For all its fanfare, Red's model of tying a good cause to a product,
known in the business as "cause-related marketing", is fairly familiar,
though on a much larger scale. Unlike other ethical consumer brands and
marks such as Fairtrade, the manufacture of the products is not a major
concern. (Some of Gap's Red T-shirts are made in Africa, but that is
the company's own choice.) The Global Fund receives the donations
directly. Apart from arranging the deals with the companies, Red just
provides and helps to market and direct the brand.
In the same way that companies seeking celebrity endorsements risk
damaging their brands if the celebrities misbehave, adopting a
multi-company trademark such as Red exposes the partners to any bad
publicity throughout the Red family.
Unsurprisingly, some of the
first companies to sign up have deep expertise in linking their brands
with good causes. American Express has long issued "affinity cards"
with donations linked to particular worthy projects. Over 20 years ago,
American Express issued a card to raise money to restore the Statue of
Liberty. A permanent American Express team spread across several
countries looks for new partners. John Hayes, American Express's chief
marketing officer, worked with Bono and Shriver for two years before
Red was started and American Express launched its Red credit card,
initially only available in the UK. "We asked a lot of questions and
did a lot of homework prior to the launch," he says. "They did a very
thorough job to ensure that all the participants had the right
approach."
The American Express card promises no annual fee for life, and its
interest rates are competitive with other UK credit cards, although it
saves lives rather than accumulating Airmiles. Any surplus Bono and
Shriver make from Red will go to the Global Fund.
Yet the business of Red had a stuttering start in the UK. American
Express started briskly and got a lot of media coverage. But months
after last January's launch, Gap still had only a limited range, which
(at least in the men's section of my local store) was piled on a low
shelf with no display of the Red trademark. Around the same time, in
Selfridges, London's iconic department store, a single pair of Red
baseball boots, again with no display of the logo, sat anonymously in
the middle of the Converse section.
US consumers, Shriver says, were much less sceptical. By the time Red
was launched in the US in October last year, Red and the brands had
raised their game and begun to exploit the potential of the trademark
more vigorously. The idea is that, because Red brings several
companies' brands together in a broader campaign infused with idealism,
the buzz around Red and the buzz around its partners ought to be able
to feed off each other.
So who are the Red customers? Gap's initial anecdotal impression is
that the customers are typical of its usual, quite broad, clientele.
"Teens and late-40s women [are] shopping at the same table," Peck says.
The latter may be a specific Oprah effect: other companies say their
Red customers appear to be younger than average. Giorgio Armani has put
the Red products out under the Emporio Armani brand, a cheaper range
for younger buyers. In an e- mail exchange, Armani said that Emporio
Armani's customer base of 25- to 45-year-olds "mirrors the profile that
Product Red has identified as being most likely to be motivated by the
idea of matching desire and virtue".
American Express will not give figures for individual cards, but Hayes
said that the majority of cardholders of the Red credit card were new
to the company, not existing customers adding or swapping a card.
American Express looks a near-perfect fit with Red. Its cards are
already defined by colour - green, gold, platinum, black - and the Red
version adds a new twist, defining its holders by identity rather than
wealth. My own Red American Express card has evoked curiosity from all
over - maitre d's at City of London brasseries, concierges at hotels in
Beijing and Geneva and inquisitive friends and colleagues.
The
fifth-floor restaurant at the Harvey Nichols store in London's
Knightsbridge is pulsating. Arriving guests run a strobing, shouting
gauntlet of paparazzi. Inside, the scene is straight out of The Devil
Wears Prada, or at least Sex and the City - improbably slim women
clutching Cosmo cocktails and men with expensively distressed hair
bearing champagne flutes. Actor Pierce Brosnan oozes through the crowd.
The party leads the London Evening Standard's social diary column the
next day. It all seems a long way from Africa.
The gathering
launched a small line of African-made clothing owned by Bono, the
ubiquitous campaigning rock star, and his wife. Helping Africa is a
longstanding Bono preoccupation, which is why he has recruited far
bigger companies and brands than his own to the cause. Product Red,
announced a year ago at the World Economic Forum at Davos, is seeking a
commercial solution to the humanitarian disaster of Aids in Africa.
In
its first year, Red has provided ammunition for both optimists and
those sceptical that the rich can consume their way to a better world
for the poor. But after a stuttering British start, Red's US
incarnation got off to a flyer. The first Red-donated money has started
flowing to Africa - $5.25m has gone to Rwanda and $4m to Swaziland - to
put HIV-positive Africans on antiretroviral drugs and to provide care
for Aids orphans. The fund has put 800,000 people in the developing
world as a whole on antiretroviral drugs and is aiming to at least
double that this year.
Red works quite simply. Its trademark, a
pair of red parentheses symbolising the embrace of solidarity, is
licensed to "partner companies" which use it on specific products. In
return, the partners donate some of the revenue or profits to the
Geneva-based Global Fund to Fight Aids, Tuberculosis and Malaria -
launched in 2002 to combat the diseases in the developing world - and
pay a fee to Red itself to cover marketing and administration. Red is
the colour of emergency and alarm; fitting for the humanitarian
disaster of more than 2 million African deaths from Aids a year.
By
last year's launch, Red had agreed deals with Gap, Giorgio Armani,
American Express, Converse (owned by Nike) and Motorola. Since then, it
has added Apple, which launched a Red iPod Nano in October.
Red
itself is a limited-liability company owned by Bono and Bobby Shriver,
the chief executive. Shriver is a droll, drawling Californian from a
family famous for its prominence in politics, business and the media.
His uncle was President John F. Kennedy. His mother, Eunice Mary
Kennedy Shriver, founded the Special Olympics. His sister, Maria, is a
former NBC News presenter now married to Arnold Schwarzenegger,
California's governor. There is no better background for a conscience
capitalist.
Red's manifesto reflects Shriver's guiding principle:
"Red is not a charity. It is simply a business model. You buy the Red
stuff. We buy the pills and distribute them... It's easy. All you have
to do is upgrade your choice."
But Shriver says with disarming
honesty that Red, like many start- ups, was "wildly undercapitalised
and wildly understaffed". It spent less than $1m advertising last
year's launch (which Shriver, carefully managing expectations, says was
really only a launch of the Red idea, not the products). Even now, Red
has only nine staff.
The donation agreements, which typically run
for several years, are negotiated separately with each partner.
American Express, for example, donates at least one per cent of the
value consumers spend using its Red credit card. Gap hands over half
the profits from its Red clothes. Red has to balance maximising company
donations with allowing its partners enough profit to make it
worthwhile. To prevent the brand being diluted, only one company of
each type (clothing lines, cellphones, credit cards) is allowed to use
the Red brand.
For all its fanfare, Red's model of tying a good
cause to a product, known in the business as "cause-related marketing",
is fairly familiar, though on a much larger scale. Unlike other ethical
consumer brands and marks such as Fairtrade, the manufacture of the
products is not a major concern. (Some of Gap's Red T-shirts are made
in Africa, but that is the company's own choice.) The Global Fund
receives the donations directly. Apart from arranging the deals with
the companies, Red just provides and helps to market and direct the
brand.
Matthew Freud, the well-connected British public-relations
baron whose company has worked extensively on Red, says: "It is
licensing nothing but a powerful idea. It is selling to brands the
equity they can gain by becoming linked to the idea."
The halo
effect for a company involved in battling Aids would appear to make Red
an easy sell. But Shriver says companies were slow to sign up. Apart
from concern at being criticised for making money from Aids in Africa,
businesses that rely on the value of their brands want to maintain
control of them. In the same way that companies seeking celebrity
endorsements risk damaging their brands if the celebrities misbehave,
adopting a multi-company trademark such as Red exposes the partners to
any bad publicity throughout the Red family.
Unsurprisingly, some
of the first companies to sign up have deep expertise in linking their
brands with good causes. American Express has long issued "affinity
cards" with donations linked to particular worthy projects. Over 20
years ago, American Express issued a card to raise money to restore the
Statue of Liberty. A permanent American Express team spread across
several countries looks for new partners. John Hayes, American
Express's chief marketing officer, worked with Bono and Shriver for two
years before Red was started and American Express launched its Red
credit card, initially only available in the UK. "We asked a lot of
questions and did a lot of homework prior to the launch," he says.
"They did a very thorough job to ensure that all the participants had
the right approach."
Art Peck, executive vice-president for
corporate strategy and business development at Gap, says Bono made
initial contact with Paul Pressler, Gap's chief executive, in July
2005. By November, when Bono's band U2 were playing near Gap's
headquarters in the San Francisco Bay Area, the project had progressed
far enough - including getting the Global Fund on board and fleshing
out a marketing vision.
Gap had already done what Peck calls
"event commitment" projects - one-off campaigns in areas such as
breast-cancer awareness. It also had long experience of the ethical
consumption movement, having spent many years skirmishing and engaging
with anti-sweatshop campaigners. But relying on a variety of other
companies and making a long-term commitment to building a sub-brand
such as Red was a step into the unknown. "We are committed to that; we
believe our partners are committed to that; certainly the people at Red
are," Peck said. "But that takes continued resources, energy and
commitment. And you don't control the whole thing. You worry about
those things."
Gap has other worries as well. Rumours have been
swirling of a major restructuring - either a sale of the entire chain
or a spin- off of one of its divisions - following disappointing
Christmas sales in the US.
Red reduced the risk of cross-company
contamination by retaining a veto over all Red-linked advertising and
by frequent consultation among the partners. The partners themselves,
alert to the accusation that they are profiteering from African misery,
have promised not to make higher margins on Red than on their normal
products, relying instead on higher volume and free marketing from the
publicity surrounding the brand to compensate for the donations they
make.
Apple's Red iPod sells at the same price as its standard
product. Some Red products are more expensive. Gap's cheapest Red
product in the US is a T-shirt that retails at $28 (about £15) compared
with $14.50 (about £7.50) for its "classic-T" - but that, the company
says, reflects the extra costs of producing limited-edition products
with higher design standards. The American Express card promises no
annual fee for life, and its interest rates are competitive with other
UK credit cards, although it saves lives rather than accumulating
Airmiles. Any surplus Bono and Shriver make from Red will go to the
Global Fund.
Still, risks to reputations can come from anywhere,
even from the Bono brand. He was one of Time magazine's "people of the
year" in 2005 and was awarded an honorary British knighthood last
month, but a curmudgeonly mood of Bono-fatigue has set in among some
pundits, fuelled by a more general sense of cynicism about celebrity
campaigning. Shriver says that the first instinct of the British press
in particular is to pounce on the tiniest hint of sanctimony or
hypocrisy. There were plenty of voices, including those of Irish
politicians, accusing Bono and the rest of U2 of double standards when
they last year moved their music publishing operations to the
Netherlands to reduce tax liability.
Bono himself professes
little concern. "I don't mind taking some flak," he says. "A few cuts
and bruises can look good on a face." He has, in fact, soft-pedalled
his involvement in Red recently, saying the brand is strong enough on
its own. "It's any kind of sainthood tag that makes me nervous. I much
prefer a `tough in business' tag," he says.
Yet the business of
Red had a stuttering start in the UK. American Express started briskly
and got a lot of media coverage. But months after last January's
launch, Gap still had only a limited range, which (at least in the
men's section of my local store) was piled on a low shelf with no
display of the Red trademark. Around the same time, in Selfridges,
London's iconic department store, a single pair of Red baseball boots,
again with no display of the logo, sat anonymously in the middle of the
Converse section.
Shriver said that Red's own research on
attitudes showed some British consumers were suspicious of the
companies making money off the brand: "People feel the companies need
Red more than Red needs the companies," he said. "[They were]
questioning whether the companies were doing enough to have earned
this."
US consumers, Shriver says, were much less sceptical. By
the time Red was launched in the US in October last year, Red and the
brands had raised their game and begun to exploit the potential of the
trademark more vigorously. The idea is that, because Red brings several
companies' brands together in a broader campaign infused with idealism,
the buzz around Red and the buzz around its partners ought to be able
to feed off each other.
And while Red is a business proposition,
its association with good causes means it can still get free publicity.
Oprah Winfrey, the reigning empress of talk shows and a huge brand in
her own right, invited Bono on to her television show to launch Red in
the US in October. Winfrey and Bono went shopping together at Gap,
Apple, Motorola and Armani stores on Michigan Avenue in Chicago and
were mobbed. Apple lit up its Fifth Avenue store in New York in red to
launch the iPod. Red's page on MySpace already boasts around 600,000
"friends".
Partner companies could experiment. Gap bought
advertising throughout an entire edition of The New Yorker, the
magazine for America's intelligentsia. But because it eschewed the TV
ads it uses for its normal marketing, the campaign cost no more to run
than its usual spend. Peck says: "It is the buzz. It is the choice of
the books that we put our ads in. It is obviously the people that were
in those ads [Steven Spielberg, Chris Rock, Penelope Cruz and a horde
of other celebrities]. It is the big opening on Fifth Avenue where they
basically had to close the street down. It was the Michigan Avenue and
Oprah thing. It is a different buzz."
So who are the Red
customers? Gap's initial anecdotal impression is that the customers are
typical of its usual, quite broad, clientele. "Teens and late-40s women
[are] shopping at the same table," Peck says. The latter may be a
specific Oprah effect: other companies say their Red customers appear
to be younger than average. Giorgio Armani has put the Red products out
under the Emporio Armani brand, a cheaper range for younger buyers. In
an e- mail exchange, Armani said that Emporio Armani's customer base of
25- to 45-year-olds "mirrors the profile that Product Red has
identified as being most likely to be motivated by the idea of matching
desire and virtue".
The number of shoppers prepared to make
purchase decisions based on association with good causes appears to be
growing - and the phenomenon is not confined to the young. American
Express undertakes regular phone surveys in the UK, that show there are
1.9 million "conscience consumers", defined as those who are prepared
to use their buying power to achieve wider social or environmental
change. It estimates that number will grow to 4 million by 2009.
Intriguingly, conscience consumers are only marginally younger than the
national average. "It looks as much of a mindset as a demographic,"
Hayes said. And because it is a growing one, "if we don't go and salute
those people with a product meeting their needs, someone else probably
will."
American Express will not give figures for individual
cards, but Hayes said that the majority of cardholders of the Red
credit card were new to the company, not existing customers adding or
swapping a card. American Express looks a near-perfect fit with Red.
Its cards are already defined by colour - green, gold, platinum, black
- and the Red version adds a new twist, defining its holders by
identity rather than wealth. My own Red American Express card has
evoked curiosity from all over - maitre d's at City of London
brasseries, concierges at hotels in Beijing and Geneva and inquisitive
friends and colleagues.
The companies involved are cagey about
precise sales numbers. But American Express seems pleased with its UK
product and Gap's Peck says he was "blown away" by the sales in the US.
He gets a couple of e-mails a week from Shriver telling him that Red
products have sold out in this or that Gap store Shriver has wandered
into. Gap, Peck says, is planning to relaunch in the UK with a much
bigger range this spring.
Stephen Cheliotis of Superbrands, which
publishes an annual "branding bible", says that Red is a "fantastic
idea with huge potential". Cheliotis reckons that combining two brands
can make marketing three times more effective, when the brands fit
together, as the Red partners do. "I think these companies have done
very well to get in at the beginning," he says.
Red is now in
negotiations with dozens of other businesses, including global car
companies. But Shriver says that many corporate executives still remain
cautious, and it will be a couple of years before Red's success can
properly be judged. "Quite a few companies said no and are still
saying: `Nice launch but it won't be sustainable,'" he says. "We're
going to have to go through each category, it seems to me, and find
some courageous company and then prove it and then they'll go, `OK, you
proved it now in cosmetics, but you haven't proved it in computers.'
And then we'll prove it in computers and then they will go, `OK, you've
proved it in cosmetics and computers but you haven't proved it in
chewing gum.' At some point people are going to say `OK, you proved it,
it worked.' I don't know what that point is but we're not there yet."
Partner
companies also need to be big enough to be worth Red's while. "I've had
to focus on the larger companies because the amount of money they could
give the fund is so much larger," Shriver said. "You see these little
$100m sales companies wanting to do truly clever things and you just
don't have time to go through all that with them."
This
hard-nosed emphasis on extracting cash from big business raises some
concerns in the established ethical-trading world. Ian Bretman, deputy
director of the Fairtrade Foundation in the UK, says he welcomes Red
and does not think it will divert money away from Fairtrade products.
He is, in fact, surprised by how few partner companies Red has.
But
he argues that Red's advertising could do more to educate people about
the role of poverty in spreading Aids. An American Express poster
campaign on the London Underground featuring a Masai warrior with
Gisele, the Brazilian supermodel, looked rather trivialising, he says.
"It looks to me like a missed opportunity to deepen the message."
Others,
from the less glamorous end of the ethical-consumption movement are
much more dismissive. A week before Christmas I sought out London's
annual "fair-trade fair" (confusingly unconnected with the Fairtrade
mark), this year crammed into a stuffy basement at the Methodist
Central Hall in Westminster.
The merchandise on the 60 or so
stalls leaned towards the handmade and the ethnic, sometimes laced with
strands of leftish politics: bright silk scarves hand-woven in Laos;
bead necklaces threaded by widows in Sri Lanka; cold-pressed organic
olive oil made by Palestinian farmers on the West Bank. (I bought some.
It was excellent, but at £7 for 750ml, not cheap.) The London fair -
there are others around the country - attracts about 3,000 visitors
each year.
The inspiring spirit behind the fair, which has run
each year for two decades, is Benny Dembitzer, whose natural ebullience
is little dimmed by the exhausting process of organising it. Wearing
trainers and a fleece top, Dembitzer looks more like the development
activists who revere him than the economics tutor he once was at
Trinity College, Cambridge.
He says his epiphany came while
working in Ethiopia in the late 1960s. Like Red, he believes in helping
developing countries through business. But he insists that the best way
to do this is what he started doing himself - connecting African
producers with western consumers. "If I was selling things, the people
who made it could eat," he says. "I am not a candidate for sainthood,
but when I sold £10,000 of [African] carpets to a mate in Oxford, it
earned 37,000 days' usual income for the people that made them."
Dembitzer
became dimly aware of Red when The Independent, the leftish newspaper
he reads, turned an entire edition red last May and had Bono guest-edit
it for a day. But Dembitzer can't quite see why the world needs another
ethical-consumption project. "There are enough very good initiatives
out there already," he says. "We should try to get more money to more
people through existing channels."
It is hard, though, to scale
up such an operation. Dembitzer says there are another 250 potential
stallholders, but vetting each for ethical standards takes time and
effort. And the Global Fund that receives Red's donations says it needs
business contributions on a massive scale. Richard Feachem, the fund's
Geneva-based director, is urbane, trim and articulate, his manner and
appearance closer to a management consultant than a British academic,
his former incarnation. With a distinguished background in both public
health and international development, he shepherded the fund through
its first few years.
The fund overcame initial objections that it
would merely duplicate aid efforts - though more recently its
reputation suffered when its governing board, split between rich and
poor country directors, could not agree on a successor to Feachem. (It
is still looking.) It has nonetheless become the main international
channel through which the rich world pushes resources to combat
HIV-Aids, and receives about $3bn a year in donor support,
overwhelmingly from governments.
At times, Feachem says he felt
more like the fund's travelling mendicant than its chief executive,
constantly touring the capitals of the rich world to cajole, inspire or
shame ministers, officials and parliaments into stumping up more
contributions. Initial hopes that the private sector would contribute
substantial amounts did not materialise. As Feachem says, a fund
disbursing billions of dollars with grant programmes that last five
years needs donor contributions to be both large and predictable - and
not simply diverted from other aid organisations.
"Companies
dipping into their corporate philanthropy funds for donations are all
very well, but next year they may decide to give the money to something
else," Feachem says. "We need flows to be sustainable." The hundreds of
thousands of people in the developing world taking antiretrovirals paid
for through the fund need to continue taking them indefinitely. "This
is a commitment until death," Feachem says.
Contributions to the
Global Fund are put into a common pot, rather than earmarked for
particular projects, in order to prevent the complexity and bureaucracy
of tracking particular donations that bedevil many other aid agencies.
But Red felt it needed to show concrete examples of its donations being
used, and the fund has allowed it to present the Rwanda and Swaziland
projects as being a direct result of Red donations.
Feachem says
he hopes that in a couple of years Red will be contributing "a few
hundred million" dollars a year to the fund - not earth-shattering, but
not negligible. And, as Feachem points out, consumers buying Red
products could increase pressure on politicians to raise official
donations.
Does it mean the fund taking risks, and the partner
companies taking risks with their brands and reputations? "We are not
in this business to be risk-averse," Feachem says. "Anyone who gets
into trying to prevent Aids in Africa has to take some risks."
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