Aussie charities lose 95% of donations to marketing
I have a really hard time with those charity kiosks you see out and about. I understand they are there for completely different reasons but I can’t help but group them into the same category as those godawful American Express guys that haunt Flinders Street station.
(I haven’t been to Flinders Street station in a while, are they still there?)
I mean at least the American Express guys are in suits and seem to have some sort of training. Twice now I’ve experienced the awkward sales pitch of a fundraising person who just blurted out of nowhere ‘can I ask you a question?’
This is then preceded by a few seconds of awkward silence where I resist the urge to ridicule them on the ineffectiveness of their blunt sales pitch because I feel bad the poor kids just a backpacker trying to make a buck.
Yes ‘street charity’, ‘face to face fundraising’ or whatever the hell they’re calling it today grates on my nerves. Unfortunately my opinion of them wasn’t helped when I read that up to 90% of first year pledges wind up in the pockets of the marketing companies they employ.
You’d be forgiven for thinking that 20 something with a sexy accent wearing a tshirt belonging to the charitable organisation actually worked for them. In effect it’s practically a uniform and dare I say it downright misleading to learn that they work instead for a marketing company.
For whatever reason most of the major charities these days outsource the dirty work of fundraising to marketing companies, In Australia the largest of which is Cornucopia.
The business model is relatively simple. Cornucopia do the gruntwork and if a pledger stays on for more then 100 days, Cornucopia then bill the charity for 80-95% of the entire years pledge.
If the pledger (surely that’s not a word) cancels the donation subscription within 100 days, Cornupcopia make no money. If however the pledger cancels somewhere between 100 days and 12 months, the charity then loses money paying the marketing company.
Keep in mind we’re probably talking chump change here, $5-$20 a month I’d say but multiply it and keep it recurring each month and it’s not hard to see how the “foreign aid sector last year raised $812 million”.
Mind you I’m not sure if that’s $812 million total or $812 million after companies like Cornucopia took their sizeable cut.
So much so are these companies focused on getting those recurring subscriptions that their employees are actually not able to take monetary donations. Yes that’s right, they don’t accept money.
God forbid I just want to make a spur of the minute donation and pass on the whole donation subscription deal. I did the subscription thing once with Amnesty International. When the time came to cancel they wouldn’t take no for an answer and instead I wound up ‘temporarily stopping my payment until I was able to afford it again’.
Needless to say I received several followup phone calls and fliers in the mail that it was enough to put me off the experience ever again.
Like begging, charity donations are something I feel has become way to structured and business like over the years. Those guys that go around Christmas time (the Smith family I think it is?) with their tins are what it should be about.
A flashy kiosk with unnaturally energetic people who ask stupid questions and only take credit or debit doesn’t make me want to donate money. You might as well place charity kiosks right next to their financial counterparts.
One only sells credit card and the other takes only credit cards; Both equally as annoying. Side by side with any luck they’ll just wind up talking to eachother and leave the rest of us alone.
October 27th, 2009 at 9:48 am Daniel(Quote)
“If however the pledger cancels somewhere between 100 days and 12 months, the charity then loses money paying the marketing company.”
Do you mean the charity loses 80-95% of the money that was donated? That was my reading of the Age article — your text seems to imply the charity actually make a loss on it.
Me? My charity budget is all allocated. I never break stride. Just keep walking.
October 27th, 2009 at 10:11 am ozsoapbox(Quote)
The SMH article states at the bottom:
I took this as say I pledge $1000 over 12 months and then withdraw after 101 days, then Cornucopia bills the charity 80-95% of the $1000 as they’ve met their contractual obligation of 100 days. This winds up costing the charity $850-$900 less the 100 days (3 months) of donations.
I do this too but if I’m actively engaged manners wise I have a hard time doing this. And it’s crap too because I know this is what they count on marketing wise when they approach you!
July 12th, 2010 at 2:22 pm Alex(Quote)
You really don’t know what you are talking about and that’s according to yourself:
The Charities chose to work with Cornucopia because since then they were able to significantly increase donations that otherwise would not be possible specially because most of people are hypocritical, they like you enjoy criticising companies like cornucopia but never gave any money to any charity.
If the pledger cancels after 100 days the marketing company does keep the 95% but the charity don’t LOSE anything because they didn’t have any costs to engage the campaign to start with and if the pledger stays for more than a year (on average a pledger will stay for four years) the charity collects 100% of the donations for the next three years with no further costs and no acquisition costs in the first place.
That’s a great deal ( low risk with a great chance to raise money ) btw, I really don’t think that getting money to help children in poverty is classified as dirty work. That’s one more hypocritical misconception from a person who lived his whole life in a country where 5 year old children don’t have to work ten hours a day.
Shame on you!!!
July 13th, 2010 at 2:44 pm ozsoapbox(Quote)
So people like me who weren’t giving before are all of a sudden going to start giving because we’re being pestered more by a third party?
Not likely.
The only reason for an increase of donations would be more being given from the demographic that would give anyway, due to said increase in pestering.
If Cornucopia raise $100 on behalf of charity A and the charity for whatever reason cancels the service, then they just lost $95 in donations. Donations belong to the charity, it’s $95 the charity had and after paying off Cornucopia, don’t have anymore.
How does that make any business sense? Either these campaigns are massively skewed donation wise in the first year or Cornucopia’s business model is kaput.
Working ‘for free’ after 12 months indefinitely (or even for 3 years) is not a sustainable business plan.
It is if you’re harassing people who wouldn’t give anyway because we have a sneaking suspicion a high percentage of the money donated goes to ‘charity administration’ and not the people being collected for.
July 14th, 2010 at 1:15 am Alex(Quote)
Mate you REALLY don’t know what you are talking about nor have the desire to find out…
“So people like me who weren’t giving before are all of a sudden going to start giving because we’re being pestered more by a third party?
Not likely.”
YES LIKELY…
People don’t usually wake up in the morning and say… Great today I will join Oxfam and commit $30 a month for the next three or four years…
The fundraising campaingners are there to make money but also to motivate people to engage and donate, to help children not to die from poluted water ( like I’ve seen when I was growing up and unfotunately you didn’t have the chance to see from you developed country ) they raise aweraness about the important job organisations like Oxfam and save the children are committet to.
Number of pledgers in Australia for Amnesty international:
2006 40,000
2010 150,000
You little hypocritical forum post is working against these children, it doesn’t matter here if you are right or if it is me, reality is ( and you can call the charities yourself to check ) since cornucopia started the number of pledgers and donations have increased, helping lots of NGO fight unjustice and poverty and you are working against that.
Of course Cornucopia is a business as it is chanel 7 or Chanel 10 but the cost per customer acquisition is far lower for the charity when using Cornucopia services then it is when producing a 30 sec advertisement on TV. People are much more likely to change chanels and forget about it. The face to face marketing is one of the most engaging and effective way to recruit pledgers therefore I don’t see any harm rewarding the company accordingly.
AND AGAIN…. the charity don’t LOSE any money becuase it didn’t PUT any money in the cornucopia campaing in the first place. Cornucopia campaingners are COMMISSION BASED.
But if the charity pays for a 30 sec commercial on tv and the pledgers it gets withdraws a month later then the charity will LOSE money because it PUT money upfront. Is this really too hard to understand????
“How does that make any business sense? Either these campaigns are massively skewed donation wise in the first year or Cornucopia’s business model is kaput.
Working ‘for free’ after 12 months indefinitely (or even for 3 years) is not a sustainable business plan. ”
ARE YOU 0UT OF YOUR MIND? Cornucopia don’t have to do any more work, all the work is done when the campaingner signs up the new pledger, for that Cornucopia keeps its fee for the first year and the subsequent years donations go for the charity and Cornucopia doesn’t have to do anything else with that pledger, done, next. You really don’t know how it works do you?
I don’t work for Cornucopia but I know and support the job they do becuase I could see in first hand the difference this money makes in poor communities as the one I grew up in. Cornucopia is just a means to the end and you are not considering the end.
Perhaps if you detach you bottom from your confortable chair in your confortable country and take a tour to see five year old children collecting coconut all day under the sun, you would change your attitude towards companies that ( yes make money ) but also help these organisations.
You think you know it all but you are just a despicable bourgeois…
July 14th, 2010 at 10:03 am Mike(Quote)
I audited a couple of charities in Australia when I was working there last year.
It is far more cost effective for charities to use Cornucopia and the like to get their money. However the problems arise when people cancel their subscriptions. The charties do lose out as the majority of the contracts are on a commission per new sign up. So if the sign up cancels within the first six months the charity loses money.
I understand that some of the new contracts with these companies require a minimum period for the commission amount. This is much better, but charities are not great at tracking these things (especially the smaller ones)
The other problem is that people think they are giving money to the charity but in reality the first year of donations are all for paying off the setup costs. But enough people do stay to make it worth it for the charities.
July 14th, 2010 at 2:09 pm Alex(Quote)
Mike I agree with you in some points but the charity don’t really lose money if the pledger withdraw it just doesn’t collect the amount the was given in the first months… there was no money out of pocket to be lost opposed to for exemple advertising on the mainstream media where there is need to spend first and hope for the best ( that pledgers will stay ).
Two important points that the moderator don’t understand, and I would like to make it clear for you as well are:
1- Cost per acquisition
2- Life time value of the customer
Cost per acquisition:
A business advertises on TV and the total cost was $30,000 with that ad the business acquired 100 new customers, thus the cost per customer in this case was $300
Now lets say that considering the past history of the product or service a new customer will spend $15 a month and will stay loyal to this specific product for on average two years, therefore:
The lifetime value of this customer is equal to $15 times 24 months totalling $360. In this case the campaing wasn’t really worth the trouble because the company only made $60.
Now let’s just bring this concept accross to cornucopia:
New pledger joins on the street, his first 10 months of contribuitions will go to cornucopia = $150
Considering that on average a pledger will stay loyal for a total of 96 months ( or 4 years ) the charity will pocket a total of 86 months contribuitions or the equivalent of $1,290.
So the charity ( didn’t lose ) but PAID cornucopia $150 for a total of $1,290 in donations, to me this is a great deal specially considering that the charity only pays IF cornucopia gets the pledger opposed to TV, RADIO OR MAGAZINES
July 16th, 2010 at 4:01 am ozsoapbox(Quote)
Sorry what? You’re telling me that people like me who refuse to give to charities because most of it is swallowed up in admin fees are going to start giving because we’re being pestered in the streets?
Yeah, good one.
On paper it might look like an increase but like I said, the only people giving more are the people who’d be giving anyway.
Wow, strawman much? Just like if you’re against internet filtering you’re pro child porn it appears if you’re against charities that keep most of the money themselves, or companies employed by charities that have the potential to swallow up large amounts of donations, then you’re pro injustice, poverty and want to see children suffer.
With increased donations I’m sure has come increased admin fees and CEO salaries too.
Wonder what the stats are on actual money being spent on the people being represented? Bet it doesn’t match up ratio wise with the increased donors and donations.
What kind of bullshit logic is this? If company X raises $Y amount on behalf of company Z and then decides to keep 95%, then company $Y just lost that amount in potential earnings. It doesn’t matter if they spent money employing company X or not.
Who calls up and whinges at the donor if they want to stop pledging X amount each month, the charity or Cornucopia? I figured there was some ongoing maintenance required on the donor lists, I mean it’d be in Cornucopia’s best interests to present statistics that show most pledgers stay on for a while.
Yes, yes it’s all my fault there’s poverty in the world. Poor them.
Also where are we pulling these ‘on average people stay with charities for 4 years’ statistic from? I’d have thought the GFC has wreaked havoc on retention averages, or are we getting this 4 years from Cornucopia themselves?
July 17th, 2010 at 8:37 pm Alex(Quote)
Most people need to be prompted to donate and please don’t believe me, go check for yourself… call the charities and ask them if they are better off or not.
The only way they can help more is by receiving more money, I don’t care how much the CEOs make as long as they are helping peolpe. For your information the australian authorities check up on how charities use their donations, again go look for yourself.
You started talking bad about a company without even understanding how it works – that really showed how stupid you are.
BUT OF COURSE WON’T CALL NOBODY BECAUSE YOU ARE A LAZY SON OF A B*ITCH WHO POSTS MISLEADING INFORMATION WITHOUT CHECKING FACTS FIRST, I AM PRETTY SURE THAT YOU WILL JUST SIT ON YOUR F**KING CHAIR AND KEEP TYPING IDIOTIC REMARKS.
July 21st, 2010 at 2:18 pm ozsoapbox(Quote)
Well that’s one naive way to look at it, myself on the other hand has a bit of a problem with charity CEO’s helping people if those people are for the most part themselves.
Obviously this regulation isn’t thorough enough if charity companies are able to lose 95% of donations to a third party marketing company with donators none the wiser.
July 21st, 2010 at 2:45 pm Cyn(Quote)
I stopped donating god-knows how long ago, after realising that most of my donations were ending up in “admin fees”.
Alex, you seem to have quite the anger problem. Here’s hoping you don’t work for a charity.
July 21st, 2010 at 5:30 pm Liz(Quote)
I think there is a marketing need for companies like Cornucopia, I think they do provide a service and they should be paid for it…
My problem is that at no point in their pitch do face to face fundraisers inform me that they work a for a marketing company and said marketing company will take a portion of my donation for themselves. Instead I am led to believe that my donation will be going directly to the charity/cause, when that simply isn’t the case.
I’m not naive enough to think that fundraising and administration doesn’t cost money, I’m not arguing that administrators and marketing companies shouldn’t get paid. I just don’t like being mislead. You could argue that it’s all in the fine print and that it’s responsibility to read it… but is it really right for someone to tell me a heart wrenching story about abused women and children in a poverty stricken community, and then to ask for a donation as though it will go directly to helping them?
What charities can I trust? Where can I get their financial reports outlining where the money goes? For now I think I’ll just keep buying the big issue (though I wonder if there’s some one making a nice big profit out of that too? I don’t mean the vendors on the street, I mean the person at the stop that controls the whole thing)
July 23rd, 2010 at 10:12 am Kerry(Quote)
What about getting volunteers to do leaflet drops? This would be cheaper than direct mail, would give volunteers something meaningful to do (I’ve been a volunteer doing admin work, and I was replaced by a paid person as soon as I injured myself doing the job), and would provide the prompt that people need before they give to a charity.
They can look at the information at their own leisure and give to a charity that rates highly according to GiveWell’s index, for example.
July 23rd, 2010 at 1:42 pm ozsoapbox(Quote)
Not that I’m saying harassing people on the street is effective but leaflet drops probably won’t help charities too much. I used to just bin any and all junkmail without reading as my bin was 10m from my letterbox.
I think people are aware of charities and the concept so it’s not like we need to be reminded. If people want to give they’ll give. Surely they can do their own research on what their options are so that the rest of us needn’t be harassed by groups like Cornucopia.
November 30th, 2011 at 5:10 pm Jess(Quote)
I worked as a sales rep for a marketing company once and while I was selling austar (foxtel in sydney) deals door to door i found out other members of the company were doing world vision.
This really upset me and I refuse to give to charities without first checking where there money goes. I think its horrible that the ceo of these charities can earn anything over 100 000 per year, the world vision guy is on over 200 000 and then they pay their sales people and admin costs!
Shame on all of them. Please research a charity before you donate