Tuesday, February 9, 2010

Libertarian Party Fails To Maximize Income From Membership Dues

Basic Membership (a/k/a Sustaining Membership) in the Libertarian Party requires a $25.00 contribution. A number of members from New York State recently decided they wished to be relieved of the responsibility of keeping track of their renewal dates and would prefer to increase their annual contribution to the Libertarian Party to $36.00 annually by joining the Liberty Pledge Club and making a monthly contribution.

These members were told they could not make that increased contribution to the party through a monthly pledge and that the only way they could join the Liberty Pledge Club is if they donated a minimum of $10.00 per month for an annual contribution of $120.00. As a result, these members have kept their annual contributions at $25.00.

Dr. Tom Stevens, a member of the Libertarian Party, stated:

This policy of requiring a minimum monthly pledge of $10.00 for an annual contribution of $120.00 makes no sense. If a Sustaining Member wishes to increase his or her contribution from $25.00 to $36.00 or $48.00 or some other figure lower than $120.00, the Libertarian Party should set them up in the Liberty Pledge Club and take their monthly contribution. Whatever credit card fee is charged for this automatic processing is more than covered by the increased contribution that member is making to the Libertarian Party. The monthly minimum contribution required to join the Liberty Pledge Club should be immediately reduced to $3.00 per month, which is $36.00 per year. A member may be inclined to donate $5.00 per month, which would be an annual contribution of $60.00 per year. The Libertarian Party is losing an opportunity to increase the revenue they collect from dues. The leaders of the party should rectify this situation without further delay.

Dr. Tom Stevens serves as a member of the Judicial Committee of the Libertarian Party and is the LPQC State Representative to the Libertarian Party of New York.

6 comments:

  1. Because of the associate costs of credit card charges. It makes very little sense to do less than $5 at a time, and even less so if there is material to be sent out in order to collect such a contribution. The real hurdles here are the monthly timing or the means of donation. As there is a lower limit to monthly contributions that can be done effectively sans internet only donation.

    Also there is a certain prestige that need be associated with higher donations. People contribute to be part of something. If you make the donation amount less, will the increased numbers of contributors potentially be offset by reduced donations by standing members to the new base rate?

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  2. Andrew writes: "Because of the associate costs of credit card charges, it makes very little sense to do less than $5 at a time"

    Perhaps that is so but I will need the facts upon which you are relying to evaluate your criticism.

    I have proposed a lower end monthly donation of $3.00, which would yield the party $36.00 over twelve months, which is $11.00 more than the basic membership.

    What is the fee that would be charged to the LP by Mastercard and/or Visa on a $3.00 automatic monthly charge over twelve months?

    Only with this information, can I evaluate whether you are correct when you say my proposal makes "very little sense".

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  3. Most credit card companies (including pay pal), charge an interchange fee to companies that receive payments through their cards or services.

    Most companies set a minimum payment / donation (Usually around $5) because otherwise they might lose money.

    Although there has been some major progress made in this field recently. I recommend reading Ron Rivest's "Peppercoin Micropayments." He's a mathematician and cryptographer. He gave a very insightful talk on the subject at a lecture I went to two years back. I can lend you my copy if you'd like.

    For a more practical application, here's an article that's somewhat related to the subject (though being CNN, it's as much hyperbole as information.)
    http://money.cnn.com/2008/07/28/news/credit_card_interchange/

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  4. I am well aware of interchange fees and I read the articles you provided links to. The fees referred to come to, on average, 2% of the purchase price. So for each $3.00 processed, the merchant fee would be $.06 multipled by 12 months for a total of $.72.

    So according to my proposal of the minimum donation of $3.00 per month (they might get much more), the LP would get at the very least $36.00 or $11.00 more than the basic membership of $25.00 for which they would have to pay an overall fee of $.72.

    Please explain again why my proposal makes "very little sense".

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  5. the average of 2% is not actually a 2% rate charge, it just averages out to that in general. There is typically a base rate charge for making a transaction and then an additional rate percentage charge. This means that the amount taken out for charge is actually less by percent as the amount increases in size (on a transaction basis.) So 4 transactions of $25 would be charged less than 5 transactions of $20.

    I made two points: one pertaining to social prestige (but that's put that one aside for now.) The other point was that is the libertarian party wanted to increase revenue by reducing the minimum donation amount, then it would be a much better idea to allow for people to contribute on a bi-monthly basis than to reduce the amount of the minimum transaction.

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  6. Not counting labor costs that are difficult to calculate in my opinion, Robert Kraus, who is responsible for processing credit card donations made to the Libertarian Party, has informed me that the costs associated with a $3.00 and $5.00 donation made to the LP per month would be "3-4% (so ave 3.5%) plus about 20-30 cents per transaction".

    Using the 3.5% and $.25 per transaction fee on average to calculate the cost, that would mean that a $3.00 donation would cost the LP $.35 in fees and a $5.00 donation would cost the LP $.42 on average.

    Hence, a $36.00 donation paid over 12 months would cost the LP $4.20 in total whereas a $60.00 donation paid over 12 months would cost the LP $5.04.

    I believe this information more than supports the viability of my proposal from a fee perspective.

    ReplyDelete