Consumers are traditionally supportive of businesses that support charitable causes. But recent research from a UTSA marketing faculty member has found that this can backfire when social ventures retain a profit.
“For-profit social ventures are new to the marketplace,” said Saerom Lee, assistant professor of marketing in the UTSA College of Business and the lead author of the study. “These companies match up with nonprofits in terms of their social mission, but they also have a profit goal.”
Her paper, “To Profit or Not to Profit? The Role of Greed Perceptions in Consumer Support for Social Ventures,” was published this month in the Journal of Consumer Research.
Lee and her co-authors conducted seven studies to examine how consumers perceive these type of organizations. “People are not aware of for-profit social ventures,” said Lee. “These businesses are upfront about their social mission, but not always of their for-profit status.”
One study recruited prior donors of nonprofit organizations as well as for-profit social ventures. When their profit status was not revealed, respondents chose to support these organizations again. But, once the organization was disclosed as a for-profit organization, the reaction was negative.
“For organizations with a prominent social mission, profits are interpreted as a signal of greed,” said Lee. “Consumers perceive that profits come at the expense of social impact.”
Several practical insights can be made from Lee’s research. First, she recommends that for-profit social ventures reduce the prominence of their social mission or highlight low profit levels to correct consumer misperceptions. And, she encourages for-profit social ventures to be upfront about their for-profit status, to minimize negative repercussions.
“While these organizations were established to benefit society, the reality is that consumers perceive them negatively,” said Lee. “But, if the organization makes their social mission a secondary part of their mission, then the perception of the organization becomes more favorable.”
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