Supporting the community is a value that many small-business owners espouse without really knowing why it would be a good idea. Consequently, few give this function the attention and resources it deserves. But both academic research and real-world experience show that getting involved in your community can pay off in important ways.
1. Customer loyalty. Simply put, shoppers prefer to patronize businesses that do things like sponsor youth baseball teams, according to Timothy Landry, associate professor of marketing at The University of Alabama in Huntsville. For a recent study, Landry and a team of researchers asked adults to list their favorite retailers and rate them based on community involvement. Results showed powerful loyalty boosting effects when retailers had products and services that reflected the participants' core values.
2. Brand equity. When sellers are involved with the community, Landry found, customers were willing to pay slightly higher prices to buy from them. That lets retailers with strong community ties increase their prices and and their profits without driving customers away.
3. Competition. Community involvement can make all the difference in highly competitive environments. Landry began investigating this a decade ago as part of a look at how small retailers fared when big retail chains entered their markets. “We learned that the traditional marketing 4Ps—product, price, promotion and place—had less to do with it than how they positioned themselves as important to the community,” Landry says.
Curiously, however, he said that many national firms appear to be more clued into the importance of developing local ties than neighborhood businesses. In a study that asked consumers to report on a retailer they felt was well-connected to their communities, many chose national companies based out of town. “While it might seem natural that a mom-and-pop would be more local, it is not always the case,” Landry said.
There are other benefits as well. For instance, some companies that engage with their communities report higher employee morale and better retention. Business owners who serve on charitable boards say they acquire new customers and suppliers by networking with other members.
How Companies Can Get Involved
When Fort Lauderdale-based Allied Kitchen & Bath built a new showroom in 2008, the company had a stage and catering facilities included specifically so it could host fundraisers for local charities. Company President Bill Feinberg says the 20 or so fundraisers they accommodate in a typical year bring thousands of people to their facility, while simultaneously helping worthwhile nonprofits.
Feinberg adds that, although Florida has been mired in a tougher construction environment than many states, his firm has grown 20 percent per year recently. He attributes at least part of that to the company’s community involvement.
Providing facilities for community groups is one of three kinds of community involvement businesses can consider. Landry calls this mutual support. It can consist of something as painless as permitting a high school band to use the parking lot for a fundraising car wash.
Another kind of involvement is socialization, which involves reflecting community interests and values. This can be done, for instance, through merchandising by stocking items connected with a local sports team.
Finally, there is facilitating social participation. Businesses can do this by creating spaces where community members can gather and socialize. “Think Barnes & Noble’s sofas and coffee shops,” Landry says.
Unlike a lot of marketing efforts, community involvement is not expensive. For instance, Allied Bath & Kitchen donates kitchen and bath appliances removed during renovations—materials that otherwise might be recycled or end up in a landfill—to Habit for Humanity.
Businesses can also contribute support by supplying employees to work as volunteers. This work can be done during paid working hours, or the employer may just coordinate employees who help out on their own time. Even financial cash donations are often tax-deductible.
Though costs may be modest, businesses should still analyze and assess before jumping into community involvement. Communities generally have more needs and opportunities for involvement than the business has resources to address, and not all will help equally with business objectives. Involving the marketing department in this decision is a sound approach.
How to Execute Your Plan
When it comes to selecting what to support, some companies request applications from organizations seeking support. Others rely on personal preference. Allied Bath & Kitchen began supporting leukemia research after the company founder, Feinberg’s father, died of the illness. Larger firms with lots of involvement may have dedicated community coordinators working full time to oversee projects.
Oversight is essential, because it’s quite possible to go wrong with community involvement and pushing people away instead of attracting and retaining customers. One of the riskiest approaches is what Landry calls social control. Businesses do this when they use business practices to enforce what they perceive to be community standards. This can backfire, as when a retailer censors lyrics of musical recordings out of a desire not to offend, Landry warns.
“Don’t try to engage in policing the community, at least not in brick-and-mortar retailing,” he says. “Online retailing, dealing with product communities, may be different, but we are still researching that.”
Read more articles in our "Local Heroes" series.