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Should You Dive into Direct Mail? Here’s What You Need to Know First

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You’ve heard the news: Direct Mail is not dead. In fact, it’s still where much of the action is for fundraisers.

Does that mean your organisation should dive into Direct Mail if you are not already doing it?

Maybe.

I’m going to give you some facts and figures that can help you decide whether or not you should fire up a direct mail program. It can be expensive, difficult, and it takes some time to start paying off. 

To get us started, let me give you what might be a startling figure: 0.6%.

That’s six out of a thousand.

Not much, but it’s a pretty average response rate for “cold” direct mail in well developed direct mail markets (like USA, UK, Australia, NZ, Hong Kong). “Cold’ is mailing to people who have never donated in response to mail, to you, before. That includes bought or rented lists, people who are on your database but never donated, attendees of events and anyone else.

For now, 0.6% is what you’ll get, unless or until you know otherwise. Response often ranges up toward 1% and sometimes even higher.

That 0.6% guess will help us calculate the volume of your direct mail program. Which leads us to the second magic number: 200.

You always need at least 200 responses in any test group to be able to statistically compare.

If you can’t afford to mail enough pieces to get 200 responses then the whole thing is pointless. Don’t do it.

To get 200 responses at 0.6% you need to mail 33,000 packs.

If you want to test two packs against each other (which you should be doing) then you have to mail 66,000 packs.

If you can afford to mail that 66,000, you’re on target — so far.

But there’s one other step.

That 66,000 mailing will hopefully get you around 400 new donors. That’s not enough donors for a sustainable direct mail program. Basically, they won’t donate enough to cover the cost of your time, database, processes etc.

For that, you need to get at least 1,000 new donors within your first 12 months. To get that, you need to mail 165,000 packs in the next year. Our third number.

So if you can’t afford that, or you can’t find that many names to mail, don’t invest in direct mail acquisition.

But if you can, here’s the next level: Knowing if it’s not just numerically successful, but also financially viable.

Which brings us to our fourth number, which is your Return On Investment (ROI) from your direct mail — or how much you got back for every dollar you spent. ROI is not a good measure for warm fundraising activities (it is actually destructive) but very useful for acquisition.

You calculate ROI by dividing the total income your donor acquisition brought in by the total cost of producing and mailing it. That should include all costs, including the cost to print and mail, list costs, and the cost of writing, design, strategy, project management, etc.

ROI can improve three ways:

  1. Your cost is low.
  2. Your response is high.
  3. Your average gift is high.

They’re all important, but you should focus most on #2 and #3. Extreme cost cutting often ends up lowering response, so it’s self-defeating. Control those costs, but really work to increase response and average gift.

Any ROI above 1.0 on a volume of 66,000 (meaning you brought in as much as or more than you spent) is practically a miracle. If you are trying direct mail in a country where it isn’t well established, maybe you have a better chance of a miracle: if you can get hold of a good list.

Rare these days. More likely, you’ll get back less than you spend.

An ROI above 0.65 ROI (65¢ for every dollar you spent) is very good. If you get that, it means you should almost certainly keep doing direct mail, and on a larger scale.

If the ROI is below this your direct mail is probably not viable. The ongoing donors will not likely cover their cost over many years.

Let’s summarize those BIG 4 direct mail acquisition numbers:

  • Response rate: around 0.6% or higher.
  • 200 (or better yet, 400 total responses, which means mailing about 66,000 to start.)
  • 1,000 new donors in your first 12 months. That means mailing about 165,000 packs in that first year.
  • ROI: if it’s 0.65, great; if it’s 0.40 to 0.65 it might work; if it’s under 0.40, there are likely better options for you.

That’s a good start. Once you establish that you have a viable program, you need to track some other things you can’t measure until a year later:

  • Second gift rate: how many of your new donors go on to give again within 12 months. Only 35%-50% of donors ever give a second gift.
  • Annual giving: add up how much they gave in 12 months since they came on board. This is how you’ll move from losing money to making it.
  • Monthly gift conversion. Encouraging your new donors to become monthly donors is one of the keys to success. PLEASE call all new donors and ask them to be a monthly giver within weeks of their initial donation.
  • Any donors who give more than twice the average donation: call them immediately, thank, and call them again a few weeks later asking for that second gift.
  • Estimate the 5-year ROI using some basic modelling.

You also should keep track of these other long-term things:

  • Donor response to a survey: send a supporter connection survey. That’s the best way to upgrade donors to their highest possible level.
  • Bequest commitments.
  • Volunteers (if that is important to your organisation).
  • Cross selling to donors if there are other ways to support your mission beyond donating.

Sounds hard work. Why bother?

Direct mail is still far and away the BEST source of major donors and bequests. Like 5-10 times better than anything else.

If you have a great, integrated program with the direct marketing team, marketing-communications and major donor/bequest people working together: it can beat everything else in the long term! It is just hard!

In fact, it’s so hard, I’d say don’t do direct mail acquisition AT ALL unless…

  • You are only mailing locals, swapped lists or a well-defined “tribe”
  • You hire a professional direct marketing fundraising agency (not an advertising agency) with a good reputation.
  • You have superb integration with major donor and bequest people willing to follow up these mid value and bequest leads.
  • You have puppies. (Just kidding. But only a little; puppies are probably the most effective subject for fundraising – even if you aren’t an animal charity, squeeze some in!)
  • Don’t make it up. Learn. If you are serious about investing – even if you meet the criteria above, PLEASE talk to me about how I can help through our one-to-one coaching. You’ll easily cover the investment in savings and have a more informed view!

I hope this helps you make the decision about diving into direct mail acquisition. It’s not for the faint of heart! But it can power the funding of your organisation like nothing else!

Before you embark on a new or revised donor acquisition strategy – even before you begin to look at the budget – please talk to us! We have tons of tools, data and helpful advice that will make it so much easier. Use this link  to book a free call with Sean. He’ll give you some very valuable free advice on the direction you should probably go, and will show you how we can help you more through our Coaching+ program.

Related posts about direct mail fundraising:

 

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