Telemarketing Just Smells Bad for Nonprofits
Nonprofits sometimes use telemarketers in “Loss Leader” campaigns that primarily benefit the telemarketing company, not the cause.
There is mounting criticism being directed at nonprofits that use telemarketing companies and “loss leader” schemes that return little to none of the money that the telemarketing company receives from donors. Tens of millions of dollars are being raised each year, donated by a trusting public who want to contribute to a cause and are completely unaware that most, if not all, of their donation will line the pockets of a telemarketing firm and never be used to help a cause.
It’s about a relationship of trust, something that charities still have with the public despite the scandals and sometimes idiotic decisions made by nonprofits here and there. It’s just this sort of deceptive practice, skirting on the edge of the dark and unseemly, that will drive the public perception of trust down.
In this expose by Bloomberg and this report by NPR, we learn just how deceptive some telemarketing practices, used by some of the largest charities, are.
The American Cancer Society actually paid $113,000 on top of the $5.4 million raised by the telemarketing company InfoCision. I wonder how many of the donors knew that absolutely none of the money they donated to the Cancer Society went to research, support, or programs?
I think it’s a double whammy; we hate telemarketers and what we have intuited, that telemarketers are increasingly violating the do-not-call law, is correct. Complaints to the FCC have grown from 65,000 in October of 2011, to more than 212,000 this year. Compliance, as judged by the number of telemarketers checking the list, has fallen by nearly half.
I’m not a “loss leader”. If I donate to the American Cancer Society, I intend that money be used for the good I’m sure they implied in the solicitation. I’m sure I’m not alone in feeling that sometimes nonprofits can look more like a ponzi scheme than an advocate for a cause.
I wonder if nonprofits are acting in their own best interests by chasing the dollars by using what might seem to the donor to be a ponzi scheme; paying a portion, or all, of collected monies to a telemarketing company in the hope that a donor will remain on board and donate money in the future.
It’s interesting that every nonprofit governance and ethics class seems to have a scenario related to just this type of difficult decision. Usually, the scenario involves a struggling nonprofit being offered a generous donation by a donor who is antithetical to the cause, like a major ocean polluter giving money to a ocean environmental group. The donor, the pollution offender in this case, gets an image boost and the nonprofit gets needed revenue, but the nonprofit has to look to its mission and values and think about potential donor loss for making, what may seem to be, this deal with the devil.
I’m sympathetic to the need to market, but I think that nonprofits need to steer clear of this smelly practice before the public gets downwind.
Category: News & Advocacy
Telemarketing is used across many segments of donors. The acquisition of new donors is only one way telephone fundraising is used. This can be expensive for the first call but the idea is to introduce a new donor to your charity and then steward them toward a long term relationship. Done properly this can yield a much wider audience of donors for a charity. The value of these donors going forward far exceeds the initial investment.
I’d like to highlight two important points:
1 – Acquiring a new donor is an investment, whether you do it by mail, digital marketing, by speaking engagements, by special events or by telephone. The reality is it is nearly always a loss the first time out. The difference is telephone, digital and direct mail track expenses very closely per donor. Most of the other methods of acquiring a donor do not have good metrics attached to them so the upfront investment is not as easy to calculate. Acquiring a new donor at a profit does happen…but not easily or often.
2 – The first call to a donor is an investment but once they give the next gift whether it is by phone, mail or online the cost per contact with that donor drops dramatically in contrast to the donation. Telephone fundraising to donors who have already given to your charity is highly cost effective and keeps a much higher percentage of people giving than any other form of communication. It also provides great live feedback from donors to the charity, giving donors an oppotunity to express their opinions and prefences about how they will be contacted in the future. Some of our best improvements to volunteering and fundraising have come from talking to our donors on the phone.
There are companies and charities who do not use best practice in their telephone fundraising. I think it is fair to call them out and hold them accountable. But to condemn all use of the phone or all use of the mail based on a few examples of abuse does a tremendous disservice to all the fine charities who have, for years, used these tools responsibly and fairly to support the good work they do.
High standards and informed critique of the sector are always helpful. Jumping on a bandwagon with a few one-sided “facts” is detrimental to the whole charity sector.
Thanks for commenting Denisa.
It should be obvious that the subject of the article is the abuse of telemarketing campaigns, not all charities, or all telemarketing. There is abuse, and it’s hurting charities. You admit there are deceptive practices, law suits, and fines being levied. That sullies the sector whether you engage in those practices or not.
We aren’t talking about all charities that begin donor relationships with a call. We are talking about large organizations that raise tens of millions of dollars from people who almost invariably feel ripped off and angry about what happened to their donation – when they find out. If it wasn’t a problem, there wouldn’t be the need for deception.
My concern is what it means for each development person and each volunteer sitting at a phone or writing letters, or even manning a table at a fair. Our trust factor is high, and it’s critical that we maintain it at that level. Even a casual glance at the comments associated with these articles shows the disconnect; defenders attempting to explain the costs of donor acquisition, and a public that is disgusted and blaming the charity sector as a whole. An informed critique of the sector recognizes the difference between reality and perception, and that perception informs reality. We’ve had the same conversation about compensation, conflicts of interest, and governance with the public. The public won.
The articles I refer to, and mine, refer to the use of telemarketing firms that ignore do-not-call lists, lie to the donors, and erode trust in the charity sector (the ones you say should be “called out”). The public wants to believe in altruism, and that we in the nonprofit sector run things cleaner and more above-board than elsewhere. I fear that these practices will make beginning and maintaining that donor relationship you refer to harder. The public really isn’t into the internal metrics of development. They just want to give – but not to telemarketers.
Hello,
My fist job was at a non-profit for 4 years and i was on the phones calling people asking for donations before I became a supervisor. This was a huge non-profit, Cal. St. Univ. of San Bernardino Annual Fund made up of current students and alumni. We raised money for scholarships. We had success beating goals ever year. We did not hard sale alums and friends of the university. We provided them with information, offered to send out event calendars and new letters, then asked for the donation. I was a manager and a trainer, we held workshops for other CSUs advising them to have informative conversations with potential donors and raised a of money this way. There is a balance in everything. Its all about how you do it, and having a target market. Most telemarketing campaigns try to reach as many people as possible and thats why it is a turn off for potential donors.