@PeterK Where, in terms of # of tickets sold, is the line between moderately successful and 'worth it'?
Hi,
@Jason Bourne,
Apologies for not noticing your question sooner.
That's a question that we ask ourselves all the time. Let's begin with cost structure.
The typical car raffle uses an attractive car that costs more than an average new vehicle but is still somewhat "modest". An example would be a Mercedes C-series vehicle. The car is usually (always?) a base model vehicle, i.e., does not come with many or even any options. The car is usually (always?) donated by an automobile dealership, which in return receives (1) favorable publicity, (2) a substantial tax write-off, (3) counts the donation towards "community engagement" or "community support", a citation that comes up frequently when attacking Tesla and (4) may be able to use marketing or other budget allocations that account for the vehicle cost differently than a normal sale.
Typically, the car is provided "as is" to the winner. The winner may have the option to negotiate with the dealer to have the prize replaced with a comparable vehicle but more suited to the winner's taste, e.g., vehicle color, upholstery and other options. The winner may or may not be able to add additional funds to "kick up" the car. I have never heard of the winner being able to configure a less expensive vehicle and take the difference out as cash.
Also, typically, the raffle does not pay any of the winner's taxes. But as these are usually $50K-$60K cars, the winner's up-front IRS-mandated withholding tax is "only" 25% of that figure, so $12,500-$15,000 up front. Some raffles permit the Grand Prize winner to take cash instead of the car, and that's what a lot of the winners do because, surprise!, a LOT of people don't have $12.5K-$15K lying around to pre-pay the federal income tax payment.
The typical car raffle only offers one prize, the Grand Prize, i.e., the car.
Everything I just wrote above explains why for a typical car raffle, what might otherwise be their biggest expense -- the Grand Prize -- may not be much of an expense at all. The raffle may -- probably does -- have additional expenses, such as legal, accounting, auditing, advertising and marketing; but these expenses should be less (at least per-category) than what the Prize would have cost. So the typical car raffle can retain a higher percentage of its gross ticket sales when finally computing the net.
Some of this may sound a little, well, unfriendly towards the Grand Prize Winner. That's a matter of opinion. I think many people would argue, well, the Grand Prize winner is better off than s/he was before, spent $x on a ticket and won a prize worth $y. If the winner can't "afford" the taxes, well, the winner can take the cash equivalent -- from which the taxes will be deducted by the raffle sponsoring organization -- and settle for 75%, which is still more than the winner had in the first place.
In my opinion, to be blunt, that sucks. Almost no one purchases a raffle ticket thinking that they are in it to win the Grand Prize and split it as a cash award with the federal government taking the other piece. I also don't like the prize being a base model vehicle, because in real life when you struggle to buy a car you almost always find a way to stick in a few things that make the car more comfortable or more personal. In our case, we chose Tesla vehicles deliberately because they align with our carbon pricing mission... but also because they are just plain awesome cars, no matter how they are powered! Moreover, we want the car to bring pleasure to the winner every single second s/he is in that vehicle. Because it's a Tesla, we can take advantage of the build-to-order system, so the car that will be built will be exactly what the winner wants. We put a LOT of money into the Grand Prize so that the Winner can pick a ton of different options. We make it flexible so that the Winner can configure a less expensive vehicle (but still way more than the base vehicle) and take the difference out as cash... or put more money in to configure an even more amazing car. And -- and obviously I'm biased -- I think this is crucial: we pay the federal income tax payment. Such a simple thing to say but it adds cost and complexity **for us** in return for **simplicity and ease** for the Winner. We have to pay 33.33% instead of 25% because we have to pay taxes on the gift of paying the taxes for the winner. So in our case, we're talking $120K toward the car and another 33.33%, $40K, to the feds. It's a big f'in prize.
And then, as you well know from this long thread, there are the 2nd and 3rd prizes where we put in reservations, cash, and federal tax payments towards Model 3s. And 4th, 5th and 6th prizes, all cash.
If all those prizes were donated then we, too, would find it easy to net cash hand over fist to put into our operational mission. But they are NOT donated. Tesla does NOT donate vehicles. I've been pestering them about this for two years now, and they have proven it very easy to shrug off my pesters.
They've got a lot to do in their mission to electrify transport and that does NOT include sponsoring outside organizations, no matter how well-intentioned, and donating vehicles. I understand. I get it. I've been a business-like guy in the past. I'd probably do exactly the same thing if I were in their shoes. But bottom line is this: Climate Xchange pays for the entire prize pool out of the funds raised by the raffle.
In fact, in the last raffle, when I wrote the raffle rules under the firm hand of our attorney, I included provisions to do a cash-only raffle if CXC only sold a few hundred tickets. I didn't really think we'd need to fall back on such rules because I couldn't imagine how we could sell only a few hundred tickets. But I also used to be an engineer-like guy, and I was paid to consider and prevent corner cases, so that's what I did then. But those rules sucked because they made the raffle more complicated and made some people afraid to purchase a ticket because maybe it would only be a cash raffle. So we eliminated all those rules this time around and just made the full prize set available from ticket #1 onwards. We took the risk.
We mitigated the risk to some extent by running a pre-raffle fundraiser among the Board and friends, raising cash towards the cost of the prize pool. You can actually see our discussion of that on the website, under Raffle Details / 2017.
Now you can see that for us the single biggest expense is the prize pool. And then, on top of that, we have the expenses that I mentioned above that any raffle would have.
For us, then, we have to sell a lot of tickets to cover all the prizes and expenses. And THEN the tickets we sell start paying for our mission. So that's why when you look at our ticket speedometer, we've cleverly colored ranges of the speedometer red, yellow and green. When you look at the green range, that's where we start saying to ourselves, whew!, OK, this is where we planned to be. Looks like we can start feeding the interns again (but only PB&J, no steak).
But there's ANOTHER, equally important or maybe more important way in which we assess the raffle. And that's on the basis of its messaging impact. We have learned the hard way that it's very, very difficult to get people to pay attention to any issue... much less carbon emissions and carbon pricing. That's why we ultimately decided we had to make the name of the raffle all about the issue itself. You'll see Carbon Raffle, carbonraffle.org, Carbon Pricing Awareness Raffle, etc., much more frequently than you'll see our name, Climate XChange. Yes, we think we need attention for Climate XChange. But at the end of the day, which is more important? Planting the seed "Carbon Pricing" in someone's brain, or planting the seed "Climate XChange"?
And everything we do for this raffle does double-duty for carbon pricing. Prizes? MUST align with the mission. Marketing and advertising? MUST align with the mission. Decision making? MUST align with these principles (written back in July, 2015 and subsequently updated for the current legislation):
Raffle Guiding Principles (descending priority order)
1. Enhance awareness of Carbon Pricing
2. Educate people about the existence and purpose of relevant MA legislation
Sen. Mike Barrett + 79 co-sponsors: see SD 1021, An Act Combating Climate Change
Rep. Jennifer Bensen + 58 co-sponsors: HD 1504, An Act [to] Reduce GHG Emissions
State-level win => Example for Other States => Need for Congress to Act!
3. Make people aware of Climate XChange
4. Raise money
Here's an example. Jessica, my wife, CXC co-founder, is currently attending the annual Citizens Climate Lobby (CCL) summit in Washington, DC. CCL has 50,000+ members and focuses on national legislation (Jessica sits on their board). Today, they are lobbying Congress. Well... Jessica has a dual-track strategy: CCL for national engagement and Climate XChange for the state-by-state effort. And guess what? CCL, despite her board seat, generally is unengaged in the state-by-state fight. So Jessica parked our red P100D in front of the hotel, decked out with Climate XChange Carbon Pricing Awareness Raffle decals on the doors and rear bumper, and handed out quarter-sheet raffle postcards to anyone who wanted one. It was like flies to honey! She and Michael Green, CXC's Executive Director, have handed out hundreds of these postcards. I think we'll sell a few more tickets as a result, 10-20 maybe. CCL members re a lot more oriented towards Nissan Leafs and almost feel ashamed to lust after Teslas. But now hundreds of CCL members will learn about the state-by-state plan and the progress in Massachusetts. Some of them will go back to their states and sign up for a state-level effort of their own (Climate XChange coordinates a State Carbon Pricing Network). So how do we evaluate THIS example for its benefit in terms of ticket sales? 10-20 tickets are good, obviously. But if I compare that to the effort to, say, sell tickets via FaceBook, well, FB is cheaper and reaches more people. Yet, in this case, those hundreds of *postcards* went to motivated people who are actively LOOKING for ways to contribute. So in my estimation, what Jessica and Michael just did was a brilliant move and could ONLY have happened because they had the raffle to put in front of people to attract them.
@PeterK is absolutely correct: this is a LOT of work and it matters a great deal to us how many tickets we sell and how much funds we raise for the mission. And your question exposes the complexity of how we evaluate the result because it turns out that the raffle has a messaging component that is every bit as important or more so than the fundraising component. We are fortunate because these two objectives are almost always complementary for the Carbon Pricing Awareness Raffle.
In closing, I haven't given you a number. But that's not because I'm playing coy. It's because I don't have an exact number to give you or even an exact number to conceal from you.(*)
The raffle isn't just a fundraiser and we don't evaluate it that way. It's really simplistic but I guess what I'd say right now, with three weeks left, at 1530 tickets sold so far, is that we really need to sell the remaining 970. All the prizes and expenses are covered and we're starting to net funds for the mission. (Keeping in mind that we also regard a lot of the raffle expenses as furthering the messaging part of the mission!) In the process of doing so, like bees drinking nectar to live and carrying pollen as a benefit to the flowers they sup from, we will inevitably make more noise about carbon pricing, about the legislation in Massachusetts, about the hearing day in front of the TUE committee coming up on June 20, and so on. It's hard for me to see any downside to this.(**)
Aren't you glad that I'm rushed for time and had to settle for giving you the short answer?
Thanks,
Alan
(**)Feel free to ask me again on July 5, when we can look at this in hindsight.
(*)Please, Internet, do not take that sentence as a challenge. I'm sure that someone, somewhere can figure out some way to look at this as if it's from the Dark Side.