- Today’s brands are embracing the move toward social good. And it’s having unexpected benefits to business.
- Discounts can be problematic for the long term profitability of a business. Givz offers a win-win alternative that’s attractive to customers and e-commerce companies’ bottom lines.
- Customer donations to charities outperform traditional discounts in terms of increased conversions and customer retention.
Every year, in the U.S. alone, e-commerce businesses lose $50 billion of revenue by offering discounts on retail products.
But that’s changing.
For decades, companies believed that the best way to attract customers, make sales and increase revenue was by offering discounts on products. But consumers are changing, and these days they expect more from the companies they support.
Discounts alone aren’t enough to attract customers.
That’s why Givz designed a system that enables brands to give shoppers, at the completion of their transaction, the option to donate a portion of their purchase to charity.
In short, Givz enables brands to convert discounts into donations. And in doing so, the business improves customer retention.
Givz founder, Andrew Forman, shared the company’s story and described the platform’s purpose-driven features on the podcast, Own Your Commerce (check out the episode here). Highlights from the conversation are included below.
Charitable trends in e-commerce
Andrew sees two huge trends happening in the e-commerce market right now, with Givz sitting at the tip of the intersection and satisfying both trends:
- Brands want to move away from discounts
- Consumers crave doing business with brands that engage in purpose-driven activity
How Givz helps e-commerce brands
Product discounts can be problematic
Discounting products can be bad for the long-term profitability of a business — that’s why many companies prefer avoiding them. Perpetually discounting products trains shoppers to expect price reductions.
Customers also start to notice patterns in the way a company discounts inventory and if an item they want to buy is full price, they’re more likely to wait until the next discount to make a purchase.
Discounts can also complicate the relationship between a company and its customers. For example, when a shopper buys a product at full price and then the next day sees that item discounted, it can leave the person feeling resentful for missing the sale price.
And for some consumers, discounts demonstrate a lack of confidence in a product and may even damage customers’ trust in the company. If a product is always discounted, then shoppers might believe the value of the product should always reflect the lower, discounted price—not the full retail value.
Roundup donations are awkward
Roundup donations are small amounts of money that are generated by rounding-up the cost of a sale — say $14.53, after taxes, for an audio book — to the nearest dollar amount — $15. And then, at the end of the month, the business combines all of the rounded-up funds and donates it to a single charity.
The only problem is that these transactions are known for making customers feel irritated or uncomfortable. It’s a small enough amount that shoppers may opt in, but not because they care about the ASPCA or wounded veterans. Oftentimes they’re doing it because they feel pressure to do it, or feel guilty for not just giving 47-cents to charity.
In addition, with roundup donations, a company essentially takes the money from their customers and then turns around and writes a check to the charity using their own name, not the names of the shoppers who donated the money. With Givz, the donation is a gift that the brand gives to customers.
Higher conversion rates
Givz has seen higher conversions from customers who are given the option to allocate a donation versus receiving a discount.
With one client, Givz tried a 50/50 A/B test where half the email list got a 30%-off coupon code, and the other half got a 20%-off coupon code plus 20% to donate to the charity of their choice. So the total discounted value appeared to be 40%. But in terms of revenue, the charitable option performed 58% better.
Providing an option to donate to a charity resulted in a massive increase in sales for the company, and it ended up only costing the business 25% instead of 30% because not all shoppers follow through with a donation after their purchase.
Increased engagement
Andrew has also found that people who choose donating over discounts are more loyal customers: they return to the store more often. Ultimately, their lifetime value is higher as well and the charitable donation has the exact opposite effect of the discount.
Givz did a Net Promoter Score (NPS) lift case study with one of its larger brands and saw a 22% lift in the NPS score for customers who donated versus those that either did not donate the money or were not given the opportunity to donate.
How Givz benefits memberships
Many businesses with a membership model give first-time customers a free trial period. With Givz, companies can instead charge their full monthly rate, or just donate the first month’s payment to a charity of the customer’s choice.
From a consumer-psychology perspective, it feels less confusing for the shopper to see a series of charges for the same amount, rather than a $0 charge the first month and, say, $39 each following month.
As always, there is the customer action point where about half of shoppers allocate the money — it’s essentially equivalent to a first month 50%-discount offer, not a first month free.
How Givz helps brands grow
Increase sales
Many businesses with a membership model give first-time customers a free trial period. With Givz, companies can instead charge their full monthly rate, or just donate the first month’s payment to a charity of the customer’s choice.
From a consumer-psychology perspective, it feels less confusing for the shopper to see a series of charges for the same amount, rather than a $0 charge the first month and, say, $39 each following month.
As always, there is the customer action point where about half of shoppers allocate the money — it’s essentially equivalent to a first month 50%-discount offer, not a first month free.
Special offers for holidays
Givz can create special offers for traditional holidays and well-known marketing holidays, such as Black Friday, Cyber Monday and Giving Tuesday. Many companies don’t want to give consumers the impression that they are capable of slashing 40 to 50% off the price of their product because that encourages buyers to simply wait for the next holiday to come along to make a purchase.
Instead, the business can give a small discount to consumers while making the donation the primary bonus. For example, a company might offer a 10% discount off the price tag, plus an additional 20% off that goes to the charity of the customer’s choice.
Early orders for holidays
Charitable donations can also be used to avoid supply chain issues that are known to occur closer to big holidays. Companies can make early bird offers to encourage customers to complete purchases well in advance of, say, Christmas, Valentine’s Day, Mother’s Day — and other holidays that are notorious for fulfillment logjams when too many shoppers inundate businesses with gift orders at the same time.
Apologizing for supply problems
If supply chain issues do occur and deliveries are delayed, having a donation component can help customers feel good about your brand. Andrew suggests that companies can always double down if delays occur, and offer shoppers another $10 to give to a charity of their choice.
What's coming next for Givz
Closing the loop
Andrew says that the next iteration is closing the loop by providing confirmation emails to customers reminding them how much of their purchase was allocated to their selected charity, and when the contribution was delivered.
The bigger vision is to keep the customer in the funnel by checking back after four to six weeks. But instead of promoting a product, the brand can provide the shopper with real data about how their donation was used and what cause it supported.
Recouping losses
Imagine if the $50 billion that businesses “lose” every year when they sell their products at a discount could instead be converted into donations.
The funds would turn into $50 billion of extra revenue for companies and $25 billion in charitable donations. Both businesses and charities will benefit — and so will customers, knowing that they helped kids with cancer, homeless animals, wounded vets and more by simply making their purchase.
This blog post is based on an episode of Own Your Commerce featuring Givz Cofounder and CEO Andrew Forman
