Customer loyalty can help out nonprofits

NEW ULM, Minn. — At the Country Loft gift shop, customers buying homemade fudge or a porcelain doll will come away with something more: cash back on a card to use for more shopping and a good feeling about supporting a charity and their local economy.

The store is part of SmartTown Alliance, a network of small businesses aimed at helping towns keep shoppers close to home rather than traveling to bigger nearby cities. Since it was begun three years ago, it has expanded to three Minnesota towns and is in the works in about a dozen other places.

"I looked at it as maybe it's a shot in the arm for a small community," said Country Loft owner Nancy Kokesch. "Small-town America is slowly dying."

For the program to succeed, consumers have to start shopping with their hearts and not only their wallets — something experts said isn't automatic.

A swipe of the card at the register sends a portion of the sale price to a charity the customer has chosen. Shoppers also get a bit of money put back on their cards for future purchases within the network. Unlike some other loyalty credit or debit cards, the SmartTown card can be used even if a customer pays by cash or check.

Programs like Target Corp.'s REDcard — which lets shoppers give up to 1 percent of their store spending to their local schools — shows that loyalty cards can work, said Michael Bouchey, chief executive of Alliance Card Inc.

While there's very little to show that such programs increase loyalty, the charity aspect of the SmartTown program could persuade consumers to splurge a little more on something like dinner in a restaurant if they know part of it is going to a good cause, said Ravi Dahr, director of the Center for Customer Insights at Yale University.

"Anything that can reduce the guilt helps," he said.

ACI is rolling out a variation of the card program, called Cash Value, for larger markets. It hopes some bigger retailers will sign on to help expand the program nationwide, but is taking care to make sure the two programs complement each other, Bouchey said.

Giving, getting

SmartTown and Cash Value programs at a glance:

HOW IT STARTS: Businesses sign up to be a part of the program, and consumers can join by picking up a free card from a business or nonprofit organization and registering it online.

USING IT: Cards with a magnetic stripe are swiped after each purchase at participating businesses. SmartTown cards can be used only in towns that have SmartTown programs, but Cash Value cards can be used in SmartTown communities and elsewhere.

WHERE THE MONEY GOES: Businesses put a small percentage of each sale back on the customer's card as a reward to be used for future purchases. An equal percentage goes to the nonprofit organization of the customer's choice. And the businesses give Alliance Card Inc. a small percentage of each sale for managing the program.