Monday, February 21, 2011

Spending less means less effectiveness

There’s an old adage in marketing: you need to spend money to make money. Some research from a US study on non-profits has found that is very true.

The Nonprofit Fundraising and Administrative Cost Project reviewed the tax forms of 250,000 US non-profits in-depth case, did in-depth studies of nine organizations, and analyzed 1,500 survey responses. They found that spending on infrastructure, including things like marketing was directly tied to overall effectiveness.

“…contrary to the popular idea that spending less in these areas is a virtue, our cases suggest that nonprofits that spend too little on infrastructure have more limited effectiveness than those that spend more reasonably,” they concluded.

They suggested that besides the ceilings that many put on overhead spending, there also needed to be floors as well. “Although our study does not specify where those floors should be set, it is an issue the sector needs to reflect on and address.”

In Canada, there are no benchmarks about non-profit spending on marketing. In the US there is some data that shows that marketing spending is an average of between 2-3% of operating costs. However, the data suggests there are in fact wide varieties of spending across the non-profit sector.

Where does that leave you? Come budget time you need to not only ask what your maximum spending on marketing is but also what is your minimum. Find it by looking at what the basic marketing picture looks like and costing that. Set that as the minimum and go from there.

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