DMA Study: Data Restriction Would Cost Nonprofits Billions

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Proposed privacy legislation restricting data use would cost nonprofit human services organizations close to $9 billion in fundraising expenses, according to the preliminary results of a study released this week by The Direct Marketing Association.

The Information Services Executive Council, an industry council of the DMA, conducted the study in conjunction with the DMA Nonprofit Federation. The groups looked at both local and national organizations. In return for cooperation with the study, the groups were guaranteed anonymity.

The proposed legislation referred to in the study was the restriction of third-party aggregate marketing data such as demographics, said Michael Turner, executive director of Information Services Executive Council.

Through firms such as Acxiom Corp., nonprofit mailers can analyze the best donors on their house files and use that data to better target their selection of prospecting lists.

"Nonprofit mailers typically don't collect data beyond transactional data given at the time of donation such as name, address and donation amount -- maybe phone number, maybe e-mail address," he said.

Therefore, third-party data are important to nonprofits to help identify prospects most likely to donate to their cause. Turner estimated that the loss of this data would result in a 50 percent drop in response rates.

To compensate for declining response rates, nonprofits would then have to spend 50 percent more to raise every dollar, he added.

Currently, nonprofits spend an average of 30 cents to raise each dollar, which would go up to 45 cents, Turner said.

While the primary loss would be 15 cents, the secondary loss could be even bigger, he added.

The secondary loss is the perceived value of the gift on the part of the donor. If donors know that only a little more than half of their gifts go to the programs, they may decide to give elsewhere.

The study is scheduled to be released in its entirety at the DMA's 84th Annual Conference and Exhibition, Oct. 27-31 in Chicago.

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