I ❤ Premium Direct Mail!!!!

By Sean Triner
On July 6, 2015 At 2:00 pm

Category : Best posts Q3 2015, direct mail, Latest posts

Responses : 10 Comments

Choose one:

  1. You love premium direct mail
  2. You hate premium direct mail
  3. Love and hate are irrelevant – what you want is to maximize net revenue and life time value of donors to be able to spend more on the purpose of the charity now and into the future.
  4. You have no idea what premium direct mail is.

Read on if you chose 3 or 4.

For the ‘4’s: premium direct mail is a generic term that means prospective and current donors are sent a direct mail pack with a gift inside it.

The purpose of the gift is to get people to donate. It is a technique to make the pack stand out and getting them to be curious and open the pack.

Lots of fundraising gurus despise these packs – as seen here on 101. They would have chosen 2, and are no longer reading because I said three paragraphs ago to not read on.

Despite lots of negative press written about premiums, many charities still mail them. But there is little published in the defence of premiums.

Others hate them.

Articles abound that we are getting people on board who ‘don’t want relationships with us.’

Some comment that they think that we shouldn’t be getting donors based on freebies, rather than the worthiness of the cause.

So let me take a look at the maths of premiums.  How much extra money is made available for charities mission that wouldn’t otherwise be available.

Let’s start with how much ‘better’ they appear to perform at the beginning.  A real acquisition test by a charity in Australia below:

rrratesroiWhilst different charities get different results, the proportions when comparing premium and non premium tend to be similar to those demonstrated above.

Hundreds of thousands of donors have been ‘acquired’ by the use of premiums, and to some extent they have kept direct mail alive.

This is important because, as well as raising money through ongoing direct mail to newly acquired donors, direct mail is still the biggest source of bequests/legacies for many charities.

I do not believe that premium direct mail should be a charity’s only source of donors. Face-to-face, phone, events, online lead gen, SMS lead gen and more – all work well for many.

But direct mail should be part of any charity’s portfolio if they want to get bequests in the mid future.

There is lots of evidence that premiums help charities. But I can’t find any evidence that donor centricity/relationship fundraising is completely at odds with premium mailings.

I liked what Jeff Brooks of Future Fundraising Now had to say on his blog on the topic. He talks about how believing in donor centricity can be misinterpreted…

“The decisions go like this:

  • Address labels? I have no use for them. Hate ’em. Not donor centric.
  • Emotional stories? I see right through them. Manipulative. Not donor centric.
  • Long messages? Ain’t nobody got time for that. Not donor centric.
  • Frequent contact? It annoys me. Not donor centric.
  • Short sentences, short paragraphs, colloquial language? I’m too sophisticated. Not donor centric.

Direct mail? I’ve never responded to it in my life. Not donor centric.”

I love premiums because I love the work that charities do, and premiums can help provide an important source of income in their portfolio.

And the data backs them up – not just in the short term, but in the long term too.

My data is all Australian, but I see US, Belgian, Italian, Brazilian, Canadian, German, Austrian, Czech and more data that basically says the same.

Put simply, charities get 3 – 4 times the response rate with premiums, with10-20% lower second gift rate.

Let us look at an example charity who tests premium (costing about $2.30 per pack) v non premium acquisition (at $1.50 per pack). This is based on better performing charities’ real data from 2014.

Both scenarios assume premiums are not sent in subsequent appeals. (We have enough charities who only use premiums for acquisition to get these numbers).

Non Premium Premium
Acquisition mailing volume 100,000 100,000
Response rate 2.20% 7.50%
Prospects 2,200 7,500
Average first donation $36 $31
Second gift rate 44% 30%
Average second donation $60 $50
Total given $137,280 $345,000
Income Yr 1 $1.37 $3.45
Cost (acq+warm) $159,900 $263,750
1 yr ROI 0.86 1.31
Multi donors @1yr 968 2,250

 

You can see that premiums got worse results in everything except initial response rate. Yet, after a year we have twice as many ‘real’ donors, recovered all our costs within a year AND have twice as many bequest prospects.

Ah, but what about the long term? Well, we see that over the years, we have a much larger absolute volume of the donors acquired by premium giving years later than those acquired without premiums.

In fact, after a few gifts it is very hard to distinguish between the donors.

Put bluntly, premium direct mail seems to get an equal or greater number of ‘quality’ donors as non-premium.

Plus it picks up loads of people who are not likely to donate again, but who effectively subsidized the costs of getting the ongoing donors.

Also, if you overlay usual filters before doing regular giving conversion calling, we find that we get about as many regular givers from the premium file as the non-premium.

So in the example above, we would expect to get 70-100 regular givers from each mailing.

Clever charities follow up appropriate donors with relationship fundraising based tactics to get bequests and high value donations.

Here we can’t see any difference with how this follow up performs when comparing premium with non premium acquired donors.

If the same targeting is applied – even just by targeting based on size of gift, recency and number of gifts, you get more or less the same result.

High value conversion i.e. following up big donors over say $250 is about the same, and you have about the same number of them.

Premiums get my charities more, older donors than non premiums.

So, in every measure of predicted lifetime value, premiums win over non premiums.

Actually, over ten years the ROI on a premium direct mail program if the charity is good at mid value and bequest follow up beats many other types of donor acquisition.

I see the numbers. I see the sustainability of the programs. But I also see merit in relationship fundraising/donor centricity in subsequent communications.

But best of all, I get to see the extra work charities like Assistance Dogs Australia, Children’s Cancer Institute and Indigenous Community Volunteers have been able to do with the cash they otherwise wouldn’t have had.

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Sean Triner (5 blogs on 101fundraising)

In 2002, Sean moved to Australia and joined forces with Australian data-expert, Paul Roberts, to form Pareto Fundraising. Their ambition was to apply what they had learned from years of pushing the boundaries in the UK to help Australia’s best charities increase their income and donor bases beyond their dreams. Challenging, fun and always practical, Sean is an energetic speaker who leaves conference, seminar and Masterclass attendees inspired, motivated and buzzing with brilliant ideas about how to take their fundraising to the next level. Sean is also a ‘trained’(!) stand up comedian, deadly snake rescuer and story teller. Useful skills for presenting and article writing.


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Comments

  1. Sean – would be interested to hear your views on complaints received from non-donors and cash donors on the apparent ‘waste of funds’ from charities on these packs. Do you think this will reach a tipping point in regards to donor retention as well as turning people off from donating to charity as the premiums increase in size, value and number?
    Also what’s your view on the advice that to continue to keep donors engaged a further premium pack needs to be mailed for a second gift? Thanks

     — Reply
    • Hi Claire
      I have one large client who spends so much money, energy and time on non-donors they seem to forget about donors. There will always be non-donors. But, there are more donors now than ever before. So what we have been doing is working!
      But donors complaining: deal with each appropriately. The best line I have ever heard is ‘You may be surprised to hear but by doing this activity, we got more donations and were able to help more (people/dogs/kids/environment)…’
      I don’t think the tipping point will be turning donors off (if a pack does that, it won’t work, so you will stop mailing it – like any creative). The tipping point will be ROI. Sending a preloaded iTouch with lots of info would get a brilliant response, lots of complaints and will never cover its cost. (Though it could work with major donors… hmmmnnn.)

       — Reply
  2. Hi Sean, thank you for contributing this post and the data on long term value of premiums. Our clients in Australia have experienced the exact same outcomes, premium direct mail is more effective for both acquisition and re-solicitation, and it increases lifetime value.

    The data and financial performance is clear. And those who hate premiums have been left with nothing but a series of factually untrue set of assumptions, stereotypes and caricatures of premium direct mail.

    There will always be people who think premiums waste funds, even though that isn’t factually true. There will always be people eagerly anticipating and predicting the eminent demise of premiums any day now, they’ll speak of “tipping points”, “saturation” and “peak direct mail”. And as premiums increase in size, value and number, more and more donors will give to charity. The exact opposite of “turning people off”, premiums are actually turning many more people into actual donors.

    No matter how much data, and no matter how many facts there are about premiums, some people simply refuse to accept them. That’s really sad, and it really hurts the charity that they work for.

     — Reply
  3. Sean,
    Fabulous post. Thank you for sharing these findings.

    How would you apply this data to small nonprofit organizations? Any differently? And do you recommend the use of premium mailings strictly for acquisition mailing?

     — Reply
    • Hi Pamela

      The data won’t change for small organizations – except they would struggle to get economies of scale. You need to mail a lot to get statistically valid response rates.

      I would recommend premiums for acquisition in Australia and New Zealand. They are likely to work ‘better’ in that they get a better response in all markets, but It will all come down to the cost / benefit equation in your market. It depends how much they cost.

      Sean

       — Reply
  4. So where do you find printing for these labels? Can it be done inhouse I’m wondering?

     — Reply
    • Hi Erin
      It is not just labels – many other premiums are sent. We tend to use external printers who source the premiums much cheaper than we could achieve. In house is not really an option for any scale.
      However, I have heard of charities using surplus stock to produce premiums in house, but they are driven by the stock available then rather than the right product. Also, their roll out is limited.
      Sean

       — Reply
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