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DMA Study: Privacy Legislation Could Cost Nonprofits $9 Billion, Nationally - In California, Nonprofits Would Lose $1.6 Billion
Charitable Organizations Would Suffer Large Losses
NEW YORK, January 24, 2002 – The Direct Marketing Association (The DMA) today released results from a groundbreaking study, estimating that potential privacy legislation would add almost $9 billion in additional fund-raising expenses for nonprofit charitable organizations nationally.
In California, where average household contributions ($1,121) are almost double the national average ($696), such legislation would cost charities $1.57 billion. The study, The Impact of Data Restrictions on Fundraising for Charitable & Nonprofit Institutions, 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 nationally 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, ISEC. "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.
"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.
The study was produced by The DMA’s Information Services Executive Council (ISEC) and The DMA’s Nonprofit Federation and was partly funded by a grant from the Privacy Leadership Initiative (PLI).
At 3:00 PM ET, the study can be accessed at http://www.the-dma.org/cgi/registered/whitepapers/restrictionsonfundraising.pdf after 3PM ET on January 24, 2002.
The DMA is the leading and largest trade association for businesses interested in interactive and database marketing, with almost 5,000 member companies from the United States and 53 other nations. Founded in 1917, its members include direct marketers from every business segment as well as the nonprofit and electronic marketing sectors. Included are catalogers, Internet retailers and service providers, financial services providers, book and magazine publishers, book and music clubs, retail stores, industrial manufacturers and a host of other vertical segments, including the service industries that support them. According to a DMA-commissioned study, direct and interactive marketing sales in the United States exceeded $1.7 trillion in 2000, including $110 billion in catalog sales and $24 billion in sales generated by the Internet. The DMA's Web Site is www.the-dma.org and its consumer Web site is www.shopthenet.org.