Age UK are in trouble for doing a deal with an energy provider that raised £6m a year for the charity. It’s tough, and probably feels unfair to them. But this is what happens when the operational needs of the business get dissociated from its core purpose. Fundraising is essential but it is not why Age UK exists.

The charity aims to help everyone make the most of later life. Undoubtedly some older people are confused by energy tariffs, and would welcome help to ensure they are not paying over the odds. The same applies to home and motor insurance, savings interest rates, even making sure they have smoke alarms with working batteries. Some people might even pay for help. But with the focus on raising money, Age UK came at the problem another way. Two years ago they agreed a special 2 year fixed tariff with E.On, which was a pretty good deal at the time. Their website says that “buying this product supports Age UK’s charitable work”. Did people who signed up think they were in effect making a donation to Age UK? Or did they think Age UK was helping them by giving them a special deal? A bit more transparency rather than this woolly language might have avoided the recent media criticism and helped Age UK’s customers too. The kicker here is that people referred by Age UK to E.ON were offered a choice of all four E.ON tariffs. The charity appeared to be endorsing all E.On’s tariffs.

Now the real deal has been revealed: “The long term commercial partnership includes a typical commission to Age UK of £10 for each customer.” As we know, if you’re not paying, you’re the product. This one is hard on Age UK’s customers because they are paying for their energy, while in effect they are being sold to E.On for £10 each.

Major charities are complex organisations. Different teams have their own goals and metrics. The challenge is to keep sight of the primary job – in this case, helping older people – and to check the impact of any activity against the ultimate purpose as well as more parochial targets. As ever, a quick metaphorical walk in the customer’s shoes is rarely wasted.

Part of Age UK’s defence is that fundraising is getting harder and commercial deals are essential. The problem is the conflation of a benefit being provided by Age UK with a fundraising deal to support them. Either is fine – even this deal is fine, as long as the customer point of view is worked through and made explicit. Plenty of happy customers will have been rattled by the negative coverage, when they may have been quite content to support the charity in this way. Soft-pedalling a message for fear some customers won’t like it is rarely good in the long run.

The wrinkle is that charities have to think about two sorts of customer – those they help, and those who support them. Other charities are under fire for targeting the same willing donors over and over, and for the trading of donor lists, which leads to the best prospects being contacted by many different charities. There’s a donor segmentation seemingly in general use among fund raisers, featuring Dorothy Donor, a typical lower value donor, and Colonel Cash, a major donor. Ignoring the perhaps inevitable gender-stereotyping, it’s a crude approach, since it’s mainly a view from the charity’s perspective, limited to the specific behaviour the charity seeks – can they give, do they give, how much do they give?  The result is that poor old Dorothy Donor, the kindly female over 55 who gives regular small amounts to lots of charities, gets hit all the time for money from charities she has no interest in. This can’t be good but on a simple ROI model it generates more money than it costs, so they keep doing it. This is the danger of an overly simplistic approach to ROI, as I’ve written here.

Meanwhile an enterprising marketer at a comparison site has seen an opportunity. The top result when you search “Age UK Eon” is “Save on Age UK energy”, with a link to energyhelpline.com, promising to compare all energy deals. That’s good business that’s good for customers.

Comment | February 2016