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Non-Profits

A Look at Non-Profits

In the last four years, retail sales of licensed merchandised based on non-profit properties have been steadily shrinking. This year however, there are signs of a slow, steady recovery. Retail sales of non-profit-branded goods in the U.S. and Canada declined 0.7% in 2015 to reach $1.25 billion in 2015. In contrast, last year the industry declined 1.7% after growing 2.3% in 2013.

Part of the reason for the sector’s recent decline was increased competition on retail shelves; non-profit brands compete for space with entertainment and other widely-known brands. But as consumers worldwide are growing more socially conscious, non-profits have grown in commercial value.

Increasing globalization has been a boon for non-profits that can now export their brand. These tend to include those that are based in the physical (The Salvation Army’s retail locations, National Georgraphic’s magazines—and now, social media) or organized activities (Girl Scouts of the USA—its worldwide scouts are organized under a different banner). Institutions, such as museums, are observing increased tourism from countries like China. In one recent deal, the British Museum is bringing its branded merchandise into China with onling retail stores in partnership with Alifish, as well as to bring brick-and-mortar locations with Alifo Brands.

And the growth of licensing in non-traditional categories, such as food/beverage, have been a boon for non-profits. As one of the first property types to thrive in licensed consumables, the increased proliferation of feel-good, wellness-geared products and retailers’ expansion of grocery spaces means that non-profit brands can bank on their historical cachet.

Note that the running 10-year average royalty for the non-profit sector is lower than for many other categories. One reason is that non-profits, on their own, compete with entertainment properties and widely known brands for licensees. That competitive landscape helps bring royalties down.

Non-profit licensing can also take the form of co-branding efforts. This is typically for exposure, but it is also increasingly intended to generate revenue. The point is to raise money for the organization and to leverage the consumer’s desire to “participate” in a non-profit’s mission, which in turn sells more products for the brand. The last couple of years have seen some pretty diverse partnerships:

  • Fashion designer Tommy Hilfiger worked with non-profit Runway of Dreams to create a capsule collection for the differently-abled community. Gary Sheinbaum, CEO of Tommy Hilfiger Americas, noted that the collection made up 20% of all kid’s sales.
  • Forget one brand—Williams Sonoma included its American Girl-licensed products in a partnership with No Kid Hungry.
  • New brands can also get a leg up on shelves, as seen with socially-minded children’s school and office supply manufacturer Yoobi and its 2014 collaboration with the Kids in Need Foundation line and Target.
  • Yoobi follows the one-for-one model, popularized by TOMS and Warby Parker. The companies donate a pair of shoes or eyeglasses, respectively, for each sale.

Frequently, co-branding agreements aren’t traditional licensing arrangements and may not involve royalties; for example, they may reflect payment of a flat fee, or the organization may receive prominence in advertising and marketing campaigns. They may also take the form of “endorsement” deals, where the non-profit logo appears in small size in the licensee’s otherwise-normal packaging.

See the complete breakdown of retail sales (2009–2015) and royalty rates (2005–2015) in the Licensing Data Bank.

Retail Sales of Licensed Merchandise, Based on Non-Profit Properties, U.S. & Canada, 2013–2015
Note: Numbers may not add up due to rounding.
Year 2013 2014 2015
Retail Sales in Billions $1.28 $1.26 $1.25
Rate of Growth 1.3% -1.6% -0.7%
Share of Total 1.3% 1.3% 1.2%

TLL’s Guide to Non-profit Properties

Technically, a non-profit is defined by its status as a charitable institution. However, within that broad categorization, non-profit licensing programs tend to focus on healthcare, environmental/nature, animal rescue, and relief/social service organizations. Some non-profit organizations fall into other licensing sectors; non-profit museums are categorized under art and non-profit educational institutions under collegiate, for example.

Representative properties: AARP, American Heart Association, American Red Cross, ASPCA, Ducks Unlimited, Federal Duck Stamp Program, 4-H, Girl Scouts of America, Greenpeace, Global Fund/Product Red, National Audubon Society, National Parks & Conservation Association, Nature Conservancy, National Trust for Historic Preservation, National Wildlife Federation, Save the Children, Sierra Club, UNICEF, Wilderness Society, World Wildlife Fund.

What’s the intention?

Partnering with a non-profit can be a great way to differentiate a brand and improve a company’s perception amongst consumers. But for every marketing partnership between non-profits and for-profits, each of the following factors must be considered:

  1. Brand-cause fit. A for-profit brand’s image plays a large role in determining the congruence between it and a social cause. Consumer perception of a company and retail sales for branded products tend to be better when the fit makes sense.
  2. Partnership dynamics. Everyone involved should work closely to ensure that the deal is a win-win—beyond the funding aspect. A non-profit partner should be commercially viable, and the for-profit partner should be dedicated towards investing time and money in furthering the social cause.
  3. Brand equity. In years prior, cause-related marketing was a great way for for-profit companies to increase their brand equity. Today, it is essential that the company start off with a positive perception. Consumers tend to evaluate both partners in making purchasing decisions.
  4. Consumer attitude and behavior. Worldwide, 60% of global consumers believe doing good should be part of a brand’s DNA—and they are more loyal to those that are, according Edelman’s 2016 Earned Brand study. For-profit partners have to be clear in stressing the altruistic nature of the deal.
  5. Campaign characteristics. Following off the last point, advertising should work to increase consumer’s goodwill towards the cause. Any skepticism consumers may have in relation to cause-related marketing is moot when they feel strongly about an issue.
  6. Distinctive geographics and cultural norms. Most of the research in this area has been done in the U.S. and the U.K., but every region differs in how socially-minded consumers and companies tend to be.

Satisfying all of the above doesn’t guarantee that a deal will do well. Here’s one example of a typical deal that went under fire. NFL’s long-running Breast Cancer Awareness Month campaign was scrutinized last year when data obtained by an ESPN reporter noted that the NFL “takes a 25% royalty from the wholesale price (1/2)” on pink goods sales, and limits its donations to 90% of those royalties. In other words, for every $100 in pink merchandise sold, $12.50 goes to the NFL. Of that, $11.25 goes to the ACS. Of the remaining 87.5%, 37.5% goes to the manufacturer and the rest to the retailer. Although this structure represents a typical co-branding deal, disclosure of these details during the domestic violence scandal heightened the impression that the Breast Cancer campaign was all for show.

Read more about how the NFL and other sports properties are using social causes to enhance their marketing programs in the Sports Licensing Report.

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