Best Practices

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Best Practices in Direct Response Fundraising
21st Annual Fundraising Day in Maryland Raymond
J. Grace Chairman and Founder Creative Direct
Response rgrace_at_cdr-nfl.com
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What we will be discussing today

• Should you exchange your donor list?
• Are premiums a good idea?
• How much/how often should you mail?
• Other topics including questions youd like to
  discuss

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Topic One Exchanging Lists
We would never exchange our list. That is our
most precious asset. And if we did, it would
only hurt our own revenue!
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Lists
3 Ways of Obtaining Addresses
Rent names (not buy) for one time use
only Re-use names re-use a list from previous
merge/purge Exchange names exchange names for
one time use only
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Lists - Costs

• Exchanged Donor Lists
• Price is approximately one fifth of the price of
  rental names because the only payment made is the
  brokerage fee.
• Commercial lists of direct mail responders
• Prices generally range anywhere from 70/M to
  130/M. Email lists are considerably higher.
• Compiled lists
• Price is approximately 35/M to 55/M, results
  vary based on list and whether modeling is used.

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Lists
Exchanging Names

• Organization A delivers names to organization B
  for Bs mailingOrganization B delivers names
  back to organization A for As mailing
• same quantity
• same selection
• costs are only the exchange fee for the broker

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Lists
Exchanging Advantages

• Less expensive, only pay exchange fee (around 20
  of average list price). Will help reduce your
  overall list cost.
• Donor names generally have a higher response rate
  than any other lists, but not necessarily higher
  average gift.
• If you dont exchange names, you will be renting
  the names at a higher cost.

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Lists

• Wont we be diluting our list by exchanging with
  other charities?
• Your list was built by renting names from the
  same lists that are available to everyone.
• Almost every name is on more than one list.
• You dont have exclusive rights to the name, only
  to the names on your list.
• Extensive long term tests show no negative impact
  on future response.

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Lists Exchange/Rental Results

• Cancer Research Charity 5 year split test of
  own housefile comparing rented and exchanged
  names vs. not rented. Names that were rented did
  better.
• American Lung 90 of names not
  rented/exchanged, 10 rented/exchanged for 10
  test chapters to see effect. Organization
  changed policy to rent/exchange names after the
  test.
• Veterans Charity Tested and retested over past
  30 years. Rented/Exchanged names did better than
  non-rented or exchanged names.

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Lists Exchange/Rental Results

• American Heart Association Results
• Year 1

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Lists Exchange/Rental Results

• American Heart Association Results
• Year 2

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Lists Exchange/Rental Results

• American Heart Association Results
• Year 3

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Lists

• In summary, exchanges are a good business
• strategy for non-profits. The benefits are
• List costs reduced
• Quicker growth of your donor file
• More net dollars for your programs
• Studies have shown that most donors give to a
  minimum of three charities. Your donors are not
  unique to your organization.
• Exchanging/renting names does not hurt
  performance.

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Lists - Renting

• Renting your names is another way to reduce
  acquisition costs.
• AHA Rental Income
• 2.7 million names on the market
• Rented 19,000,000 names
• AHA rental income for FY2003 was 1,100,000.
  Lowered acquisition name costs by this amount.

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Everyone knows that premium donors arent as
good donors as mission based appeal donors they
just dont have a good long term value.
Topic Two Premiums vs. Straight Letter
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Premium vs. Non-Premium

• Some of the myths and facts surrounding premiums
• What is a premium and how does it work?
• Who uses premiums and why?
• When should premiums be used?
• What are rules for selection?
• What pitfalls are there and how are they
  overcome?
• How are premiums incorporated into successful
  mail plans?
• What are the exceptions to the rule?

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Premium vs. Non-Premium

• Some of the myths and facts surrounding premiums
• Premiums often have a negative response.
• A sound look at some real examples and results
  could change your outlook.
• Should your organization use premiums? Answers
  vary.
• Premiums are not relatively new they have been
  around since 1926.

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Premium vs. Non-Premium
Calendar
Key Chain
Examples of Premiums
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Examples of Premiums

• Address Book
• Beans
• Book
• Bookmark
• Bumper Sticker
• Calculator
• Calendar
• Candle
• Cards
• Charms
• Check
• Clock
• Coffee
• Coin
• Crayon
• Cross
• Flag

• Grocery List
• Key Chain
• Magnet
• Magnetic picture frame
• Mass/prayer cards
• Membership card
• Mobile
• Necklace
• Notepad
• Ornament
• Paper flower
• Pen
• Pencil
• Petition
• Photo album
• Photo of famous person

• Picture frame
• Pin
• Postcards
• Poster
• Post-it notes
• Prayer Book
• Ribbon
• Rice
• Rosary card
• Seeds
• Sewing Kit
• St. Christopher Medal
• Stamps/Seals
• Static Cling decal
• Stationary
• Stickers
• Teabag

• Tip calculator
• Tissues
• T-Shirt
• Wallet calendar
• Watch
• Watch/Calendar Combo
• Wooden cross
• Wrapping paper

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Premium vs. Non-Premium

• Who uses premiums and why?
• 75 of lists work with premiums
• Premiums work!
• Excellent name placement
• Should try to relate premium to mission and copy

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Premium vs. Non-Premium

• Who uses premiums and why?
• Higher response rate compared to those mailings
  without premiums.
• Builds a donor file quickly.
• Total net is higher than those mailings without
  premiums.

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Premium vs. Non-Premium

• When should premiums be used?
• Depends on your organization
• Tie into events and Holidays
• ChristmasEasterMothers DayReligious
  HolidaysSeasonsBack to School

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Premium vs. Non-Premium

• When should premiums be used?
• Examples of good tie ins based on calendar events

Mothers Day
Christmas
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Premium vs. Non-Premium

• What are rules for selection?
• Use premiums that relate to the mission or
  program of the organization.
• Select premiums that can be inserted by using
  vendors who can do large volumes of handwork.
• Weigh the costs for extra postage, inserting,
  and the premium.

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Premium vs. Non-Premium

• What are rules for selection?
• Use the magic word free in the copy.
• Prevents misunderstandings.
• The reply envelope should be smaller than the
  premium.
• Test gift asks because the premium will usually
  return twice the percent return, but lower
  gift average.

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Premium vs. Non-Premium

• What pitfalls are there and how are they
  overcome?
• Not all premiums respond equally.
• Premiums rarely work with advocacy and political
  appeals
• Look at the predicted results - Increased
  revenue offsets costs. - Higher response rate
  makes extra time worthwhile.

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Premium vs. Non-Premium

• What pitfalls are there and how are they
  overcome?
• Examples of a charity which used various
  premiums with one outperforming the others

Coin
Cards
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Premium vs. Non-Premium

• How are premiums incorporated into successful
  mail plans?
• Use a mix of premiums and non-premium mailings.
• Audiences overlap

Audience A
Audience B
A B
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Case History
labels
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Case History
Acquisition/Prospecting Test
Pieces 50M50M
Package LabelsSt. Ltr.
Cost/M 727.31607.31
Return 5.832.39
Average 18.7621.21
Package LabelsSt. Ltr.
New names 2,9151,195
Net 18,302-5,039
Result 44 better return
Currency is in Canadian Dollars.
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Case History
Projected LTV and ROI results
Labels 2,915269,30494,712174,591 60184
Straight Letter 1,19577,90555,47422,431 19
40
Donors from testTotal gross income Total cost
Total net income Long Term ValueReturn On
Investment
Values include results from acquisition and 6
years of renewal mailings.
Currency is in Canadian Dollars.
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Case History
ABC Charity
Acquisition/Prospecting Test
Pieces 732M1,463M
Package PremiumSt. Ltr.
Cost/M 610580
Return 4.102.05
Average 8.7511.87
Package PremiumSt. Ltr.
New names 30,00030,000
Net -184,024-492,557
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Case History
ABC Charity
Projected LTV and ROI results
Premium 30,0001,519,433965,471553,963
Straight Letter 30,0002,051,8911,468,910582,
980
Donors from testTotal gross income Total cost
Total net income
Note
The cost of the straight letter acquisition was
higher because more pieces were mailed to obtain
30,000 responses. The house file donation
averages and response rates are higher than the
acquisition results.
Values include results from acquisition and 6
years of renewal mailings.
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Case History
ABC Charity
Projected LTV and ROI results
Premium 60,0002,889,0841,484,4341,404,650 1
8.4757.4
Straight Letter 60,0003,651,9742,089,2691,56
2,706 19.4339.7
Donors from testTotal gross income Total cost
Total net income Long Term ValueReturn On
Investment
Into which program would you invest the one
with higher LTV or the one which would make more
money, i.e., greater ROI?
Values include results from acquisition and 6
years of renewal mailings.
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Case History
Break Even Points
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Topic Three How Often to Ask
We would never ask our donors for money more
often than four times per year. To do otherwise
would wear out our welcome and anger our donors.
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• Donors need to be treated like part of the
  charitys family therefore, regular
  communication is necessary if your client wants
  them to remain a part of their family for a long
  time.
• The donor mailing / newsletters job is to
  secure donations, whilst keeping the donors up to
  date on what their money has been doing. The
  more personal the details, the better your
  returns will be.

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• Mass marketing is a numbers game. When an
  organization starts mailing, costs are high
  because of small mailings, plus having to rent
  all of the prospect lists.
• If a house file grows quickly, higher volumes
  will be mailed, making everything cheaper,
  leaving an organization to spend more on programs
  and less on mail costs.

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Average life of a donor is three to six years, so
you are in a race to do a few thingsA. Keep
the file growing while attrition sets in (35
per year in the first three years, lower
thereafter).B. Secure as much revenue from the
donors as possible because many will leave after
several years. Donor fatigue.C. Get the donor
to donate at least twice per year. Many first
time donors never donate again, but donors who
donate twice or more stay with an appeal for
years, as well as leave money in their wills.
Convert as many as possible to monthly.
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• Net Dollars the strongest argument for mailing
  often is net dollars to the charity.
• Mailing more often increases net revenue, not
  decreases it.
• Dont fail to mail your monthly donors 2 4
  times per year they will become your best
  performing segment and you will see reduced
  attrition.

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Example of a Response Curve
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Frequency of Mailings
Effects of Overlapping Drops
Doubling day
Lost Revenue
Response
Days from mail drop
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Miss a Mail Date?
Effects of Missing Mail Dates
Response
January
December
April
August
Month
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Miss a Mail Date?
Effects of Missing Mail Dates
Response
January
December
April
August
Month
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Miss a Mail Date?
Effects of Missing Mail Dates
Response
January
December
April
August
Month
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Miss a Mail Date?
Effects of Missing Mail Dates
Response
January
December
April
August
Month
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Thats 12 Mailings Per Year

• Isnt That Too Much?

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A Call From A Pastor In Texas

• He called to express his concern about how MADD
  was wasting money with all these solicitations.
  I listened politely then asked him the following
  question
• As a pastor, do you include in each service time
  to pass the donation plate?
• His answer was yes!

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If You Do Not AskThey Will Not Give
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The Bucket Has A Hole In It

• ? New Donors Acquired
• ?Current Donors
• ?Donors Cease Giving
  (Attrition)

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How often you should ask depends upon your goals

• MADD wants to get its message out to save lives.
  So does National Breast Cancer Foundation.
• Others want to optimize net income.
• Others want to reduce costs of fundraising.

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Other Best Practices in Brief

• Except for the very largest nonprofit mailers,
  for which charity response lists are not
  sufficient, the use of geo-demographic modeling
  has not generally proven useful in prospecting
  for new donors. For some medium sized and larger
  nonprofit mailers, modeling may be useful to
  improve upon RFM (Recency, Frequency, and
  Monetary) segmentation techniques and identify
  lapsed donors who may be worth mailing.

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Other Best Practices in Brief

• While you may want to reduce the number of
  renewal mailings to monthly committed donors,
  you should probably still mail them about four
  times per year rather than removing them
  entirely. You can insert a lift note that says
  we recognize you are a loyal monthly donor but
  we thought youd be interested in information
  about some of our programs. This is not in lieu
  of but in addition to any newsletters they might
  receive.

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Other Best Practices in Brief

• When looking for potential deferred giving donors
  the most important variables are not average or
  most recent gift or even some type of wealth
  index. The most important variables are age and
  frequency of giving. The typical bequest comes
  from someone who is older and has been giving to
  the charity regularly over a period of years. By
  far the most frequent deferred or planned gift is
  a simple bequest. The best prospect is someone
  who is older and on the file 5 years and with 2
  gifts per year.

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Other Best Practices in Brief

• Why should you look for potential deferred giving
  donors? Because there are literally Trillions of
  dollars that will be transferred by bequest over
  the next generation and fewer than 1 of
  charities even ask for money in the form of
  deferred giving.

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Other Best Practices in Brief

• There is some dollar average level for each
  non-advocacy charity and some advocacy charities
  where acknowledgement letters with reply devices
  will break even or be profitable. How quickly
  gifts are acknowledged is directly proportional
  to the response rate to an additional
  solicitation in those acknowledgements. The
  faster the acknowledgement the higher the
  response rate.

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Other Best Practices in Brief

• Whether to use a BRE (Postage pre-paid Business
  Reply Envelope) or a RAE (return, address
  envelope) is a testable question that varies over
  a period of time and for each charity. Just try
  each against the other in a head-to-head test and
  be sure to measure the additional costs per reply
  for the BRE but spread those costs across the
  entire mailing costs to determine your costs in
  the mail and your net income/1000 letters mailed.
  Generally the BRE works better for higher dollar
  donors and for Acquisition and not as well for
  donor renewal.

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Other Best Practices in Brief

• Try follow-up mailings to your regular appeal,
  particularly if your mailings are well spaced
  out. Often follow-up mailings will produce as
  much as a 50 or greater lift to the initial
  appeal. Follow-ups are mailed between 2 and 4
  weeks after the initial appeal, typically to the
  better donors who received the initial appeal,
  reminding them that they might have not yet
  replied and asking them to do so. The theme of
  both mailings should be identical or strongly
  related. The follow up works best when you
  follow up thick or lumpy original premium
  packages but cut the real low dollar names out of
  the process.

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Other Best Practices in Brief

• Upgrading individual donors is a good idea.
  Thus, for example, an upgrade test might be to
  take the most recent gift times 1.2 or 1.4 and
  include that in the personalized ask.
  Upgrading an ask string (10.00, 15.00, or
  _____ vs. 20.00, 30.00 or _____) is quite
  different from upgrading an individual donor.
  Such ask string upgrades should be carefully
  tested because often they gain a higher average
  gift at the expense of a lower response rate.
  Make sure your computer instructions have the
  ability to use different multipliers for higher
  dollar donors or to reduce the upgrade at some
  point. The general rule is you will eventually
  get what you ask for but dont push too hard too
  fast.

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Other Best Practices in Brief

• Try an action item or involvement device to
  increase response rates. This might be a
  bounce-back card to a victim or person
  suffering from a disease that the charity is
  trying to help. It gives the donor the
  opportunity to feel that they are interacting
  directly with the beneficiary on a one-to-one
  basis. Other examples would be petition
  mailings, surveys, and requests for certain
  prayers or remembrances.

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Other Best Practices in Brief

• Make sure your message and look are fully
  integrated. Do you use the same colors and
  artwork for your logo and put your web address on
  your letterhead, website, annual report, direct
  mail letters, and any other communications with
  others. Consistency in communications is the
  first step (though not the last) in integrating
  your marketing program.

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Other Best Practices in Brief

• Direct mail can be an element in both employee
  workplace giving and certain cause related
  marketing campaigns. Just use your imagination.
  For example, what about a payroll stuffer to go
  into the payroll envelope which contains a letter
  to the employee asking them to sign up for a
  payroll gift to a charity or to make a single
  gift? It doesnt require postage or a carrier
  envelope so it can be inexpensive. What about
  getting a corporate sponsor to allow you to put
  your brochure with a tear-off donor coupon into
  their monthly billing statement?

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Other Best Practices in Brief

• Attendees at special events put on by a charity
  rarely respond to a mail appeal for giving as
  well as your direct mail built housefile.
  However they often respond as well or better than
  a good prospect list. Therefore, capture names
  and addresses at your special events and it will
  help you build your housefiles. Lists of
  visitors to museums or charity projects will also
  work well in prospecting if you mail them soon
  after the visit.

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Other Best Practices in Brief

• For most charities, there is greater growth
  opportunity from direct mail and 15 donors than
  there is finding that elusive 150,000 or
  1,500,000 donor. There is also a longer term
  stability and predictability from the lower
  dollar donors. From the direct mail housefile
  come the majority of the planned gifts of
  tomorrow, especially if you are not a college or
  club. Remember the closer the relationship with
  the donor to the charity or its representatives
  the better your chances for any gift. Similarly,
  the more donations and the longer they have
  donated to your organization the better chance
  you have to secure gifts by other channels (e.g.
  capital, major donor) because they have built a
  relationship with the charity and you have
  already cultivated them by mail.

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Questions or New Topics
The only bad question is the one which wasnt
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