SAN FRANCISCO — When John Cortez went shopping for a T-shirt with a (RED) logo at a local Gap clothing store this weekend, he knew part of the proceeds would be sent to HIV-positive women and children in Africa.
"I like the product, and it's a good cause, so I might as well buy it," says Mr. Cortez, explaining how he had "two good reasons" to spend his money at the Gap.
What he didn't know – and what Gap customers can't find out – is exactly how much money per item goes to Africa.
His experience hints at both the power for good and reasons for criticism of (RED), a high-profile campaign, partnering some of the world's most recognized brands like Gap with The Global Fund, an organization that grants money to fight diseases.
(RED), launched by rock star Bono and Bobby Shriver last year, has drawn praise for raising $25 million for AIDS medications in Africa, as well as some reservations about marketing costs and a lack of transparency. Such tensions are not uncommon within the rapidly growing business of cause-related marketing, which puts a corporation's advertising dollars behind a nonprofit's cause.
"There's a wide variety of cause-related marketing out there, and ... consumers need to ask the tough questions," says Mark Feldman, a Boston-based consultant who has worked in the field for more than a decade. "They have a right to know more of the details because the company is claiming an association with a cause."
Cause marketing is becoming a major force. Companies spent $1.34 billion on it last year in the US alone, up 20 percent over 2005, according to the IEG Sponsorship Report. Part of the reason: Eighty-four percent of Americans are likely to switch brands to help a cause, when price and quality are equal, according to a 2002 Cone Corporate Citizenship Study, an industry-based poll.
Among the more visible campaigns are the yellow bracelets that link Nike to the Lance Armstrong Foundation, which aims to fight against cancer, and Upromise, an education savings program that receives sponsorship from corporations including ExxonMobil.
(RED) aims to provide long-term support to The Global Fund through the sale of products carrying the (RED) brand. Apple sells a (RED) iPod, American Express offers a (RED) credit card, and Gap has an entire line of (RED) clothing and accessories.
The companies get some of the profits, and the chance to be tied to a cause as well as the celebrities behind it, including Oprah Winfrey, director Steven Spielberg, and photographer Annie Leibovitz. In exchange, (RED) gets these companies to market the cause and the products, and wins a share of the proceeds for The Global Fund.
"We hijacked marketing budgets that would normally have gone for good products, but now they're going for good products that will also bring money into Africa," says Tamsin Smith, president of (RED). "There are 10 miles of Gap windows in the United States. And for many weeks [those displays] were talking about AIDS in Africa."
Splashy advertising in top cities and publications has added to the campaign's impact – and raised some eyebrows. Last week, an Advertising Age article unfavorably contrasted the amount of money raised for Africa against "estimates as high as $100 million" spent by the companies on marketing.
(RED) says no dollar figure can really be placed on raising awareness about the 5,500 people dying of AIDS each day in Africa. It also rejects the $100 million figure as too high by tens of millions of dollars.
The person who believes he's the source of that number says it was merely an educated guess. "I floated something that has become truth that's not truth," says Ben Davis, head of a San Francisco-based communications firm.
He is also a leader of a consumer watchdog group, which takes issue with the consumption-driven approach of campaigns like (RED). "I would look forward to being corrected by people who are in a position to provide a real answer," says Mr. Davis.
But the inability to obtain some numbers troubles him. "The good folks at (RED) should live by the same standards of transparency that other folks who deal with donated money have to live by," says Davis.
Among the unknowns: How much each company has contributed to The Global Fund, and in the case of Gap and a few others, including Giorgio Armani, how much each purchase of (RED) products counts. Gap says it contributes half the profit on each purchase of a (RED) item, but declined to be specific about how profit is calculated, citing competitive reasons. And, asks Davis, "what does that really mean to the consumer?"
Indeed, some people at Gap stores are confused. Cortez thought that half the purchase price of a RED item went to Africa. And even a couple of Gap salespeople in San Francisco – who were enthusiastic about spreading the word about the AIDS crisis – had the same false impression.
Some companies are more straightforward. Apple donates $10 per (RED) iPod to The Global Fund; American Express gives 1 percent of expenditures generated on a (RED) credit card; and Motorola gives $17 on the purchase of a MotoRazr V3m Red Cell Phone. Converse donates 15 percent of its net retail sales of (RED) shoes.
Though Gap is not as explicit, its commitment to the cause is undeniable: It has signed on for about five years, sent factory work to Africa, and devoted prime advertising, store space, and employee training to it. "The amount of real estate that Gap has given to this campaign – it's truly tremendous," says Mr. Feldman.
The company points to significant results, too. To date, contributions from Gap's (RED) products can cover the annual cost of AIDS treatments for more than 20,000 women and children in Africa, says spokesperson Robin Carr. "We're getting really amazing, positive feedback from customers and our employees."
And Gap, other companies, and (RED) at joinred.com hope to build a community of people around the AIDS cause who would be more willing to volunteer or donate directly.
Davis, however, suggests that (RED) and Gap have a chance to set the bar higher for cause-related marketing by embracing transparency, particularly at the point of purchase.
That may be sound legal advice. Eleven states have laws that say the exact amount on a per unit basis should be disclosed whenever a product is sold based on a representation that a purchase will benefit a charitable purpose, says Ed Chansky, a lawyer who specializes in this arena.
But these laws are rarely enforced so companies may not know about them, Mr. Chansky says. He adds that he doesn't know the specifics of the (RED) deal to judge it.
Ms. Smith of (RED) says she understands that people are still trying to grapple with the model and how to audit it. But how The Global Fund spends the money is clear, she says, and (RED) has been able to help solve some of their difficulties by raising it.
"Look at the end result. This is $25 million. None of these companies have written a check to The Global Fund before," says Smith. "The $25 million is only the beginning. And I have to be delighted with that number. It's found money."