Wednesday, June 29, 2011

Charity Wednesday: Lady Gaga - A Lesson in Cause-Related Marketing

Lady Gaga is under fire for potentially profiting from her own charitable efforts.  On her website, she provides her fans with a way to help relief efforts in Japan through the purchase of  "We Pray for Japan" bracelets.  The bans cost $5, and a note on the site claims that "All proceeds* go directly to Japan relief efforts."  A law firm based out of Detroit is suing the singer, alleging she has broken federal racketeering and consumer protection laws by charging taxes on the items, inflating shipping costs, and misrepresenting how much is being donated to charity by the sale of the bracelets.

I went through the process of ordering a bracelet and below is the detailed summary of charges:
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Subtotal:
$5.00
Shipping and Handling:
$3.99
Tax:
$0.78
Order Total:
$9.77

As you can see, my $5 bracelet for charity cost me nearly $10.

But I don't think what Lady Gaga is doing is illegal, or anything less than well-intentioned.  I just don't think her people know how to sell something to raise money for charity.

When a company sells a product that is marketed as a way to help charity, it's called cause-related marketing.  You've seen it.  Those yogurts with the pink lids sold to fight breast cancer and the stuffed animal with the tags that say their purchase will help fund wildlife protection are common examples.  Typically in cause-related marketing, a company will partner with a charity and agree to donate a certain set amount (50 cents, 3%, etc.) of the sale of a specific item, in exchange for being able to use the charity's name in marketing and advertising of the item.  It helps the company look good and it helps charities, because they usually don't have to do much work to secure those funds.   There is nothing wrong with a company covering their own expenses with the sale of these items, or even making a profit. As long as consumers know how much of their purchase is helping a charitable cause.  And applicable sales taxes do apply to these purchases.

Because I'm still waiting for the call from Lady Gaga's people to consult on her charitable efforts, I'll give my advice here.  This is how I think the sale of the bracelets should have been handled.  First I would have decided on a specific charity to receive my bracelet goodwill (Gaga does not disclose what charity will receive the donation). Second, I would have chosen how much money from the sale of each bracelet to donate to my chosen charity.  Lastly, I would have chosen a price for the bracelet based on total donation goal, production costs, and own profit goal.  And I would have made my first two points public, at the point of sale on my website.    


*About the word 'proceeds.'  It means almost nothing. It could mean profit, after marketing and production costs, or a percent of the profit, or whatever the company decides to throw toward a charity.  It's a ambiguous term for something financial with no defined commitment attached to it.  Lawyers probably love it.





Tuesday, June 28, 2011

Scams of the Week: June 28, 2011

Superior Fake Degrees - These guys are back.  Their site was once shut down for engaging in activity that violated their web host's terms of service, but now they're back. I know what you're thinking: of course this is a scam. The very nature of their business indicates dishonesty.  They make fake degrees. But that's not the bad part. Well, that's not the worst part.  They take people's money and give them nothing in return. They also have a giant Better Business Bureau logo on their website. Suffice it to say, this company is NOT BBB Accredited.

Immigration Scams - BBBs have been getting bombarded with immigration scams in the past few years. As immigration has become a hot topic in the media, more scams pop up.  Most prominently was one that had roots in Sedalia.  Immigration Forms and Publications owners were recently indicted on racketeering charges, which carries an average sentence of about eleven years.  We received complaints from many Canadians, Europeans and Latinos explaining how they'd been ripped off by these con artists.

Tuesday, June 21, 2011

Giving Makes You Happy

It really does!
Have you ever noticed how the most joyful among us are often the most generous?  I once spent a summer in Mexico City where I learned quickly that the happiest people weren't the stuffy upper class of that economically stratified country, but the poor folks that cleaned homes, cooked meals, and sold street food.  They were also the most generous.  What did I do if I needed to know which bus to take downtown?  I simply asked one of the taco vendors - and I wasn't surprised if she paid my fare, too. 

Maybe its part of some evolutionary oddity developed to promote our own survival.  Regardless, giving definitely makes us better people.

And there are so many ways to give.  Parking your car further from a store's entrance frees up closer spots for those with limited mobility or six kids in tow.  Tipping 20 percent, versus your usual 15, could make the day of the guy who served you lunch.   Handing your unexpected bonus over to your friend with huge medical bills could turn a windfall for into a blessing for two.

And regularly donating to a charitable cause you believe in could make happiness become your new habit.

For more information about how giving to others can be a gift to yourself, check out the book list on happy giving provided by the Greater Kansas City Community Foundation.  Their suggestions are on my reading list.

For how giving can help the student in your family, this report from Australia might give you some inspiration to try different technique to increase Junior's test scores.

And visit the BBB of Greater Kansas City to check out a growing list of local charities that would appreciate your gifts. 

Monday, June 20, 2011

Scams of the Week: June 20, 2011

My Closing Services - Why do timeshare resell scams love Kansas City? Every time we report on one, another one pops up.  This is the latest in a long line of timeshare scams that claim to have Kansas City addresses.  First there was Full Service Timeshare, then Tru Vacation Services and Diamond International Escrow.  Of course, none of them actually operated in Kansas City; they just claimed to.  It's getting to the point where we can safely say, NEVER give money up front to sell your timeshare. I have literally never heard of anyone selling their timeshare after paying an up front fee. The only fees that should be collected are at the close of sale. Even then, be very careful--some timeshare scams say that they've already sold the timeshare and its time to collect. They'll even recommend an "escrow" company to hold the money as the sale is finalized. They're actually the same company and they steal the money. In researching this scam, I ran across others you should avoid for the same reasons:

Continental Timeshare Services (timesharesvcs.com)

Key Property Marketing


SellRentMyTimeShare.com

Thursday, June 16, 2011

Combating Quackery

Better Business Bureaus have been in a continuous battle against quacks (con artists who claim to have medical expertise) for nearly a century. Previously, quacks relied on the imprecise nature of medicine and filled in gaps of understanding with wild fabrications so as to convince patients to buy their fictitious remedies. Dismantling medical misconceptions has always been challenging because traditional medicine also originated with unfounded theories.  During the middle ages, people thought emotions were controlled by the secretion of fluids, called humours, from different organs. Doctors practiced bloodletting (the piercing flesh to release "bad blood") for most of human history. Because of doctors' crude misunderstanding of biology, quack products were often superior to the traditional medical techniques that could, and did, kill patients. For example, homeopathy does nothing.  However, during the eighteenth century, unlike traditional practices, homeopathy didn't bleed people to death when they had the flu. Patients perceived an improvement in health using the technique and it gained some respectability. People at the time didn't know that nearly all medicine in use ranked somewhere on a scale between fatal and ineffective.

Fortunately, the current public has a basic understanding of germ theory and physiology. Because of that, quacks largely avoid using medical excuses for how their products work. Unfortunately, they now manipulate scientific language to the same effect.  Their claims violate the laws of possibility by redefining terms like "zero-point energy," "quantum physics," and "cellular biology."  They need not fully understand the concepts because their only purpose is to misrepresent them.  By using scientific jargon, they bamboozle many people into believing they know what they're talking about. Quacks choose particularly difficult concepts to comprehend and have no problem explaining things in any which way that suits them. When consumers attempt to verify the science behind the product, they find that scientists frequently have difficulty explaining complex scientific theories in a way that laymen can grasp the concept. One side or the other often loses patience leaving the consumer where he started.

The most recent quackery spectacle came when the Australian authorities forced Power Balance Wristbands to admit they were a scam. After stating they were sorry, that they misled everyone, and then offered refunds, they shut down the Australian website. The company claimed that the wristbands increased strength and balance in the wearer because a hologram sticker on the band emitted a frequency that interacted with the electrical field of the human body. Dr. Harriet Hall ridiculed the product in an article for Device Watch and a thorough debunking of its claims in a University of Wisconsin trial. Yet, this company sold millions of wristbands, athletes endorsed them, and in America, the business still running strong.

Power Balance succeeded in its pseudoscientific campaign by misusing terms such as hologram, frequency and electrical field. Overloading consumers with unrecognizable jargon can cause consumers to feel adrift, out of their depth. It can nudge them to trust information that comes from the most confident source.  Of course, marketing materials always sound confident, even when they contain false information.

Holograms DO NOT interact with the body's electromagnetic field.  A "hologram" is a visual effect. Visuals cannot interact with bioelectromagnetism. In fact, if this wristband produced a strong enough frequency to interact with the body's energy field, it would cause compasses to spin.  Because it is just a piece of plastic, no such effect happens. Nor can holograms increase strength.  The only way to increase strength is to build muscle. Unless this wristband causes the muscles to strain and rebuild (it doesn't), it cannot help your body increase muscle mass. Power Balance misrepresented reality in order to sell spongy plastic with a shiny sticker for sixty dollars.

Power Balance wristbands are just the latest exposed quack products in crowded company.  Amega Wand claims that its product reduces pain by using a conceptual scientific theory known as zero-point energy. This is nonsense.  Copper Bracelet manufacturers claim that copper reduces arthritic pain when in close proximity to joints.  Along with "magnet therapy," this too has been debunked. The pain relief field of medicine has long been the target of miraculous pseudoscientific claims, but similar claims are made about cosmetics, weight loss, and even cancer and AIDS treatment.

Consumers will always have difficulty verifying the truth of medical and scientific claims, but they can take a few precautions. Manufacturers that make medical claims should immediately cite it with sources. If the claims are not sourced, consumers should disregard them. If the claims are sourced, then the consumer can check whether the citations are legitimate by visiting websites dedicated to investigating false scientific claims (www.medicalscienceblog.org, www.randi.org, www.devicewatch.org). Some skepticism should be exerted when investigating alternative medicines.  It is unlikely that a company will discover miraculous new remedies and treatments without receiving 1) considerable accolades and awards, 2) renown in the scientific community and, 3) reinforcement of claims by peer review. Quacks have none of these.  Sometimes quack companies will make up their own awards and even create fake medical journals to help sell their smoke and mirrors, so consumers need to be sure to check the credibility of all the company's claims. Quacks will lie about anything and sink to any level for profit.

While consumers may not be able to fully grasp the intricacies of quantum physics or cellular biology, they should be able to find enough information to determine whether a claim is unlikely or even impossible.  Consumers should check Wikipedia, which is a great asset for understanding the basics of scientific and medical concepts. Consumers should ask around, visit their doctors, and even call the Better Business Bureau to find out if we have complaints about products operating as advertised. Most importantly, consumers should not rush into buying any medical product. They have all the time in the world to make a decision and should take advantage of it. Many lies will be exposed with the simple passage of time.

Wednesday, June 15, 2011

Charity Wednesdays - Is it O.K. for Charities to Spend Money to Make Money?

Apple spends 60 cents to make every dollar. And that's considered wildly successfull in the business world. Yet, in order to meet Standard 9 of the BBB's Standards for Charity Accountability, a charity can't spend more than 35 cents on anything other than program delivery.

This blurb in Philanthropy Today illustrates a growing debate in the nonprofit sector. If for-profit businesses are encouraged to invest in their people and infrastructure, instead of putting everything into their products all of the time, why isn't the same true for charities? Apple has great products precisely because of the investment the company makes in itself. Could we actually solve issues, for example, of hunger and povery if charities charged with fighting those ills could invest more in themselves?

What say you?

Friday, June 10, 2011

BBB Joins the Fight Against Distracted Driving

From the BBB

This is personal. As a mom of three boys, I know that my kids are most in danger when we are on the road. I am so pleased that the BBB is working with employers to make it safer for my boys, and everyone else, to be on the road.

This video, part of the campaign, hits close to home.

Wednesday, June 8, 2011

Charity Wednesdays: Charting Impact

Charting Impact  was recently launched as a collaboration between the BBB Wise Giving Alliance, Guidestar, and Independent Sector.

It is a simple tool that gives organizations an opportunity to concisely tell the public what they have done in the past, what they plan to do in the future, and how they plan to get there.  It is designed to get beyond the focus on expense ratios and overhead in regards to charity effectiveness, and allows us to see what is actually being accomplished in charities both large and small.

It will help donors assess very quickly which organizations are really furthering the causes most dear to them and which organizations are simply wasting time and money.

I encourage all Kansas City Nonprofits to take part in this important project.

Monday, June 6, 2011

Scams of the Week: June 7, 2011

Amega Wand - Another miracle treatment that exploits scientific terminology, in particular "quantum physics," to bamboozle customers into believing a device has medical merit. The company, Amega Worldwide, claims that it harnesses "zero-point energy" in order to relieve joint pain.  The company calls it Amize Fusion Technology.  By throwing "Fusion" in there, they again try to confuse people with scientific terms.  If anyone in the world had developed a technology that uses zero-point energy, which is basically untestable at this point, to relieve pain, they would have a Nobel prize in physics and medicine.  Because the concept is ridiculous in the first place, and they have no scientific accolades to boast, we can safely label this one a scam.

Passive Niche Profits - Another Cash Flow business opportunity. A lot of "reviews" have been popping up defending this program, but the reviews are obviously from people who are shilling for the company and not claiming that they are...which is illegal.  It also has site after site saying that people can earn $100/day, $250/day and even $1000/day. Making $365,000 per year sitting in front of a home computer sounds pretty good.  That's because it's a fantasy world concocted to entice people to buy a program that probably won't make them any money.  The odds are against them, anyhow.

Instant Massive Cash Flow - Scam artists usually attempt to avoid negative buzz words.  After the FTC indictment of "Winning in the Cash Flow Business," I expected anything with the words "cash flow" in its name to disappear.  It's also bad when a business opportunities start talking about "tiers" and "levels" and when you visualize it, it looks suspiciously like a pyramid.

Cash Gifting Bank - Cash Gifting is illegal.  This company says that because they slapped a product into the middle of a known pyramid scam, it suddenly becomes legal. Not surprisingly, the product is only to help people become more efficient at 'cash gifting.'  Also, stating something like "this one is legal" is not the a confidence booster for customers.

Wednesday, June 1, 2011

Charity Wednesdays - Don't Judge a Charity By It's Name

Especially if it's name has something to do with an embroiled sports star who may, or may not, have used performance-enhancing drugs.

If you're a fan of cycling, then you have no doubt heard about the ongoing saga of Lance Armstrong and the debates about whether he used performance-enhancing drugs to help him win seven Tour de France titles. Also if you're a fan of cycling, or if you just happen to own a bike, or know anyone who has ever had cancer, or simply have a thing for yellow wrist bands, then you have undoubtedly heard about the charity Lance Armstrong founded, the Livestrong Foundation.

As noted by Philanthropy Today, the Livestrong Foundation is trying to distance itself from the chaos surrounding the career of its founder.  That's a good thing.  Nobody should ever donate, or not donate, to a charity because of how they feel about one person associated with it.  As Philanthropy Today's Rich Polt more eloquently puts it:
Nobody should ever have given to the Livestrong foundation based on Lance Armstrong’s exploits on the bike. Instead, corporations, foundations, and individuals should always base decisions on whether to give on the questions asked of all nonprofits: Are its programs effective, is it achieving its mission, and is it responsibly stewarding financial resources?

While the allegations against Armstrong are serious, they are a reminder that there isn't a person out there that hasn't made a misstep.  You don't have to be star athlete to royally screw up.  But one bout of alleged wrongdoing does not invalidate the good that anyone does.  Charities should not go down in the same flames that consume the reputations of the people associated with them.

The Livestrong Foundation may be a fine organization.  Or it may not be (for the record, the BBB has no report on the organization).  But the public's faith in the charity should have nothing to to with how a few bike races were won.