Group coupons are new tools for charity

It was one of the high points -- or low points -- of the Super Bowl TV commercials. Actor Timothy Hutton seriously explains to viewers the plight of the Tibetan people against a visual backdrop of scenes from Tibet.

Suddenly Hutton is sitting in a restaurant, adding, "But they still whip up an amazing fish curry!"

The ad, for a Himalayan restaurant in Chicago, was sponsored by Groupon, the nation's leading Internet group coupon site. While most viewers didn't realize it, they were witnessing one of the ever-growing marriages between group coupons and U.S. charities.

Although not apparent, Groupon was raising money for the Tibet Fund and three other charities during the Super Bowl.

Promoters argue these are "win-win-win situations"-- for the consumer, the advertised business and the charity. But nonprofit leaders warn consumers to do some digging before donating, Some coupon sites donate little. Others much more.

"It's a strategy that can be used well -- or poorly," said David Hessekiel, president of the Cause Marketing Forum, based in New York. "A nonprofit has to look deeply at why they are getting involved in it and what they will get out of it. What is good or bad often depends on the execution."

The discount coupon sites, which typically offer a deal-a-day ranging from pizzas to pilates classes, have become wildly popular. And with funding drying up on all fronts, nonprofits are eager to try new strategies.

The Blind Squirrel already has an impressive list of nonprofit partners, including the St. Paul Winter Carnival's sponsor and CommonBond Communities, a major low-income housing developer.

"It's something new and different," said Lou Harvin, spokesman for the American Cancer Society's Minnesota chapter, which is signing on next week. "We always try to be on the cutting edge of technology. We'll see how it goes. But we expect it to be a great new tool."

Click and give

For those uninitiated into the world of group coupon sites, here's roughly how they work. A website offers discount deals for one of its business "partners," say 50 percent off a restaurant dinner. It blasts online announcements to registered subscribers. People purchase the deal online. Part of their transaction often ends up as a donation to charity.

The St. Paul Festival and Heritage Foundation, sponsor of the St. Paul Winter Carnival, decided to test these fundraising waters in November when it joined forces with the Blind Squirrel, said Beth Pinkney, foundation president.

The Blind Squirrel, meanwhile, received access to thousands of potential customers, and an opportunity to share their names, ZIP codes and e-mail addresses with participating merchants, said Stuart Graham, CEO of Blind Squirrel. It will also help nonprofits pump up their databases by referring them to "friends" of their customers.

Pinkney said she's been pleased with the partnership.

"Especially in these challenging times, we are always looking for ways to fund our programs that don't require more time and work from our staff," she said.

During its kickoff month in December, the foundation earned $2,000 from the website, said Pinkney, though the foundation did little publicity. She did not have figures for January.

The Twin Cities has been a very receptive market, said Graham, a San Diego businessman. The Blind Squirrel's contact list is already 80,000, he said, and it is expected to hit 240,000 in the next three months.

Read the fine print

But Jon Pratt, executive director of the Minnesota Council of Nonprofits, advises nonprofits and donors to research how much support charities actually receive. There are different models.

Groupon, for example, has a "G-Team" linking volunteers to different causes. It also runs fundraisers for select charities with donations matched by outside philanthropists. And for the Super Bowl, Groupon donated up to $100,000 in matching funds for donations made to four featured charities.

Living Social, meanwhile, offers a "12 Days of Giving" during the holidays, contributing 1 percent of its revenues for 12 days to charities. That figure was $130,000 last year, staff said.

That relatively small figure points to the fine print that consumers should heed, nonprofit leaders say. If a company offers to give "4 percent" to charity, for example, is it 4 percent of the value of the coupon? Or 4 percent of the company's share? And what is the company's share?

"Would the Animal Humane Society want to advertise with The Blind Squirrel?" he asked.

Likewise, nonprofits can run the risk of over-commercializing their cause, they said.

"As a nonprofit, you're always protective of your donors," said Lisa Lane, development director at the Neighborhood House in St. Paul. "You don't want to be part of the din. You approach with caution."

That the humble coupon has evolved into a charity fundraising phenomena isn't surprising to some. Americans respond well to businesses "with a heart." And since the coupon sites have no tangible products, their charity model can set them apart.

"Clearly, something needed to be done to differentiate one [site] from the other," said Mike Hollywood, director of new media at Cone Inc, a national leader in cause marketing research. "There's only so many yoga studios in Boston you can promote. It sweetens the deal."