Bill me later: regular giving using direct mail

Being a face to face fundraiser in LA, Chicago or New York really stinks. Your colour-coordinated outfit and Ipad is simply no match for the drunks, junkies, and hookers who long ago staked out the best street corners and who defend their turf with zeal.

Being a media buyer for a charity using DRTV to recruit monthly donors in the US is even worse. 1 “tarp”, or enough ads to reach just 1% of your target market, can cost $1 million. You need $10 million just to “test” DRTV as a tool to recruit monthly donors.

It’s been like that for over 20 years. That’s why a long time ago US charities learned how to use direct mail to acquire monthly donors with tremendous success. Hundreds of US charities bring in over $1 million a month from monthly donors – acquired by direct mail. It’s a simple technique, but requires looking at both direct mail – and regular giving – in a completely different way.

Here in Australia, the average age of a cash direct mail donor is about 70 years old. The last thing people that age want is something that automatically debits their savings each month. That’s why when charities try to convert cash direct mail donors to regular giving, they often get a low response rate.

So Bill Them Later 

To get around this problem, many charities simply offer their direct mail cash donors a monthly “billing” option for their regular monthly gifts. They do not force the donor to hand over their credit card or direct debit details. Instead, each month they send the donor a “reminder”. It’s also a great opportunity to share news and the latest updates on your work.

If you have a donor’s credit card or direct debit details and you run their monthly pledge through each month, you usually get a 90%-99% “response rate” depending on the donor’s tenure.

When you send the donor a monthly reminder, and you leave it up to the donor to decide each month, you don’t get anything close to a 90% response rate. It’s more like a 40%-60% response rate.

In other words, you can mail these donors 12 times a year, and get a 40%-60% response rate. And you can send donor care to your heart’s delight each month too!

This dramatically increases the lifetime value of cash direct mail donors by simultaneously increasing the response rate to each appeal, and increasing the mailing frequency to 12 times a year.

Some people may look at a “bill me later” option for regular giving as a “glass half empty”. But just run the numbers and it becomes very obvious, very quickly that it is indeed a really big glass full of millions of dollars just waiting to be raised.

Cheers!

Thank you, may I have another? Donor Acknowledgements and Re-solicitation

For years, it’s been the dirty little secret of direct mail fundraising – thank you letters don’t work.

One problem is that a thank you letter can cost the same, or even more, than the cost of sending the original solicitation. Especially since they are sent in smaller volumes and there are lower economies of scale. If you add in staff time, per letter, it’s even worse. Here’s how that brutally affects the bottom-line:

Average Gift:                                                        $50
Response Rate:                                                    10%
Gross Income per letter mailed:                      $5.00
Cost per letter mailed:                                      -$2.00
Net Income per letter mailed:                           $3.00
Cost per thank you letter:                                 -$2.00
_________________________________________________
Net Income after thank you letter                    $1.00

Thank you letters take a big “bite” out of your net income, on a unit price basis. In order for the thank you letter to cost-justify, you need the response rate or the average gift to rise the next time you mail each donor. Sounds like a nice idea, but the problem is that the increase has to be, well, really big.

In fact, in the example above, the response rate needs to rise from 10% to 14%, or, the average gift has to rise from $50 to $70 – all on account that you mailed the person a thank you letter, and no other reason. And even if that happens, it means the thank you letter simply didn’t lose money. It still has zero net financial impact. In order for the thank you letter to win, to raise more money than not thanking a donor, the increase has to be even higher.

Take the problem and bend it over

A lot of people dismiss this kind of data by relying on non-financial and highly qualitative arguments to justify sending thank you letters. Some people cite surveys that claim donors “like” or “trust” thank you letters. But that is no guarantee the donor will give more, and what someone says versus how they actually behave is often starkly different.

Others simply suspend rational reasoning entirely and profess blind faith that maybe, someday, one of these donors will leave a massive bequest – all because of a thank you letter. But it is far more likely that won’t happen.

This “problem”, however, turns into a gold mine when you simply turn it over and think about it completely differently – by asking for an extra donation in the thank you letter.

Turbo Charge Your Retention

The additional response you get by asking for a second gift in your thank you letter also dramatically increases your second-gift rate, not surprisingly. The number of people upgrading from one gift to two, and from two gifts to three starts to happen at twice the rate it was happening before. This increases the proportion of “multi-donors” in your database, which causes the overall response rate for all appeals to rise over time. The lifetime value of each donor roughly doubles.

Many people simply assume that asking for money in a thank you letter will cause future response rates to fall. It does the opposite. Because it systematically increases the average frequency of donation, your response to future appeals rises, your retention improves and your attrition falls.

And then finally, there’s the question of how to ask for a donation in a thank you letter. This is the really easy part. We all know how to ask for money, we do it every day. There are lots of good causes and lots of important programs that need financial support. It’s really quite easy to think of a reason to ask for money in a thank you letter. All most people have to do is just get past the “taboo” associated with it.

Premium Testing Spotlight – Pens

Over the past 25 years, we’ve mailed virtually every imaginable premium. From greeting cards and shopping bags to ultra sound images, sachets of lavender, peppermint tea, chocolate coins, real coins, and even free pints of Ben and Jerry’s Ice Cream.
Not all of these premiums worked. But there’s one premium that works every time, for every charity — a pen.

No premium gives you a bigger lift in response rate relative to its incremental cost. Adding a pen to your direct mail fundraising package will typically add about $0.30 to your cost per mailpack.

If you normally get a $40 average gift (typical for Australia), your response rate needs to rise by 0.75% to break even. That’s all.

If a pen makes the response rate rise by more than 0.75%, then your income will rise faster than your cost, and your net income will significantly increase.

In March, 2015, we ran the following test for an Australian cancer charity as part of their Autumn house appeal:

Adding a pen cost an extra $0.30. The response rate needed to rise by 0.75%. It actually rose by 2.90%, or almost 4 times more than it needed to. This dramatically increased the net income by 50%, just by adding a pen.

In addition, we tested personalising the pen with the donor’s name. That added another $0.15 to the cost of each mailpiece. The response rate needed to rise by 0.38%. Here’s what actually happened:

The actual response rate rose by 1.25%, or about 3 times the 0.38% it needed to rise in order to break even. That meant the vast majority of the extra income went straight to net income, which rose by another 33%.

Adding a personalised pen to the package more than DOUBLED the net income over mailing no pen at all.

It can seem like “everyone” mails a pen these days, and it’s easy to question their value. But time and time again, pens have proven themselves to be among the most valuable premiums to use in direct mail fundraising.

Pens are also incredibly versatile. You can create custom designed pens, shaped like a magic wand for example (see picture above), or any other imaginable object. Pens can be made with plastic, metal, wood, recycled materials. They come in every colour, and every colour of ink.

You can easily create a pen that is not just perfect for your charity and your donors, but financially very profitable as well.

If you would like to find out how pens and other premiums can improve the performance of your direct mail fundraising program, just get in touch!

Cheers!

Case Study — To List Swap or Not.

This is a tale of two charities. Both charities are based in Australia, and they both work in the area of overseas aid. Last year, they both mailed a premium calendar-based acquisition direct mail package. The two designs are shown above.

The charity on the left amended their privacy policy to be compliant with the Australian Privacy Act. That meant they could swap their donor list with other charities and contribute their donor’s transactional histories into the same data cooperative as 100 other Australian charities. This gave them access to a list of bondafide donors, with a proven history of responding and donating to other charities.

The charity on the right considered becoming privacy compliant. But their board said no. That left them to rent lists of people with no transactional history of ever donating to a charity.

And here are the results: 

The privacy compliant charity on the left, which was able to list swap, ended up acquiring 4 times more donors at 1/7th of the cost for each one — mailing virtually the same design, at the same cost per mailpiece.

If you would like to learn more about how to lift the results for your next direct mail fundraising campaign, just get in touch.

Cheers!