Tuesday, February 11, 2014

The Do-not-call List and Charity Telemarketing

As I have discussed here before, the national do-not-call registry exempts charities (and those who call on their behalf). This exemption may keep doors open for nonprofits seeking to raise money, but it has also opened the door for substantial criticism of the sector as a whole due to the inefficient telemarketing practices of a few. In this post, I'll step away from the efficacy of the nonprofit exemption to look more broadly on the effect the do-not-call list has had on nonprofit fundraising.
As one may expect, the do-not-call registry has hampered efforts of for-profits to make use of telemarketing pitches. As it turns out, it may also have had the effect of pushing telemarketers to increasingly sell their services to nonprofits. Using annual data from the (nationwide) telemarketing campaigns from the NY attorney general reports as well as annual data on do-not-call registry participation from the FTC, the following chart displays the connection between the success of the do-not-call registry and the use of telemarketing in the nonprofit sector.

The usual caveats about inferring causation apply here, but it is noteworthy that active enrollment in the do-not-call registry is positively associated with telemarketing efforts on behalf of nonprofits, with a correlation of 81%. The positive association is statistically significant (two-tailed p-value < 0.01) despite the small sample size. The positive correlation also persists (though it is smaller) if the fundraising amounts are calculated in real terms and/or on a per-capita basis. Thus, while the do-not-call list was intended to reduce intrusive telemarketing, it may have had the opposite effect for nonprofit telemarketing.

The silver lining is that it also is associated with more efficient telemarketing practices. The next plot displays the connection between do-not-call registry enrollment and fundraising efficiency.

This correlation in this case is 54%, but the connection is only marginally significant (two-tailed p-value of 0.13). It is conceivable that any improved efficiency is attributable either to demand effects (additional fundraising via telemarketing entails a more skeptical public) or supply effects (multiple telemarketers seeking to enter the nonprofit game compete away some of their share). Regardless, it is also worth noting that this improved efficiency is quite inefficient nonetheless, with the best year offering a situation where telemarketing returned an average of 42% collected to the nonprofit.

What do we take from this? Even though the nonprofit sector gained an exemption from the do-not-call list, it does not mean the sector was shielded from its effects. Whether the sector would be better off without the exemption is another question.

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