The Direct Marketing Association (The DMA) released preliminary results from a study, estimating that potential privacy legislation would add almost $9 billion in additional fund-raising expenses for nonprofit charitable organizations. The study indicates that restrictions on marketing data will disproportionately affect organizations that provide human services, such as child care and care for veterans.
"Severely restricting the use of marketing data will increase costs for every sector of the economy – and nonprofits are no exception," said H. Robert Wientzen, president & CEO, The DMA. "Raising money for charities is difficult enough during a period of slowing economic growth, but with less access to marketing data, human service organizations will have significantly less to spend on improving the quality of life of their clients."
The study reveals that a ban on the use of external marketing information, except for name, address and phone number, would force charitable organizations to spend an additional $8.8 billion per year just on fundraising, thus reducing the amount available to provide vital services. Nonprofit donations from direct mail and telephone solicitations amounted to almost $60 billion in 1998 (the latest year for which complete figures are available), with approximately 30 cents being spent to raise every $1. Under the conservative estimates simulated in the study, organizations would be forced to spend upwards of 45 cents to achieve the same donation level.
Nonprofits, above all organizations, are held to a higher level of accountability by individual donors, foundations and regulators.
"Spending 45 cents to raise one dollar not only puts a crimp in the missions of the charitable organizations, but it also dampens future fundraising – it’s a vicious cycle," said Michael Turner, PhD., executive director, Information Services Executive Council (ISEC), an industry council of The DMA that conducted the study in cooperation with The DMA Nonprofit Federation. "It would be a shame if money had to go to administration instead of the people who need it most."
"This study used a conservative scenario. The already bleak picture could get much worse for nonprofits if they were prevented from sharing marketing information with other like-minded organizations," said Lee Cassidy, executive director, The DMA Nonprofit Federation.
"Marketing data is the life blood of our economy. It enables us to get quick and easy credit and low-rate mortgages; it even gives us discounts at our supermarkets," said Wientzen. "Responsible marketers know that the survival of their businesses relies on being responsive to their customers’ preferences – they do not need government to legislate that. In light of this study, Congress and the Administration need to view the entire American economy, and the nonprofit sector in particular, as potential unintended victims of legislation that restricts marketing information."
"As this nation depends more on private organizations to deliver social services, it is ironic that the governments may make it more difficult for these worthy groups to efficiently fund themselves," said Cassidy.