Intro: It's the holiday season and that means companies are partnering with charities to give them a hand. That's great, but commentator and writer John Solomon says there's one type of charitable promotion out there that should get consumers doing the math.
Solomon: Twenty years ago, American Express launched the concept of [sales-driven] corporate donations to charity. It offered to give a penny of every card transaction to keeping the Statue of Liberty spiffy. Lady Liberty got a face lift, and American Express made more money. Other companies followed suit.
These days, everybody’s on the bandwagon. More and more companies are using the technique as an out and out marketing tool for new products and services.
It's called percentage of sales donations and it makes a company look great by implying the business is making a real sacrifice. But don’t be too awed by their generosity.
Take Time Warner Cable. It's been selling its new high-speed Internet service in New York by offering to donate the $25 connection fee to local children's charities.
But in a subscription business like Internet, giving away that first month is a small price to pay for future revenue.
In fact, under most of these programs, the company is really just an unnecessary middleman between you and the non-profit group.
That's why companies rarely, if ever, disclose how much they are making from percentage of sale donations.
If they did, consumers would see how little a sacrifice it really is.
So this Holiday Season, when you’re considering buying a four dollar [gingerbread] latte from Starbucks so that they can send 10 cents to the Starlight Foundation. Consider an alternative: You could pass up that fix and donate the whole sum to charity.
Just remember these pitches are often more marketing than cause. If companies want to take full credit for good deeds, they should be giving away more of the money.
In New York, this is John Solomon for Marketplace
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