The Long-Term Value of Community Relations

Most marketers have a careful eye on metrics, such as cost per lead, conversion rates, and the holy grail of “hard” return on investment calculations. Yet with a fair percentage of marketing budgets pegged to quarterly objectives, a myopic focus on “short-term value creation” often excludes activities—such as global community relations—that set companies up for long-term success.

The run up to the housing and global market crash of 2008 was euphoric for almost everyone. From Wall Street bankers with multimillion dollar paychecks to U.S. homeowners cashing out with multiple refinances and gorging HELOCs it seemed there was plenty of wealth for all. However, as with most all night parties, the liquored punchbowl is eventually emptied, leaving everyone with a massive hangover now aptly titled, “The Great Recession.”

As with most economic resets, priorities tend to shift. One executive quoted in the Financial Times lamented that in the past few years, most corporate boardrooms were too focused on profits with little consideration for social responsibility and the greater good. Now, Indra Nooyi, CEO of Pepsi says, “Everybody is talking about the new rules of capitalism which are don’t just think about the company within the four walls of the company, think about your obligations to society.”

A powerful way for companies to think outside their four walls is to take action by investing a portion of the marketing budget in global community relations. What are community relations? One website says, “The underlying principal of community relations is that when a company accepts its civic responsibility and takes an active interest in the well-being of its community, then it gains a number of long-term benefits in terms of community support, loyalty, and goodwill.”

One company adopting this mindset is Teradata, through its “Teradata Cares” program (full disclosure—the author is employed by Teradata Corporation). Teradata Cares is community relations program that encourages and engages children around the globe in science, technology, engineering and math programs as a way to connect with local communities. Via the sponsorship of high-school robotics competitions, educational grants and other methods, Teradata contributes to activities that help develop tomorrow’s technologists.

Thinking about stakeholders outside of a company’s four walls doesn’t come naturally for some enterprises. Moreover, others may find it difficult to spend on marketing programs that may not drive an immediate return on investment. Indeed some shareholders argue that investing in global community relations has nothing to do with a company making its quarterly numbers.

Not so says Susan Baxley, Teradata’s Director of Community Relations. “What people may not realize is that programs like Teradata Cares actually help the profitability and future success of a company because employees learn team building and other leadership skills. Employees also gain a sense of community pride from their volunteer efforts and are thankful for the opportunity to give back to their local communities. This, in turn, leads to more satisfied employees and stronger employee retention rates.”

Today, a fair portion of marketing executives manage their budgets much like an investment portfolio. And in an era of tight budgets where every dollar should be justified, there is nothing inherently wrong with this approach. However, sometimes “value” is much more than the sum of a column in a spreadsheet, especially when programs such as community relations make such a positive difference in the places we work and live.

Questions:

• If you allocated marketing budget to community relations, how would you track and measure the value of your investment?
• Should community relations expenditures come from the marketing budget, or elsewhere?

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2 comments

  1. Opps Paul, you have touched a sensitive area for “web optimizers” who want money now. From clicks. CTR. 🙂

    • If you allocated marketing budget to community relations, how would you track and measure the value of your investment?

    It is obvious that this is a long-term investment, so there is actually no 100% research tool I think. Someone once told me to read Mandelbrot? 🙂 Perhaps the measures might be some brand recognition and loyalty indicators? These could be measured before and after some actions and then you get some feeling whether your work influenced people or not. But this is hard research work.

    • Should community relations expenditures come from the marketing budget, or elsewhere?

    I think this depends on organisational structure. Where is marketing positioned and where is PR? Is it part of the top management? Or is it a strict sales-oriented-organisation? Who are the communities?

    Personally, I strongly believe (without much scientific facts) that investing in relationships pays up at least twice the value. But during years I’ve also noticed that one should be selective about which relationships you want. Because there are people (more or less sales-CTR-oriented) that see relationship only as a profit maker.

    And if we talk further about CRM programs for example – it is obvious that some companies like it just as a tool to make more profit. But then that’s CProfitM, not CRelationshipM.

    We must use relationships to create win-win situations. And that means we also listen to those communities, learn and use that knowledge to change ourselves. And by doing that we can also avoid the downfalls of recessions easier.

    • Dusan, as far as measurement goes, I think you’re on the right track. Get a baseline first, and then attempt to measure some KPIs that you think will be influenced by the investment. However, with something like community relations, hard ROI may prove non-traceable.

      I also really enjoyed your last comment, “We must use relationships to create win-win situations.” This is one of the challenges I have with the focus on pure shareholder value, whereas I propose and prefer stakeholder value which includes employees, suppliers and the community.

      As always thank you for commenting. I learn much from the interaction!

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