I’m Ticked Off!

Trust me, my headline is not something to just get you to read this week's post. I'm really ticked off. Recently (May 5, to be specific), an article was published in The Chronicle of Philanthropy (subscription required to view the whole article) by an associate professor of accounting at Ohio State University's Fisher College of Business. Just the thought of having someone in "finance" weigh in on fundraising strategy makes me nervous, but after reading the article I was steaming.

The title of said article is "Transparency and Lower Donor Tax Breaks Can Keep Telemarketers in Check." But before I go into why I'm so upset, let me go ahead and say the following:

1. My issue has nothing to do with channel — I don't care if the article referenced telemarketing, e-marketing or direct mail — I would still be irritated. And, to be honest with you, the article could have easily referenced any channel in the same way.
2. I am not blind to the fact that there are some bad apples in the bunch. Yes, there are nonprofits that are truly not doing the best possible job with donation stewardship. Yes, there are nonprofits that feel a lot more like a scam than a charity trying to fight for a cause. But this author has called out some of the most reputable and greatest stewards of donor dollars in this country.
3. I am all about people having an opinion and sharing it. However, I do believe that before people cast bad mojo on some of our country's top nonprofit brands, they should at least understand some of the details. (Granted, I'm assuming this author does not understand the details because if he did the article would not be worthy of being an article.)

Now, with those disclaimers out of the way, let me give you some details about why I'm bothered. In a nutshell, the article called out the Alzheimer's Association, the American Diabetes Association, ALSAC/St. Jude Children's Research Hospital, the American Lung Association, Easter Seals and Smile Train, and implied they were not good stewards of donor dollars. Why? To quote the article, they "... are just a few of the organizations the Michigan report listed as using solicitors to raise at least $1 million from donors but receiving less than 35 percent of the total collected."

Now, I realize the majority of people reading my blog are not first-year fundraisers or first-year marketers, but I'm going to go back to the basics and talk about the difference between acquiring a new customer and renewing a customer.

Let's pretend for a minute that we are not nonprofit marketers or fundraisers. In fact, let's pretend ... magically ... that we are, um, er (glancing around my house), marketers at Proctor & Gamble and we are in charge of the Tide product line. We have our marching orders from the top. Our product line must operate at a specific margin. Just pulling a number out of the air (of course, now I'm really curious and will be Googling this after I write this blog), let's say our bottom-line, year-end margin target for our product line is 62 percent.

When we make our marketing plan for the year, we have to look across marketing and advertising strategies that keep our current customer base committed to using Tide. But, we also know that continuing to build brand awareness and talking about why Tide is better than another brand is critical. In fact, many of those efforts are actually positioned to grow the customer base of Tide product buyers. And, of course, like any good marketer, we've got to run the ROI on all of our efforts to make sure we meet or beat that bottom-line margin goal. Right?

Now, we all learned in business school that it costs more to get a new customer than to keep a current customer — but we have to do both. Every brand has to strive to grow its customer base at the same time it achieves greater loyalty from the current customer base. And, the final element of our dream world of being the product-line lead for Tide is that when we look at the details of our marketing plans, we realize that the bottom line is what matters for us to reach our company goal and the expectations set by our boss(es).

But, as we look at the details, it is true that our efforts focused on getting new Tide customers, which have lower, direct ROI than some of our efforts geared at our current customers. Some of the channels we use are even more expensive than others. But, as good marketers we understand that this is normal, expected and OK. As long as the marketing plans are thorough and the channels are measurable for the short term and the long term, it is truly all about having a balanced marketing approach. And success is measured by the bottom line.

This all makes perfect sense to me. I'm betting it makes perfect sense to you, too.

So, why on Earth is a single campaign being used as a measure of success — or even worse — a measure of stewardship and impact?

The article uses an average of 35 percent as net income to the organizations from the campaigns that were reviewed. Let's put this in perspective: Even if St. Jude was exactly that average for that particular campaign and it really did spend 65 percent of a dollar — that is not its bottom line. So what is its bottom line? Well, its annual report shows that the organization spends only 13 percent of every dollar on fundraising, only 6 percent on management, and a whopping 81 percent of every dollar on research and treatment. Boy, if you didn't know this organization or how to access this information, that article could give a terrible impression of its efficiency.

And, for all you seasoned marketers and fundraisers out there, I'm sure you immediately came to the same conclusion that I did. I bet the campaign being referenced was probably focused on recruiting new volunteers or acquiring new donors. And we all know that when you do that, you spend more up front because the real value comes when that donor or volunteer becomes loyal to the brand and stays engaged over the years.

Digging further into the article — after the charities are made to look inefficient — there are recommendations about how to "stop" this kind of bad marketing and decision making. Now, we should always be looking for ways to keep our donors more informed as to how we are using donor dollars, but the recommendations in this article, in my opinion, are not focused on the right metric for educating donors. If we had to communicate the details of each and every campaign, we would have to then make sure all of our donors understand what it takes to do fundraising — the financial differences between marketing to current donors versus marketing to generate a new donor. Not to mention, that just seems like a lot of time spent in the wrong direction.

So, I decided I should make sure I wasn't just irritated and applying my opinion incorrectly. I had two unique opportunities in the last week to ask for some other opinions.

First, I called Dirk Rinker, president of Campbell Rinker. The good folks over at Campbell Rinker have been providing marketing research to nonprofits for more than 20 years. I gave Dirk some perspective on my issue and asked him, flat out, is this really what our donors want? Do they want to get into the minutia of campaign-specific details? Dirk's opinion was pretty thorough and backed up by some facts:

• Today's donors want more transparency, but they want information that is relevant and can help them make a decision about the brand overall — not about the campaign.
• Members of the younger generation (25 to 35) do require more information than the older generations, but as they age, and have more life and business experiences, they will even adjust their need for detail and start to measure on broader metrics.
• Organizations should consider compartmentalizing information for younger donors, but if they used a broad-scale approach to communicating greater details they would be over-informing a lot of donors who don't want that information.
• Finally, in a recent market research study, only 30 percent of new donors actually looked for financial efficiency metrics before making their first donations. Oh, and by the way, 80 percent of those found what they needed (pie charts, annual reports, etc.) to make the decision.

After my call with Dirk, I actually felt a bit more ticked off about the article. But, the "younger generation" issue still concerned me and made me wonder if I was really missing something. As it turns out, I ended up at an impromptu dinner party this past weekend with four members of the younger generation. They ranged in age from 25 to 32 and were in law school. I was a bit nervous to ask my questions. They are soon-to-be lawyers, and they might have really given me a run for my money. We talked about the Tide example, and then I told them about the article I had read and my conversation with Dirk. The general consensus?

• They do want more information — but it's not the detail suggested in the article.
• Their No. 1 concern is efficiency. They gave examples of how they research organizations to make volunteer decisions and donation decisions. Interestingly enough, they had different definitions of "efficiency" — the lowest was 15 percent for fundraising/management, and the highest was 40 percent. We had a healthy discussion around what was perceived to be "appropriate" according to some of the watchdog entities in the industry.
• They were equally split whether they, at this time in their lives, found it easier to give money versus give their time. But all of them wanted to make sure they were aligned with brands that were doing the best job possible with their particular missions.
• Granted, these are young people in law school, but the concept of acquisition metrics vs. renewal metrics was not a hard concept for them to grasp. They got it completely. It made sense to them. And, they were not bothered by it because — guess what — they are concerned about the bottom line and not about the campaign-by-campaign decisions made by people who are professionals.

So, as you can imagine, I felt much more rooted in my original feelings and opinion, which then just put me right back to the place of being ticked off. As I stated earlier in my article, I am not blind to the bad organizations that operate at terrible efficiency levels. But the old saying, don't throw the baby out with the bathwater, comes to mind.

Furthermore, while I'm not worried about a bunch of donors reading the Chronicle of Philanthropy article and becoming concerned about some of the reputable, amazing brands mentioned, I do believe that there is a bit of sensationalism that is occurring in the media around this topic. This article was written in a publication that is primarily for nonprofit executives and leaders. I'm all about challenging ourselves as an industry to be better, more efficient and clearer with our supporters on how their donations are being used. And, yes, I would like to see nonprofits that are doing a poor job of stewardship put out of business — but the bottom line is what counts in my eyes.

To measure the effectiveness of a brand based on a single channel or a single campaign strategy is a terrible mistake. And, honestly, I'd like to see the media report on what matters — not just something that has a shock factor.

(E-mail Angie Moore directly at amoore@NavigatingOffTheNapkin.com for more on the referenced Chronicle of Philanthropy article.)