Business Model Examples: Which is Right for You
Today, companies large and small are finding success by combining profit with purpose.
A 2020 Zeno study found that 94% of consumers think it is important for a company to have a strong purpose. The study also found that consumers are four times more likely to purchase a product from a mission-driven company and 4.5 times more likely to champion that company and recommend it.
“For many companies, being a corporate citizen of the world is now part of their business model," said Jennifer Nickerson, corporate citizenship manager for City National Bank. “Doing what's best for their community, their neighbors and the planet is a great way to build brand identity."
A new business model, called the "give back model," has arisen from these trends. It allows a brand's customers to make a positive impact on the world by tying their purchases to the brand's giving.
Perhaps the most well-known example, TOMS Shoes, is considered the pioneer of the "buy one - give one" model. They started it in 2006 by donating shoes, but today TOMS donates one-third of its profits to grassroots organizations around the world.
Read more about give-back strategies for your business below.
Most Popular Strategies
The give-back business model can be implemented in various ways depending on what a company would like to accomplish.
To better engage with your customers, do good and boost business, you might consider:
- Buy-One, Give-One. The idea is simple: When a consumer buys a product, the business will give the same item to someone else who needs the product. The strategy works well for those addressing specific gaps, such as TOMS giving shoes to those who don't have them. This model is not always right for companies that aim to address more complex issues, like education or homelessness.
- Buy-Some, Donate-Some. When a customer makes a purchase, the business donates some or all of its profits to a cause. Unlike the buy-one, give-one strategy, this option allows companies to address more nuanced challenges.
- Awareness Branding. This strategy allows companies to promote specific types of social change by providing educational materials to customers on social media channels, their website, packaging materials or on products themselves, such as mugs and posters. The trick is to make sure your own values and company operations align with your brand and the social values you're promoting.
- Multi-Purpose Mission. If you want to address numerous challenges that intersect, the key is to make sure your give-back strategy can address each mission successfully. Otherwise, customers may find that your brand feels complicated and unfocused.
An example of a company that focuses on a multi-purpose mission comes from Scott Morris, co-founder and president of Freshpet in Secaucus, N.J. When Morris started selling fresh refrigerated pet food, he knew from the start that the company's mission would be to take care of more than pets.
“Our pet food is lightly processed and looks more like human food," said Morris. “At the same time, we're taking care of the planet by making sure our manufacturing plants are landfill-free facilities, buying all our electricity from wind power and using a system that generates energy and captures the heat needed for steaming the food."
In addition to those and other sustainability practices, Freshpet has donated 10 million meals to animal shelters since the company opened in 2006.
While consumers appreciate an effective give-back model, it's important to remember that they expect a good product, too.
For this reason, David Simnick, co-founder and CEO of Soapbox, believes a company's focus on products should grow alongside the give-back model that ultimately, will help sell those products.
“I was a subcontractor for the U.S. Agency for International Development, working overseas, when I realized I wanted to start a business that would supply something that people around the world truly need," said Simnick. “I started Soapbox with a friend because I knew that soap is one of the most cost-effective ways to institute foundational health globally. A bar of soap and a bottle of shampoo are among the most requested items in homeless shelters, too."
Today, Soapbox donates a bar of soap for every item purchased online and in retail stores, such as Walgreens and Target.
Since founded in 2010, the company has donated more than 20 million bars of soap to food pantries, homeless shelters, shelters for victims of domestic abuse and nonprofit partners in 65 countries.
“Our business doubled from 2017 to 2018 when we relaunched with new branding and better packaging, then doubled again from 2018 to 2019," said Simnick. “In 2020, everyone was looking out for themselves and others. Our business grew 10 times larger because of the focus on handwashing during the pandemic."
Listening To the Consumer
An initial mistake Simnick said he made was to focus on the mission he believed in more than the product his consumer demanded.
“Consumers are not in the market for a charity, they're in the market for a product," he said. “The mission isn't why they buy in the first place, but it's why they come back. In our customer reviews, first we hear about what they like about the product, and then we hear that they love the community give-back."
However, Simnick said that retail buyers for stores are often most excited by the mission.
“It's a way to differentiate ourselves from other manufacturers, to tell them that we can donate millions of bars of soap around the world with the help of Walgreens," he said. “We think Soapbox would not be nearly as successful as it has been without the mission."
Simnick believes that making a tangible donation is more meaningful to consumers than cash donations.
“Cents and percentages don't mean anything to consumers," Simnick said. “It's important to relate your donation to your product and to brand your company accordingly. Ultimately, that makes it easier to understand."
Consumers, particularly Millennials and Gen Z, expect companies to do the right thing, said Nickerson.
“It's important to tell your story, even if it's a small thing in comparison to the size of big corporate donations," Nickerson said. “At the same time, business owners need to choose their strategies wisely, think through the entire lifecycle of what they plan and then do what they say they will do. Otherwise, it's a public relations nightmare."
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.