Focus On: Premiums: Here Donor, Donor

While not technically considered a premium in ParadyszMatera incentive studies, decals are an interesting offshoot of the premium world. In terms of performance metrics (response and average gift), they tend to behave more like non-premium packages. Traditionally the domain of humanitarian and certain health/charity mailers, decals have become more popular with advocacy and political groups within the past six months.

Premium performance
It’s evident that premium use is significant, but how are premiums performing for nonprofits? For the past two years, ParadyszMatera has conducted a quarterly acquisition-performance benchmarking study using compiled statistics from 21 of its nonprofit clients (collectively mailing more than 250 million pieces annually).

In general, while response has shown recent softness for most premium mailers (down cumulatively 6 percent from 2003 to 2004), average gift for this period has improved (by 3 percent). Note that we saw a similar trend
with non-premium mail in that response was soft, but average gift amounts increased.

At the end of the day, it truly becomes an issue of an ROI calculation, one that takes into account all factors of a package’s performance and cost. Most importantly, a careful consideration of a program’s goals at any given time is crucial to the analysis: When driving donor numbers is the key factor, a premium package almost always will achieve this goal faster than a non-premium package. If overall revenue is the key metric, we must calculate both the up-front and lifetime value of a donor acquired by a particular package in order to decide the appropriate strategy.

Optimize performance
The key to optimizing performance of premiums in the future will be a combination of these factors:

• Frequent and consistent testing into fresh, new creatives, including systematic package rotation;

• A deliberate match of incentives to particular sub-audiences; and

• The disciplined use of LTV information in a true donor ROI analysis.

The last point cannot be made too strongly. We are entering a new era in donor acquisition, one in which a complete ROI analysis must be done on every prospect group. Increased access to LTV information is shaping the argument over premium use. Organizations are developing an evaluation system that accounts for the LTV of donors acquired by premiums versus those by non-premiums (and other non-direct sources).