November 22, 2005
SUBJECT: SHOP SUNNYVALE DISCOUNT CARD (Study Issue)
REPORT IN BRIEF
The City Council ranked the Shop Sunnyvale Discount Card issue as a priority for study at the December 2004 Study Issues Workshop. The issue was suggested by the Cherry Orchard Neighborhood Association. Several models for this program were identified and reviewed. Staff is recommending that the concept of a Shop Sunnyvale Discount Card be referred to the Sunnyvale Chamber of Commerce and other business organizations for consideration.
BACKGROUND
In August of 2004, at their quarterly meeting, the Cherry Orchard Neighborhood Association (CONA) suggested the City of Sunnyvale consider developing a Shop Sunnyvale Discount Card as part of the City’s “Shop Sunnyvale” marketing campaign. Vice Mayor Swegles asked the CONA members to submit their ideas to City staff so the City Council could consider this idea as part of the December 2004 Study Issues workshop. CONA offered the following suggestions for the study issue:
1) Issue a simple SHOP SUNNYVALE plastic ID card that is valid for a defined period of time, such as a two year period (2005, 2006), and require the signature or “see ID” entry area on the back of the card.
2) The card would be purchased from the City of Sunnyvale for a fee of $10 per card, as this is designed to offset the initial costs of staff and ongoing administration for purchasing and generating the cards.
3) Present the card to any/all participating retailers, such as restaurants, stores, hotels, etc., and obtain whatever discount they have previously agreed to provide any bearer of a SHOP SUNNYVALE discount card. It should be left up to each retailer/participating vendor of services/products as to what their discount is – whether it’s a percentage of each transaction, a flat dollar amount, or even different amounts at different times of the year or for different sizes of transactions.
The study issue was ranked as the fifth highest priority for study by the Community Development Department. The study explored the feasibility of developing a discount card program, looked at models and assessed costs and options for management of a program. Staff met with business groups and individual businesses to determine their interest in participating in a program.
EXISTING POLICY
SOCIOECONOMIC ELEMENT
Demographics and Neighborhoods
GOAL 5.1C: Endeavor to maintain a balanced economic base that can resist downturns of any one economic sector.
Policy 5.1C.1: Support efforts to establish Sunnyvale's downtown area as a strong commercial center for the City.
Policy 5.1C.3: Maintain an attractive business community.
Policy 5.1C.4: Promote business opportunities and business retention in Sunnyvale.
Policy 5.1C.6: Consider development of a strong business retention program.
DISCUSSION
The City of Sunnyvale has an ongoing “Shop Sunnyvale” marketing program in place to encourage Sunnyvale residents to shop locally and to explain the benefits to the community. This program includes periodic ads in a variety of local newspapers and entertainment magazines, Shop Sunnyvale promotions on KSUN, utility bill inserts, articles in the Harbinger employee newsletter, articles in the Quarterly Report, and outreach through presentations to community and neighborhood groups. Encouraging residents to shop locally is part of a larger effort to sustain and increase sales tax revenues so the City can continue to provide essential services, quality of life services and amenities to the community. This is an important element of the Economic Development program and has been maintained to support local businesses. Similar shop local campaigns are in place in surrounding communities. The Shop Sunnyvale Discount Card would be an added component of the marketing program.
Models for a Shop Sunnyvale Discount Card
As part of the research for the Shop Sunnyvale Discount Card Study Issue, staff researched and identified fourteen models for designing a discount card, coupon or other related program. Each model is described below and, where possible, costs for the program have been identified. If the model could be adapted for implementation by the City of Sunnyvale, that information has been included in the discussion.
25THAVE.COM: 25th Avenue is located in San Mateo and is comprised of 107 businesses. They have collectively developed a marketing website, which was launched in January of 2005. The purpose of the website is to showcase the individual businesses while highlighting the benefits of shopping on 25th Avenue. Approximately 20% of the businesses have chosen to participate in providing PDF coupons on the website. The website is fully dynamic with static as well as video information about the stores. The 25th Avenue Business Association updates and changes information by the business association. This program was done entirely by the association and no City resources were involved in the development of this program.
ALLSUNNYVALE.COM: allsunnyvale.com has been around for a couple of years and has recently started a coupon program for Sunnyvale businesses through their website. Currently, there are 26 participating businesses, all but one of which are local businesses. The participants are not charged for the service at this time, but could possibly pay a small fee in the future. The website creator is interested in working with the city to avoid creating two competitive programs. The City would provide information about local retail and service businesses that could be included on the web site. No direct costs are anticipated other than staff time to develop and update information on Sunnyvale businesses. Businesses have expressed concerns about distributing business lists. The City of Sunnyvale made a decision to link to Yahoo! Yellow Pages because of budget constraints to develop a web-based database in-house and because Yahoo! and other private sources are already providing this service.
CLUB DONATELLO: Club Donatello is a Four-Star, Gold Crown Owner’s boutique set in the heart of San Francisco’s Union Square. The Club Donatello Owners Association has created a card that can be used at various high end restaurants and shops throughout San Francisco. The 2,295 Club Donatello members can either look up the businesses that accept the card on the Club Donatello website, or they can look in the storefront window for the Club Donatello card sticker. Club Donatello purchases their cards in bulk at a rate of $2.50 per card. By selling the card for $5 for a lifespan of 1-2 years, it is estimated that card cost would break even. No City resources were used.
This is the model that was recommended by CONA for development of a Shop Sunnyvale Discount Card. Based on the experience of Club Donatello, in the initial year of the program, it is estimated that one-half FTE staff person would be required for the introduction and upkeep of the program, and one-fourth FTE staff person for the maintenance of the program. Program start-up required outreach to businesses; development of discount card look; marketing tools; and card production. Maintenance of the program requires continuous outreach to business; updates to card and marketing materials. The estimated annual staff costs would be $50,000 for start-up and $25,000 for maintenance of the program. These staff costs would have to be added to the cost of the card. The program could be advertised on the City and/or the Chamber of Commerce web page listing all participating stores as well as what they are offering for that period. The stores would contact staff to change their offer throughout the lifespan of the program i.e. weekly, monthly, etc. In addition, each participating store could have a special “SHOP SUNNYVALE” decal sticker in their window to indicate that they are part of the program. Club Donatello purchases their stickers at a cost of $20 for 1,000 stickers. No City resources were used.
CUPERTINO VILLAGE COUPON BOOKLET: In the summer of 2005, Sand Hill Property Company, the management company of the Cupertino Village Shopping Center, rolled out a coupon booklet in an attempt to diversify the clientele that was frequenting Cupertino Village. The shopping center is located on the corner of Homestead and Wolfe and borders Sunnyvale. Sand Hill Property Company came up with the general design, layout and all of the artwork, and worked with a printing company on final design. The cost of the booklet (+/- 55,000 copies) was $15,000 dollars – $11,000 for production and $4,000 for distribution. The booklet was distributed by each tenant of Cupertino Village, by the nearby Hilton Hotel to guests of the hotel, and by placing a copy in editions of the Sunnyvale Sun and the Cupertino Courier. According to Sand Hill Property Company, the positive response has been overwhelming and they are considering the creation of a booklet for their other property in Cupertino, The Oaks. No City resources were used.
DECATUR $AVER CARD: Decatur is a small town in Indiana with a population just under 10,000. The Decatur $aver Card is a discount card used at businesses who are participating Chamber members. Cards are sold as a “Buy 1, Get 1 Free” promotion for $35, but there is no charge for the 30 participating businesses. The program has been a success so far, and the only negative comment the Chamber has received is that there should be more food establishments on the card. This program was through the Chamber of Commerce and no City resources were used.
DINE DOWNTOWN PALO ALTO: Dine Downtown Palo Alto is a downtown dining program that ran every Monday throughout the month of August with approximately 20 participating restaurants during lunch and dinner. The program will pick up again for the month of January. The purpose of the program was to introduce people to the restaurants and increase the number of regular customers. The majority of restaurants that participated in the special prix fixe menus did so only during the dinner hour, while a number of them did lunch as well as dinner. This program was initiated and managed by the downtown business improvement district without City resources.
DINER’S CLUB: Diner’s Club has been in existence since 1950 and is currently used in more than 200 countries in 70 local currencies. Users of the card earn 2 points for every dollar spent and can save up to 20% on their entire bill, including tip, tax and beverages. Points can be redeemed anytime for a wide range of options, from miles to brand name merchandise, to charitable donations. This program is a privately managed credit card program. The City is not in a position to develop a refund program in return for patronizing Sunnyvale businesses.
ENTERTAINMENT BOOKS: The Entertainment Book story began in 1962 when a suburban Detroit couple developed a local coupon book offering discounts on sports, leisure activities and vacations. The following year restaurants and other categories were added, and Entertainment Book now serves 160 major markets throughout the world. Entertainment Books are frequently used by schools, community and employee groups as a fundraiser and they retain up to 50% of the sales proceeds. One of the company’s key assets is their proprietary coupon database of 65,000 local merchants that offer “2 for 1”, 50% off and other valuable discounts that appear in the company’s savings books, online savings subscriptions (entertainment.com), custom discount programs and on various affiliate partner web sites. The cost of the book is $30.00. To date, nearly 90 million books have been sold, with more than 8 million of those being sold in 2004. This program is an independently owned program and marketed directly to businesses. Entertainment Books are sold in Sunnyvale and surrounding communities by schools and other groups to raise funds to support their activities. No City resources were used.
GO CARDS: GO Cards are currently available in Boston, Chicago, Miami, Orlando, San Diego, San Francisco and Seattle. The GO Cards are all-inclusive tickets to each of these cities’ top attractions, and are accompanied by a full color guidebook to the city. The cards come in 1, 2, 3, 5 or 7 day increments and include over $365 in free general admission. The GO Card allows for entry to such historic landmarks and museums as the Paul Revere House, San Francisco Museum of Modern Art, the Space Needle, Sears Tower, the San Diego Zoo, and the Kennedy Space Center. This program is an independently owned program and marketed directly to businesses. No City resources were used; however, Sunnyvale venues such as recreation facilities or museums could work directly with GO Card to be included in their programs.
PENNYSAVER: PennySaver is the world’s largest magazine delivered via US mail and has been in place for over 37 years. PennySaver has the capability to blanket all of California’s nine million households, and averages 12,000 households per zone. There are numerous advertising opportunities through PennySaver, such as Display Ads, Print and Deliver Flyers, Insert Ads, Marquee, VIP cards as well as Commercial Reader Ads.
PennySaver has developed a proposal for a Shop Sunnyvale Coupon Booklet. The booklet would have eight coupons per page (sixteen in each section). The booklet could be mailed once every two or four months. Their distribution in Sunnyvale is to 51,500 homes. The two-month rotation option would cost $12,360 annually and the four-month rotation option would cost $7,725 annually. If businesses are rotated in the booklet, with sixteen businesses featured, forty-eight to ninety-six businesses could be featured annually. Depending on interest by the businesses in participating in this program, additional booklet pages could be added. The PennySaver representatives recommended that the City pay the initial costs and phase out the City’s financial investment after four mailings. They felt this would allow businesses to experience the benefits of the program and increase participation in the long run. A similar program was developed with the Fremont Chamber of Commerce with a flier that was sent out weekly with different businesses highlighted each week.
SAN JOSE MERCURY NEWS SHOP LOCAL: The San Jose Mercury News website has a shop local coupon section on the paper’s website that is coordinated with a company named shoplocal.com. This option is an advertising program in which businesses can individually decide to participate. The web-page is broken down by local stores, categories, and brands. Local and national companies participate in the program, including Albertson’s, Home Depot and Target. No City resources were used.
SAN MATEO HOLIDAY COUPON PROGRAM: The San Mateo Holiday Coupon Program started in the 2004 holiday season by the “Shop San Mateo” Program which is a formal network led by the Chamber of Commerce with support from the City of San Mateo. The formal program includes members of the various shopping districts in the city. In its initial year, there were 40 participants that offered various deals that changed week to week from November 23rd until December 29th. The program was promoted through posters, flyers and the city’s website. Residents had to subscribe to an e-mail service to receive a link to the PDF coupon section. Feedback on the initial year was mixed, with suggestions indicating that the deals and coupons were not big enough. This was due, in part, to the time of year, as many of the stores that were not participating offered customary holiday deals that were equal to or better than what was being offered by participating stores. The goal for the 2005 holiday season is to recruit 100 businesses to participate in the program. Businesses that signed up before November 4th are given a full page ad, while those that signed up after that only received a small PDF coupon with their name and what they are offering for that week. The website is updated and maintained by the City’s Information Technology Department. The estimated cost to the City for this program, including staff time and direct expenditures, is $8,000.
VARSITY GOLD CARD: The Varsity Gold Card, based in Arizona, is a high school fundraising organization. They have worked with over 13,000 schools and 29,500 groups across the United States to raise funds for their athletic programs and other activities. The card typically sells for approximately $10 dollars with an expiration date of one year from the start of the program. On the front of the card is the name of the organization and on the back of the card is the name of the store as well as the deal they are offering (e.g., 10% off, 2 for 1, etc.). There is only room for approximately 20 businesses on the back of the card, and the businesses are not able to change the offer for the duration of the program. Organizations work directly with the Varsity Gold Card to be included in this program.
A variation of this model would be to use a combination of the card as well as a flyer or a website update. The back of the card would be blank, and those who purchased the card would refer to web-based updates to know which stores are participating and what specials they are offering. Costs would be similar to the Club Donatello model if the Shop Sunnyvale Discount Card was to be based on this model.
SHOP SUNNYVALE COOPERATIVE ADVERTISING PROGRAM: In Fiscal Year 2003/04, the City of Sunnyvale Economic Development Division and the Sunnyvale Chamber of Commerce created a cooperative advertising program with Sunnyvale businesses. The purpose of this program was to increase visibility for Sunnyvale businesses by combining advertising for all Sunnyvale businesses in one section and minimize the cost to businesses for advertising. Although it did not specifically offer discounts at the advertised establishments, this could be a focus of the program. The City and the Chamber coordinated the program with both the Sunnyvale Sun and the San Jose Mercury News. The City and the Chamber shared the cost of the banner for the advertising sections of the newspapers and the newspapers offered special rates for businesses to purchase advertising. The cost to the City was $4,000 for 20 issues throughout the year. Staff and advertising costs were built into the Economic Development Program budget. The program was discontinued because of budget cutbacks in the Economic Development Program, the high level of staff support required through the Chamber of Commerce and the City, and the sporadic commitment on the part of Sunnyvale businesses. At current rates, the cost to the City to reinstate this program would be $6,720 to place six consecutive full page ads in the Sunnyvale Sun and $400 per ad to purchase a banner for a full page ad in the Mercury News. A minimal number of recommended issues for publishing advertising is ten for a total of $4,000.
Outreach to Businesses and Neighborhood Organizations
In July and August of 2005, staff conducted field research at 17 shopping centers throughout Sunnyvale. Staff selected these shopping centers by location as well as diversity. Staff met with as many businesses as possible in each of the selected shopping centers, and left a brief survey with those that were unavailable. Follow-up contact was made with owners and/or managers of the businesses in the shopping centers to further discuss the program and to collect surveys. Over 250 businesses were contacted and 36 of those businesses expressed interest in participating in a Shop Sunnyvale Discount Program. Of these 36 respondents, 16 were food/restaurant establishments, 12 were retail and eight were services. Some additional businesses expressed potential interest if the program proves to be successful. The Sunnyvale Auto Dealers Association discussed and expressed an interest in the concept of the discount card. However, this was not identified as one of their promotional priorities. Participation by major chains requires approval from their corporate offices and none were willing to commit as part of the survey.
All neighborhood associations in the city were mailed a brief survey to determine their interest in participating in a formal Shop Sunnyvale Discount Program. Responses were received from the Cherry Orchard Neighborhood Association, Heritage Neighborhood Association and SNAIL. Comments reflected that many residents liked the card or the coupon booklet. The single card concept was attractive to residents because it is simple to use and easy to carry. Some residents thought that receiving more coupons in the mail would not have any added value. Other comments were received in support of mailing the coupon book because offers could be tailored to holidays, seasons, etc. and the books would be more evenly distributed. Residents that do not have computers would be at a disadvantage if the information is web-based and it would limit their ability to benefit from the program. As an alternative to coupon books, it was suggested that the City mail coupons as part of the utility bill mailings. In addition, neighborhood associations were willing to include information in their newsletters. There were comments from one neighborhood association that this should not be a priority for the City and that resources should be used to improve the cleanliness of downtown. It was also stated that the City should focus on all businesses and not just El Camino Real and downtown.
Staff met with Adam Simms, Chair-Elect for the Sunnyvale Chamber of Commerce. He expressed an interest in including this program concept in the upcoming Chamber of Commerce work sessions to develop Chamber programs for the coming year.
FISCAL IMPACT
The cost to the City would vary depending on the model that is used to implement a Shop Sunnyvale Discount program. If the Shop Sunnyvale Discount Card program is selected, the startup and ongoing cost to the City would be approximately $25,000-$50,000 annually including staff costs, materials and promotion. If the City decides to go with the cooperative advertising program, the annual cost for advertising in the Mercury News and/or the Sunnyvale Sun would be approximately $4,000-$10,720, or less if the City partnered with the Chamber of Commerce or other business organizations. The proposal for a PennySaver Coupon Booklet would cost $12,360 for distribution every two months or $7,725 every four months with costs being phased out after four mailings.
Conclusion
There are a number of viable programs in existence that could be tapped directly by businesses to increase their visibility and interest by residents. These include the allsunnyvale.com web site, entertainment books, San Jose Mercury News Shop Local section, PennySaver, and Varsity Gold Card. These options could be pursued more vigorously by working with the business community as part of the current Shop Sunnyvale marketing campaign with minimal or no cost to the City. The City’s role would be to highlight these opportunities and encourage businesses to market discount opportunities to local residents. Ultimately, it is each business’s decision on how to spend advertising dollars. A new discount card program, coupon program or revived cooperative advertising program would involve additional resources for staffing, production and/or advertising depending on the option chosen or a reduction in service level for one or more current programs.
PUBLIC CONTACT
Contact was made with over 250 Sunnyvale businesses and the Chamber of Commerce through one-on-one discussions and surveys. All neighborhood associations were mailed a survey and staff met with neighborhood association representatives upon request.
Public contact was made through publishing in the Sun newspaper, posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the City Clerk’s office and Library.
ALTERNATIVES
1. Take no action on the Shop Sunnyvale Discount Shopping program concept and refer it to the Sunnyvale Chamber of Commerce and other interested business organizations for their consideration.
2. Create a City-sponsored Shop Sunnyvale Discount Card and or/coupon program.
3. Approve the proposal for the PennySaver Coupon Booklet that would be distributed every two or four months.
4. Create a cooperative advertising program working with local newspapers such that the City of Sunnyvale pay for the advertising banner and local businesses purchase individual ads on a one-two page section of the newspaper.
RECOMMENDATION
Staff recommends Alternative #1.
In identifying alternatives for a Shop Sunnyvale Discount Program, staff considered several factors including potential competition with fundraising organizations, appropriate role of the City in promoting particular advertising programs, appropriate role of the City in comparison with the role of the Sunnyvale Chamber of Commerce and other business organizations to develop and implement a program and whether a program could be developed and implemented within existing staff and financial resources. Based on the research conducted on the programs identified in this report and discussions with other City economic development managers, these types of promotional programs are developed and managed by private organizations and chambers of commerce. This avoids potential issues related to promotion of individual businesses at the exclusion of others. City staff may participate in the planning and provide limited support, but the business organizations play a lead role in development and implementation. Additionally, a business organization such as a chamber of commerce or other business association could create a program that would potentially provide additional revenue to support their organization, which would not be appropriate for local government. The role of the City in economic development is to support business organizations or business clusters in their efforts to promote themselves. Therefore, staff recommends Alternative #1 because it is more appropriate for a business organization to promote specific businesses.
In addition to the reasons cited above, staff is not recommending Alternatives #2, #3 or #4 because of the additional staff and other financial resources that would be required to implement the programs.
If City Council approves the recommendation, the Economic Development staff will be available to participate in discussions with interested business organizations about whether or how to develop and implement a Shop Sunnyvale Discount Program and provide input based on research that was conducted for this study issue.
Reviewed by:
Robert Paternoster, Director, Community Development
Prepared by:
Karen L. Davis, Economic Development Manager
Approved by:
Amy Chan
City Manager
Attachments
A. Shop Sunnyvale Discount Card Study Issue Paper