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.