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The Long-Term Value of Community Relations

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Most marketers have a careful eye on metrics, such as cost per lead, conversion rates, and the holy grail of “hard” return on investment calculations. Yet with a fair percentage of marketing budgets pegged to quarterly objectives, a myopic focus on “short-term value creation” often excludes activities—such as global community relations—that set companies up for long-term success.

The run up to the housing and global market crash of 2008 was euphoric for almost everyone. From Wall Street bankers with multimillion dollar paychecks to U.S. homeowners cashing out with multiple refinances and gorging HELOCs it seemed there was plenty of wealth for all. However, as with most all night parties, the liquored punchbowl is eventually emptied, leaving everyone with a massive hangover now aptly titled, “The Great Recession.”

As with most economic resets, priorities tend to shift. One executive quoted in the Financial Times lamented that in the past few years, most corporate boardrooms were too focused on profits with little consideration for social responsibility and the greater good. Now, Indra Nooyi, CEO of Pepsi says, “Everybody is talking about the new rules of capitalism which are don’t just think about the company within the four walls of the company, think about your obligations to society.”

A powerful way for companies to think outside their four walls is to take action by investing a portion of the marketing budget in global community relations. What are community relations? One website says, “The underlying principal of community relations is that when a company accepts its civic responsibility and takes an active interest in the well-being of its community, then it gains a number of long-term benefits in terms of community support, loyalty, and goodwill.”

One company adopting this mindset is Teradata, through its “Teradata Cares” program (full disclosure—the author is employed by Teradata Corporation). Teradata Cares is community relations program that encourages and engages children around the globe in science, technology, engineering and math programs as a way to connect with local communities. Via the sponsorship of high-school robotics competitions, educational grants and other methods, Teradata contributes to activities that help develop tomorrow’s technologists.

Thinking about stakeholders outside of a company’s four walls doesn’t come naturally for some enterprises. Moreover, others may find it difficult to spend on marketing programs that may not drive an immediate return on investment. Indeed some shareholders argue that investing in global community relations has nothing to do with a company making its quarterly numbers.

Not so says Susan Baxley, Teradata’s Director of Community Relations. “What people may not realize is that programs like Teradata Cares actually help the profitability and future success of a company because employees learn team building and other leadership skills. Employees also gain a sense of community pride from their volunteer efforts and are thankful for the opportunity to give back to their local communities. This, in turn, leads to more satisfied employees and stronger employee retention rates.”

Today, a fair portion of marketing executives manage their budgets much like an investment portfolio. And in an era of tight budgets where every dollar should be justified, there is nothing inherently wrong with this approach. However, sometimes “value” is much more than the sum of a column in a spreadsheet, especially when programs such as community relations make such a positive difference in the places we work and live.

Questions:

• If you allocated marketing budget to community relations, how would you track and measure the value of your investment?
• Should community relations expenditures come from the marketing budget, or elsewhere?


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Paul Barsch directs services marketing programs for Teradata, the world's largest data warehousing and analytics company. Previously, Paul was marketing director for HP Enterprise Services $1.3 billion healthcare industry and a senior marketing manager at global consultancy, BearingPoint. Paul is a senior contributor to MarketingProfs, a frequent columnist for MarketingProfs DailyFix, and has published over fifteen articles in marketing, management, technology and healthcare publications. Paul earned his Bachelors of Science in Business Administration from California Polytechnic State University, San Luis Obispo. He and his family reside in San Diego, CA.

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  • by Neil Anuskiewicz Tue Aug 31, 2010 via blog

    • If you allocated marketing budget to community relations, how would you track and measure the value of your investment?

    It seems that it would be very challenging to track and measure the value of the investment. It seems like publicity where there are tangible and intangible benefits to doing it but very hard to track and measure.

    When it comes to my life as an individual, I kind of believe in karma -- not necessarily as a spiritual concept but that is how society works even if you don't see it immediately. A lot of folk phrases such as "what goes around comes around" sort of captures the essence. This is ultimately true for companies as well.

    The company gives back to the community and gets back in return in both measurable (I heard about because of your efforts on X) and very hard to measure (e.g., good will).

    • Should community relations expenditures come from the marketing budget, or elsewhere?

    It seems to be sort of publicity and part of PR, which is part of marketing. Marketing budget seems logical.

  • by Paul Barsch Tue Aug 31, 2010 via blog

    Neil, appreciate that you took the time to comment! For an alternate view on the case AGAINST corporate social responsibility, I'd refer readers to a WSJ article: http://online.wsj.com/article/SB10001424052748703338004575230112664504890.h.... In this column a University of Michigan professor argues that companies don't necessarily have a responsibility to act in the public interest, and should consider shareholder value foremost.

  • by Neil Anuskiewicz Wed Sep 1, 2010 via blog

    Those who are against social responsibility have general read a bit too much Ayn Rand.

    The same sort of argument could be made for the individual: never do anything for anyone unless it directly benefits you. It is possible for a company to both maximize shareholder value and take social responsibility into account in their decisions.

    Mr. Karnani also seems to over estimate how much society relies on corporations to solve social problems. I think it is safe to say that most people are not holding their breath on that one.

  • by Paul Barsch Wed Sep 1, 2010 via blog

    Neil, regarding your comment; "It is possible for a company to both maximize shareholder value and take social responsibility into account in their decisions", I completely concur.

  • by Neil Anuskiewicz Wed Sep 1, 2010 via blog

    Besides, I am certain that companies are socially responsible, at least in part, for the good will and publicity it generates.

    I for one am more likely to buy from a company that I think is trying to do some good things. Social responsibility is part of maximizing shareholder value. I'm far from the only person who takes these things into account when making buying decisions.

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