Exclusivity and Cause-Related Marketing

On the Horns of a Dilemma

The August issue of Costco’s member magazine, “The Costco Connection,” features a short story about the retailer’s longstanding commitment to children’s hospitals, with a special emphasis on Seattle Children’s Hospital and Medical Center.

Since 1989, the article points out, Costco has raised more than $30 million for Seattle Children’s and an unstated amount for 24 other children’s hospitals in North America.

Now for the rest of the story.

Seattle Children’s Hospital is part of Children’s Miracle Network (CMN), which raises more than $225 million a year on behalf of its 170 affiliated hospitals in the United States and Canada. As CMN proudly points out, most of the best children’s hospitals in North America’s are affiliated with CMN.

One of the things CMN asks of its participating hospitals is that when they land a sponsor which could become a regional or national sponsor that they share. A goodly number of CMN’s largest national sponsors were brought on in exactly that way. And indeed the staff that runs the CMN program for Seattle Children’s Hospital did just that.

But there was snafu. Not long before, Arkansas Children’s Hospital in Little Rock had brought Wal-Mart to CMN. Costco is perhaps the only mass merchant retailer that Wal-Mart has never beaten in the United States and Wal-Mart’s Sam’s Club unit is a fierce (albeit smaller) rival of Costco.

CMN offers sponsors category exclusivity and with both retailers in the same grouping something had to give. The national office of CMN was on the horns of a dilemma. While Costco was an effective fundraiser in Seattle, Costco stores at that time were heavily weighted in the Western U.S. Both retailers were giants, but Wal-Mart was already truly national.

Ultimately CMN went with the bigger giant. It was the right decision in terms of money. Wal-Mart raises roughly $30 million a year for CMN, more than it gives to United Way or anyone else. Wal-Mart is CMN’s largest sponsor by a factor of 4 or 5.

Meanwhile, instead of feeling rebuffed, Costco went right on fundraising for Seattle Children’s and eventually 24 other children’s hospitals in North America, all of which are affiliated with Children’s Miracle Network. I don’t know the exact number, but I estimate that those 24 other children’s hospitals split something north of $5 million a year and perhaps as much as $8 million or more a year.

In other words, Costco is almost certainly among CMN’s top five largest sponsors. It may even be number two!

The result has been some awkward situations. Like perpetually running into the person you seriously dated before you married someone else.
  1. Neither CMN’s U.S. website or press materials list Costco as a sponsor. CMN’s Canadian website lists Costco as a sponsor, but snubs ‘em by not including a link to Costco’s website, a courtesy it extends to every other sponsor.

  2. At CMN’s annual meetings for its affiliated hospitals they conduct fundraising sessions for each sponsor except Costco. The 25 hospitals instead get together independently of Children’s Miracle Network during the annual meeting to share ideas and best practices.

  3. Likewise, during CMN’s annual television show Celebration, Costco is not recognized on the national show. But it is recognized in local markets by the 25 children’s hospitals.

Meanwhile Costco's website says “the United Way and Children’s Miracle Network are important to our charitable giving.”

So if CMN somehow manages to pull in multi-millions from two competitors, why raise the issue?

I raise it because there’s not many Costco’s in this world. CMN is fortunate… lucky even… that Costco does as much as they do for relatively little in return.

More to the point, if you’re just starting to sell sponsorships you need to think very hard about offering exclusivity. The advantage of exclusivity for a nonprofit is that it gives a sponsor assurances that your charity will not approach competitors. The advantage to nonprofits is that you can ask for more money in return.

But use it judiciously.

The fellow in the picture above escaped with a few scrapes and bruises. But exclusivity in cause-related marketing can be like running with the bulls at Pamplona; exciting, thrilling, and life-affirming.

But it can also get gory in a hurry.

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