‘Free your pennies,’ give to charity, finance minister says

A penny saved may now be a penny yearned.

With the federal government announcing as part of its budget in March to cease production of the one-cent coin in the fall, some high-profile charities are hoping people will continue to donate their pocket change even after the penny is phased out.

Businesses likely to round up after penny’s demise, marketing professor says

The price for that widget on the shelf, the one that currently costs $4.99, will change.

The federal government said as much March 29 as it announced the the 2012 budget and the end of penny production come fall. Decimal prices for goods paid in cash will eventually be rounded to the nearest five-cent increment, up or down.

Shoppers will not be spared the change as businesses will likely round up, says Kenneth Wong, a professor of marketing at Queen’s University.

The idea that a product costing $4.99 is more appealing to consumers than one costing $5 is a misconception, he said. People tend to round to the nearest whole number rather than focus on the lower number already, he said.

Wong said that 99-cent pricing strategies cut into profit margins by about 11 per cent. By contrast, if businesses made one per cent more in sales, profitability would only increase by about 3.3 per cent, he said.

“So you need to convince me that a 99-cent product, instead of charging them a dollar, is going to give me 3.34 more customers than I would get in a dollar,” Wong said. “If you can’t convince me of that, then your pricing methodology of 99-cent pricing is in fact probably costing your bottom line a lot of money.”

He added that such pricing strategies were from earlier days of retailing when businesses were selling a greater number of inexpensive goods and were hoping to sell on impulse.

“In today’s world, where inflation has taken hold, even the dollar store doesn’t charge a dollar anymore. It’s that big a deal,” Wong said.

Andrew Burditt, a spokesperson for the Salvation Army’s Canada and Bermuda territorial headquarters, said the impact of the discontinuation would most likely be felt during the Christmas period when the Salvation Army embarks on its annual kettle campaign. But he is confident of achieving similar results to past years.

“Every year we wonder whether it will still be as successful as it has been but every successive year we seem to do just a bit better than the year before,” he said. “If come Christmas time the nickel is the smallest denominational coin, then maybe people will end up just grabbing nickels.”

The government is expected to save $11 million a year from the discontinuation of the penny as it currently costs the Royal Canadian Mint 1.6 cents per penny to produce and $130 million per year to keep it in circulation. Pennies will still hold their monetary worth as long as people hold onto them.

“So I say to everyone, all of you here: free your pennies from their prisons at home and those jars they’re in and give them to charity,” Finance Minister Jim Flaherty told reporters at the budget announcement March 29.

With pennies accounting for approximately $1.5 million of $8 million donated to the Tim Horton Children’s Foundation, the charity’s vice-president Dave Newnham said he welcomed the minister’s remarks.

“In the short-term it’s possible that there may be an opportunity [to donate] for Canadians who want to find other uses for their pennies,” he said. “But for the long-term it poses a challenge for us, for sure.”

Newnham does not know the specific reasons why people choose some coins over others or whether nickels would replace pennies in the donation boxes next to Tim Hortons’ cash registers, but he said he hopes people continue to give.

“There’s lots of different opportunities for people to put different types of coins and we’ll use every single one of them,” he said.

Burditt agreed.

“I don’t want to sound arrogant,” he said. “but Canadians, not just to the Salvation Army but to other causes and different charities, have proven themselves to be generous time and time again.”