Great Deal for Consumers, but maybe not for Charities (or Participating Businesses)by Peter Roundhill © PR Loyalty Solutions, 2012
Entertainment Coupon Books went on sale this month for just $5 each, including shipping! What a bargain! True, you only have five more months to use the coupons (which expire November 1), but given that there are thousands of dollars worth of discounts, it’s an amazing deal. The books cost way more than that just to print! It’s a great value for consumers, but what about for the charities that sell the books and the businesses that offer these coupons?
The Entertainment company is trying to get rid of all their overstock – better to earn just a dollar a book than nothing at all. And with the 2013 edition coming out soon, it makes sense to get what they can for last year’s leftovers. But how does this affect consumers, charities and businesses?
Consumers & Cheap coupons
$5 for an Entertainment Coupon Book is a great deal for consumers. Despite there being just five months until the book expires, there are still $10 worth of Safeway coupons (great if you shop there anyways), plus hundreds of half price coupons for restaurants, free discounted bread at McGavin’s Bakery, and 2-for-1 deals on attractions just in time for the summer. Want to cut your eating-out expenses in half? Then get the book and save.
Oh, but wait. There’s a catch. You get the 2012 book for just $5, but only if you sign up to buy the 2013 book directly from the Entertainment Book company, not from a charity. As an added bonus (and further insult to the charity that sold your original book in the first place), if you pre-order next year’s book then you’ll save an additional $5 off your 2013 coupons, which gives you a further incentive not to buy from your neighbor’s little kid when she knocks on your door in September raising money for her school.
If you buy Entertainment Books because you want to save money, then buying them from a charity doesn’t make economic sense. And if you buy coupon books because you want to support a a charity, then it doesn’t make sense to buy them directly from the company. Think about it – If you buy the book online for half price, and then donate what you save to the charity and get a tax receipt, you’ll save money, the charity will earn more and the non-profit can concentrate on its charitable work instead of spending hours and hours selling books for the Entertainment Corporation.
And finally, what’s ironic about this $5 deal is the fact that specials on 2012 books were actually better several months ago, when the coupons still had a lot more life. Months ago the $50 Vancouver books were being offered for $15 each and two for $25, and with those deals there were no conditions that you had to agree to pay $45 for the 2013 edition (which makes the $5 savings simply 2-for-1, or two for $50).
Charities and Discounted Coupon Books
Now what about all the charities and non-profit organizations that work hard selling Entertainment Books as a fundraising activity? $5 coupon books straight from the corporation are definitely not good for non-profits, especially when the offer has a catch – get the 2012 book for $5, but only if you agree to buy your 2013 book directly from the company, not from a charity!
Entertainment built its business model originally around helping non-profits to fundraise. Every autumn school children and charity groups go door-to-door selling the books to their neighbors and friends to raise money for their causes. This benefits the charities as it brings in lots of money. It’s also great for the Entertainment Coupon company because it has an army of volunteers looking after its promotions, sales and distribution. (You just can’t beat free labor!) For every book the non-profits sell, they keep a good percentage. It’s a lot of work, yet an effective fundraising activity. But there’s a problem. …
By offering coupon books to consumers directly from the company, and thus effectively cutting out the charitable “middleman”, the Entertainment Book company makes money at the expense of its vitally important #1 distribution partner group – the charities. Does it really make sense for me, the consumer, to give a charity $45 or so for a book (that they worked hard to distribute) when I can buy the same book directly from the company for half price or just $5?
Granted, the book is now old and seven months closer to its expiration date, but you could buy Vancouver Entertainment books in the fall straight from the company at close to half price too. Yes, me, a consumer who’s only effort is to go online and click “buy” off their website could get as big (or even bigger) a discount off the book than many charities were getting originally (while they were spending tons of hours promoting, selling and handling all the distribution and logistics). Now is that any way to treat your number one distribution partner, and charities yet!?
Any company that helps charities as part of its business model should be respected, unless of course they overcharge the charity. What I don’t understand is when fundraising businesses charge charities more for the product than consumers can buy for themselves. Instead of paying $45 or $50 for each book from a charity, the consumer can pay $5 directly to the Entertainment Coupon Company (or maybe $25 in the fall when they aren’t so out of date), and then write a cheque for the difference to the charity. The charity will actually earn more money (with far less effort), the consumer will get a tax receipt and save money, and the Entertainment guys still get their money (although just not quite as much).
So what are our recommendations? The Entertainment company should stop undercutting the charitable organizations that work so hard to promote and distribute their product. A consumer off the street, especially in the fall when the books are relatively new, should not be able to go online and order a single book on special for the same or less than the price a non-profit has to pay when it’s ordering dozens or hundreds of books (and doing all the sales, promotions and distribution themselves). That would be like Apple selling iPads to electronic stores for $400 and suggesting they mark them up to $600, but then telling consumers that they too can buy their iPads direct from Apple for the same $400. That would not make for good business.
So what should be done with all the 2012 coupon books that didn’t get sold earlier in the year? No, the Entertainment company definitely should not throw all the unsold books in the recycling bin (or worse, the garbage can). That would be a waste. Perhaps they should consider printing fewer books though, or donate unsold books to charities in the spring. The charities could then sell the books for half price (and keep the profits). Whatever they do, if the Entertainment company wants loyal non-profit distributors, it needs to treat them fairly as valuable business partners.
The Entertainment company is in the business of making money, not donating to charity. That’s perfectly reasonable. But it doesn’t make business sense for a business to undercut its distributors. Charities should be challenging their supplier on that issue.
Coupon books are great for consumers and excellent fundraising activities for charities (despite the fact their suppliers sometimes undercut them). But what about for businesses? For some businesses 2-for-1 coupon books work, but for many (or actually most) they do not.
A coupon can work for a business if (1) it introduces a consumer to the business (i.e., brings them to the door), and then after sampling the product (2) the consumer becomes a repeat customer and is willing to pay full (or near full) price each time in the future. If both these steps don’t happen, and if the business does not have exceptionally high margins to allow it to offer services at half price and still make a profit, then 2-for-1 coupons can be a bad deal for business.
One major challenge with coupon books is that there are so many options. A person doesn’t need to return to a restaurant and pay full price after using a coupon because there are so many other restaurants offering 2-for-1 deals too. Most restaurants cannot afford to sell their food at half price all the time, but that’s what coupon books help make happen. Retail stores are the same.
When coupon books start coming on sale in the fall at half price, or for $5 as they are today, it can make sense for a consumer to buy multiple books. When this happens, people can use a coupon at the same place every time they shop. (When a coupon book costs just $5, and you can save $15 in a single restaurant meal, then it makes sense for someone who eats out frequently and has a favorite restaurant to buy multiple books).
In rare cases, coupons can lead to customer loyalty – but only in rare and well thought out cases. When coupons are too plentiful, however, consumers come to expect discounts and question paying full price for a product. When this happens coupons are a detriment to many kinds of businesses.
It’s commendable that Entertainment Book provides a vehicle for non-profits to fundraise and earn money for their charitable activities. Kudos to Entertainment Book for making it happen. It’s unfortunate, however, when the company sells the product directly to consumers for about the same or less than it charges charities. It’s also unfortunate that after non-profits promote the Entertainment Book to the world, everyone can then simply order their books directly from the corporation for less than the rate charged by the charities.
So what should people do?
Charities: They should complain to the Entertainment Book company if they are being charged more than consumers are charged directly. Maybe it’s okay for Entertainment Books to go on sale half a year after their official start date, but not just a month or two. If charities complain, then maybe the company will listen.
Consumers: Don’t stop supporting charities. If you don’t like the idea of paying $45 (or $35 or whatever) for a fundraising product where the charity only gets $15 or $20 or so, and you can buy the same thing for half price yourself, then write the charity a cheque for the difference (or more) and get a tax receipt in the process. And if you don’t think charities are getting a fair deal for their efforts, then send Entertainment a note saying so.
Businesses: If you participate in the Entertainment Book in part because you want to support local charities, recognize that not all book sales benefit groups in your community. If direct sales from the coupon company or the availability of multiple discounted book sales bothers you, then let the Entertainment guys know. The company has two strategic partners – community businesses and community non-profits. If both groups complain, then maybe the terms of business might improve.
Entertainment Company: You have three customers: (1) consumers, (2) local businesses, and (3) non-profits. If you want (1) loyal consumers (the people who buy the books), and only that, then of course sell the books as cheaply and as profitably as possible. If you want (2) loyal local business customers (i.e., the providers of your coupons), however, then don’t sell the merchants on the fundraising benefits of the product if in fact you are undercutting the charities they want to support. Also, be aware that the more books consumers have in their hands, the worse off most business customers will be. And if you want (3) loyal non-profits (i.e., your retail distributing customer), then don’t undercut their prices or charge them the same wholesale as you do retail to their customers. And finally, if you value good PR, not negative, then re-read points #2 and #3 above, and especially #3.
So what can the Entertainment Company do? Maybe start by not printing so many books. Yes, they might lose some sales, but by selling surplus books at the expense of their charitable distributors they risk losing credibility and goodwill with their business and non-profit partners. Consumers might love them, but it’s probably not worth all the other losses. Plus, it is risky if they do this regularly (which they appear to be doing). Consumers will learn. Consumers won’t buy the books when they are full price, or when they are 33% off starting in mid-October. Some consumers will wait until they are less than half price, which means you’ll have even more unsold books to get rid of next year!
Entertainment Book used to promote on their back covers that they have helped charities across North America raise hundreds of millions of dollars. In fact, if I remember correctly, I think they used to even write how many dollars they helped raise in each given area where they offer a book. Today, however, on the back of each coupon book bought directly through the company is no mention of the charitable benefits. All it says now is “SAVE MORE. DO MORE …” (which they’ve trademarked), and stuff like “get exclusive discounts, tips and updates, plus enjoy giveaways and sweepstakes” by following them on Facebook and Twitter. This is how they can inform consumers how to buy their books directly from the company at a discount instead of through the charities.
So, Entertainment Book: are you still in the business of profiting by helping non-profits and local charities? Or has your model changed to use charities to promote your products but then to sell to consumers directly as much as possible? Yes, it’s too bad that electronic coupon businesses like GROUPON are affecting your profits, but don’t take it out on the charities. And yes, we respect the fact that you are a business and that your purpose is to make money. Businesses are supposed to make profits. However, like they say, “you can’t have your cake (or half-price restaurant coupon or support from charities) and eat it too!” Are non-profits and charities your valuable business partners, or aren’t they?
Peter Roundhill is a managing partner with PR Loyalty Solutions, a Vancouver-based consulting firm specializing in customer loyalty and reward programs. Peter has an MBA specializing in entrepreneurship, a degree in Economics (UVic), and a certificate in Community Economic Development (SFU). Peter’s 2007 Master’s thesis was on “Customer Loyalty and the Design of Community Reward Programs.”
PR Loyalty Solutions is a customer loyalty marketing consulting firm specializing in reward program design, effectiveness audits, and coalition community reward program creation. Need advice on how to create or improve a customer loyalty initiative? Then Contact Us.
Click here to learn about PR Loyalty Solutions’ Services.