corporate social responsibility of the organization to a different, higher level, simply due to the life saving purpose of the campaign. However, Gap had been found guilty of exploiting labor in the third world countries (developing countries, such as Indonesia), employing human labor to work under unfavorable, unsafe working conditions for very long working hours, with exchange of extremely low wage rate. They are also involved with the exploitation of child labor, which is illegal and unethical. So here, there is an ethical dilemma. Gaps production operations are legally and ethically questionable and yet its name is shining due to being one of the partners of Product (RED). So are cause-related marketing events really good? Although there are companies which only make use of these charitable campaigns as tools to spit-shine their companies image, we must not forget those which are truly committed to being a good corporate citizen. Treatments of employees are also one important sector of the companys CSR,

so unless Gap made amendments to its operation policy regarding the exploitation of labor or any other unethical conduct, its participation in RED will not be seen as its real self commitment towards its corporate social responsibility. The consumers, the public should be aware of the companies conduct to know the intentions behind their involvement in cause-related marketing; whether it is pure commitment towards CSR or image spit-shining acts by some clever marketers. So when making a purchasing decision, they would not be misled by the falsely emphasized company image.

(Product) RED Campaign

There are various types of technology that have contributed to the media coverage, marketing efforts, and public discussion of the RED campaign. Firstly, (Product) RED promotes its product range with a cause-marketing campaign, in which, (product) RED ties the marketing of a brand, company, product or service directly, e.g. GAP, Armani, Apple iPhone, to a social cause HIV awareness and AIDS prevention. Most causemarketing campaigns provide for a social cause by donating a proportion of sales to a specific body, for which in this case is Global Fund. Moreover, (Product) RED uses the INTEGRATED MARKETING COMMUNICATIONS (IMC) technology for its marketing campaign. The IMC involves the utilization of all the elements of the marketing mix, which specifically includes the product, the price, the place, and the promotion. As mentioned, (Product) RED ties its marketing to particular brands and companies.

These participating companies, in turn, negotiate how to put on the price of its RED editions to the market. The participating companies also collaborate with (Product) RED to anticipate where to launch, promote and sell the products. (Product) REDs marketing strategy also makes full use of both the Internet-based social media and the Offline social media. Via the Internet-based social media, the impact of consumer-to-consumer communications has been greatly magnified. (Product) REDs promotion had been made and spread among consumers very much quickly through the Internet, in networking sites, blogs, etc. As for the offline social Media, (Product) RED have successfully managed to advertise and promote on channels of traditional print (newspaper, magazine), mail order, public relations, industry relations, billboard, radio, and television. Associating (Product) RED with the popular culture and icons, such as U2s Bono and Oprah Winfrey had further contributed to the products promotion and marketing.

AdAge reports about (Product) RED

A year after REDs launch , Ad Age reported that only about $25 million had gone to the charity itself although $100 million had been spent on marketing the campaign. Industry observers speculated that this could trigger a backlash against the campaign. However, what AdAge have overlooks was that the figure of $25million which had gone to charity was actually raised within the six months of the launching of (Product) RED products range in the United States. It is also interesting to know that this amount was five times the

amount given to the Global Fund by the private sector over the previous four years (Valley, 2007). Furthermore, AdAge cited no source to the $100 million claim to (Product) REDs marketing campaign expenses. Based on Bobby Shriver (2007), the biggest spender launching RED products was the clothing company Gap (advertising budget $7.8m). Also, RED sources

suggest that even the total spent on advertising on (Product) RED which includes RED firms such as Apple, Motorola, Converse sneakers and Giorgio Armani, etc, was less than a third of the $100m cited in the AdAge magazine.

Product (RED) Campaign and its Supporters

The idea behind Product RED was that it would always create a win-win result. The campaign was focused not only in fulfilling its corporate social responsibility, but was also concentrated in trendy and up to date creation of products and services, which in turn, creates more demand for a product/service, hence maximizing the companys profit. (Product) RED reduced corporate social responsibility to cause-related marketing, in which donations to social causes are not only made as one-time write offs, but instead, a portion of sales are provided for the Global Fund, each and every time a purchase of a product is made by a (Product) RED buyer. Because other companies involved in Corporate Social Responsibility have marketing budgets which dwarfs its allocation for a social cause, (Product) RED have taken on a new twist to its strategy to be socially responsible. (Product) RED focuses on long-term philanthropy. This initiated a new model for fund-raising. Hence, (Product) RED provides for a sustainable source of cash for the Global Fund which exceeds one-off payments from charitable givings.

In addition to the point above, (Product) RED is principled on profit- motivated giving. To demonstrate this, lets assume a typical consumer was given a hundred dollars and was offered a choice to give it up solely for donation, or to purchase a product which supports a certain cause. As humans, we are driven by incentives; hence, a typical consumer would choose to spend his one hundred dollars for that which he can actually obtain something in return. In the end, a typical consumer would be motivated to purchase a product which support a certain cause in favour of solely giving up his money for donation. (Product) RED sells its products based mainly in this concept. (Product) RED encourages consumers awareness to the AIDS in Africa, while at the same time allowing easier participation from the consumers (supporters) of the cause. Bobby Shriver (2007) has stated that 99 per cent of funds raised by the (Product) RED go directly to life-saving schemes. These life-saving schemes had put 160,000 Africans on lifesaving anti-retroviral, orphans were fed and kept in schools in Swaziland, and a national HIV treatment -prevention programme has begun in Rwanda. Also, people who became aware of crises through RED's marketing have increased their charitable giving. (Bobby Shriver, 2007) (Product) Red have also managed to concert political pressure with its constant advertising exposure of the message that "6,500 Africans died needlessly yesterday of a preventable and treatable disease" being a key part. This had resulted to the US Congress agreeing to a record $724m donation to the Global Fund for 2007. Last but not the least, more product names and brands incorporate the REDs vision into its new products. This means that as new products are created to meet the demands of consumers, a sustainable flow of part of the profit goes out to the Global Fund. The campaign is less likely to

lose supporters, since new products will continue to interests brand and product conscious consumers.

Reference:
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