Thursday, March 11, 2010

The Perception Game

Like any hard-charging corporate leader, Mike Hannigan has profits on the mind. Nearly two decades ago, Hannigan, alongside longtime business partner Sean Marx, founded Give Something Back Business Products, a Northern California-based office supply company. Since then, they’ve won press, plaudits, and yes, plenty of profits.

What sets GSB apart, though, is where they direct those profits. Unlike most companies, Give Something Back Business Products devotes the majority of their earnings straight into the coffers of local charities. As Hannigan explained during the first part of our exclusive four-part interview, Give Something Back Business Products utilizes a thoroughly unconventional business model. So unconventional, in fact, that it occasionally leaves peers in the business world scratching their heads.

In part two of our conversation, Mike describes his efforts to maneuver the prickly game of perception as he forges a bridge between the worlds of business and philanthropy.

Q: In those early days of starting the company - you and your co-founder Sean Marx in the early and mid-nineties, when you were first starting up - were there a lot of people who kind of just laughed you out of the room?

MIKE HANNIGAN: There still are.

Q: Really?

MH: I mean, we still have problems. One year – I think it might be our third year - when we first got onto the Inc. Magazine 500 Fastest Growing Companies List, we were also the award winner for the worst corporate name. Because the Inc. people couldn’t figure out Give Something Back. That’s not a business. That’s like a non-profit. That doesn’t say anything about selling office products.

So we constantly have to overcome this perception that we’re asking customers to make a financial sacrifice in order for just a social benefit. I mean, every company gives its profits away. Every company. They give it away in dividends to the stockholders for appreciation of the stock. No company sticks the profit in a mattress somewhere. Eventually it gets distributed to the owners as appreciation or dividends. So that’s an argument we have to make to the consumer.

The consumer, though, they don’t have the option of spending more. If we can get in the door and we can say, well, okay, so what’s important to you? And they’ll say, well, I need to have competitive prices. So we’ll say, let’s see what you got. And then they compare with what we have and they say, you guys are cheaper, or the same.

Also a significant portion of our business comes from winning closed competitive bids where the winner is not even known until the envelope is opened in public and the lowest bidder is determined. Closed, competitive bids. Everyone submits their prices, and the buying company opens the packets and the lowest price wins the deal. We win more than our share of those.

But you’re absolutely right. Initially, the perception of a competitive business could survive in our marketplace and give its profits away was a counter-intuitive proposition, but I think in the past ten or fifteen years, that’s less and less so. It’s still a hurdle we have to overcome, but once we overcome it, there’s a stickiness to our customers that I think most of our competitors don’t have. Once they actually see that, oh geez, they got this box of pens for a buck sixty-nine. They used to pay a buck seventy-nine. Then you’ve got a customer for life.

The concept of the community as stakeholder is a novel one, to be sure, and Hannigan is relentless in educating the public about his endeavor. But how does Give Something Back Business Products allocate the generous funds it donates to charities each year? Tomorrow, in part three of our conversation, Hannigan reveals the mechanics of his company’s giving.


Insolvency advice said...

The company would never get this far without working hard and think smart and clever. Thanks for sharing this conversation with us your readers.

business plan said...

It’s great to read this interview. I do agree that businesses always encounter a lot of challenges. And he did his best. He stand firm with the company and he did a great job.