The so-called “buy one, give one” business model has increased in popularity recently. There are both good (empowering, efficient) and bad (disenfranchising, inefficient) BOGO business models. Consider the Warby Parker model as an example of the good kind, and the original TOMS Shoes model as an example of the other kind.
Here are some suggested guiding principles for social enterprises in designing a BOGO model for social impact.
- First, do no harm.
The last thing you should do is disrupt local economic ecosystems by giving away for free what is produced locally for a fair price. The law of unintended consequences often applies to charity, when the gift displaces locally produced products – the key is for local production to reach marginalized populations.
- Select the right product.
Not every product works for a related give, but there is room for creative new additions. Shoes, glasses, lights and coffee seem to top the list. How about cellphones, water, toilets and books? If there’s not a compelling connection between the buy in the affluent market and the give in the destination market, then the consumer response is likely to be lessened.
- Don’t just increase the price.
Find a way to reduce costs (like, glasses frames), then use the cost reduction value to capture the value of the “give one”. Just doubling the retail price to cover the cost of the give is a wasteful model, and likely vastly overstates the value of the give (and may be just a margin enhancement technique).
- Be transparent.
Show the public the value of the actual give relative to the consumer price of the buy. Even the best at BOGO often don’t disclose the true value of the give, which leaves the consumer confused as to the actual benefit of their purchase. If the shoes cost $3 to manufacture in China, then suggesting that $65 covers the cost of the give pair of shoes is a questionable practice.
- Be tax efficient.
Use a business model that allows for tax deductibility of the give for the consumer. Consider explicitly dividing the price clearly and allocating the true gift value to a related non-profit (501c3) foundation in a hybrid business model context. Pay twice the retail price for a paired product is a very tax inefficient way to deliver a charitable impact.
- Empower locals.
Fund, build and/or produce locally after training disadvantaged or marginalized communities and people to be self-reliant producers. Sometimes gifts or charity is the best way to address a problem (the “three c’s”: crises, children, conflict), but more often it’s an enterprise solution supported by a BOGO contribution of capital or in-kind materials that will make the greatest impact.
- Find a grassroots partner.
Don’t reinvent the wheel from miles away, but instead find a local partner with expertise in serving the poor or disadvantaged and work with that partner to deliver a grassroots solutions to a problem related to the underlying product. Local microfinance firms, adult literacy programs and women’s empowerment through enterprise initiatives make for strong local partners that are close to the people to be served.
- Create lasting opportunity.
Giving things often doesn’t create long-term opportunity for those who need it, so help to build capacity for local solutions to local social problems through the give one model.
Photo (cc) by MasamiSato and published under a Creative Commons license. Some rights reserved.
