One of the major themes mentioned by numerous speakers at the South NJ Social Entrepreneurship Summit was the importance for social enterprises to produce a high quality and competitively priced product or service above all else. 

This might be one of the major differences between traditional non-profits and social enterprises. Often practitioners (Spring Into Action included) assume that customers will pay a premium and sacrifice quality expectations because of the social good behind a purchase. This simply is not true. Two memorable quotations to this end came from Joe Deloss, Chief Sandwich Officer of Freshbox Catering and Jonathan Greengrass, VP of Development and Public Relations of The Greyston Foundation who said,

“Pity doesn’t pay,”

and

“Margins before Mission.”

In other words, although having social impact behind a product or service may help a business attract customers, if quality is lacking customers simply will not return. In this regard, social enterprises are no different than regular businesses.

There is a slight caveat to this basic market principle that social good is not enough to differentiate in the market. Some social enterprises start their businesses with an anchor customer who agrees to pay a premium (normally about 20%) for the social benefit created. This normally comes from a big corporation or institution through the procurement of a necessary ingredient or service.

Examples:

Greyston Bakery started its brownie business by working with Ben and Jerry’s.

Pioneer Human Services has a relationship with Boeing for aerospace manufacturing.

Evergreen Cooperatives leverages relationships with major institutions in the community for its coops. The prime example is the laundry service that is provided to the Cleveland Clinic.

The brilliance of this strategy is it is a direct and relatively low risk way to enter the market. Once established, the quality must be on par with the competition in order for such an arrangement to be sustainable.  The downside to this kind of preferred procurement is that it leaves organizations beholden to one large customer. If used effectively, this provides a great basis to expand to other revenue streams over time.

We understand the need to build a business that offers an excellent product or service along with social impact. We think that this is a great way to truly satisfy customers. Right now we are trying to figure out how to proceed: finding an anchor institution or through a more traditional launch.