Why You Should Get Good at Direct Mail Now

05 Jul Why You Should Get Good at Direct Mail Now

Warning, warning: Geek post this week!

For all the harping I do about treating all the numbers in your communications as suspect (See All Numbers are Guilty Until Proven Innocent), that only goes for what you communicate with others. The fundraising numbers you collect – and pay attention to – are really important FOR YOU. For example, here’s one:

2,000

As in: I’ve only met one single land trust organization that consistently has 2,000 or more individual donors each year that does not have a significant direct mail donor acquisition program. That organization is the Ice Age Trail Alliance and is as much a hiking club/trail organization as it is a land trust.

Here’s why there are not more:

Let’s imagine that 2,000 donors gave your organization money last year. The highest one-year repeat giver (renewal) rate I’ve seen is about 80%. The norm is 70-75% and for many organizations, it’s lower than 70%.

But let’s say that yours is 80%.

That means that 400 donors who gave you money last year will not give again this year. For your land trust to stay at 2,000, you’ll need to replace them.

At least.

Every year.

Just to break even.

There aren’t many alternatives to direct mail that will help at that level.

Also, the number 2,000 is the number many consultants (including this one) who have studied land trust sustainability use as an estimate of the minimum number of donors a staffed organization needs to be sustainable over the long run.

If 2,000 is the number needed for sustainability, and it takes a robust direct mail acquisition program to achieve and sustain that number of donors, why aren’t we all busy getting really good at direct mail?

And sustainability isn’t even the best argument.

Let’s look at this another way: If your database will allow it, go back 10 years (to 2006) and look at the population of individuals who made first gifts (donated for the first time) that year. Now track those donors forward to the present and calculate how much money those donors have given over the ten years. Subtract the amount of money it cost to recruit them and how much money you’ve spent keeping them informed and solicited since then. (Estimate these costs as nearly as possible.) The result is called the 10-year Net Present Value (NPV) of these members, and if you divide by the number of donors, you’ll have the 10-year NPV per donor from 2006.

In my experience, which admittedly is based in direct mail, it cost about $80 to recruit members 10 years ago and about $25 per year to send them information, invitations to events, and renewal letters. Again, in my experience, their average cumulative contributions over the ten years are in the range of $1,650 per donor, making their 10-year NPV per donor:

$ 1,650 – $80 – ($25 X 10) = $1,320

You can track this information for your organization, too, and it would be a good idea. Go back as far as you can and start looking at the “classes” of new donors making first gifts to your land trust each year. If you can, measure the donors you recruit by different methods. Then track the NPV per donor at 3 years, 5 years, 10 years and eventually 25 years.

Here’s where I’m going with all this: I believe the 10-year NPV for direct mail donors is different than for social media donors, project donors, and event donors. In short, I believe direct mail donors are worth more. I’m working on trying to prove this, but few organizations track how they recruit donors, and information is tough to come by.

Here are several more things I have come to believe but can’t prove yet:

• It doesn’t matter whether you call your annual donors “members” or not. It does matter how you treat them.
• The great majority of people responsible for land trust fundraising across the country have no experience with direct mail acquisition programs at all.
• An organization can lower the cost of acquiring donors by mailing to better lists and by writing better letters.
• An organization can increase the NPV by not giving up too easily on donors who ignore renewal letters, by asking for more money each year, and by marketing a planned giving program.

So again the question: If $100 investments today result in $1,650 returns in ten years, why aren’t we all busy getting really good at direct mail?

I’d love to hear your thoughts. Here are a few of mine:

• It’s expensive up front: Acquiring 400 new donors each year from direct mail requires an annual investment of $35,000-40,000 or more.
• It doesn’t return profit right away: If it costs $80-100 to recruit a donor, and the donor gives $35 as their first gift, you’ve lost money the first year. In many cases, fewer than half will renew the first year, so even if those who do renew were to increase their gift to $50, you’re still behind after two years. It’s in the third year that investments in membership begin to pay off.
• It’s intimidating: Direct mail is technical writing, and it’s counter-intuitive. To the uninitiated, it doesn’t make sense. This stuff shouldn’t work, or at least it shouldn’t work here, in my neighborhood/town/city/county.
• There are bad stories out there: In a perfect world, brokers wouldn’t sell old lists, and printer/mailhouses wouldn’t advise nonprofits to send out bad stuff. Organizations that send bad stuff to bad lists flop, and the flopping stories get shared. Which reinforces the narrative that direct mail doesn’t work – even though it does. Better than anything else out there.

When everything settles out, you want donors who make initial gifts, renew those gift with increases every year for decades, make major gifts (for them) to a project or several they fall in love with, and leave you in their will.

Sustainability gives you an argument to use direct mail to find such donors. NPV gives you a metric to consider.

How are you measuring your donor acquisition strategies, and are non-direct mail strategies working for you?

(BTW, if YOUR organization has more than 2,000 individuals who write you checks every year AND you don’t use direct mail to recruit them, I’d love to know about it. Aside from the “exception that proves the rule” idea, I’m also intrigued by innovative success stories.)

Cheers,

-da

Photo credit: Turtle Nap by Walt Kaesler.

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It’s unclear what the fallout from Brexit will be for US markets and charitable giving. Suffice it to say that there are many who believe giving will be down in 2016 and that it will disproportionately affect stock gifts and organizations that depend on small donations from many people.

I don’t have any good ideas, and I’m not qualified to make predictions here, but I do think it will be helpful to get out in front of fall and holiday fundraising. Here’s one blogger’s take from the Atlas of Giving:

• There is ample evidence that volatile financial markets slow down the US growth engine
• Federal Reserve Chair Janet Yellen has said publicly that she does not know if global recession will be triggered by this event. Not a statement of optimism from the US Fed Chair.
• US unemployment will increase… this will hurt churches and charities that rely on many small gifts from many donors
• A 20% decline in the S&P index will reduce US GDP by 0.2%. All charities will feel the pain but the education sector and Donor Advised Funds will feel a disproportionate part of the effect because stock values impact them so much.
• Expect a 1% worldwide retraction of 1% of global GDP.

Bottom Line from the Atlas of Giving: Nonprofits and churches should adjust their income budgets downward as much as 3-5% for 2016. No organization should launch any capital campaign right now. It is time to batten down the hatches and pay attention to your current donors.

If you are on Linked In, you can find the entire post here: Rob Mitchell, Atlas of Giving.

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Fundraiser’s Almanac
Here’s what I’ve been thinking about for July. What are YOU thinking about?

Planning My Fall Appeal – If you followed my advice back in February, you will have a draft of your Fall Appeal letter already written. The draft will use what you learned from last year’s appeal as well as your current year’s communications theme. There is no reason not to pull that letter out now, create several versions to meet the needs of your segmented donor file, and PRINT THEM ALL NOW. Print the letters with a September date, fold and stuff them, seal them and put stamps on. Then put them in a box on a shelf with the drop date written on the outside. One less chore for the fall! – which will make time for major gift prospects visits.

Getting Ready for Fall Foundation Deadlines – Board members can play an important role in supporting the business of writing foundation proposals. July is a great time to organize that support, and it all starts with systematically finding out who they know. Last year’s post listed the steps necessary to organize that process. It included this:

Evaluating My Fundraising Year So Far – Given what you know right now, where will you be at year’s end? Go ahead – stick your neck out and take a WAG. Will you make your fundraising goals? Here’s the question: “Given what I know right now about what foundations have committed and what grant requests are still out there, and what I know right now about membership, major gift requests, corporate fundraising, and so on, can I still project getting to my fundraising goal for the year?” July is really the first time that you have enough information to attempt this exercise. Forewarned is forearmed. If trying to forecast now means that you avoid a head-on collision in December and January, your effort will be worthwhile

Getting Ready to Talk to My Mailhouse – July is a good time to go have a meeting with your mailhouse. Take a copy of the letter you prepared earlier to show (and weigh!) and talk to them about list segmentation, timing, and copy deadlines.