I had to go to Rite Aid today and pick up some things after work. I bought these charity balloon things they offer. It was a dollar. In return, I got a dollar worth of coupons. I never really mind it, because it’s always for stuff I don’t use. I was just wondering about it now. How can stores do this? If they have the money to give you in coupons, shouldn’t they just donate that money to the charity?
I’ll bet that the coupons are provided by the manufacturers, so it doesn’t cost the store anything.
There’s no “should” about it.
Here’s how it works. Charity A contacts Rite-Aid to sponsor them for a fundraising drive*. Rite-Aid says, “absolutely, we’ll do the usual $1 balloon donations”**. Then someone at Rite-Aid thinks, “gosh - we can also reward the donors with a little stack of coupons, which will encourage them to spend more money in the store and/or start developing brand loyalty to some of our favorite manufacturers and products”. They contact the manufacturers and tell them to speed up the next round of coupons. Doesn’t cost Rite-Aid a dime.
*Because it’s a decent way to get your name out to brand new potential donors without having to spend a bunch of money on a mailing, and a $1 entry gets a lot of people, which can build up to some recognition the next time that particular charity does something, increasing the chances of that person donating a larger amount.
**I’d also bet that the charity has told Rite-Aid that they’ll give them a dime for every dollar they raise.
The monetary value of the coupon is 1/20th of one cent. Under IRS regulations, a non-profit (or, in this case, a company working on behalf of a non-profit) is allowed to give you something back in stewardship as long as its monetary value is less than 2% of the original donation. As $0.0005 is a lot less than 2% of your $1 donation, Rite Aid is in the clear.
However, I’d expect the full might of the IRS to crash down on Rite Aid the minute they tried to give out coupons for donations of less than 2.5 cents.