A recent survey of public charity and private foundations revealed that 40 percent of respondents saw contributions decline more in the first five months of this year than in 2009. However, 63 percent of respondents also saw an increase for their services. Non-profit organizations are clearly struggling to get donations. Enter the dual mission business model, defined by PSFK as a “business model that executes on a multitude of levels.” In other words, a business which also supports a non-profit. TOMS Shoes is a good example. PSFK describes TOMS Shoes as a “classic case study of dual mission business modeling.”
In 2006, American Blake Mycoskie created TOMS Shoes after a trip to Argentina where he noticed children not wearing shoes. For every pair of shoes purchased by customers, TOMS Shoes gives another pair to a child in need of shoes through its non-profit, One for One. As PSFK says, TOMS Shoes’ business model “establishes a service that creates community resources in developing countries and provides commercial goods for purchase in existing markets.”
During a CNN interview, Mycoskie said that as a for-profit business, TOMS Shoes continues “to sell shoes so we can continue to give shoes.” He pointed out that during tough economic times “the donors maybe aren’t there, the charity really suffers.”
Mycoskie added that being a for-profit business which supports a non-profit turns customers into marketers. “So when someone buys a pair of TOMS, they’re not just buying a pair of shoes, they’re kind of joining a movement. And they want to participate in that.” he said. “And so when they wear their shoes, and someone says, ‘what are those?’ they never say ‘TOMS.’ They tell the whole story. They say, ‘When I bought this pair of shoes, a child got a pair.’ And that’s the best type of marketing you can have.”
PSFK says that TOMS Shoes business model “establishes a service that creates community resources in developing countries and provides commercial goods for purchase in existing markets.”
The market maker funding model
An article in the spring 2009 issue of the Stanford Social Innovation Review identifies the 10 most commonly used funding models by the largest nonprofits in the U.S. One of the models the article lists is the market maker, which it defines as a non-profit that provides “a service that straddles an altruistic donor and a pay or motivated by market forces.” In other words, it’s another label for the dual mission business model.
The article suggests that nonprofit leaders who consider using the market maker funding model should ask themselves the following questions:
- Is there a group of funders with a financial interest in supporting our work?
- Are there legal or ethical reasons why it would be more appropriate for a nonprofit to deliver the services?
- Do we already have a trusted program and brand name?