I say potato, you say pyrrhic

It's the kind of thing that ends up getting splashed all over the media: Study shows charities are wasting money; fundraising is a big joke, say researchers!

That's how an article in the Stanford Social Innovation Review, Pyrrhic Fundraising starts:

It takes money to make money, the saying goes. But nonprofits actually lose money -- at least in the short term -- when they try to raise funds through direct marketing.... researchers show that over a one-year period, U.K. nonprofits earned just 39 cents in donations for each $1 they spent on direct mail. Altogether, fundraising through direct marketing, which includes direct mail, television and print advertisements, and face-to-face solicitation, generated just 44 cents for every $1 invested.

I'm thinking "Pyrrhic Fundraising" would be something like a Pyrrhic Victory, a victory that destroys you. Sounds like fundraising is a money-wasting disaster. No doubt that's an accurate characterization of some fundraising programs. But this article makes it sound like Pyrrhic Fundraising is the normal thing.

Let's look at the facts given in the paragraph above: It isn't clear exactly what programs these ROIs (.39:1 for direct mail and .44:1 for all direct marketing) come from. If it's for overall fundraising programs, they're pretty sorry indeed. "Pyrrhic Defeat" might be a good characterization of such a program. Few organizations last long with numbers like that.

More likely we're looking at donor acquisition programs, where an ROI of .39:1 isn't very good, in my experience. But it's not off-the-charts terrible, either -- and fundraisers in the UK face challenges beyond those in the US. But a half-way decent program will raise subsequent gifts and bring the ROI up to a 3:1 and beyond. Over time, a program will identify long-term supporters and high-end donors and end up with a very healthy stream of donor revenue.

We owe it to donors to raise funds successfully. They have every right know whether we're doing that. When an organization is failing (some nonprofits do suck), donors shouldn't give to that organization.

But if you say (or imply) in a public place that fundraising in general is a self-defeating activity, you're leading people astray, pretty much warning them not to respond to nonprofits' appeals for funds. It wouldn't take a lot of donors swearing off fundraising to have a disastrous impact on the good causes that raise funds.

I doubt that's the SSIR's intent.

To be fair, the article as a whole isn't as one-sided as its title and lead make it seem. There are balancing quotes from experts, including Mal Warwick and Senny Boone, executive director of the DMA Nonprofit Federation, that give the more complete picture of what it takes to raise funds in a responsible way. But we know how thorough the media are when they report "studies." What the first paragraph says is probably going to be the story, if there is one.

A little more care with what we say in public is in order. The last thing we need is a case of "Pyrrhic Study of Fundraising."

(Disclosure: I'm one of several people who post at the SSIR Opinion Blog.)

Technorati Tag: philanthropy

Comments

[John McWhinney]

Fortunately, claims made in the Stanford Social Innovation Review rarely get splashed all over the media. When was the last time?

You say pyrrhic defeat: I say loss leader.

[M]

I hate article like this. Direct mail fundraising works differently for different types of organizations (human services vs. higher education, for an example). Studies like this can be useful benchmark for self evaluation, but I think it leads the public astray to paint fundraising with such a broad brush.

Plus it doesn't even count for the intangibles that fundraising does, such as raising public awareness for an issue. Maybe the donor who gets the direct mail piece may not give now, but maybe they will in two years, or in ten. Maybe the person solicited had no idea that (insert cause here) was a problem and maybe now they will volunteer their time to help.