Charitable Giving Gets Smarter
I went to McD’s for a coffee the other day and they asked, “Would you like to contribute $1 to Ronald McDonald House and receive a coupon for a free small coffee?”
“Sure,” I said. That’s a no-brainer, right? Yes, from the charity’s POV.
Mickey D’s has a GPM (gross profit margin) on coffee of around 87% so their COGS (cost of goods sold) for a small coffee is probably–
$1 x (1-.87) = $0.13
This includes direct labor, cup, hot water and coffee grinds.
So for each dollar they raise for their charity, their cost is ~13 cents. It is similar to a self capitalization technique where firms issue script instead of paying for things in currency of the realm. More about script here, https://www.eqjournal.org/?p=3233.
From the consumer’s POV, this is essentially a costless way of giving to charity and makes a person feel like they’re doing something worthwhile too.
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