Thanks to premium direct mail, today many charities in Australia have large databases of premium acquired cash donors, with 12 month active counts ranging from 10,000 to over 100,000 donors.
The average gift is about $35 to $50. But 10% to 20% of those donors give $100, $500 or even $1,000 at a time. And a large premium cash acquisition program will generate thousands of these donors as well.
So how do you get the most income from this high value segment? The short answer is to mail them nicer packages, and they will give more, and more often. That is easy to test and is well established.
The best way to maximise income from mid-level donors is to improve the quality of the communications you send them. And that usually costs more. So here’s a simple maths equation I use to sort that out.
If you mail a package that cost $2 to a segment of donors who give $20, you will need a 10% response rate to break even. To calculate that, you divide $2 by $20, which equals 10%.
If you spend $3 to mail a package to $50 donors, you need a 6% response rate to break even. Anything over a 6% response rate is profit, or net income.
If you spend $4 on a $100 donor, the breakeven is 4%. If you spend $15 on a $500 donor, the break even response rate is 3%, and if you spend $20 on a $1,000 donor the break even is 2%.
So the higher the average gift, the more you can spend per contact, and the threshold at which you start hitting profit drops at the same time.
That then leaves the question…what do you spend more money on? What gives you the best lift in response, per extra dollar spent?
Start with fundamentals — like paper weight and paper stock
Most direct mail fundraising is printed on an uncoated white stock, with a medium weight or thickness, usually 80 gsm (which stands for grams per square metre). Consider using the 100 gsm, or 120 gsm versions. They are a bit thicker and feel nicer.
Then consider the coating for the paper. Most direct mail fundraising is printed on uncoated paper, but consider using a matte finish. Or you can even choose a glossy finish. Both coatings will make the images printed on the paper look better.
And then think about the paper stock itself. There are thousands of paper stocks to choose from, in every imaginable colour and all sorts of textures. A well selected paper stock is a simple way to make the words on the page appear important, valuable, and worthy of the donor’s attention.
Next — Embellish the Paper
When it comes to embellishing paper stock, remember theses four — embossing, die cuts, gold foil and glitter. Use them all if you can. And when it comes to added cost, remember the break even response rate formula.
If it costs an extra 20 cents per piece to add a die cut, and another 30 cents to emboss the outer envelope, that is adding 50 cents per piece to your cost.
Take 50 cents and divide it by an average gift of $100, and your response rate needs to rise 0.50% to make these embellishments break even. If your response rate rises 1.00%, you will actually double your money. If the response rate rises by more than 1.00%, you make even more money.
If your average gift is $500, adding 50 cents to your cost per package needs a 0.10% lift in response rate. And if your averge gift is $1,000, your break even is a 0.05% increase in response.
That’s all it takes — to raise more money from mid-level donors.
Mail Objects — not just paper
In the example above, Vision Australia sent three “front-end” premiums, and a “back-end” premium designed to upgrade donors from giving $35-$50 up to $75 by offering a tea towel premium. It cost $4 more to add all these premiums to each package and the response rate needed to rise 5.33% to break even.
The actual response rate rose from 8% without premiums to 27% with premiums. Their net income tripled for every premium design they mailed. And, the dramatically higher response rate tripled their second gift rates in that time-frame.
Learn to work with direct mail’s stengths, and don’t be a victim of its weak points.
Direct mail can deliver physical objects into your donor’s hands. You cannot send a t-shirt through a phone (yet).
Focus in on the fact that direct mail can deliver physical objects — and not just a story on a piece of paper — and you will discover a mind-boggling array of options to raise more money from your donors.
Send objects that your donors will value, and use. Give them things they can wear. Send them things they can display. Turn your donors into walking, talking, advocates and evangelists and living, breathing advertisements for your cause and your mission.
It is not just about sending donors “stuff”. The key is to understand the financials, and then select “stuff” they will respond to with increased donations. From there, you can construct an entire physical universe of donor premiums that will cement your long term relationship with your donors much more than what a simple letter alone could ever achieve.