At the end of June 2008, the American Red Cross was challenged to erase a $209 million operating deficit. At that time, the nonprofit organization, now 130 years old, brought in a new CEO, Gail McGovern, and she led the charge in putting the organization back in a stable financial situation.
By the end of June 2009, the organization had cut that deficit to $33.5 million, and by 2010, it had a slight surplus. This significant accomplishment was the result of a multifaceted focus on restructuring American Red Cross, starting with instilling a culture of fiscal responsibility.
“When you’re operating with a $209 million deficit, there clearly isn’t a culture of fiscal responsibility,” said Peggy Dyer, chief marketing officer. One of the most important focuses of American Red Cross is that it is a good steward of the donated dollars the American public gives to help those in need. And since the late 1990s and early 2000s, $0.91 of every dollar the organization raises has gone to supporting that mission.
“Victims of disaster receive the funds we raise, which is why a culture of fiscal responsibility is so important,” said Dyer.
As part of its efforts to restore financial stability, the organization streamlined and consolidated its back-end operations. Prior to enacting this initiative, the approximately 700 local chapters American Red Cross has around the country had their own back-office functions, bank accounts, IT systems, and financial systems. It removed the duplicates and streamlined its operations across the organization.
From there, it focused on finding ways to generate new recurring revenue streams that would also help it extend its mission, which is where American Red Cross’ licensing push comes into play. “We want to stay on the forefront of innovation, and we’re looking for solutions that better meet consumer need as we go forth in our licensing push,” said Dyer.
Throughout its history, American Red Cross’ brand has stood for hope and help, and it’s a message it continues to spread today. The organization is in a unique position as its icon is used during times of war as symbol of safety and neutrality. With that comes a tremendous responsibility in how the organization uses its brand and emblem.
“American Red Cross is viewed by the public as second only to the public library as the gold standard in terms of community value,” said Dyer. “We have a remarkable brand, and our favorability ratings have consistently been the highest of virtually every nonprofit we track.”
As part of the International Red Cross and Red Crescent Societies, American Red Cross adheres to seven principles to guide it: humanity, impartiality, neutrality, independence, voluntary service, unity, and universality. With these elements behind it, it’s easy to see why the organization is taking its time in developing a licensing program.
“We’re at an important inflection point for our brand as we move to a much more active licensing focus,” said Dyer. As it builds its team of licensees, the organization is looking for companies that share its passion for its lifesaving mission and those that want long-term relationships to help it extend its mission.
To do this, American Red Cross plans to co-develop products and look for existing products that will complement its main areas of focus. The organization is best known for its disaster relief efforts internationally, nationally, and regionally. “We respond to nearly 70,000 small local disasters a year for people who need food, shelter, comfort, and hope,” said Dyer.
American Red Cross also supplies more than 40% of the nation’s blood supply, another of its core missions. It also has a significant health and safety focus, educating and preparing Americans for emergencies and training them on first aid and CPR. Over the course of a year, American Red Cross trains 10 million people on these topics.
The service American Red Cross is least known for is the help it provides to the Armed Forces; it provides emergency communication and support to approximately 500,000 service members and their families each year. Although licensing is still an extremely new venture, Dyer said the organization has developed a game plan for how it will tackle this new focus.
“We’ll do product development to identify what will complement each of our mission-oriented focuses, whether it a first aid kit for our health and safety classes or a babysitter backpack equipped with tools to complement our babysitter instructor class,” said Dyer. “We’re definitely looking for partners, but we’re also looking at existing products that will fit our consumers’ needs.”
For the future
Marketing is another new discipline within American Red Cross, and Dyer was hired 18 months ago to tackle it. She said that although the organization’s brand has great awareness already, the focus has been on making it more relevant to younger generations.
To this end, the organization identified mobile as an important focus, and it put together a strategy around fundraising and tested it through mobile marketing. Its first test was a complete failure, said Dyer, but American Red Cross learned a lot and was better prepared to respond by the time the earthquake hit Haiti in early 2010.
“We developed Text Haiti to 90999 for donors to make a $10 donation to American Red Cross, and we had record-breaking donations,” she said. More than $32 million were donated at $10 at a time, equaling more than 3 million new donors. In doing research afterward, the organization found that 40% of the donors who participated were under the age of 40.
The organization also asked Judith McGrath, CEO of MTV Networks, to join its board of governors. “Having someone like that help guide us, as an organization focused on reaching youth, is a wonderful opportunity,” Dyer said.
Taking advantage of opportunity is definitely one of American Red Cross’ strengths. Having reached its goal of financial stability, it’s on stable enough footing to put its focus on new ventures. “We are looking for the future to invest in new revenue streams and growth, and part of that is developing an active licensing program,” Dyer concluded.