A lot of the critique that we get is that we can’t be sure this works because we haven’t done enough research or can provide data to show that this works. That’s great critique and this post addresses both.
Research
We commissioned research (a Master’s Thesis that was just successfully defended) on the economic sustainability of philanthropic enterprises (i.e. guiding companies) that donate all profits. Please note the research was completely independent but we did pay the researcher for their time.
Here is the main conclusion of the paper (I encourage people to read the abstract and discussion and conclusion if they want to understand more):
“The thematic analysis demonstrates that philanthropic enterprises should be able to meet the economic needs of their current and future stakeholders without compromising the objective to donate all of their profits to non-profit organisations and charitable causes. However, the research findings do not suggest that their corporate philanthropy alone is enough to drive economic sustainability. Instead, philanthropic enterprises should preserve some flexibility in the yearly donation percentage and reinvest a part of their profits to market their philanthropic endeavours and develop their business.”
For those who want to dig deeper into all of the data and citations, you can find the thesis here.
Data
I want to emphasize that there is already a lot of data in the paper, but this is additional data that we have.
We ran the exact ad from a competitor (one of our most successful competitors) and swapped one headline of three headlines from “100% sustainable baby products” to “100% of profits go to charity”. We changed the sustainable message in the description (one of two) to a donation message also. The non-profit ad was clicked on 50% more than our competitor’s ad (5.99% interaction rate vs 9.24% interaction rate).
We ran a qualitative analysis asking people how they would rate a company that donates 10% of profits to charities and how they would rate a company that donates all profits. 10% of profits was rated 7.1 and all profits was rated 8.7. Please note that donating 10% of profits is already exceptional.
The reply rate to our cold emails to sustainable brands is more than 20%. This is, by far, the best cold email I’ve ever sent.The average reply rate of cold emails is 1-5%. The conversion from reply to signed brands is almost 50%, meaning that for every 10 cold emails we sign up 1 sustainable brand (10% conversion rate). Most cold email campaigns are well under 1%.
Brands sign up with higher commission percentages. Multiple brands have told us explicitly that we ask for a higher commission than the competition (they are usually on more than one marketplace) but that they accept that because we donate all profits.
To conclude: it’s easier for us to sign up brands, and we sign them for higher percentages than our competitors.
Please note that we will do purchase intent research tomorrow (what is currently our most risky business assumption) to see if consumers go for the donation option significantly more than a regular offering and we will test this with identical products and with a product people have a small disliking for, to see if people sometimes go for the lesser option if the proceeds go to charity. We will share here once we have the results of that research.
Consolidating feedback
Brand and I have talked to a lot of people over the last couple of months about this concept and we get a lot of the same feedback, so we will start consolidating everything into one sheet together with us addressing the feedback. We will share that once it’s done.
Of course, more research and data is needed, but what we have found so far is very encouraging for the prospects of guiding companies.
A lot of the critique that we get is that we can’t be sure this works because we haven’t done enough research or can provide data to show that this works. That’s great critique and this post addresses both.
Research
We commissioned research (a Master’s Thesis that was just successfully defended) on the economic sustainability of philanthropic enterprises (i.e. guiding companies) that donate all profits. Please note the research was completely independent but we did pay the researcher for their time.
Here is the main conclusion of the paper (I encourage people to read the abstract and discussion and conclusion if they want to understand more):
“The thematic analysis demonstrates that philanthropic enterprises should be able to meet the economic needs of their current and future stakeholders without compromising the objective to donate all of their profits to non-profit organisations and charitable causes. However, the research findings do not suggest that their corporate philanthropy alone is enough to drive economic sustainability. Instead, philanthropic enterprises should preserve some flexibility in the yearly donation percentage and reinvest a part of their profits to market their philanthropic endeavours and develop their business.”
For those who want to dig deeper into all of the data and citations, you can find the thesis here.
Data
I want to emphasize that there is already a lot of data in the paper, but this is additional data that we have.
We ran the exact ad from a competitor (one of our most successful competitors) and swapped one headline of three headlines from “100% sustainable baby products” to “100% of profits go to charity”. We changed the sustainable message in the description (one of two) to a donation message also. The non-profit ad was clicked on 50% more than our competitor’s ad (5.99% interaction rate vs 9.24% interaction rate).
We ran a qualitative analysis asking people how they would rate a company that donates 10% of profits to charities and how they would rate a company that donates all profits. 10% of profits was rated 7.1 and all profits was rated 8.7. Please note that donating 10% of profits is already exceptional.
The reply rate to our cold emails to sustainable brands is more than 20%. This is, by far, the best cold email I’ve ever sent. The average reply rate of cold emails is 1-5%. The conversion from reply to signed brands is almost 50%, meaning that for every 10 cold emails we sign up 1 sustainable brand (10% conversion rate). Most cold email campaigns are well under 1%.
Brands sign up with higher commission percentages. Multiple brands have told us explicitly that we ask for a higher commission than the competition (they are usually on more than one marketplace) but that they accept that because we donate all profits.
To conclude: it’s easier for us to sign up brands, and we sign them for higher percentages than our competitors.
Please note that we will do purchase intent research tomorrow (what is currently our most risky business assumption) to see if consumers go for the donation option significantly more than a regular offering and we will test this with identical products and with a product people have a small disliking for, to see if people sometimes go for the lesser option if the proceeds go to charity. We will share here once we have the results of that research.
Consolidating feedback
Brand and I have talked to a lot of people over the last couple of months about this concept and we get a lot of the same feedback, so we will start consolidating everything into one sheet together with us addressing the feedback. We will share that once it’s done.
Of course, more research and data is needed, but what we have found so far is very encouraging for the prospects of guiding companies.
Thanks for clarifying, Vincent! Strongly upvoted.