I have mentioned before that people don’t normally perceive a difference between non-profit and for-profit cultural organizations. Colleen Dilenschneider has a good summary of the research showing this.
What makes people care about the difference between for-profits and non-profits is the positive social impact that the organization is achieving.
Dilenschneider writes:
Nonprofits do not “own” social good. Corporate social responsibility is a necessity for companies today. There are countless articles on the importance of for-profit companies doing good. It is a key tactic for gaining customers and increasing sales.
Being good at your mission is good business. Data demonstrate that organizations highlighting their missions outperform those marketing primarily as attractions.
Interestingly, this is the one area in which non-profit identity definitely works in favor of their tax status. In a piece on The Conversation that Non-Profit Quarterly cited last summer, researchers found the following (my emphasis):
In one study, we asked people to donate money to an organization supporting literacy and education. The only difference was that some people were told the company was a for-profit social venture – it had a social mission and also made a profit. Other participants were told it was a nonprofit. People gave 40 percent less money when they believed the organization was a for-profit social venture.
In another study, we gave people money and asked them to purchase a decorative notepad from one of two organizations. When given a choice to buy it from a nonprofit or a for-profit social venture, nearly two out of three people went with the nonprofit.
It seems people don’t think companies can make a profit and support a social cause at the same time.
These findings along with Dilenschneider’s data may emphasize the value of highlighting your organizational mission and the impact you have over encouraging people to engage with you in a commercial manner.
Before you get too excited thinking this could be good news if you just change your messaging, the researchers in The Conversation had additional insight that recalls our old nemesis, Overhead Ratio.
…emphasizing a social cause makes people think the company is altruistic. When the company also makes money, this flies in the face of a belief that it’s generous or altruistic. When companies have a social mission, people tend to think that all money should go to the social cause…
This doesn’t mean that nonprofits always win though…when people were told the nonprofit was known to have excessive spending, the majority of people flipped and bought their notepad from the for-profit social venture.