Bringing Customers Inside: What Many Businesses Can Take From Non-Profits

Not too long ago a café, Good and Plenty, abruptly closed in my neighborhood. There wasn't any warning - I just showed up and there was a sign on the door saying "Thank you for supporting us these past years. We have closed."

It made me sad, and not only because I'd wanted some turkey chili for lunch. I hadn't known that the business wasn't doing well. I found myself wishing that there had been some kind of visible meter that indicated the health of the business. Most proprietors won't put a fishbowl out saying, "We need more money." But people really liked Good and Plenty; even that day there were a few people lingering outside in a spontaneous grief circle.

If Good and Plenty had asked, I would have given $250 in return for store credit, a valued diner/stakeholder discount card, thank yous from the owner, recipes, goodies, access to private events at the place, and whatever else they dreamed up if it would help keep the café open. Were there 100 people like me, and would $25,000 in immediate cash have made a difference? The store credit would have cost them a fraction of what I paid, and for me it would have been a cash equivalent. I probably would have eaten there more often too because I had a credit to eat through and I would feel like a mini-owner and supporter.

The 20 bucks I spent at Good and Plenty per week weren't a good metric for the value I was getting by having the café in my neighborhood. I got some tiny value each day just seeing the café open and people sitting there eating (The storefront was empty months later). Knowing you can get good turkey chili is helpful even on the days you don't have it.

We're surrounded by businesses every day that have positive externalities - businesses that throw off value that make the world a better place but that can't monetize that value for themselves.

Take bookstores. Having one in your neighborhood is a pleasure. You go in and peruse books and magazines, maybe even sit down and while away a couple of hours. They make your neighborhood better. Yet we all know bookstores are struggling because half of us go home and order the book we saw online. They can't get value for what they provide.

Newspapers are another example. Most people agree that having a local or regional newspaper is a good thing. Newspapers inform people, tie them together, give a sense of what's happening in one's community, etc. Yet they're struggling mightily because their main revenue sources, classified ads and subscriptions, are no longer viable. They can't capture a significant portion of the value they generate.

How do you bring these outside benefits inside? It's almost always a good thing to internalize externalities. It's generally been implemented in negative situations - if a company has a factory that pollutes, it may have to pay for a carbon offset tax (a "pollution credit") so that the company internalizes the cost of spewing a bit more gunk in the air. But it isn't often applied to diffuse benefits. It works great - we get a free benefit - until the café or bookstore or newspaper or magazine or music teacher goes out of business.

How could we address this sort of problem? In theory, we'd each need a micro-payment emitter, and the tiny benefit you get from walking by the café or reading the local paper would accrue to the business and keep it healthy. (On the Internet, advertising 'eyeballs' are kind of supposed to work this way; ad rates may not be high enough to make this effective).

In practice, it may mean more businesses learning to act like non-profits.

We accept certain behaviors from non-profits and interact with them in ways we don't with companies. Non-profits talk to us and ask us for things and we expect it. Individuals become patrons of theatre companies and museums all the time. Public spaces have big donors and foundations supporting their buildout and upkeep. Wikipedia can make an appeal that "If everyone reading this would just donate $1 we'd have enough money to keep running without advertising." We're happy to pay to go to the museum even though we know there are names on the wall.

My neighborhood cafe reaching out to customers and saying "Hey, we're in a bind and could use your help. If we get 100+ patrons at $250 apiece it'll keep us running. Here's what you'll get in return" would have been a highly unconventional move. So would the neighborhood bookstore asking a foundation to subsidize it, or a regional newspaper soliciting community donations, or a magazine asking people to become 'patrons' and pay extra for an array of benefits.

We're conditioned to let businesses fail, regardless of how much we like them. We believe that if the market doesn't want that bookstore to exist, then it shouldn't exist.

But I think many companies underestimate how many people have real attachments to them and would appreciate being brought into the circle to help. The sooner that we collectively recognize that the marketplace may not always be a perfect reflection of what value a business is bringing to our community, the more willing we may be to get involved. What was a profitable business in one era can become a public utility and a recognized public good in the next. And if businesses bring more of us inside, open their doors and engage us at higher levels, we'd all be in position to benefit.