It’s been three postings already since we started discussing about SSTM. In this post, we will discuss how the ‘crowd factor’ enhances the TOMS business model.
The crowd factor
This is a pretty obvious aspect, but a definite counterargument for the “better ways to help” criticism. The fact that there are better ways to give to the people in need is quite undisputed. In fact, you can donate your time, money, and other resources to maximize giving. This much is simple.
However, not everyone will donate their money and time to these causes. I believe there are two key factors why:
– On donating time, people are often uncomfortable to step out of their comfort zones. Although donating time can be an exciting prospect for the giver, it takes a great amount of courage and determination to set aside this time to help others.
– When people donate money, they want to see where it goes. Specifically, as increasingly noticed by non-profits and NGOs around the world, people want to see something tangible and visible ‘in exchange’ for their donations. This is not your typical give-and-take, but they want to see the results of what their goodwill has been. UNICEF and other leading NGOs such as World Vision provide one-on-one donor for a child, and provide continuous updates on the child’s status. This is the “tangibility” and “visibility.”
Giving is special when the average Joes and Janes unite
Giving is truly special if it is done by a crowd that unite under a cause. The math is simple. A million people donating a dollar each, and ten people donating ten thousand dollars each are two quite different numbers. If a million people unite under a same cause, it strengthens not only the cause, but the supporters as well. It verifies that the cause you are working towards is worthy of attention from the other million people. This is strength in numbers.
Indeed, there are people to whom this “better way to give” argument applies. These are people who are active givers and donors – people who are actively involved with a non-profit (or two), or who donate a large portion of their income for charitable purposes already. It is a pity that there are much too few of these great people.
For these people, they will end up finding a way to give. Even if the UNICEFs and World Visions of today did not exist, they are the truly charitable ones that will fly over to war-stricken areas to donate their skills, and start funds to help people who are in need. Although these people could be TOMS fans, TOMS targets a wider range of people. This is quite similar to the economic principle of price discrimination.
To the average people who are too ‘busy’ living their respective lives (to be honest, some of our authors are guilty of ignorance as well), the prospect of engaging in giving through shopping for fashionable shoes appeal greatly. Really, it is not only about the giving. I am buying my own shoes, which happen to be fashionable, but I get to help someone in need too.
The charitability discrimination
Price discrimination is defined as “sales of identical goods or services are transacted at different prices from the same provider” as per Paul Krugman’s book on international economics. It essentially means that if I want that candy and willing to pay $5 for it, and my friend wants it for $2, as long as the cost structure makes sense, the seller will sell it to both of us at these different prices.
As applied to charity, this sounds a bit different. From the charity perspective, the good being “transacted” is the actual act of helping (i.e. providing the same pair of shoes, for TOMS).
Let us assume that my fictional neighbor, who is a part of Doctors without Borders and regularly donates 20-30% of his income to various charities, will ‘buy’ this good by actually purchasing shoes and giving it to those who are in need. Maybe he will buy a thousand pairs while he is at it, too. Perfect.
But for me, a poor recent university graduate, my willingness to purchase this ‘good’ is low. If I buy a pair of TOMS, my theoretical purchase price for this giving-shoes “good” is:
The price that I paid for a pair of TOMS – the happiness that I get from TOMS = price I paid to give another pair of shoes to a shoeless child in Argentina
Our apologies on this theoretical translation. What we mean to say is, TOMS has effectively created a method to get the majority of people who were previously not ‘willing’ enough to donate, donate. It is in human nature that we are born good. We want to help people, but at the right ‘price.’ TOMS, by this creative merging of giving and shoe-buying (and lots of marketing and public-relations activities and superior brand-building), has created an entirely new crowd of givers, that when put together, is a force to be reckoned with.
Our takeaway for today is simple. There are many ways to give. TOMS is just one of them. If one argues that there are better ways to give than TOMS, it seems like no better argument than “Don’t go to Wal-Mart. There are other ways to buy your groceries.” How is this even an argument? TOMS has redefined the giving paradigm. This is why I believe that the Charitable Corporation is the next big thing in business – giving should not be a side activity for corporations. CSR should not be a separate division, but instead a part of operations.
Giving should be a way of life.
How do you like to give? Do you donate yourself? How often, and why? We want to hear from you.
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