VIDEO How Focus on ROI Can Hobble Your Fundraising
Maths of Fundraising

VIDEO: How Focus on ROI Can Hobble Your Fundraising

I hate to admit it, but a lot of what it takes to be smart about fundraising means doing mathematics.

Not my best subject.

Fortunately, it’s not super-hard math.

And fortunately, we have math geeks like Sean to help us understand.

In this difficult time, we need all the good math we can get.

Check out our discussion on the danger of relying on Return on Investment (ROI) and its even more evil twin, Cost to Raise a Dollar.

Find out what numbers you should and should not be looking at as you try to understand what’s happening with your fundraising.

Whether it’s the math of fundraising or any other topic, it’s best to equip yourself for success. And that’s what you’ll do when you join The Fundraisingology Lab by Moceanic. It’s a true community, the thing we all need most right now — plus all kinds of courses, templates, checklists, and other resources that can help you go to new places as a fundraiser. More information here.

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Direct MailMaths of Fundraising

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

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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Maths of Fundraising

VIDEO: How Much Do You Cost?

Too often we treat the time of fundraising professionals like you as if it’s a free resource.

But it’s not at all free. In fact, it’s the most precious and irreplaceable resource you have. And when you put a dollar value on your time, you’ll have good answers to questions you may have struggled with before:

  • Should I be working on that event we’re doing?
  • Should we outsource something I’ve been doing?
  • Is now the time to hire a new person?
  • Is it better for me to spend my time doing activity A, or activity B?

The formula gives you straightforward, no-ambiguity answers to questions like these. Because the second you put a real value on your time, the light will shine on those questions. And you’ll find that your time is treated with the respect it deserves!

The formula is easy. You can do it in your head. And watch how it guides your thinking and strategy! Watch the video!

Discover how you can connect more with your donors, grow your fundraising income, and master your career. Join The Fundraisingology Lab and you join the thousands of smart fundraisers who are becoming EXTRAORDINARY FUNDRAISERS. Check it out.

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Direct Mail

Direct Mail: Dead, or More Alive Than Ever?

These are dark times for direct mail fundraising. Response rates are down (and have been trending lower for more than a decade). At the same time, costs of paper, printing, and postage keep going up, usually faster than inflation.

And then there’s the M-word: Millennials. Everybody knows they don’t respond to direct mail. We’re not sure they can even find their own mail boxes!

So direct mail is dead, right? The sooner you stop using it for fundraising, the better. Right?

Not so fast.

A sober and non-panicked look tells us that direct mail isn’t dead. It’s not even sick. But it’s changing, like everything else.

If you’re profitably using direct mail in your fundraising program, cancelling it might be one of the biggest mistakes you could make.

Have you heard about the grand experiment of the American Cancer Society?

One of the biggest direct mail fundraisers in the US looked at the big picture of falling response rates, rising costs, and the looming Millennial Threat. On top of that, the direct mail program was a relatively small source of revenue. It seemed obvious to them: direct mail was fading in importance. So they suspended direct mail donor acquisition. Just acquisition, which is the least profitable and most difficult part of direct mail. They kept their large and thriving direct mail donor cultivation program going. The suspension started in January 2013.

They restarted direct mail donor acquisition about 18 months later.

Because the experiment was a financial disaster. Here’s what happened:

  • The number of new donors to the Society dropped by 11% — those other channels didn’t pick up the slack.
  • The massive and successful event, Relay for Life, raised $25 million less than the previous year.
  • The estimated five-year impact on income: a loss of $29.5 million

And that doesn’t even look at the loss of bequests, which largely come from direct mail donors. That loss is likely only now starting to be felt. And it is going to add millions more in losses over the years.

If an 18-month suspension of direct mail acquisition can do that much damage to an organization with the massive brand recognition and resources of the American Cancer Society, think what it might do to most fundraisers — the rest of us, who are far smaller and far more dependent on individual donors.

Thing is, even as it grows more expensive and difficult, direct mail is a keystone investment for almost any fundraising program. It is a scalable, reliable source of donors who will do more for you over time. As one American Cancer Society leader said after the experiment, “For every $1 we invest in direct mail acquisition, we bring in $7 over the course of three years.”

No question — direct mail is not the cure-all it used to be. The cost has made it unworkable for some organizations.

If you have a viable direct mail program and you shut it down, here are some things that may happen:

  • You’ll likely lose immediate (first year) revenue.
  • Your event revenue may suffer.
  • You’ll get fewer planned giving prospects.
  • Your major donor program will shrink. The large majority of major donors start their giving as direct mail donors.
  • Your online giving will probably suffer — direct mail is one of the main drivers of online giving.

But what about the Millennial Threat? Are their different habits and media use going to finally kill off direct mail as a fundraising channel?

Maybe. But that isn’t a factor yet. People of that age are not DM-responsive — but they’re less responsive to other media too. We thought the same things about Boomers a couple of decades ago. When they were in their 30s and 40s, they were less responsive to direct mail, and all kinds of boys cried all kinds of wolf about the coming doom. But as the Boomers have aged into their 50s, 60s, and even 70s, we see them paying more attention to direct mail. Chances are, the Millennials will do something similar when they reach those ages. But even if they don’t, that’s years in the future. It’s not now.

So how do you know if direct mail is working? There’s a pretty easy calculation:

  • If your direct mail acquisition is getting a return on investment of less than 0.5:1, it doesn’t really work.  The cost is so high you will always struggle to make it pay off.
  • If that acquisition ROI is 0.65:1 or better, you almost certainly have a viable direct mail program.
  • If it’s somewhere between 0.5 and 0.65, it might be viable.

And here’s the other factor: Direct mail is the best source of major donors and bequest donors. Nothing else comes close. So to really get full value from direct mail, you must have two things:

  1. A robust donor upgrade pipeline that encourages donors to increase their giving.
  2. A solid bequest marketing and follow-up program.

Without those things, even a solid direct mail program is probably iffy in the long run!

Bottom line: Direct mail is a challenge. And expensive. (And it’s getting more so.) Direct mail is important, but it might not be for you just now.  Keep your eye on that initial return on investment and make sure you have a way to maximize donor upgrading and bequest marketing!

For more on the investment mindset you need to maximize your direct mail program, see this enlightening video with Professor Adrian Sargeant: How to Use — or Misuse Donor Lifetime Value

Want help overcoming the challenges of direct mail? Join The Fundraisingology Lab for the resources and community that will help you become a master!

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Maths of Fundraising

VIDEO: How Much Do YOU Cost Your Organisation?

Should you write that appeal? Plan that event? Make those phone calls?

Or would it be smarter to outsource it?

There’s an amazingly easy way to calculate that.

In this short video, I’ll show how an astoundingly complex bundle of facts all boil down to a super-simple formula that shows exactly who much you (or any person on salary) costs your organisation — by the day or by the hour.

Empowered with this knowledge, you can make smart decisions about how you spend your time. Get rid of the bonehead stuff that doesn’t make sense. Spend your time doing things that have the most impact!

Please share your experience with decisions about outsourcing or not by leaving your reply below. We’d love to learn from your experience.

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pop art man holding money bags free no strings
Pro Bono

Free Toilet Paper! How Much Is It Going to Cost?

Someone recently asked me a very good question: Are in-kind donations part of fundraisers’ responsibility? Or is it the responsibility of a procurement officer?

Charities love to get stuff for free. When I was a new fundraiser, fresh out of college in 1992, I rang up Jane Tewson – founder of Charity Projects / Comic Relief in the mid 80s. I told her I wanted to be a fundraiser, and asked if I could visit her for tips. She accepted and I think it would have been my second ever trip to the big city (London).

It was a great, inspiring day and one of the things she told me was that Charity Projects didn’t pay for anything. They had this team of scroungers who got stuff to keep the place running. A great example was the 180 toilet rolls stacked outside the loos that someone had donated.

Over the years she has set up other charities — including some here in Australia — and been involved in organisations connected with NGOs, such as an organisation that measures corporate social responsibility.

But here’s the important thing: Since meeting Jane back then, I have not seen any significant successful pro bono (free) services that genuinely help charities. The only exceptions are some well-run volunteer programs.

Significant pro bono services that I have come across as a fundraiser, and then as a supplier tend to fall into three categories:

  1. Marketing / PR / advertising creative. (“We will produce a great viral video for you.”)
  2. Marketing / PR / advertising media. (“We have a load of display space at train stations you can have for free.”)
  3. Sales opportunities. (“Your donors will want to buy our insurance, and we give you a percentage of the sale.”)

The number of times charities have talked to me all excited about a free opportunity is overwhelming.

But time after time, a cold hard look at it afterwards shows that the whole thing was a waste of time. After the event (and after the agency has won its award) the charity usually says, “It didn’t work — but at least it didn’t cost us anything!”

But they are wrong.

Saying it was free but it didn’t work is like saying, “The surgery was a success, but the patient died.” If the project didn’t work, it cost you. Probably a lot more than you think.

The time spent negotiating, approving copy, ensuring IP rights are maintained — all that is expensive. The quality staff time you spend on it is time not spent doing something you know would have created revenue.

Even a free direct mail appeal that raises $100,000 is not free money — if it took the place of one that cost $50,000 — and raised $250,000. That’s a clear loss of $100,000. And an even bigger loss of donor retention because of the donors who didn’t give who otherwise might have. You’re going to be paying the bill for the free appeal for years to come. (And in my experience, those “free” fundraising projects almost always fail much more dismally than my example here!)

Or even if the pro bono work was not instead of another activity, it costs time. Most fundraisers fail to cultivate relationships with their top donors — because there just isn’t enough time. There is no doubt that those half dozen calls NOT made to top donors would have raised a lot of money, but didn’t — because of that free gift.

If someone offers you something for free, remember this: If it seems too good to be true, it is.

Nothing is ever truly free.

When ad agencies and media companies suffer losses in work, some will show up at your door, offering their services to charities for free. To them, it’s a way to bulk up their portfolio, burnish their reputation, keep staff busy in slow times, and maybe get a tax write-off. They’re not doing it purely out of virtue! (I’m sure they’re good and decent people, but their duty is to their own company, not to your mission!)

If someone comes to you with a really exciting offer of free creative, media, or a promotion opportunity, think it through carefully. Make sure you are in charge of the project — that you can stop the project or fire the agency if need be. Make extra sure there are clear goals, expectations, and a contract. Nail down exactly how much of your staff time it will take to run the project — and put a monetary value on that time to avoid those “invisible” losses.

I am sure there are good pro bono offers out there. But I’ve never seen one since Comic Relief all those years ago. Even then, it’s quite possible they would have raised more money if their people spent their time asking donors for money, instead of for toilet rolls.

Please share your experience with pro bono “gifts” by leaving your reply below. We’d love to learn from your experience.

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Maths of Fundraising

How Cost-Effectiveness Could Destroy Your Charity

Write down these three things:

  • Your favourite charity — not the one you work for
  • How you support that charity (monthly gift, volunteer, occasional donation)
  • Why you support them

Here’s mine:

  • My favourite charity: The Sumba Foundation
  • How I support it: Regular gift from credit card plus an occasional extra donation
  • Why? I went to see them at Christmas last year and met loads of the kids. Before the Sumba Foundation started its work, half of all kids would die before they get to adulthood, mostly from malaria. It is easily prevented. And I was really motivated.

Please go ahead and make your list. It will be worth it.

It’s a curious thing, but most charities, much of the media, and an annoying number of public servants appear to think that the percentage of money raised by charities that are spent on the core charitable work is the most important measure of worth.

So much so, that for some states and nations, return on investment (ROI) is one of the key measures that charities must report.

That obsession with ROI damages our ability to make the world a better place.

And I have the data to prove it.

So often, fundraisers are given the challenge to increase income by some amount without lowering the ROI (or, to put it the other way around, without raising the cost of fundraising, or COF).

ROI can be a useful measure – for example, when a fundraiser is considering tactic A vs tactic B to acquire new donors and there is a limited budget. Provided ROI is considered over several years, measured holistically (ie to include additional gifts, upgrades and bequests), and the rollout/repeat potential is considered, then ROI can be the best measure.

So why does it make me so angry? Principally, because an obsession with ROI above all else kills growth. Too many charities choose the path of slow growth – or even reject otherwise successful strategies – because of their fear of low ROI.

For example, charity A raises $40,000 from its Christmas appeal to donors, which costs $10,000 – an ROI of 4. They know that by increasing the amount of time spent on the appeal, sending out more information and writing longer, more professional copy (in other words, by spending more money) they could likely increase the donation income to $100,000. But the pack would then cost about $50,000. And the ROI would be 2.

So the boss says no, and the charity continues the old way, maybe improving income a bit by writing longer copy. Net income stays at about $30,000. An improved and more expensive method would have netted $50,000.

Apart from the fact that the charity has $20,000 less to spend on services (or fundraising growth) in the short term, the decision is even more harmful in the long term.

Meanwhile, Charity B, which decides to go the more expensive route, will benefit from:

  • Higher net income immediately.
  • Many more donors giving again and again for years to come.

This is not just some hypothetical example. The chart below depicts a real-life Australian case study. This charity decided to look at the long-term picture, and not worry about ROI.

net vs roi

The consequence for this charity of their shift in mindset was enormous.

You can see that after a number of years with lower ROI, it is creeping up again. More importantly, the overall amount available for services (that is, net income) from Tax 04 to Xmas 07 was $2.08 million. (Charities in Australia usually have two peak times for mailing – Christmas and “tax” – which is mailed around April/May). If they had kept to the old strategy, and experienced a bit of growth, they could have expected to net about $600K.

I repeat: the organisation could have raised a net of $600,000, at an impressive average ROI of 7. Instead, they raised $2.08 million, at an average ROI of 2.8. Which result is going to help its beneficiaries more?

Why are so many intelligent people led astray by ROI to the point that they choose to be far less effective at what they exist to do in the first place?

The answer is simple – they’ve been told that this is what is important to donors.

But we keep hearing “ROI (or cost of fundraising, COF) is important to donors.” But who says so? Well, the media, common sense – and even the public. The problem is that this is what people (donors and non-donors) really do think. But it’s not how they behave. The charity above clearly had no problem.

I have lots of other examples.

The charity probably had to explain the strategy to some major donors and even the authorities. But its economic basis was so solid that those guys were not going to have a problem with it. Normal donors still gave – and they did nothing to “hide” their drop in ROI.

The reason donors give is that they are asked properly and they care about the cause. People who harp on about the amount of money that goes on administration are normally non-donors. They just use the cost of fundraising as a good excuse for not giving. (And they’re not going to give anyway — they’d find some other excuse if that weren’t available to them.)

I recall being told about an experiment where a group of people were given real money to donate. They were given choices based on photos, stories about beneficiaries, and pie charts of expenditure. Never were the pie charts a significant factor in choosing which charity to support.

I am not as extreme on this point as Professor Myles McGregor-Lowndes of the Australian Centre for Philanthropy and Nonprofit Studies at QUT. During a presentation on accounting for charities (which he managed to make interesting), he called on the Fundraising Institute of Australia to bar charities who focus on how low their cost of fundraising is.

But no fundraiser should allow their organisation’s beneficiaries to suffer because they are bamboozled by the unsubstantiated bollocks that passes for fact when it comes to ROI. Of course, you need to be careful with your funds – I am not suggesting charities go out and take ridiculous risks – just plan strategically.

Don’t believe me?

Remember the exercise I asked you to do right at the beginning? For the third question (Why you support your favourite charity) did you write something like this?

Their cost of fundraising is really low and I am impressed by their effective admin systems…

Of course not. Do you even know their cost of fundraising?

Donors care about what you do and the impact that you have. Not what it costs you to raise it.

Please share your experience with reporting ROI or cost of fundraising by leaving your reply below. We’d love to learn from your experience.

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Direct Mail

Use Postage to Maximize Impact in Direct Mail Fundraising

It’s easy to get so caught up in the creativity of a direct mail pack that you forget one of the most fundamental facts about it:

It’s a piece of mail that goes through the postal system.

And that means you have choices about the type of postage you use — both outbound and inbound.

In the US, we have two postage rates with a whole lot of ways to deliver each:

  1. Nonprofit rate, which we can send with a stamp, printed indicia, or metered postage
  2. First class, which can also be sent different ways.

postage

The cost for both rates varies, depending on how much you cooperate with the postal service’s automation standards.

Here’s a surprise: Recent testing has shown that the rate and type of postage you use to send direct mail has little impact on response.

That means when you’re choosing postage, you are deciding on two factors:

  • Cost. Nonprofit rate starts as low as 10¢; a stamped letter is 49¢.
  • Timing. First class mail usually gets delivered more quickly than nonprofit rate mail.

In real life, this means you can use nonprofit rate postage any time, even with higher-end donors.  Unless you want them to get the mail sooner.  Also, we know that variety is good for any donor’s direct mail diet, so using first class postage for your upper donors is probably worth doing.

Another of those you-can-go-either-way postage decisions is what kind of return envelope you use:

  • Business Reply Envelope (BRE). The donor can send it back without postage; the postal service bills you for a first-class letter plus a little more.
  • Courtesy Reply Envelope (CRE). The donor has to add a stamp to mail it.

(I’m describing how it works in the US; most countries have something similar.)

It used to be that BREs won nearly every test.  Not anymore, at least in my experience. Now, BREs and CREs perform about the same.  Here’s the odd thing about testing this:  If you always use one type of return envelope, and then you test the other type against your usual, the test does better.  That is, variety and change are good for a response!

So far, I’ve been telling you that your postage decisions don’t make much of a difference for direct mail results.  But there’s one approach I know that makes a big difference: Adding real first-class stamps to the return envelope.

By putting first-class stamps on the return envelope, you will increase response to your direct mail. Better yet, put several stamps of different denominations, adding up to first-class postage. Like this:

stampedCRE
This is an expensive thing to do, adding 49¢ to the cost of the direct mail pack.  For upper-end donors, it’s a no-brainer.  The increased response, coupled with the high gifts they give makes the cost an easy decision.  But for the rest of your donors, that cost outweighs the improvement in response.

In my experience, the dividing line between donors it’s worth spending the extra stamps on and those for whom it’s not worth the cost is at $100.  It pencils out for donors who give $100 or more in a year, but not for those who give less.

If your experience with postage is different from mine, I’d love to hear about it! If you are in a country with very different postal regulations or conditions that cause you to do things differently, let me know.

How to use postage to maximum impact in direct mail fundraising is just one of the things we’ll look at in my upcoming course, 7 Steps To Creating Record-Smashing Direct Mail.  Click here to sign up for The Fundraisingology Lab and get instant access!

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The Most Crazy Thing I Ever Heard
Maths of FundraisingBequests and Legacies

The Most Crazy Thing I Ever Heard

I heard the most crazy thing ever: A frustrated charity fundraiser told me that they had to cancel their annual survey this year.

Why? Had it failed to work?

Not at all. It was still gathering game-changing data from their donors. Uncovering major donors and legacy givers.

They were cancelling because the programs department had gone over budget. “We all have to cut costs!” she said, clearly frustrated.

They will definitely save costs. They’ll save even more than they planned:

  • They will save money on producing the survey
  • They will save on entering the data from the survey
  • They will save on banking and bank fees for depositing the immediate revenue
  • They won’t have to follow up all the bequest and major donor leads
  • They won’t have to call as many people to explain how they can become monthly donors after they asked
  • They will save costs on the people they don’t hire, or make redundant because they are raising less money
  • They will save money on implementing their charitable purpose because they won’t have as much to spend

Why not save even more? They can cut other super money-making communications. That will save an enormous amount of money — when they close their charity down.

But then I heard something even crazier.

Another frustrated fundraiser told me she could only send their survey every other year because they couldn’t keep up with the leads!

Yes. They couldn’t repeat a fantastic, donor-centric fundraising communication every year because it worked too well!

OK, it really is crazier than cutting because money is tight. But not by much.

Imagine any other business that cuts back on its best lead generator for the most valuable product line it sells because they can’t follow up the leads!

It really is the same as being offered a million dollars and saying “No thanks, I haven’t a bag big enough to put it in.” The savvy leader would come up with the $100 for the new bag.

In the case of a charity worried about following up too many people telling them they would like to donate over $1,000 – they should get more fundraisers to follow them up. Or re-prioritise!

Fundraisers: Don’t make silly decisions like this. And don’t accept them without a fight if it comes from above. If it keeps happening, take your brilliant skills and help a charity that genuinely wants to make the world better, and has people competent enough to not make crazy decisions.

Sean Triner

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Do I Still Love Premiums!?

Are premium direct mails still pulling their weight in donor acquisition?

A couple of years ago, I wrote an article on my blog and a similar one on 101 Fundraising about premium direct mail.

Direct mail, and in particular, premium direct mail, provides the largest source of new ‘one-off’ donors in Australia and New Zealand.  Also, direct mail is also the largest single source of known bequestors and donors giving over $1000.

Premium direct mail is when charities send a gift, like greetings cards or a tote bag to their potential donors. Like the one below.

Assistance Dogs Keyring 2010

But are these one-off donors ‘real donors’, or just people responding out of guilt, or even ‘bribed’ by their gifts?

The data below shows how Assistance Dogs Australia has fared since they started mailing large volumes of premiums from 2013.

PFBM17 Assistance Dogs massive growth

They also invested in monthly (regular) giving – calling new direct mail donors and asking for monthly gifts, and later on, investing in face to face.

Top Dog at Assistance Dogs, Richard Lord told me “We trialled premium direct mail and the results were unprecedented. This spurred us on to invest in the acquisition of cash donors who have been motivated to become regular givers and to leave bequests.”

(Yes, Top Dog really is his title.)

Focusing on the cash scale (green), you can see the huge growth they had.

After taking into account the original cost of acquisition, the net effect has been transformational for this charity, their brand awareness has skyrocketed, and their future ability to provide services secured.

Richard said, “The increased funds have added stability to our organisation allowing us to diversify our programs and to increase the numbers of clients we serve.”

Basically, those extra funds helped them get more dogs trained and placed.

The problem with premium direct mail compared to non-premium is the second gift rate: It is much lower.  It ranges from 20% to 40%, with most now just below 30%.  This compares to non-premium direct mail getting second gifts from 35% to 45% of new donors, with most around 40%.

Jason Smith, the boss of fundraising at the Burnet Institute in Melbourne told me the results of this big premium pack below that he produced with Pareto Fundraising. (Note to North American readers: the response numbers you’re about to see will make you green with envy! For a number of reasons, direct mail response rates are much higher in Australia than you are used to.)

Burnet Institute premium pack

He got 12% response rate across the 2015 and 2016 mailings.  That is 12% from acquisition!

But just 24% of these new people donated again.  So, of all the people he mailed, 9% gave once, and about 3% gave again.

If he had mailed a non-premium he’d have been lucky to get 2% in the first place.  AND he wouldn’t have had that income from the 9% of donors who effectively subsidised the costs.

In addition, he is tracking bequests and has had a couple of these new donors confirm they have put Burnet Institute in their will and is following up a load of other bequest leads.

Premium direct mail is not for all charities, and responses are lower now than in olden days (like five years ago) but it remains the biggest source of donors and retained monthly givers.

Should you consider premium direct mail acquisition for your cause now, in 2017?

For many charities – probably not.  It is hard work, expensive at first and needs specialist skills, a good quality donor database, and project management.

The decision will also depend on your country or state laws, regulations, costs and list access.

But generally, I would say that it is worth looking into if you know what you are doing in this area, have qualified staff or suppliers and you know how to follow up these new donors for bequests and mid-value donations.

What do you think? Do you have good or bad experiences from premium direct mail? Or have you any questions as to whether you should get into it or get out of it!? And please ask questions / share your experience by leaving comments below!

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