Outsourcing gone wild – how a Chugger chat got me thinking about corporate reputation

A few weeks before Christmas I was approached by a ‘chugger’ (charity mugger) out the front of my local IGA supermarket.

I wish I could lay claim to that term but it’s been widely used for several years now.

He was a friendly young bloke determined to sell me a booklet of vouchers for which “all proceeds would benefit the Alannah & Madeline Foundation”. It’s a charity that I know a little bit about and I was in a festive mood so I handed over my credit card.

While he was processing the sale, I started to ask a few questions about his job. Did he sell for other charities, was it interesting work and so on.

I was quite surprised by his response. He was either very elusive, a bit dopey or possibly a combination of both. He couldn’t or wouldn’t give me straight answer about anything. Most concerning was that he knew nothing about the history of the Alannah & Madeline Foundation or the work they do!

As a brand advocate for my clients (and my own business) I found this a little concerning. I wonder what the senior people and Directors at the Alannah & Madeline Foundation would think of this lack of connection with their ‘brand’?

The charity sector is a very cluttered market (there are 54,000 registered charities in Australia) and they are competing for a limited ‘share of voice’ and an and even more competitive ‘share of wallet’ so, just like any other brand, they need to differentiate themselves as much as possible. As a bare minimum, they certainly need to get their elevator pitch spot on.

I told myself it was a donation and the money was going to a very good cause so it seemed petty to argue about the value of the booklet or the lackadaisical attitude of the youngster who sold it to me … then curiosity got the better of me.

When I got home I looked through the booklet and noticed a company called Appco mentioned in the fine print and recalled a media report I’d heard a few months earlier about dubious tactics employed by a business contracted by numerous charities to manage their fundraising efforts. Up until I read that piece I wasn’t even aware that outsourcing this function was common practice.

What I discovered was truly breathtaking.

Professional fundraisers now generate about 90% of regular donations to Australian charities. The Wilderness Society, OXFAM Australia, UNICEF, RSPCA, Starlight Foundation of Australia and the Cancer Council are just a handful of the larger, high profile charities that have completely outsourced their fundraising efforts.

It’s big business. And it’s highly coordinated.

The chuggers are all independent contractors paid on a commission only basis. These individuals are all ‘employed’ by a ‘Marketing Agency’ who are, in-turn, hired by the charity.

The behemoth of outsourced fundraising is UK based, Appco. According to a report in the SMH last year, there are at least 60 businesses sub-contracted to Appco alone and there a host of baby Appco’s out there as well.

The commission they make from the raffle tickets, voucher booklets and subscriptions they sell is astounding.

Here’s just one story I came across. Since 2011 Appco has implemented a gift voucher program on behalf of Special Olympics Australia, a charity that runs sports for people with intellectual disabilities. Over four years to 2015 this activity generated $11 million in sales yet the charity received only $500,000 – less than 5% of the money raised from gift vouchers sales.

Under another agreement it has with the World Wildlife Fund, Appco collects 85% of donations made in the first year of any new animal sponsorship.

Here’s an excerpt from a piece an anonymous chugger wrote for Mamamia a few years back: “Travelling to regional areas and smaller rural towns was also rather lucrative. In and out in a week, we were able to exhaust small, untouched pockets of the child sponsorship market, all the while enjoying the free travel and the endless drinking that accompanied our road trips.”

Most of those youngsters you see selling raffle tickets in the shopping centre decked out like Lifesavers (think Baywatch not confectionary) representing the Surf Lifesaving Association wouldn’t know the difference between a nipper and a kipper.

Forget the business model for a second, from a PR perspective this is complete madness.

There is up to four different layers of control between the client (Charity) and the Chugger. No wonder there was no ‘product knowledge’ or empathy for the ‘brand’ when I asked my Chugger a few simple questions about who he was raising funds for.

Outsourcing is wonderful. It is a critical component of business life for so many people.  I rely on businesses outsourcing their sales, marketing and communications activity to put food on the table. In fact, I’ve just started another separate business that is entirely based on helping medical specialists outsource costly and time consuming work. To say I’m an advocate of outsourcing would be an understatement.

But there must be checks and balances in place. Surely chugging is one example of outsourcing gone completely mad?

And charity fundraising just happens to be an example that stood out to me. The building sector is another that employs countless sub-contractors many who wouldn’t know much about the brand they are actually representing yet still sometimes have face-to-face contact with the customer.

When a contractor (or a ‘subbie’) represents you poorly in the marketplace or employs questionable contracting practices of their own it reflects directly on your brand.

No matter the savings you make or incremental income generated from outsourcing, the cost-benefit of such a poorly managed association may not be worth the damage to your corporate reputation?

And no one should be prepared to pay upwards of 85% commission to anyone for anything. I don’t think Gustavo Fring even made that sort of margin– but someone with more interest in the crystal meth game might be able to enlighten me on that!?

The mere fact I’ve managed to mention drug dealing and charity fundraising in the same sentence should be enough to get you thinking about the importance of paying close attention to third party business arrangements.

Photo Credit: news.com.au 2015

2018-03-29T23:56:38+00:00 April 8th, 2017|Categories: Business Strategy, Customer Experience, Effective Communications|0 Comments