(PRODUCT) RED (A)

In late 2007, Bobby Shriver, co-founder of (RED) along with Bono, walked into the storage room of the new
company’s cramped office. Staring at piles of newspaper clippings and magazine photos of the people and
products, behind the brand designed to help eliminate AIDS in Africa, Shriver recalled the meetings that
planted the seed of this consumer movement. (RED) would face the typical challenges of a start-up
enterprise, from brand positioning and inadequate capital to organizational development and international
expansion. In addition, its unique origin was reflected in a novel business model.

The Business Model (See Figure below for Schematic of the (RED) Partnership with Apple)

(RED) is a nonprofit organization that partners with the iconic brands that contribute profits from the sale
of (RED)-branded products to raise money to fight HIV / AIDS in Africa through the Global Fund.
(RED) harnesses the power of people and companies to fight AIDS.

Partner companies made a multiyear commitment and were given category exclusivity over that period and
the right to design and sell (RED)-themed products. (RED) products did not necessarily have to be colored
red. Each partner was responsible for marketing its own (RED)-branded products, using funds intended for
existing marketing campaigns. This meant that (RED) itself did not incur the promotional costs typically
associated with new product launches. Up to 50% of the profits from the sales of (RED) products went
directly to the Global Fund.

The idea that evolved was to create a brand that would be trusted and valued by consumers. Bono chose
the name “RED” because, according to Shriver, “Red is the color of emergency,” referring to the
thousands that were dying of AIDS every day. The parentheses () in the company’s logo were developed
by a brand-identity firm after listening to the cofounders describe what they hoped to achieve. Tamsin
Smith explained: We call the parentheses or brackets the “embrace.” Each company that becomes
(RED) places their logo in the embrace. And this embrace is elevated in superscript to the power of
RED
RED. Thus the name: (PRODUCT) .

Shriver and Bono built a small team to launch the company. Knowing the (RED) brand would attempt
to leverage consumerism to reveal the better aspects of human nature, the team decided the core
essence of the brand should be to inspire, empower, and connect. This notion was woven through the
(RED) Manifesto (see Exhibit 1). Even in the growing fields of cause marketing, conscious
consumerism, and corporate social responsibility, (RED) stood out in its attempt to engage the private
sector in one of the major health crises of modern times. Shriver described the thinking behind the
(RED) approach: We believed companies and their consumers would care about helping eliminate
AIDS in Africa, but it had to be a two-way proposition. We couldn’t just promote the idea of (RED). We
had to make sure the products were compelling and that they sold. To be sustainable, our partner
companies had to make money. To keep (RED) vibrant for the long haul, it had to be good for the

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Global Fund and profitable for the businesses involved.

Sustainability was essential. HIV had become a manageable disease with the development of antiretroviral
drugs, but this regimen necessitated continuous, lifelong treatment. Shriver therefore needed to hunt for
the right partners. “We were marrying these companies—dating wouldn’t work,” Shriver said. The courtship
process was the first challenge they faced in engaging product partners.

Once (RED) took root in the imaginations of the initial corporate partners, the next challenge was to create
products and introduce the concept to customers. The founding (RED) team leveraged the company’s
limited resources to launch with some of the most recognizable brands in the world; products ranging from
Giorgio Armani sunglasses to Apple iPods to Converse sneakers bore the (RED) logo. By October 2007,
consumers had already purchased enough (RED) products to generate $50 million for AIDS relief.

But despite this early success, (RED) faced several ongoing issues. While research showed that
awareness of the brand had grown significantly, could (RED) continue to be both sustainable and
compelling? What new corporate partners should the company pursue? How best should it
communicate results and deal with confusion about its business model? Complicating matters, the
(RED) team was keenly aware of the difficult balance between the desperate need to generate money
quickly to buy AIDS medication for Africa and the need to carefully manage the trajectory of its
branding effort, which would be essential to sustainability. In short, building the brand and making fast
money to save lives were inseparable but sometimes opposing goals.

Background

Bono and Shriver first worked together in 1987 on the album A Very Special Christmas to raise money
for the Special Olympics. The tremendous success of the album, which included original tracks from
artists ranging from U2 and Bruce Springsteen to Run-D.M.C., spawned many follow-ups. “This series
of albums made $100 million in cash for the Special Olympics,” Shriver explained, “without my having
to ask any of my friends for a donation. Do you like asking people for money? I did not! But it was easy
to say: ‘Hey, this CD is $11. And it rocks.’ That, I liked.” This basic concept, selling consumer products
that were desirable in their own right to generate revenue for a prosocial idea, would be tweaked and
used again in creating (RED).

AIDS in Africa

By the end of 2007, an estimated 33 million people were living with HIV worldwide. In sub- Saharan Africa,
where two-thirds of the world’s HIV-infected population lived, about 1.6 million people died of AIDS
annually, a rate of over 4,400 deaths per day. The World Health Organization referred to the spread of
AIDS as the “toughest health assignment the world has ever faced”.

Although there was no known cure for AIDS, it was treatable with antiretroviral drugs (ARVs). Scientific
breakthroughs had improved the efficacy of ARVs to the point where they could substantially extend
patients’ lives. As a result, between 1996 and 2002, the number of deaths attributable to AIDS had declined
70% in the United States. Meanwhile, the cost of ARVs had decreased. In 1996, the annual cost of AIDS
treatment in developing nations had varied from $3,000 to $6,000 per person. Access to generic versions
of ARVs, however, brought treatment costs down dramatically. In 2003, when the price of keeping someone
alive with an ARV therapy regimen dropped to less than $140 per year, the movement to drive distribution
in poorer countries kicked into high gear.

The Global Fund was formed in answer to United Nations Secretary General Kofi Annan’s call in 2002 to
finance a dramatic turnaround in the fight against AIDS, tuberculosis, and malaria, at a time when virtually
no one in sub-Saharan Africa was on ARVs. Some small institutions had experienced considerable success
treating AIDS through community-based health initiatives in resource-poor settings in Brazil and Haiti, but
there was no large-scale distribution of ARVs to HIV/AIDS patients in Africa. Infrastructure problems, such
as understaffed or poorly funded medical facilities, made it difficult for patients to receive proper care and
treatment. In addition, although the cost of drugs had declined, they were often still prohibitively expensive
for the estimated 70% of sub-Saharan Africans who lived on less than $2 a day.

With several billion dollars from governments around the world, the Global Fund began moving people in
Africa onto ARVs, but the organization, which had been established as a public-private partnership, had

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raised only $5 million in three years of private-sector engagement. Bono and Shriver had lobbied the
American government to capitalize the Global Fund. Soon after, Bush administration officials started
inquiring as to when the private sector was going to take a seat at the table. With this pressure building, the
two began brainstorming ways to engage the power of the business community and the vast number of
people who were not committed activists but who, Bono and Shriver believed, would want to help if “the
ask” was simple. They approached the challenge as an emergency. They remembered the lesson of the
Very Special Christmas albums: Selling something people are excited to buy feels better to both sides than
hawking raffle tickets or token charity wares.

Building Partnerships

In the fall of 2004, Bono met with CEO Ken Chenault and CMO John Hayes of American Express.
American Express believed that a partnership with (RED) would not only capitalize on the growing trend of
conscious consumerism, but also allow their company to reach new demographics. Meanwhile, Bono and
Shriver saw American Express as an ideal launch partner. “First,” explained Shriver, “we thought the
partnership would generate a lot of money. Second, they were a global brand with worldwide recognition.
And third, we knew that we’d get instant credibility from a serious, buttoned-up company.” After the
meeting, the parties started negotiating an agreement for a (RED) American Express card.

The next companies approached were Gap, Converse, and Giorgio Armani, each of whom expressed interest
in the concept. (RED) chief operating officer Colin Brady recalled: “(RED) targeted brands with special
emotional relationships with their consumers. It was important that the (RED) message be something
people would wear or display proudly.” The team approached other companies who declined to “take
the risk” of an association with AIDS and Africa. Among the explanations given were: Africa is too far
away, consumers don’t care, the issue is too complicated and poorly understood, and AIDS is too
controversial.

After securing partnership deals, (RED) worked with each partner on the tone and expression of the brand
and communications materials. Sheila Roche, head of global communications at (RED), explained: The idea
was to create a collaborative relationship. This meant getting involved without getting in the way of the
people who really knew what they were doing. The (RED) product had to be communicated differently
from their other products because it had to feel (RED), it had to be (RED), it had to capture our brand
essence. But at the same time, we were partnering with these companies because they had competence in
areas that we did not. So we wanted to get them to do what they did best.

Partner Benefits

Central to the sustainability of the (RED) business model was the idea that corporations would benefit
financially from their association with the (RED) brand. Indeed, because the (RED) team wanted to develop
a sustainable business model, it was essential that the relationship be profitable for partners so that these
partners would devote significant resources to their (RED) product lines for years to come. As Shriver said:

The profitability piece of this scared some partners in the beginning. They were used to the old charity
model—they wanted to do a single T-shirt and donate 100% of the proceeds. But we said no, we wanted
more robust collections and we didn’t want all the money, we wanted them to make money, too, because
we knew that if they didn’t make money, the idea wasn’t sustainable. This felt odd—even bad—to them
at first, but we wanted them to view us as business partners, not grantees. Still, despite the potential
advantages that (RED)’s brand could confer, partner companies faced a great deal of uncertainty in their
decisions to sign on to the brand. Each company would be associating its brand with a potentially
controversial new way of tackling an emergency, and doing so in a way that might invite confusion,
scrutiny, and possible accusations of opportunism. Smith noted:

We were asking each of our partners to take the brand that they had spent years developing and
marry it to a completely untested idea. All of our partners knew that they could become targets for
critics who didn’t like or didn’t understand what we were doing. We were lucky that the companies
were willing to take a chance with us and put themselves on the line and in the spotlight.

Launching (PRODUCT) RED

Bono, Shriver, and the launch partners announced the (PRODUCT) RED initiative to the world at

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 the annual World Economic Forum meeting in Davos, Switzerland in January 2006. By spring 2006,
(RED) had done a soft launch with a limited product range in the United Kingdom. The official global
launch of the campaign followed in October 2006, in the United States, with products from the
following six initial partners (see Exhibit 2 for example products):

American Express American Express developed a distinctive red credit card which said, “This card
is designed to help eliminate AIDS in Africa” on the back. It was publicized by supermodel Elle
Macpherson, who made the first purchase with the card, and was available only in the United
Kingdom. American Express contributed 1% of all purchases to the Global Fund.

Gap: Although Gap had an entire line of (RED) apparel products in development, it launched its
(RED) campaign in spring of 2006 in the United Kingdom with a 100% African-made T-shirt, which
retailed for $28. Gap contributed 50% of profits from (RED) products to the Global Fund. The full
collections became available in October 2006.

Converse Converse’s first (RED) product was a Chuck Taylor All-Star shoe made from mudcloth
imported from Africa, priced at $68. Converse’s chief marketing officer, Dave Maddocks, who
conceived the mudcloth idea, commented: “It drove home the idea that our brand is very much about
artistry, self-expression, originality, and optimistic rebellion. We feel that is our intersection with
(RED).” Converse contributed between 5% and 15% of (RED) sneakers’ net sales to the Global Fund.

Giorgio Armani Giorgio Armani’s first (RED) product was a pair of Emporia Armani sunglasses,
which retailed for $170. Armani said: “It is time to take action, but in a new way. When my friends
Bono and Bobby Shriver invited me to join forces through (RED), I understood immediately that this
was a pioneering initiative.” Armani also developed a complete (RED) line of fashion items, which was
released in October 2007. The company contributed an average of 40% of its gross profit margin from
(RED) products to the Global Fund.

Apple released a (RED) special edition of its popular iPod Nano in October 2006. It contributed $10
from each $199 sale to the Global Fund. A (RED) shuffle and (RED) iTunes gift card followed.

Motorola unveiled a new line of (RED) cell phones and accessories. Its first product was a (RED)
version of its slim MOTORSLVR phone, costing $300. The phone’s packaging was produced in
Lesotho. For each (RED) handset sold, Motorola contributed $17 to the Global Fund.

Promoting the (RED) Campaign

The launch of (RED) was accompanied by a multimedia promotional blitz. Shriver and Bono made
appearances on Fox News, NBC Nightly News, and various other media outlets. The Independent On
May 16, 2006, a British newspaper, published a (RED) issue, guest-edited by Bono, to raise awareness of
issues in Africa. The issue featured perspectives from politicians such as Tony Blair and Gordon Brown.
Half the revenues from the issue went to the Global Fund. Two more (RED) editions followed.

Perhaps the most highly publicized event inaugurating (RED)’s launch took place on the Oprah Winfrey
show, featuring a “shopping spree” involving Bono and Oprah. The two celebrities drove to Chicago’s
Magnificent Mile, a shopping area in which several (RED) partner retail stores were located. Oprah and
Bono bought a number of (RED) items and emphasized the benefits (RED) money would bring to African
communities. “This is the most important T-shirt I’ve worn in my life,” said Oprah, commenting on the Gap
100% African shirt she wore during the broadcast. The event reportedly drew one billion media
impressions.

At the same time, (RED)’s partners launched their own advertising campaigns in support of their product
lines. Gap’s campaign, for example, included photographs of celebrity sponsors such as Steven Spielberg,
Dakota Fanning, Penelope Cruz, Chris Rock, and Mary J. Blige, all wearing their favorite Gap (RED)
apparel. The photos were on every back page of the New York Times and throughout the pages of the New
Yorker magazine. (RED) COO Brady noted: We didn’t have the expertise or the money to create and run a
large-scale advertising campaign for (RED). However, our partner companies not only knew how to do it
well, they had the funds to do it big. They used money and talent that they had already allocated to their
advertising budgets—the only difference was that now they used it to promote (RED) products.

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 Initial Results

By the end of 2007, (RED) had contributed $50 million to the Global Fund, enough to put over 30,000
patients on ARV therapy and institute a variety of other health initiatives in Swaziland and Rwanda.
While governments had donated over $4.8 billion to the Global Fund during its first few years of
existence, corporations had contributed less than $5 million prior to the launch of (RED). But by
January 2007, just three and a half months after launch, (RED)’s partners had contributed $25 million
to the Global Fund. Shriver explained the significance of this figure:

When we hit the $25 million mark, I was stunned. The Christmas music CDs I had produced in the past
earned $8 or $9 million in a year. It was more than Denmark or China had given to the Global Fund the
previous year. The company had also achieved a high level of U.S. consumer awareness in a very short
time. Julie Cordua, (RED)’s VP of marketing, explained: We did a pre-study before we launched in fall
2006 and had 1% awareness. We went back in the field in January 2007, and did another test. We
found that, in the general population, we’d risen to 17% accurate awareness of the brand—17% of the
public knew that (RED) was about AIDS in Africa. In our core demographic, that percentage was at
32%.

Managing Misconceptions

The most widespread misconception about (RED) was that it was a traditional charity. While
traditional charities solicited donations from foundations and grant-making organizations, (RED) saw
itself as offering benefits back to its partner companies; as a result, (RED) had therefore intentionally
approached the marketing divisions—not the foundation divisions—of possible partners. Additionally,
“charity” products tended to have a price markup which meant the donation fell exclusively on the
consumer, not the company. (RED) products did not follow this model; the companies themselves
covered the donation from their profits. Moreover, (RED) differed in the way it presented its mission,
aiming not to make people feel responsible for or guilty about world problems in order to induce them
to buy, but instead to tap into their consumerism by offering them a (RED) choice. Bobby and Bono
elaborated: We’re trying to reach people who are just minding their own business; they are already
spending money buying T-shirts and cell phones, and we’re just tempting them with (RED) ones, while
giving them an opportunity to add an element of goodness to that consumption.

In part due to the unconventional nature of the (RED) model, the campaign had attracted criticism
from day one. Some decried (RED)’s partnerships with large corporations. “The companies are going to
benefit a hell of a lot more from Bono’s name than the Global Fund is going to benefit from the
companies,” noted one UN official. Another critic agreed: “There is a broadening concern that business
is taking on the patina of philanthropic activity and even substituting for it. It benefits the for-profit
partners much more than the charitable causes.” One website, Buylesscrap.com, specifically attacked
(RED)’s marketing practices and encouraged readers to donate directly to charitable causes. The site’s
founder, who ran his own cause-marketing firm, wrote: “The (RED) campaign proposes consumption
as the cure to the world’s evils. Can’t we just focus on the real solution—giving money?”

Shriver, however, saw (RED)’s efforts as supplementing those of traditional charity. He explained: “If
you want to make a charitable contribution, don’t go to the Gap. Write a check. But if you want an
Armani watch, go get your (RED) Armani watch. And $30 will buy AIDS medicine.”

In March 2007, Advertising Age published a critical article contrasting the collective marketing
outlay by Gap, Apple, and Motorola on (RED)-related products—which the publication estimated to
be as high as $100 million—to the “meager” amount donated to the Global Fund itself, which it
estimated to be about $18 million. In an open letter to Advertising Age’s editor, Shriver rebutted the
criticisms. He noted that (RED) had in fact raised $25 million for the Global Fund at that point, which
was five times the amount generated by the private sector for the Fund over the past four years
combined. Shriver also pointed out that the marketing budget expended by (RED)’s partners was
money that these companies would have spent marketing their own brands. Shriver concluded his letter
by stating: “We believe (RED) will lead to more rather than less giving.”

Exploring Possibilities

To help keep pace with (RED)’s growth, the company had recently hired advertising and communications

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expert Susan Ellis Smith from Omnicom Group as CEO to help address several key issues in extending the
brand: partnerships, customer relationship management, and most critically, sustainability.

Partnerships

Because the (RED) model was reliant on partnerships, the team needed to think carefully about how to view
its existing partner relationships going forward, how many partners it should have at any given time, and
what types of new partners it should target. The team considered a wide range of options, from consumer-
packaged goods to service brands and even music content. Brady noted: You bought a phone. Now what?
You’re probably not going to buy another phone for a few years. We need to figure out how people can give
something—even $1— every day. That’s why convincing people to give a portion of their utility bills to
(RED) might be great. Similarly coffee or water, soap or toothpaste, even chewing gum might be great.
People have to buy these things anyway, so why not give them a chance to do some good when they do?

Customer Relationship Management

Having generated excitement with the brand launch, (RED) felt that a key focus going forward was
demonstrating the impact that (RED) funds were having on the ground. Smith traveled to Africa several
times over the summer and fall of 2007 to meet with what she called “(RED)’s shareholders,” the people
who were alive thanks to (RED) consumers. “Making that connection is a critical part of completing the
value circle,” she explained. “People want to know where the money is going and we need to show them,
not only to say thank you but to encourage them to keep choosing (RED) over non-(RED). Not only is
the JOINRED.COM blog full of stories and photos from trips, but a major thrust of the July Vanity Fair
issue on Africa, which was edited by Bono, was driven by our desire to show how (RED) was working”.
As part of this effort, (RED) created a calculator on the JOINRED.COM website on which consumers
could enter each of their (RED) purchases and receive a report on the impact their contributions had
made. The team also considered how aggressively (RED) should try to convince consumers who bought
one (RED) product to buy other kinds of (RED) products. Shriver noted: We have people who we know
are (RED) consumers. Should we give them all an affinity card, create a loyalty program, and try to
motivate them to buy everything (RED)? Do we have an online (RED) store to make shopping (RED)
easier or more exciting?

Sustainability

Of course, all of these decisions were related to the larger question of brand sustainability. Keeping
people supplied with ARVs continuously was necessary to ensure their effectiveness, meaning that the
(RED) team needed to guarantee a constant revenue stream to the Global Fund. Brady remarked: We
need to be smart about choosing our partners because we depend on them to create the cool products
that will keep our brand fresh and relevant to consumers. At the same time, we have to think about
fatigue, too. If we push this brand too hard, there’s a chance that consumers will become tired of our
message and we’ll lose our relevance and our impact.

With millions of HIV-positive people in Africa waiting to benefit from consumer action, the (RED)
team needed to make decisions quickly about the future of the (RED) brand, balancing their desire to
build a lasting brand with the pressing need for funds for people who would die without ARVs. Susan
Ellis, (RED)’s new CEO, summed up her vision for the brand:

I see (RED) as four things: commerce, community, education, and hope. Now we have to expand the
model and continue to keep the (RED) brand dynamic. Given the support we have received from the
(RED) community, given the power of the message, I am certain we will make (RED) a part of
everyday life.

Exhibit 1 (RED) Manifesto

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Source: Company documents.

Exhibit 2 Examples of (RED) Products