By: Taylor Potter, CCEW Program Director
The market for socially conscious goods has exploded in the U.S. In 2013, Americans spent over $1.7 billion on goods that have a social mission. This is everything from chocolates, to shoes, and children’s toys, but all have one thing in common – the proceeds of their sale directly support a specific mission, something that makes the world a better place. Many of these goods are often made by artisans in developing countries as a way to provide employment and boost local economies.
With this rapid market growth, many nonprofits have started developing products that they can sell, using the profit to reinvest in the organization. This is not the traditional t-shirt fundraiser; it is a product that is produced in accordance with the foundational mission of the organization. Having a sustainable revenue stream can provide exposure and funding for a nonprofit, but it also requires laser-sharp focus and sound business practices. We will highlight the 5 best practices for social good product development and then use a case study to show examples of these practices in action.
Tell the story well.
Stories sell. The product and/or product display need to connect the product to the mission and purpose of the organization. A great way to do this is by developing a tag that tells the story of the product and the beneficiary. For example, organizations selling products made by artisans in developing countries might include a picture of the artisan and his or her signature. Connect the branding and messaging to your organization and the promotions you use on a routine basis.
Do “market testing” on products before going into mass production.
Make sure people will buy the products you want to make and understand why they will buy them. Develop pilot products and get them in front of your potential customers, and then pre-sell as much as possible. Do you have a dedicated customer base? Make a product prototype and pre-sell the product to your customers. Then, you can use that money to create the product, rather than developing a full product line that becomes difficult to sell. You’ll already know people want your product!
Know the cost structure of the product.
It’s critical that an organization understands the cost structure and markup of the product. This includes the production, wholesale and suggested retail cost for each product. Make sure the production costs are as low as possible and find ways to increase efficiency where applicable. Accurate cost analysis leads to appropriate pricing structure and ultimately allows you to earn a profit on each item sold.
Develop wholesale prices.
Have plans to sell your product in retail? Talk to any local retailer and they will tell you that retail will cost you 40-60% of the suggested retail price. If the customer purchases the product for $40 from the retailer, the retailer will earn about half of that sale ($20). Make sure your product margins consider retail markup and consumer willingness to pay; this is critical for a sustainable model. You can standardize this across your product line. For example, you could set your wholesale prices 15%-30% above production cost. Not sure if retailers will be interested in your product? Find out! Many local storeowners are more than happy to work with emerging social goods companies.
Be persistent in developing relationships with key partners
There are a number of organizations that exist to help nonprofits, especially those that are international, get their product to market. Aid for Artisans is one of the most well known. Every year, these organizations host events that connect wholesalers to artisans in developing countries. Take advantage of the organizations that have spent time doing the heavy lifting and look to develop partnerships whenever possible.
Case Study – Child’s Cup Full
In 2014, a CCEW team* worked with Child’s Cup Full (CCF), a nonprofit that provides employment opportunities to women in refugee camps in the Middle East. The women are taught to make high-end children’s toys, the toys are sold in the U.S. and profits reinvested to employ more refugee women. In addition to developing an expansion plan for the organization, the team developed recommendations to avoid the above mistakes:
- Tell your story: The CCEW team developed product tags that told the story and corresponding promotional materials for wholesalers. Marketing sells!
- Do market testing: CCF had success building B2C customers and had yet to develop relationships in the B2B market. The team visited over 15 stores across Oklahoma to receive feedback from retailers on the product and developed new products (now best sellers!) based on their response.
- Cost structure: Prior to the launch of the CCEW project, CCF spent 3 months calculating their unit production costs. They were very diligent in sizing and weighing fabrics and stuffing and calculating artisan’s production time to develop the cost-basis.
- Wholesale prices: The CCEW team developed a new price structure to build the customer base and incorporate wholesale prices. At the time of the engagement, a majority of CCF’s products were over $100. The CCEW team quickly learned that customers loved the story, but the price point prohibited many purchases. The CCEW team designed 3 tiers of product prices. CCF has a low-cost product ($10-15 retail) that could be an impulse buy (i.e. building blocks), a mid-range product ($40-60 retail), and a high price point product (i.e. calendars) for the serious buyer ($100+ retail).
- Key partners: Since the project, CCF has attended artisan events across the country, including the Alliance for Artisan Enterprises and Aid for Artisans. CCF has reported that they’ve developed critical relationships at each conference and their businesses is growing as a result.
It’s exciting to watch the growth of social impact goods as a method of employment around the globe. Being a nonprofit does not exclude you from employing best practices in product development, sales and marketing. Leverage the skills and lessons learned by those before you!
Are you working to launch a social good? Let us know!
*Shoutout to Team Leader Sarah (Gray) Teague, Kristin Messerli, Lauren Wells and Adenike Adewolu!