Direct Mail and Telemarketing Have an Undeserved Reputation for Bilking Donors

Nonprofit organizations have been skewered in the news media in recent months.

The list of America’s 50 worst charities compiled by the Tampa Bay Times, CNN, and the Center for Investigative Reporting probably drew the most attention, but that has hardly been the only attack.

There was also the coverage in March in The Chronicle of Pearl Cohen, a disgruntled former telemarketer turned whistle-blower who says she was shocked that nonprofits usually pay more to acquire a new donor than they receive in the first gift.

And in May this newspaper’s opinion section featured a misguided article from Brian Mittendorf, an Ohio State University professor who suggested that donors who give to charities with higher overhead costs should receive a less generous tax deduction than donors to charities with lower overhead.

The public could be forgiven for concluding from such coverage that there’s an outbreak of nonprofit organizations bilking American donors.

Based on my 30 years of experience as a fundraising consultant, I suggest that much of the uproar is based on a fundamental bias that journalists, regulators, and others have against direct-marketing appeals.

To be sure, some fundraisers have been unscrupulous and have ripped off donors by creating fake charities and taking other steps that nobody condones.

Such cases are few and far between, but when the public trust is betrayed, the perpetrators should face consequences. Trade associations like the Direct Marketing Association’s Nonprofit Federation and the news media have important roles in outing the wrongdoers as well as educating the vast majority of nonprofits so they can avoid such problems.

And in those rare cases in which a nonprofit consciously misleads the public, my colleagues and I in the direct-response business need to show a little more backbone, including seeking public sanctions from respected trade associations.

But most of the recent accusations of fundraising scandals have nothing to do with that kind of outrageous behavior.

In a large number of cases, the hand-wringing headlines about nonprofits come from people who don’t like getting what they consider junk mail or harassing calls at dinnertime. They don’t understand that that’s not at all what’s involved in mail and telephone appeals from legitimate charities and their consultants.

Those of us who conduct direct-response campaigns for a living understand that most Americans work hard and have little time.

When they get a call or a letter offering them an easy way to give $25 or $50 to feed a starving family, to give medicine to a child battling cancer, to save a pet from a cruel death, to honor a wounded war hero, or to beat AIDS, they are moved to act.

And that is good not just for charities but for donors and for the soul of our nation.

Nonetheless, the reasons charities spend money on direct-response campaigns is much more about dollars and cents than emotions. When nonprofits invest in mass-marketing efforts to reach new donors, they can end up with far more money for their mission over the long haul than they can by investing in many other techniques.

That message gets lost on regulators, watchdogs, journalists, and, indeed, many in the nonprofit world.

When the CEO of a nonprofit spends a lot of money traveling across the country to meet with a wealthy donor and gets nothing in return, it would probably not cause a ripple because raising money from the rich is considered tasteful (or at least something journalists and watchdogs understand).

But when a charity calls or writes potential donors and doesn’t get an immediate financial return, many observers jump to the conclusion that there’s a scandal, instead of investigating the real—and viable—long-term strategy.

It’s time to move beyond this bias against direct mail and telemarketing and look at the results over time.

Not only do many of the donors recruited by mail and telephone end up giving loyally over the years—making up many times over for the initial expense of attracting them—but those people often make very large gifts or leave generous donations in their wills.

They probably never would have done so without that first telemarketing invitation or mail solicitation.

Marketing costs are a normal, necessary, and healthy part of the way nonprofits finance their organizations. Saving money by hiring mediocre talent and failing to spend money on the steps that are essential to growth are the real reasons so many charities are not effective—not overspending on direct response.

Healthy nonprofits raise money from diverse sources, including the wealthy, foundations, government, and average Americans.

They use diverse sources to reach these donors: television, radio, mail, print ads, online, e-mail, events, one-on-one pitches, and written proposals.

To gauge a nonprofit’s efficiency, we need to measure each approach in an appropriate way. When it comes to direct-response efforts, it makes no sense to measure campaign by campaign.

Instead, regulators, watchdogs, donors, and others should look at an organization’s overall income and expenditures—over a minimum of 12 months. Nonprofits try new fundraising tactics all the time. Let’s not penalize them for testing whether one campaign’s approach is better than another.

At most organizations, reviewing a year’s spending on programs versus overhead tells an accurate story.

And we all know that even an annual fundraising metric doesn’t tell a donor what matters most: Is a nonprofit getting results?

If a donor gives a charity money to feed the hungry, she doesn’t care how low its overhead is if it doesn’t actually feed hungry people.

Unscrupulous fundraisers should be exposed and penalized. But those of us who have legitimately raised billions of dollars for nonprofits over the years all wish that we could raise money for great causes without paying for postage, killing trees, and spending money on fundraising staff members and consultants.

We all wish that donors would give money to support operations and long-term solutions to complex problems.

We all wish that donors would spontaneously give more money to more charities without anyone writing them letters repeatedly or calling them at home.

But we all know that won’t happen.

Society is counting on charities to do important work. We can’t drop the techniques that have proven to work over the long haul for so many of our nation’s most effective nonprofit organizations.