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Africa fact of the day
Advertising Age calculates that around $100 million has been spent blanketing billboards and magazines with images of Bono and other "celebrities", while the total sum raised for Africa is $18 million.
Just to be clear... Total spent on making Bono more famous = $100 million.
Total spent on drugs for Africans = $18 million.
Here is the link, and thanks to Chris F. Masse for the pointer. Jason Kottke comments.
Posted by Tyler Cowen on March 7, 2007 at 06:48 AM in Current Affairs | Permalink
Comments
The productivity/counterproductivity of aid aside, isn't $18 million still $18 million? The disparity seems to be more an excuse to attack Bono than anything else. Has any commentator calculated how much money should have been raised?
Posted by: NCA at Mar 7, 2007 8:46:14 AM
Here's a link to a letter by the CEO of RED defending the company against the criticisms by Ad Age.
http://www.joinred.com/ad_age.asp
Posted by: Jason at Mar 7, 2007 8:55:29 AM
He [Bono] stressed that this was a commercial venture and not philanthropy.
That about sums it up.
Posted by: Brandon at Mar 7, 2007 9:17:36 AM
The response makes good sense and I am at a loss as to how any economist could object to the strategy.
RED CEO replies to critics and says "we encourage our partners to go about their business including their marketing. This sells the products; the products generate the $25 million. In addition, this marketing would have been spent anyway…It never would have been (nor will it ever be) given to the Global Fund. We were able to divert existing marketing dollars for (RED). The companies have erected signs in stores and billboards across America saying that AIDS in Africa is a serious global problem."
The strategy is to us the incentive structures companies actually have to generate funds for fighting Aids in Africa. The companies paint one of their products red, advertise and sell the product, and some of the profit goes to RED. Company X gets to associate themselves with a good cause and Bono and in return RED takes a fee.
WTF is wrong with that?
Posted by: aaron_m at Mar 7, 2007 9:22:20 AM
I don't care about Bono one way or another; I am not sure if I even know his music.
And maybe I don't understand how Red is supposed to work. (The letter from RED's CEO did not help me.)
But the numbers could also indicate simply that the campaign to raise funds is not working well. Sometimes you place ads and they simply don't pull.
So? Not everything works in life, especially in business.
Of course I guess Bono could be associating himself with something which doesn't work just for more publicity but I would sorta doubt that.
Posted by: David Sucher at Mar 7, 2007 10:19:10 AM
What is not to understand. Companies can choose to put the RED trademark on their products, and then they can choose how much to spend on advertising their own prodcuts with the RED trademark.
As the site notes:
"Established brands who license the (PRODUCT) RED mark send a portion of the profits made on (PRODUCT) RED products directly to the Global Fund to fight AIDS in Africa. (RED) never handles this money. A licensing fee for use of the (PRODUCT) RED mark is used to manage and market the (RED) brand."
Posted by: aaron_m at Mar 7, 2007 10:35:51 AM
Though it seems grossly inefficient on the surface, I do agree that 18 million is still better than 0. Additionally, we have to recognize that at least it was consumers choosing, of their own free will, to buy a "socially conscious" product that contributes to a cause of their choice, rather than a government tax that takes from those who do not believe that this cause is a priority for them.
Posted by: anne at Mar 7, 2007 10:37:37 AM
aaron m OTM
Posted by: David McDougall at Mar 7, 2007 10:52:56 AM
Arggggg, what is it that you people don't understand!
It is not as if there is a charity with 100 million that is asking itself if it should spend the lot directly on Aids relief or on adds to sell products, with some profits going to aids relief.
There are a bunch of companies with 100 million to spend on advertising and a group (RED) that is trying to figure out a way to get these companies to spend it in a way that helps poor people with Aids in Africa. Companies are essentially giving a portion of their profit to be able to use the RED logo.
If RED’s effort is to be considered inefficient we would need to know what they spend on managing and marketing the (RED) brand, i.e. what it costs them to make it interesting for companies to use the RED trademark. But the article does not give us this information at all, instead it simply guesses at what these companies spent to sell their products.
For the companies’ effort to be considered inefficient we would need to know not only what they spent on advertising their products with the RED brand, but what they make selling these products. We would also need to know how much more these companies would be willing to donate directly had they not invested in the RED business model. We could then get some idea on whether or not we can expect these companies to be able to contribute more to Aids in Africa by giving via the RED business model or by simply giving directly. If the RED business model is one that creates an incentive for companies to give at a level beyond their direct charity level because the brand is strong and the profitability of RED branded products is good, then we can say that the RED model is more efficient than the direct charity model.
If not we can say that potential charity dollars were wasted in various companies RED ad campaigns.
Posted by: aaron_m at Mar 7, 2007 11:15:18 AM
The right comparision isn't between $18MM and 0 but between the $18MM and its opportunity cost. The key questions are whether customers view (RED) purchases as a substitute for real charitable contributions and whether they are overestimating the charitable benefits of the (RED) purchase. For example, suppose Joe gives $20 a month to charity, and he is thinking about buying an iPod. If he decides one month to skip the $20 donation and instead buy a $100 (RED) iPod, the charity is worse off than if he had bought a regular $100 iPod and given his regular $20.
Posted by: DK at Mar 7, 2007 12:40:47 PM
DK
This is only an issue if we expect people who buy RED products to do so at the expense of donations they otherwise would have made. Do we have reason to think this is the case? We would need some data.
Even if we assume that people will reason this way they still have all the relvant informtion about how much of their purchase goes to charity. I looked at the products and it is clearly stated how much goes to the Global Fund for each product. So if I normally give 20 to charity and skip it to buy a RED ipod, I also know that only 10 dollars goes to charity. So I cannot motivate the choice to myself on the premise that the net result is the same, because I know that it is not.
Posted by: aaron_m at Mar 7, 2007 1:09:23 PM
Is it possible that the $100 million spent on advertising might be a sunk cost, in that the $100 million was an already budgeted amount before the RED campaign took off? Of that $100 (going to aaron_m's comment), how much directly went to RED type stuff, rather than saying, "Here is the advertising budget and it only raised $18 million."? If it is already a sunk cost, the the score is
money making bono popular = $0
Money raised for AIDS = $18 million.
Posted by: Fletch at Mar 7, 2007 1:18:12 PM
The problem is that companies are portraying their RED work as actual charity. For instance, the Gap shirt above mentioned that 50% of profit is given to the charity. The phone advertised nonstop also gives some small percentage of profit to charity. Certainly there's, at first glance, some false advertising going on, isn't there? If a kid sells magazines and say it's to raise money for Little League, but ends up pocketing most of the profit, there's something wrong going on.
Further, I would be stunned if RED didn't, at the margin, substitute for normal charitable giving both from consumers and from the companies who sublicense the name.
Posted by: cure at Mar 7, 2007 1:26:43 PM
incidence shmincidence, Bono kind of a dick.
Posted by: josh at Mar 7, 2007 1:27:12 PM
Cure,
What on earth are you talking about!!!????!! These companies are selling products for profit like they always do. And they are clearly saying that only a percentage goes to charity and what that percentage and/or amount is. How can that be "false advertising?"
They may be buying a "nice guy" image cheap, but maybe not. Do some work and see what the numbers says. For the iPod and the Converse shoes the price of their regular product is the same as the RED branded product, so they must be taking less profit on the RED branded product.
Posted by: aaron_m at Mar 7, 2007 1:50:44 PM
aaron m: exactly. as you say, we need data to measure the amount of charitable giving displaced. The $18MM should not be compared to either the $100MM or $0 but to the empirical estimate of the amount of giving displaced.
I don't have any evidence, but my prejudice is that the displacement is pretty high and that the ads are intentionally targeting impulsive, emotional people who are unlikely to weigh the costs and benefits rationally. OTH, if they weren't buying (RED) items, they would probably be spending their money on ineffective carbon offsets, so the net effects on society might be small.
Posted by: DK at Mar 7, 2007 2:17:06 PM
NCA says:
"The disparity seems to be more an excuse to attack Bono than anything else."
I fail to see the problem.
Posted by: Equity Private at Mar 7, 2007 4:22:59 PM
I fail to see the problem.
The problem is that an economist is getting snarky about the fact that it takes money to make money (or, in this case, make room for charity)
Posted by: perianwyr at Mar 7, 2007 5:30:08 PM
DK: intentionally targeting impulsive, emotional people
I would conclude from this that it is not displacing other charity. It reminds me of a couple of posts on this blog on charity which expressed the belief that impulsiveness is a big driver in charity, eg, that giving for specific events increases total giving.
Posted by: Douglas Knight at Mar 7, 2007 8:47:27 PM
The accusation that (RED) has spent $100 million to collect $18 million appears at this point to be only that, an accusation. If any evidence has been offered to show that the $100 million was not in fact sunk costs (would have been spent on the same billboards regardless of whether any sales proceeds were going to Africa), I haven't seen it.
So my main problem here is the use of the word "fact" in Tyler's headline. Substituting "claim" or "accusation" or "guess" makes it more accurate and fair.
Posted by: Paul at Mar 7, 2007 11:57:54 PM
Pardon I meant to say there "(would NOT have been spent...)"
Posted by: Paul at Mar 7, 2007 11:59:04 PM
Besides the points raised so far: the AIDS charity is likely getting a huge benefit above and beyond the cut of the profits from the sales. They are getting that holy grail known as brand awareness. They're getting it not just from the billboards and marketing; more importantly, they're getting it from the sales of the RED branded products themselves.
If a consumer is persuaded by the marketing to buy the RED t-shirt instead of the regular one, then they have taken a deliberate step to identify themselves as "someone who cares." Having done so, they will now be more likely to show they care in other ways, such as contributing to charity. See Cialdini's Influence and the chapter on consistency and commitment. Rather than displacing a charitable donation by the consumer, a purchase of a RED branded product will stimulate additional charitable donations of one sort or another by the consumer.
Posted by: eddie at Mar 8, 2007 3:43:17 PM
Regardless of whether the promotion is for commercial and charitable reasons, or simply charitable reasons, $18 million is still being used to help AIDS in Africa. I think it is important though, that consumers realize that Bono's venture IS commercial, not completely charitable.
Why don't they just donate the $100 million straight to the cause in Africa... that would make a truer hero than using charity as propoganda for celebrities...
Posted by: Mere at Mar 12, 2007 6:18:12 PM
"Why don't they just donate the $100 million straight to the cause in Africa"
Sure Mere, why don't YOU just donate a huge wad of your own cash to Africa? Self-interest, that is why! The reason these companies do not simply donate the dollars is because they do not get the ads and sales they currently get out of the RED campaign. They do not have a self-interested reason to just give away 100 million and would not do that.
Yes it would be nice if we were altruistic enough to simply use what we have to stop suffering around the world. But it hardly seems like a serious criticism of the RED programme since all they are doing is using the incentives companies actually have to get some dollars to Africa.
You could of course aim your criticism directly at the companies as say, just give Africa 100 million. But then it becomes obvious that we do not normally criticise companies by saying 'hey where is the line in your budget for 10 million to Africa?' What percentage of profits do you insist be given to charity in those companies you own stocks in? 0.1%, 0.01%? Certainly not at the level of the advertising budgets for companies like Converse or Ipod.
Posted by: aaron_m at Mar 13, 2007 5:55:45 AM
Thank God for aaron m, who seems to actually have a brain unlike some of the other clueless individuals who have posted comments on this topic. I love lazy people who sit around and ridicule a charitable campaign, one that is highly effective on more levels than one for those of you dolts who cannot seem to grasp that, and then pose moronic questions like "Why can't they just give directly to the charity?" Think what you want about Bono, he is DOING something, which is more than I can say for 99.9 percent of the people I know and, I suspect, most of (save aaron m) the people quoted on this site.
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