When Profit Equals Price: Consumer Confusion about Donation Amounts in Cause-Related Marketing

A series of five studies examine potential consumer confusion associated with the "percentage of profit" wording often used to describe cause-related marketing in which money is donated to a charity each time a consumer makes a purchase. The initial four studies demonstrate that (1) expressing the donation amount as a percentage of profit leads to widespread confusion and near universal overestimation of the amount being donated, (2) even consumers who have had formal accounting training are susceptible to this bias, (3) participant motivation in an experimental setting cannot account for these results, and (4) people report higher attitudes toward a company and express stronger purchase intentions as a function of the percentage value of the donation but not as a function of whether it is a percentage of profit or price. The authors conclude with a study that explores several potential affirmative disclosures for the percentage-of-profit problem.