Part 2 — Why Direct Mail Fundraising has changed — and why it’s not changing back

Reciprocal list exchange and data cooperatives — to some people in the Australian fundraising sector, the idea of sharing a charity’s donor list with other charities is still regarded as a sin against “donor-centric” fundraising.

Very soon, those people won’t be sending out any direct mail fundraising, because very soon it will be financially impossible to do direct mail fundraising without list swaps and data cooperatives. Here’s why…

Other charities know more about your donors than you do — when you look at your own database of donors, all you know is that Donor X gave a donation on such and such a date. That, and their name and address is all you know.

When you join a data cooperative and you mix your donor database in with over 100 other charities, you can see that Donor X also gives to other charities, you can see how much they give to others, how many times, and whether they give to charities similar to yours or to a wide range of causes.

You can see which of your donors are giving you cash, but giving to other charities by regular monthly giving. You can see how much they are giving monthly, when did they start, and how they signed up (by phone, face-to-face, online or direct mail).

When you stay outside of a data cooperative, you see none of that. But all the other charities in that data cooperative can see all that information about not just their donors, but your donors too. That’s because…

Most of your donors are already in a data cooperative — when over 100 different charities combine their databases together into a data cooperative, it aggregates and captures what’s called “The Common Donor Universe”. Most of your donors are giving to other charities, and they end up in the data cooperative, whether or not you added them in yourself.

Virtually every charity database in Australia, when matched up against a data cooperative, will have a match rate of 40% to 80%. That means most of the time, most of your donors are in that data cooperative already. Other charities are able to contact a majority of your donors whether you share their information or not.

Your most valuable donors are already in the data cooperative — Which half of your donor database is in the data cooperative? The better half  — the donors who give the most and who give the most often. The most profitable half of your donors, who generate the vast majority of all your income, are already in the data cooperative.

Donors that give to only one charity on average donate $449 to that charity. Donors that give to two or more charities — the ones you find in data cooperatives — give on average $552 to each charity.

Donors that give to only one charity make an average donation of $65 each time they donate. Donors that give to two or more charities donate on average $95 each time they donate.

And donors that give to only one charity donate 9.63 times over their donor lifecycle. Whereas donors who give to more than one charity donate on average 10.59 times to each charity.

To see the data in full, please read my earlier article Disloyal Donors Are Better Than Loyal Donorshttp://www.linkedin.com/pulse/disloyal-donors-better-than-loyal-derek-glass?trk=pulse_spock-articles

Data cooperatives can guide your entire donor journey and lifecycle — Some people in the Australian fundraising sector are busy preaching righteously against the evil technological innovation of data cooperatives. But the smart people in the sector are discovering that data cooperatives are central to not just donor acquisition, but they also increasingly play a central role in donor stewardship and creating an effective donor journey.

Data cooperatives can help you upgrade donors who are giving more to other charities than they are to you. The only way you can find and target those donors is by using a data cooperative.

And for donors who are lapsed, you can use data cooperatives to determine which of your lapsed donors are still giving money to other charities, and which donors have stopped giving to you and to every other charity. Again, you can only do that with a data cooperative.

Because of postage increases, rising competition and other normal everyday macro-economic factors outside our control, eventually, the only charities that will be able to cost-effectively use direct mail as a fundraising channel will be those charities that join data cooperatives.

For the purists and the self-righteous, who refuse to change their privacy policies and refuse to share data with other charities, their donors will not reward them one extra dollar for doing so.

Nobody gets a lift in donations by promising to never share data.
The only thing charities get for not sharing data is a direct mail fundraising program that eventually shrinks and dies.

Why Direct Mail Fundraising has changed – and why it’s not changing back – Part 1

Premium direct mail design — the seismic changes in direct mail fundraising design in Australia over the past 8 years leaves some in our sector wishing for a return to the “good old days” when all you needed was a good story and a good house file to make money in direct mail.

 

No pens, no greeting cards, just a really “powerful” story.

For starters, those days weren’t so good. Back then, you were lucky to get a 1% response to cold mail acquisition and it took 3 years of re-asking those donors, over and over again, until you made any net income from that “relationship”.

In Australia today, premium cold mail packages “only” pull 2%, or double that, on their worst days. Well-designed and well-tested premium packages pull over 10%, and bring in ten times more donors than the “good old days”.

When you continue mailing premiums throughout your entire journey with that donor, you raise even more money, each and every time you contact them, generating total net income that is 4-8 times higher.

Why did this happen?

You can blame the internet and smartphones. It is no longer cost-effective to deliver written communication — alone — by direct mail.

If you have a good story to tell, and that’s it, you are far better off communicating that message online or onto a mobile phone. You can add video and sound to it as well. Direct mail is simply a big waste of money if all you have is a “powerful” story to tell.

Eventually, because of postage increases, rising competition and other normal everyday macro-economic factors outside our control, the only kind of direct mail that will be cost-effective to mail will be premium direct mail.

That’s because you can’t deliver physical objects over the internet or onto smartphones (yet). Premiums are physical objects that fundamentally change the donor’s experience with you and measurably increase donations.

Although they are often dismissed by colleagues in the sector as “trinkets” or “bribes”, they are actually the key drivers that increase donations today and into the future.

Donor’s keep, value, and use the premiums you send them. These objects end up as part of our donor’s lives, and we end up becoming part of their identity and what they represent as a person.

Premiums increase donor’s identity with you, premiums yield higher retention rates when implemented throughout the donor’s journey and they increase total net income.

And that is why premium direct mail is not going away, nor should it. The good old days are gone. Thank goodness.

Are you losing money on direct mail donor acquisition? Call us.

The envelope above, from Multiple Sclerosis NSW used 10 different tests from overseas. Can you identify all 10 things that were done differently to create this design?

This package also pulled 15% response rate, it makes money on cold mail donor acquisition. And it was mailed in last 12 months.

It also cost less than $4.00 per pack to mail. Not $5 or $6 per pack — less than $4.00.

Are you getting a 15% response rate on your premium cold mail? Or are you getting less than 5%? Is it costing more than $5.00 per pack? If yes, then call us.

We use proprietary testing data on premium direct mail from charities in 26 different countries.

To create this package for Multiple Sclerosis NSW, we used 32 different tests that were run worldwide.

Four of those tests involved just the greeting cards — including tests run on the size, shape, packaging and branding of the cards.

Several tests were used to write and design the letters — the pack actually has three letters in it.

A number of test results were used to design the reply form, the name labels, the pen and, half a dozen tests were used just to design the notepad alone.

Premium direct mail is expensive. The days of easy money from poorly designed and largely untested premiums are over.

If you can achieve greater than a 10% response rate on premium direct mail, it works great and delivers high volumes of new donors. But when premium direct mail — at $5 or $6 a package — starts pulling less than 5% or even 2%…

…it’s time to get yourself an agency that has the testing expertise and business intelligence to make premium direct mail work the way it’s supposed to work.

Some charities will give up on premium direct mail altogether. Their cash donor bases will just start to shrink, their pipelines for major giving conversion will dry up and eventually their bequest income will fall.

But smart charities will use the latest testing results from around the world and enjoy the benefits of high volume, low cost, premium donor acquisition.

Which kind of charity do you want to be?

Call us: 0418 113 796

Derek@Ask2.com.au

www.Ask2.com.au

Donor Experience, Donor Identity and Premiums

Looking for a way to improve your donor’s experience with your organisation? Would you like them to identify more closely with your work? Then use premiums.

Premiums engage your donors physically and they bring you into the donor’s actual everyday life.

Pens, notepads, t-shirts, greeting cards, tote bags, these things might seem trivial and costly, but they engage your donors in ways that fundamentally transform both the donor experience and the donor’s identity with you.

They enter the donor’s life and end up on their refrigerator, tucked into a purse, or sitting on their desk.

Premiums end up in people’s wardrobe, adorned to their cars and key rings, and when designed and styled attractively and presented in a retail manner, they become valued objects. Donors become proud to be associated with them.

You can literally design a complete collection of branded and unbranded premiums for their entire journey with you — from the hat down to the socks, with matching bag, t-shirt, scarf, tea-towel, tea bags, pen, notepad, key ring, sewing kit, seeds, gardening gloves, monogrammed stationary, backpack, sunnies, jumper, umbrella, pillows, blankets, and even knickers — the whole kit and all of it personalised with the donor’s name on it.

At each one of these touch-points along the journey, you measurably raise more money.

Premiums are measurable, test-able, sustainable and scalable over time. And the possibilities are infinite. There will always be demand from donors for new and innovative premiums. New premiums are constantly emerging.

The best way to start this journey with your donors is right at the start. If your direct mail donor acquisition design is not pulling at least 10% response, give us a call and we can show you how.

A high performing premium direct mail donor acquisition package, pulling more than 10% is the fastest, most cost efficient way to grow and engage your donor database. If you are currently getting only 5-6%, or even as low as 2-3%, we can turn that around for you.

Bequest Fundraising – Still gazing into the crystal ball?

Every fundraiser will tell you the same story: “Gladys Smith  left us a fortune.  We couldn’t figure it out.  She wasn’t on the database.”  Any decent bequest officer will give you the real story: “Actually, Gladys was a donor.  Every year she bought Christmas cards from us.”

No one gets bequests out of nowhere; someone has triggered the gift.  Many charities in Australia try to recreate that trigger with a tick box wedged into their direct mail reply forms or a question embedded in a donor survey.

But how much is a tick box or a question worth?  How much time and effort is it going to take you to establish if it’s worth anything, and, if so, how much and when will you receive the monies?

Imagine a 42-year old mother of two signing up at a shopping centre for $20 a month.  She then ticks a box in her welcome kit stating her intention to leave you a gift in her Will.  At her age, she isn’t going to die for another 40 years.  And she’s hardly likely to run off to her solicitor to have her Will written.  She might add you in a Codicil years down the line – if she’s still considering you as her charity of choice, if she’s got anything left to leave, and if her children don’t take the lot. That’s three big “ifs” in a row.

So, if tick boxes and survey responses are only worth the effort the donor put into them, then what kind of communication works better? And who should it be targeted to?

At Ask², we love to ask. And the clients who do best with bequest fundraising send communications that are clearly and only asking for a gift in a Will.  The entire discussion is not bashful at all.  On the contrary: the charity offers up lots of information, and the donors provide lots of details in return. If you are serious about acquiring bequest donors, the key is to ask. Ask to be put in the Will. Ask about what you’re going to get. And don’t pretend to be doing something else.

A bequest appeal we recently produced for one of our clients resulted in 2% of the mailfile telling us: “I’ve done the deed and here’s what I’ve left you.”  All very nice but why were we statistically confident that these responses were worth x amount of dollars and would ‘convert’ in x amount of time?  Targeting.

Targeting is where you set aside recency, frequency and total value of donation – and bring in the following big guns:-
Age: An 85 year-old who is not recorded on your database is a more valuable prospect than a 42 year-old monthly donor.

Gender: Women generally outlive men and they make the greatest proportion of charitable donors.

Marital Status: ‘Ms’ or ‘Miss’ fare even better than ‘Mrs’.

Children the less children a donor has and the older they are, the more will be left over for your charity.

Factors such as income, home ownership, and postal code are also predictive of higher or lower bequest values. Postal codes, combined with other variables, can also be used as a “proxy” for age when that key data element is not available.

Those key insights are changing the landscape of bequests marketing in Australia. My 80-year old neighbour recently received a charity letter asking her for a bequest. She had never previously communicated with that charity.  It was a cold mail ask. Brilliant.

Targeting a bequest letter to a very high age demographic can generate responses that will produce income within a shorter space of time, and subsequent bequests can then be tracked over a 5 year timeframe.

Assume the response rate to a letter like that to be in the region of 0.20% and sent to 50,000 prospects.  Over 5 years, let’s say that 10% of the respondents die and ‘convert’ into actual income, with an average bequest value of $50,000. If the cost per piece is about $2, you net $400,000 in the first 5 years. That’s the topline.

If you want to get a more detailed picture, factor in the kind of bequest that’s been left to you,  and how long it will take for full distribution to occur.  That’s why asking what type of bequest has been left to your charity is important.  Information about distribution and timing can be garnered from your Finance Director.

And bear in mind that Wills are a goldmine of information.  They tell you about the types of gifts that are left to charities, but also which other organisations you’re sharing the cake with.  They also tell you a lot about the people who leave you a gift.

Lastly, take a look at the world around you.  Bequests are subject to interest rates and other global economic factors.  Why not ask your donors to make their gifts index linked?

Bequest fundraising, when communicated the right way and targeted the right way, can be a measured and predictable fundraising channel. You can control what is happening. You can tell the story of Gladys Smith because you wrote it.

Premium Direct Mail is Donor-Centric

There’s a widely held belief that premium direct mail is somehow bad for you. It’s not “donor-centric”, it hurts your “relationship” with your donors, I’ve even heard people claim it “reduces lifetime value”.

Nothing could be further from the truth.

This so-called “donor-centric critique” is nothing new, it’s been around for over 30 years. After three decades, if premium direct mail really did reduce lifetime value and if it really did wreck financial ruin on any charity that tried it, then, these designs would have died out a long time ago. In reality, there is more premium direct mail being mailed now than ever before. And for a very good reason – it works, and it continues to work year after year after year.

The reason for that is simple. Premium direct mail is the most donor-centric form of direct mail design possible. The best performing premiums often have little to no relevance to a charity’s mission – but they are very useful, desirable, and therefore more relevant to the donor themselves.

Greeting cards, for example, work best when the charity’s logo is removed. They work even better if they are designed for any occasion and completely blank on the inside. And greeting cards work the best when several are sent at once, with a mix of themes and designs. Greeting cards that “match” get much lower response.

Also, remember that lifetime value is a financial calculation. It is an actual number. Lifetime value is not a merit badge you get for adhering to some vaguely defined notion that you are somehow being “donor-centric”.
By rejecting premiums, by tossing out namelables, by focusing solely on “storytelling” and earnestly reporting to your donors all the compelling examples of your “transformative work”, you do not by definition increase your lifetime value.

Lifetime value is driven by 1) the response rate to each appeal, both cold and warm, 2) the frequency in which you ask, and 3) the average gift.

If you yank premiums out of your program and the response rates drop dramatically, which they usually do, then that will make your lifetime value go down, not up. If you “rest” your donors and ask them less frequently, your lifetime value will also go down, not up. If you replace a house appeal with “donor care” or a “soft ask”, your lifetime value goes down, not up.

And likewise, if you add premiums to your direct mail, response almost always rises. If you use really good, really well tested and really effective premiums your response rates rise dramatically, and that also makes lifetime value go up, not down.

If you use premiums for both cold mail and warm appeals, the response rates will rise for both. And when that happens, your second and third gift rates rise, and your donor retention improves.

In other words, using premiums to increase your lifetime value is donor-centric. You are mailing things to donors that they value, they appreciate, and that they can use. In return, they reward you by donating at a higher response rate each time, and more frequently. That is what donor-centric fundraising is really all about, and premium direct mail is what actually delivers it.

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