Penny-Wise and Pound-Foolish

Today on PRSPCT-L–the fantastic, freewheeling chatroom of the fundraising research world–a seasoned “listerine” posed some important questions for everyone in fundraising.  The subject: Doing more with less.

She wrote, “I’m wondering if any of you have had to drop your subscriptions due to budget cuts. Is anyone making use of only free resources?  Do you feel that most information you used to pay for is available free — even if free information-gathering is more time-consuming  — or if the quality of the information you can provide is lessened due to loss of paid resources?”

On one level, this seems a simple matter.  Times are tough.  Cut some costs, work hard and make do.  But is it really a question of whether or not to use Google vs. Lexis Nexis?  Let’s take a look.

Clearly, an increasing volume of data is now free and easily accessible.  At the same time, it’s difficult to know if the data in free and fee-based products is really the same since details are not readily available online and the people behind the sites are almost impossible to reach.

Here’s an insider perspective: A few years ago, I worked at a company that keyed data from a public source and resold it in different “flavors” to various online providers.  On one free redistributor’s site, the data was broad but not deep.  In other word’s, it had lots of detail but it only went back two years while paying customers had fourteen years of data!  Also, the search functionality and formatting differed considerably.  If you looked up a person’s stockholdings in one “cheap” source, you would be greeted with pages upon pages of transactions.  In the other, “premium” source, all the transactions were compiled into a few handy, clear and easily understandable dollar figures, saving as much as 30 minutes to an hour of calculations.

Those kinds of differences exist across many products in fundraising research.  However, many in fundraising tend to think of these very different data sets in broadly generic terms.  This would be like perceiving both morphine and aspirin as merely “painkillers”–in a sense, that’s true, but that characterization doesn’t properly distinguish between two entirely different substances that generate very different results.

Then there’s the issue of expense.  But that’s not as clear cut as it first appears, either.  After all, it’s not the research resource that’s the big expense, it’s the person using it!  For example, a researcher earning $35,000 plus benefits costs an institution about $0.47/minute, not including supervision, resources, space allocation and professional development, among other things.  That may not sound like much but it adds up quickly.  Both in the cost of having the researcher do something and, more importantly, the additional cost of NOT doing something potentially more important.  Using free but less efficient products actually exacerbates this problem, driving up internal costs and reducing fundraising opportunities overall.

A case in point is address updating.  Nonprofits need to update addresses because not doing so would both waste money on printing, postage and time and limit potential revenue.  This is well understood and the reason why so many organizations use services like AlumniFinder to recover “lost” constituents.  But many also spend their own time looking up these records one at a time online assuming that is the least expensive way to get the job done.

It’s not.

Every time a fundraiser or researcher looks something up, even on a free resource, there is a cost associated with that work.  A five-minute Google search: Between $4 and $7.  Research ten addresses a week over the year: Up to $3,600 a year!  And if prospecting is put aside, even for a moment here and a minute there to “save” money by using less efficient “free” resources, the cumulative annual effect is hundreds of thousands or even millions of dollars in lost or delayed fundraising revenue.  On the other hand, running addresses through in a batch with AlumniFinder means that all the work is done quickly, consistently and inexpensively, saving hours and hours of time for prospecting, rating and strategy setting.  Spend a little up front, save a lot–and potentially make a lot more–on the back end.

If understanding prospects and donors is truly central to development, we’ve got to continually invest in the tools to our success.  First, we need researchers to conduct research and not fundraisers as fundraisers need to be out developing relationships and soliciting support.  Second, we need to spend money on proper research resources that drive knowledge and efficiency.   Because when it comes to time, we can’t afford to be penny wise and pound foolish.

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2 Comments

  1. Good one Jay – it is very much a case of efficiency. I could waste plenty of time looking up addresses or stock info at free sites, and take a few hours to compile and calculate. But luckily, I have Lexis Nexis for Development Pro, so in seconds, I have a ton of info, going back years – so that I can see patterns without too much trouble.

    Here’s another good example – two days ago my VP asked for the giving history for X Large Corporation’s Foundation. Because I pay for a subscription to Metasoft’s Foundation Search, in about 20 minutes, I was able to give him Excel spreadsheets with the foundation’s giving history since 2000, and I even broke it out into two sheets, one for ALL categories of giving, and one specifically with their Education gifts (since we are a university). Plus, I calculated really quickly what percentage of their total giving was made to education (57%). Searching for all this via the free access to various foundation search engines would, probably, have taken me about two days to gather, and I doubt the info would have been anywhere near as complete, nor would it have been so easily sortable or analyzable, since it wouldn’t have been in Excel, but likely would have been simply printed out copies of the 990.
    I didn’t give him the electronic copies I created, but I saved them, so if he wants them, he can sort them by state, or by receiving organization too.
    The difference is tremendous, and the expense – well, well worth it.

  2. If we really do not want to be Penny Wise & Pound Foolish lets start with the questions being asked, in the above example maybe the only thing the VP wanted to know is how big a check the foundation was willing to write. In which case the question could have been much different. By not really being clear this VP may have just wasted a lot of time. With less $ for research it just might be time for the major gift folks to actually know their customer, this would be money well spent and long over due.

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