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How Might CRM Be Used in a Not-for-Profit Setting such as Charitable Fund-Raising - Essay Example

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The author states that charity transcends all borders and religious divisions. In order to achieve the desired goals, charitable fundraising strategies should adopt modern customer relationship management techniques. This paper analyzes the gamut of the issues and prescribes suitable recommendations…
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How Might CRM Be Used in a Not-for-Profit Setting such as Charitable Fund-Raising
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How might CRM be used in a not-for-profit setting such as charitable fund-raising?  Executive Summary Physically challenged, mentally retarded and economically weaker among us deserve a fair treatment in the society, and the cultural, economical and technological developments should be shared by all.  The governments, non profit organizations and the great philanthropists continuously strive hard to achieve this goal with a missionary zeal. This responsibility is also placed on the corporate citizenship, and the voluntary contributions towards social and environmental programs on their part should espouse these causes.   As the corporate structure is mainly geared up to meet the challenges of the commercial world, they are also widely using the services of the nonprofit organizations, as resource providers as corporate philanthropists. Charity transcends all borders and religious divisions.  In order to achieve the desired goals in this respect, charitable fund raising strategies, as is the compulsion of time, should adopt the modern customer relationship management techniques, to be effective and efficient in their functioning. This paper aims to analyze the entire gamut of the issues and prescribe suitable recommendations in this connection.  CRM in not-for-profit sector                                                                                         An organization, whether it is in the field of business or charity, needs to follow the proven management principles and techniques to fulfill its aspirations, and realize its goals.  In the modern world, if we can understand the hardships the less fortunate people among us undergo as a human beings, and realize that it is our responsibility to take care of them to the extent it is possible in our individual capacity, we can say that it is a ‘renaissance’ in thinking.  When a popular government takes initiative in this direction, it sets an example to the various segments of the society.  ‘Federal tax law provides tax benefits to nonprofit organizations recognized as exempt from federal income tax under section 501©(3) of the Internal Revenue Code (IRC).  It requires that most organizations apply to the Internal Revenue Service (IRS) for that status.’ (Department of the Treasury Internal Revenue Service, 2009 US)  There is tremendous pressure on requirement of resources by the non profit organizations for its various projects.  It should be sourced externally, as there is no income from the operations or the services are provided at cost basis with no margin of profit, as in the case of commercial enterprises. The charitable organization is a legal entity, and it can enter into contracts of various types in its dealings.  ‘In the USA, the economy is classified into three areas: commercial, public and non-profit.  Here, the term non-profit is used to denote voluntary organizations and indeed is sometimes known as the voluntary or third sector.  Fine (1990) combines the second and third elements of the US economy and uses the term ‘social sector’ in his work on social marketing – Convey T’  (Buttle. F, 1996, p170) Therefore, marketing is an integral part of the not-for-profit organizations to ensure regular flow of funds to the projects, and CRM is discussed in relation to such entities.  The role of the regulatory authorities should be recognized properly.  It is always better to involve them in the activities by their active guidance and participation, rather than considering them as intruders.   After all their opinion carries more weight with the public, and hence their participation an endorsement to the mission. Major findings We have undertaken a sample survey, in respect of the application of CRM in NFP sector, with reference to ‘Donor retention’.  The main focus is building relationships with members that result in long-term support for Not-for-Profit organizations. The findings are very significant and strengthen the following points. Customer retention is the superior concept in long term, compared to random solicitation for donations. The donors or resource providers have the tendency to be cause-specific or entity-specific rather than general in nature, in view of the fact that ‘the means are limited and the demands are unlimited’.  In fact this is the foundation for the study, as it is a universal constraint. The donors would like to identify their contributions with the end use.  This is really an ‘eye opener’ recognized in the study.  The NFP sector should make all efforts to address this phenomenon in the society, in order to justify their existence meaningful. There is no substitute for ‘personal touch’. It means dissemination of information though ‘word of mouth’ and the concept is different from ‘Direct Marketing’. There is a ‘service angle’ to the issue and ‘satisfaction’ of the service providers in this regard is important. Recommendations The organization should develop a strategy to nurture the long term relationship with the resource providers. Designing new schemes to facilitate identification of the beneficiaries or end uses with the contributions made. Identifying the needs of the resource providers with regard to their donations, to evolve methods to satisfying these needs, and most importantly giving feed back to make it known that their sentiments are respected. Improvement in the level of service is a continuous process, and, where there is a question of satisfaction, there should be an answer in terms of service. Embark on a ‘word-of-mouth’ campaign to enhance the factor of personal touch. Organize events to bring together the donors and beneficiaries to improve the ‘perception’ level of the benefactors and to create and enhance their attachment to the causes. 1.0 Introduction The services rendered by NFP organizations are of various types. An organization may render any one or all types of services, services with no charges (free of cost), services charged at cost (without margin), charges based on dividing system of expenses with mutual cooperative basis among the users.  ‘Because receivers do not directly pay for the service, there is pressure for marketing to take on ‘selling’ function in order to attract resources. … marketing … tends  to be one of communication.  Indeed, the National Society for the Prevention of Cruetly to Children (NSPCC) does not have a marketing department as such but has a communication department instead – Convey T’ (Buttle F, 1995, p180). CRM effectively implemented with the schemes to satisfy the needs of the resource provider, for example identification of the donations to the end uses, such as ‘sponsor a child’ in the case of orphans or physically challenged, or sponsorship for education of the students, would create the emotional attachment of the resource providers to the entity on a long term basis. ‘There may be no reward but some other form of mutually satisfying exchange - Convey T’ (Buttle, F, 1996, p173) Long term relations could also be developed with the service minded people in the society, who would like to volunteer their services to the NFP organizations. For example, a Doctor, Teacher or Physiotherapist would be useful to the organization in many ways, and the money saved on account of such service is the money earned by way of donations. The Salvation Army, with a number of programs for the development and welfare of the society, could raise funds on a regular and long term basis by adopting CRM techniques by attracting donations and volunteers. 1.1   Objectives  CRM in a not-for-profit organization aims to achieve strengthening of the communication aspects of marketing, strengthening of the relationship with the constituent groups, constant interaction with the customers, the development of long term relationship with the resource providers and promoting word of mouth campaigns suitably planned.  The fact that charities are the third largest mailers in the UK after financial and mail-order organizations (Massey, 1995) reinforces the overemphasis on the tactical, communication aspects of marketing.  During the past decade internet plays an important role in communication. 2.1   Background The Salvation Army, Australia The organization with reference to which we apply the CRM principles and techniques for fundraising programs and strategies is The Salvation Army of Australia.  The organization is not-for-profit in nature and associated with the social development with more than 120 years of history.  In an effect it is also working on the root causes of the social maladies in eradication of the social problems, and rendering services for the development and welfare of the society. The issues involving domestic violence, drug menace, gambling, orphans, etc. needs special agencies to reach out and help the affected people. These people are mostly abandoned by the society, because, their families are helpless and the governments in general have no mechanisms to deal with the situation, other than enacting laws that would help the agencies such as Salvation Army who took up these social causes.  These affected people need proper guidance by way of counseling, aid and assistance on the one hand and recognition, employment or financial support to be able to stand on their own legs on the other hand.  The later aspect is very important considering, charity is not for life, in the case of persons blessed with normal gifts, on birth like all other human beings.  Similar organizations operating internationally with a very challenging and diversified objectives depend on donations for the huge resources required to carry on their mission. ‘Apart from helping social welfare projects of organizations, we support Research and Development in health care especially Young Cancer patients. Educating and economically empowering the underprivileged and Rural women, Counseling the depressed and rehabilitating the victims of social problems, Development of wasteland and rural farmer oriented developments work are also our activities’ (Hope Foundation,  a Public Charitable Trust, www.hopefoundation.in)  According to the website of the Salvation Army, http://salvos.org.au/ there are many opportunities for involvement with The Salvation Army, from volunteering, to shopping in their op shops, visiting their cafés, working or studying with them or trying out the many community activities on offer at their local churches apart from making donations or rendering other services. 2.2   Focus of literature review ‘THIRD SECTOR ORGANISATIONS are different. They testify to our ability to organize among ourselves, to do whatever needs to be done, to give ourselves voice, to provide a service, to help others, with- out being required to by government or being lured by the hope of enrichment.’ (Lyons M. 2001,P217). For these organizations resources are available not out of sales to the customers or end users.  There is no direct relation between the donors, patrons or providers and end users as well as the authorities responsible for the allocation of the resources.  However customer relationship marketing could be widely applied by the not-for-profit sector.  The fact that charities are the third largest mailers in the UK after financial and mail-order organizations (Massey, 1995) reinforces the overemphasis on the tactical, communication aspects of marketing.  However, during the past decade internet plays an important role in this regard. Social responsibility:   The reporting system of the government is designed to ensure community benefit in running the not for profit organizations to become eligible for the tax exemption benefits given to them. ‘Not-for-profit hospitals have been under increased scrutiny as local and state governments have become more concerned about holding these hospitals accountable to their communities for their tax exempt benefits.’ (Maiuro, Lisa Simonson; Schneider, Helen; Bellows, Nicole, 2004) There are NFP organizations of various sizes, types and objectives operating in Austria, and their impact on the society in phenomenal.  Their operation covers Products (Blood donation, spectacles, medicines, etc.), Services (education, training, etc.) and Causes (Child abuse, domestic violence, etc.)  Regulation of these entities with reference to the resources, utilization, regulatory compliance, tax concessions and community benefit is very important. ‘That the importance of community support and the need for a strong and independent not-for-profit sector be considered in reviewing the efficiency of tax concessions to not-for-profit organizations.’ (Moor, D., 2009)   External Agencies: ‘Some of our client relationships in this sector have lasted for more than 100 years, so you can imagine the bank of experience and knowledge that we have accumulated. This centre provides free access to a range of resources, ideas and contacts that are relevant to those managing not-for-profits.’ (Makinson & d’Apice, 2010). The expertise available with such agencies could be effectively used . Workshops: Various agencies organize workshops, seminars and conferences for the staffs and officers of the non profit organizations on various issues in Australia. ‘The Victorian Women’s Trust (VWT) and the Australian Women Donors Network are pleased to announce a series of new workshops for 2010 - a unique educational opportunity to help you to maximize your effectiveness as philanthropic Trustees and Executive Officers.’ (Louise Arkles, 2010) Corporate Philanthropy: Corporate companies in Australia donate significantly and actively participate in the philanthropic programs. ‘The Australian business sector gives to the community in multiple ways. Many companies have set up a philanthropic foundation … Some companies have established a community partnerships program and fund this from within the company.’ (Philanthropy Australia Inc., 2010). Philanthropy reflects in the corporate culture of many companies and they encourage their employees also to participate in the social development programs. Hibbert, S.  and Horne, S. argue for the donor behavior research that focuses on decision-making processes as a concept which is central to the understanding of how consumers behave. (1996, Volume: 13 Issue: 2 Page 4 – 13) Charity marketing:  The principles and the techniques of the CRM could be effectively used for charity marketing, when the service aspect of the concept is understood and the needs of the donors are fulfilled. ‘Many savvy small businesses are affiliating themselves with charities to market their businesses. Not only is it a primary means for developing a powerful network but also it helps others in the process. People like to associate themselves with businesses that support causes, which help disadvantaged people in a meaningful way.’ (Charity Marketing: Growing Your Business Through Charitable Giving,www.MarketingBestPractices.com)   2.3   Customer benefits & sacrifices There is emotional attachment developed in the minds of the donors, who often say, ‘I have to send new year gifts to my children’ or ‘I have to visit my elders’ place next week’, meaning old age homes.  This emotional attachment is nurtured by the organizations, and that is the crux of the customer relationship marketing in charities.  The process is with reference to the ‘satisfaction’ the donor derives, and this psychological benefit to the patron should be considered as the secondary mission, in addition to the mission for which the organization exists. Among the various questions, the question ‘Do you want to identify your involvement with the use of the funds contributed by you?’ added with view to elicit the intention of the resource providers, brought out the fact that the donors would like to involve in the process on a long term basis. Donor Retention: It is about maintaining long term relationship with the resource providers, and improve the level of their commitment. By addressing the needs of the donors by analyzing their behavior, the organization would ensure realization of the objectives on a consistent manner. ‘Because receivers do not directly pay for the service, there is pressure for marketing to take on ‘selling’ function in order to attract resources. …– Convey T’ (Buttle F, 1995, p180). The decisions are not momentary in many cases, but reflect their plan to involve themselves in the causes. They want confirmation that their sacrifice is justified, as they derive satisfaction out of the outcome. This is exactly the long term commitment that the organizations are aiming at and called as ‘Donor Retention’. ‘Mix in a few open-ended questions that help you get a better picture of how your customers feel about you.’ (McConnell B and Huba J lament, p30) In fact events to bring together the donors and the beneficiaries would improve the ‘perception’ on the part of the resource providers. 3.0   Methodology         The focus of this preliminary study is primarily on CRM with reference to fundraising for not-for-profit organizations, designing questionnaire for a survey with a view to shape up the donor retention strategy based on CRM for the current and prospective donors, analyzing the survey findings in this respect, and make recommendations. 3.1   Hypothesis        Only the business houses with objectives in relation to its existence, strategies to meet the challenges ingrained in the circumstances, recognition of the obstacles in terms of execution and methodology in achieving its goals succeed in business and be the ‘first among the equals’, if not the industry leader, considering the strengths and weakness of the competition.  This basic principle is in tune with the success of any organization whether it is industrial, commercial or social in nature.  The purpose of the not-for-profit organization varies from eradication of AIDS to lofty ideal of animal welfare, and poverty relief, sports, human rights, etc. in between.  The CRM techniques could be effectively used in these organizations with particular reference to fundraising and donor retention strategies. A survey has been planned to observe and analyze the behavior of the participants in this respect. 3.2   Questionnaire The questionnaire is designed with the following aspects.  Easy to answer: The questions should be objective type to enable the persons to choose the answer out of the alternative options.  This is to avoid interpretation of the answers based on the language used by the participant.   Time factor:  The questionnaire should take minimum possible time for the participants to answer the questions.  Structure:  The structure of the questionnaire should cover all the aspects under survey in terms of the objectives, in a logical sequence, to carry the participants step by step to the next level.  At the same time lengthy questions should be avoided.  This will also be useful for classification of the response for further analysis.  Simplicity:  The participants are from various walks of life, income groups and with different educational and social background.   The questions should be simple enough to understand by all the proposed participant groups, since the understanding levels of the participants varies due to many factors, and hence there should not be any confusion in terminology.        3.3   Data collection There are many factors that influence the quality and perfection in the process. Reliability of the data, sample size, source of data, experience and communication skills of the data collector, etc. are some of the important aspects in a survey. Lacunae in one or more of these aspects will vitiate the results. Personal touch: When the population to be covered is compact, personal touch in data collection would enhance the utility of the survey for obvious reasons.  An experienced field staff could detect the false answers easily and exclude such forms from survey.  For special surveys involving specialized opinions of the participants, technicality of the issue or confidentiality, this method of data collection is recommended.  Bias:  There are chances for the data collector’s bias towards the issue which could materially affect the survey results.  Communication factor:  Web surveys are commonly used by various agencies, and includes on line polling also.  The participant should be in a position to forward the filled up questionnaire back to the survey team.  For example, the questionnaire is in the email form or with a ‘send’ button at the bottom for this purpose. 3.4   Data Analysis In data analysis, on many occasions, only comparison but not computation is possible. We can only compare the level of satisfaction but can’t compute, though we try to assign marks to ascertain the level of satisfaction. Customs and cultural development in a society have to be taken into account. Therefore, the skill, judgment and experience of the researcher are very important.  Finally, Subjectivity and bias of the researcher can not be ruled out. These aspects play an important role in interpretation of the findings. A good research should be unbiased. Personal opinions or views of the researcher should not influence the out come of the research intentionally or unintentionally. Affiliations of the researcher may be useful for proper direction in research.   “There is no hope of doing perfect research” (Griffiths, 1998, p97), is a well known statement in the field of research and many research scholars tend to agree with this statement. Research is the process of detailed study to arrive at conclusions.  The research may be in respect of discovery of new facts or for the purpose of testing new ideas like the present one, ‘the CRM in non profit organizations. The factor of ‘Cost’ involved in a project or allowed for a project, will also influence perfection.  The research is the cornerstone of the developments in science & technology and management, as it is said, “there is always a better way to do!”   4.0   Survey findings While discussing about the structure of the questionnaire, it was pointed out that the questions should have the basis with reference to the objectives, and it should reflect the critical factors which are under consideration.  There are several factors which are related to CRM, and a better understanding of these factors would be useful to shape up the policies and strategies in this respect. What are the Clients’ attitudes toward the non profit organizations? How often do they donate and the percentage of their income they donate. Is there any regularity with which contributions are made by the donors? Are the donations, cause-specific or entity-specific? What are the channels through which they are contacted?  What is their response? Do they want to identify their involvement with the use of the funds contributed by them?   What are their perceptions of the factor ‘personal touch. Are there any specific reasons behind the charity? What are the benefits they derive? The donations may be based on religious or community considerations, tax considerations, sentiments, etc.  A person’s heart with a physically challenged sister may be moved by the plight of the physically challenged.  The charity may be linked to some occasions such as birthdays, wedding days, anniversaries (death) of their near and dear ones.  Or simply some people may feel that it is their responsibility to take care of the less fortunate and downtrodden. However, the important points emerged as elaborated under the head ‘Major Findings’ indicates the relevance and efficacy of CRM for fundraising. 4.1   Survey findings & literature review           Long term relationship: ‘The development of long-term relationship becomes important not only with resource providers but also with other ‘customers’.  Christopher, Payne and Ballantyne (1991) identify six markets that need to be addressed within an RM perspective: customer, referral, supplier, employee, influencer and internal markets – Convey T’ (Buttle F, 1995, p180) The charities with a long term programs and commitment would generally like to have long term relationships with the donors who are generous and regular in their support, say donating for the cause of orphans on wedding day or in memory of one’s mother, or on birthdays of their children and so on.  The charitable institutions should maintain data base to tap these sources, sending receipts, certificates for tax purposes, reminders about the special occasions, greetings and ‘thank you’ notes to improve the services, consequentially the relationship. Word of mouth: McConnell B and Huba J lament, ‘Marketing in 2002 is based on 1960’s principles.  What’s taught in a college marketing class?  The four Ps: Product, Place, Price and Promotion. .. Most college marketing textbooks cover very little, if anything, about word-of-mouth and customer evangelism.’ (2003, p6) The donors appreciate personal touch, and their response is mostly positive in this respect, and they react favorably towards ‘word of mouth’ campaign.. Strategy: The strategies by way of courtesies make a stray donor committed, and a committed one to make bigger gifts on special occasions in their life, and perhaps leave a legacy in favor of the institution when the time is ripe.   Here, the point to note here is the ‘service’ with which the donor is treated.   Therefore, service factor functions well and yield results not only in commercial operations but also with the charitable or non profit organizations. Vehicles, building blocks, equipments are liberally donated by the donors who are attached to the charitable institution. Competition: There is competition in all walks of life whether one is driven by commercial or service (meaning service to society) motive.  Not only that, it is important to ensure that the donor cherishes his relationship with the organization based on its mission and the trust he reposed on the ‘organization’.  If the donor is made to realize that he is part of the organization, it paves way for a long term relationship with commitment on the part of the donor. Limitations: It is humanly impossible to know the reasons behind the donors’ behavior. There are number of reasons such as love, compassion, empathy, guilt, shame, fulfillment of the parents’ wish, child or friend’s wish, penance, etc.   The reason here is not important, but, the recognition of the sentiment, that is important, because finding out the reason is not only ‘not important’, but also not going to be useful for the organization, may be detrimental, because it is in the personal domain of the benefactors. Therefore, a mere curiosity in this respect may backfire, and it is outside he purview of our analysis for the simple reason that it is extraneous to our study, because nurturing the relationship and not investigating into the motives is relevant and constructive.    5.0   Conclusion                  Tact, maturity, understanding and selfless service of the NFP at all levels is important for the successful implementation of the programs. For the Salvation Army with the strong fundamentals in this respect, CRM concepts merged with the philosophy underlying the charity, service spirit and proper recruitment policy (staff & volunteers) would yield good results in general, and in terms of long term association of the donors and volunteers, in particular. Recommendations: Recommendations as detailed in the beginning based on the findings emphasize the long term approach, word-of-mouth campaign and improvement in the level of service, with a view on donor retention. Value Management: ‘Value Based Management is the management approach that ensures corporations are run consistently on value (normally: maximizing shareholder value)… Value Based Management includes 1. Creating Value, 2. Managing for Value (governance, change management, organizational culture, communication, leadership), and 3. Measuring Value’ (Value Based Management.net, 2010). In the case of NFP organizations, value refers to the perception of the donors as well as the ‘service’ in terms of meeting their satisfaction, apart from the professionalism, efficiency and quality with which the organization is run. Satisfying the psychological needs of the resource provider is the underlying concept of customer relationship management with reference to the not for profit setting. The NFP organizations have five key constituent groups that need to be considerd: Resource generators,  service users , regulators, managers and staff members (Gwin, 1990)’ (Buttle F, 1996, p180). Therefore, a comprehensive strategy in this respect covering all the constituents is important to enhance the value perspective of the organization. Reference List  Department of the Treasury Internal Revenue Service, 2009, Publication 4220 (Rev. 8-2009) Catalog Number 37053T, viewed on 12 April 2010,http://www.irs.gov/pub/irs-pdf/p4220.pdf  LYSOHIR, S., DOANE, J., & IMHOFF, C. (2007). The principles of successful CRM. Straight talk. New York, N.Y., Distributed by Insight Media. BUTTLE, F. (1996). Relationship marketing: theory and practice. London, Chapman. McConnell,  B., & Huba, J., (2003). Creating customer evangelists: how loyal customers become a volunteer sales force Value Based Management.net, (2010). What is Value Based Management? Definition, viewed on 12 April 2010, http://www.valuebasedmanagement.net/faq_what_is_value_based_management.html Hopefoundation, Hope Foundation, a Public Charitable Trust. Viewed on 14 April 2010, hopefoundation.in Makinson & d’ Apice, 2010, Welcome to our Charity & Not-For-Profit Resources Centre, viewed on 14 April 2010, http://www.makdap.com.au/charity_home.cfm Louise Arkles, (2010). Gender Lens Workshops, Philanthropy Oz Blog. Viewed on 14 April 2010, http://blog.philanthropy.org.au/ Maiuro, Lisa Simonson; Schneider, Helen; Bellows, Nicole (2010), Endangered species? Not-for-profit hospitals face tax-exemption challenge: How can you maintain your organizations tax-exempt status?, Healthcare Financial Management Moor, D., (2009). Taxing Charity: a submission to the review‘Australia’s future tax system’ Public Interest Advocacy Centre. Viewed on 14 April 2010,http://www.piac.asn.au/publications/pubs/09.05.01%20Taxing%20Charity.pdf Hibbert, S.  and Horne, S.(1996), Giving to charity: questioning the donor decision process, Journal of Consumer Marketing. MCB UP Ltd Lyons, M. (2001), Third Sector: The Contribution of Nonprofit and Cooperative Enterprise in Australia, Allen & Unwin Zappala, G. & Lyones, (2006) M. Factors Associated with Fundraising Dependency among Nonprofit Organisations in Australia, Australian Journal of Social Issues, Vol. 41, 2006. Ms. Woodward, S. & Ramsay, I. (2003), Accountability and Corporate Governance of Not-for-Profit Companies Project, Centre for Corporate Law and Securities Regulation (CCLSR) at The University of Melbourne. Viewed on 14 April 2010, http://cclsr.law.unimelb.edu.au/not-for-profit/finalreport/Final%20PDFs/Chapter%201%20OVERVIEW.pdf London Metropolitan Business School (2010).  Non-Profit and Voluntary Sector Marketing, London Metropolitan University. Viewd on 14 April 2010,http://www.londonmet.ac.uk/lmbs/research/centre-for-research-in-marketing-cermark/publications/publications-abstracts/non-profit-and-voluntary-sector-marketing-1.cfm#N5 Frey, D. (2010)Charity Marketing: Growing Your Business Through Charitable Giving. Viewed on 14 April 2010, www.MarketingBestPractices.com  Read More
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