Study: Public Can’t See Past Profit Motive of Social Good Companies

A recent report in the Journal of Consumer Research suggests that the for-profit motive makes social good companies seem less altruistic compared with nonprofits, yet less authoritative than traditional for-profit companies. The problem, researchers say, comes down to messaging.

For-profit companies may have their hearts in the right place—taking on the spirit of nonprofits, if not the tax status—by focusing on the social benefit of their work.

But that doesn’t necessarily mean that the public appreciates the distinction. According to a recent report in the Journal of Consumer Research, the public often struggles to see the distinction when a stated profit motive is involved. And as a result, social good companies suffer the worst of all worlds—they don’t get the reputation boost of being a nonprofit, nor do they receive the boost that for profits do.

“For organizations with a prominent social mission, profits are interpreted as a signal of greed; absent a prominent social mission, a for-profit orientation can instead imply greater competence,” states the abstract of “To Profit or Not to Profit? The Role of Greed Perceptions in Consumer Support for Social Ventures.”

In the work, Saerom Lee, an assistant professor of marketing at The University of Texas at San Antonio, and coauthors Karen Winterich, an associate professor of marketing at Pennsylvania State University, and Lisa E. Bolton, a professor of marketing at Penn State, put their theories about social good companies to the test using a variety of experiments.

To put it simply: The researchers had consumers use their wallets to decide whether they would support a social good company over a nonprofit, everything else being equal. In both cases—one involving a donation, the other involving an identical product sold by both types of organizations—the nonprofit won out each time.

But interestingly, when choosing between identical products produced by different shades of for profits—one made by a social good for profit, the other by a more traditional for profit—the social good organization still lost out, as the traditional for profit’s perceived higher quality outweighed the profit motive.

“When the primary mission was social, a secondary profit mission triggered greed perceptions and undermined consumer support,” the report states.

Getting Past the Perception

That doesn’t sound good for certified B corporations and other for profits associated with a cause. So how can they transcend all that?

In a blog post about the report for The Conversation, the study’s authors note that a big part of the problem comes down to messaging for these social good firms. The tell comes from a minor finding in the study: That nonprofits known to have a poor reputation by consumers are less likely to gain support than social good companies.

The authors emphasize this highlights the importance of transparency among social good for-profit organizations.

“Companies that don’t overemphasize their social missions generally make people less likely to perceive them as greedy,” the authors explain in the blog post. “Being upfront about how much of the money they make supports the cause versus how much is kept for financial gain also helps.”

So, long story short: If you run a social good for profit, you might want to emphasize that your organization doesn’t actually profit all that much.


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

Got an article tip for us? Contact us and let us know!