Understanding Business, 10th Edition

Published by McGraw-Hill Education
ISBN 10: 007352459X
ISBN 13: 978-0-07352-459-7

Chapter 1 - Taking Risks and Making Profits within the Dynamic Business Environment - Critical Thinking - Page 25: 2


A business benefits its community -- and itself -- by leveraging what it does best. This communicates to regular and prospective customers that the business is a committed member of the community, and this builds customer loyalty. Your restaurant, for example, could donate (a) 'in-kind' food, meals or meeting spaces to assist local non-profits, or (b) cash donations to well-publicized events that are aligned with your mission, like sponsorship of the Cinco do Mayo festival if yours is a Mexican restaurant. Your restaurant could also provide a venue for local visual and performance artists, and it could even serve as a collection point for toy or food donations, or a meeting place for the 5K Fun Run. Business's that provide a free service to the public for their own benefit or helping out local community are known as 'social enterprises' and their main objective is to serve social objectives such as providing jobs and training to teenagers who are struggling with grades or unemployed to help them later in life.

Work Step by Step

Most businesses have excess capacity (they can always serve a few more meals or manufacture a few more t-shirts). The cost to exercise this capacity is usually at or below cost. The savvy entrepreneur uses this excess capacity for promotional purposes. Some promotions are traditional discounts to boost short-term sales, but others build long-term goodwill, awareness, and loyalty among regular and prospective customers. Finding ways to give back to benefit the community is ultimately rewarded with higher sales because customers tend to support the businesses that support them. When this is done well, it boosts awareness and it's possible to generate sales from new customers and additional sales from your repeat customers. Your current and prospective customers make up your community. Since customer loyalty is built on their goodwill, it's a good business practice to find ways of "giving back" that are valuable, authentic and cost-effective.
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