The Direct Mail Fundraising Racket: Is It Ethical?

Matt K. Lewis Senior Contributor

The Fox affiliate in Detroit deserves some kudos for this hard-hitting investigative report on the direct mail fundraising racket. Since this is a topic I know a bit about, I figured I would rant a bit on its ups and downs.

Here are some thoughts…

Direct mail fundraising (raising money through the mail) is a legitimate practice. If you are a candidate or organization, this might be one component of a fundraising plan. It should not be your entire plan — as is too often the case.

The biggest problem with mail is that the overhead is crazy. Even when companies aren’t bilking you, the cost of renting lists, paper, mail, etc. are exorbitant. The goal is to break even on prospect letters (to donors who have given to candidates or causes similar to yours) and make money on house file letters (to people who have already donated to your candidate or cause). Prospecting can also be used as a way to find diamonds in the rough that you can then woo and upgrade via personal solicitation (almost nobody goes to the bother of this).

Now, let’s get to the unseemly stuff. There is the obvious problem that the people who donate via mail are very old — which helps explain the courier new 12 point font (a problem the video addresses).

There is the additional problem that the overhead is very high — which means that candidates or causes net little money.

Now, at the micro level, this is justifiable. If I’m running for office, and my direct mail program grosses $650K, and I net (profit) $100K — that’s still a hundred grand that I wouldn’t have had otherwise.

At the macro level, however, this is problematic. What it means is that the conservative movement is very inefficient. What it means is that conservative donors around the nation just wasted $550K on consultant fees and stamps — money that they wanted to go toward beating liberals.

It means the little old lady who thinks her $25 is going to go to stop abortion is probably paying for some consultant to buy a gin and tonic.

Now, let’s go to the truly unethical stuff (though none of this is illegal). The real problems arise when direct mail firms get involved. Because their goal is to make money for themselves, for some firms, it matters little whether the candidates or causes they support have a chance of winning. So they are getting a lot of conservative donors around the nation to give money to outfits that are destined to fail or lose. They are tilting at windmills. (They will argue that this is still good for the cause; it usually isn’t.)

They sometimes surreptitiously own other subsidiary companies that rent lists to their clients. What is more, their contracts often stipulate that they retain some form of ownership of the lists they are acquiring for you (so they can then make money by renting your list to one of their future clients.) So they have multiple revenue streams and double-dip.

And because there is a sort of shell game going on (where you are constantly mailing new letters and getting money back that usually goes to an escrow account that, ironically, they control), it’s very hard for the client to keep track on how much money they are really netting.

Frequently, these mail firms encourage desperate candidates to go into debt — to spend every dollar possible to try to win what is likely a quixotic campaign, to begin with.

But here’s the catch: Even after the candidate loses, the mail firm often retains the right to recoup their losses by mailing more letters.

The problem is that nobody wants to give money to retire past campaign debt, so there is a pretense that the candidate is running for office again.

So donors are being duped; they think they are giving money to defeat a liberal politician, but what they are actually doing is giving money to pay consultants — the candidate they think they are donating to isn’t even going to run for office again.

… I could go on and on about the benefits and perils of direct mail fundraising, but suffice it to say the best advice is this: Caveat emptor.

So is direct mail fundraising unethical? Not inherently, though you’re probably safer sending your money to a Nigerian prince who emails you than hiring some direct mail firms.

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UPDATE: First, I want to make clear that I’m not suggesting all direct mail firms are skeevy — just that some are (and it’s probably more pervasive than most realize).

Second, I was reminded that I actually forgot to mention some of the worst practices. These firms often also manage the “caging” — which means the money is sent directly to them (not the campaign or the cause).  For obvious reasons, this gives them leverage. What is more, I’ve even heard talk of people working direct mail firms sometimes also serving as the official treasurer on the campaigns they service — which, I would think, constitutes a conflict of interest.