Premiums and Paid Products Spotlight: Primed for Premiums?
A special section means a special Editor’s Note, which means I get to turn over the reins to some special guests. So I spoke with consultant Pamela Barden, founder and president of PJBarden Inc. and member of the FundRaising Success Editorial Advisory Board, and copywriter Willis Turner, senior copywriter at Huntsinger & Jeffer, who shared some thoughts on the use of premiums in fundraising. Welcome to the conversation!
Margaret Battistelli Gardner: How would you describe the place of premiums in fundraising?
Pamela Barden: Premiums are a great way to deepen the relationship with a fledgling donor. This requires careful choice of the premium to find one that enhances your mission. For example, a health care agency may select a small first-aid kit, or a museum could offer a few note cards featuring something from its collection. I have used a small, low-cost, mission-related premium to secure a second gift from a new donor; a premium can be that added incentive to encourage a stronger link between the donor and the nonprofit.
Willis Turner: It depends on what you’re trying to accomplish. The promise of the premium can be very alluring. For a relatively small investment you can reasonably predict that significantly more people will respond to your mailing. And in many cases, that can be all you want. Sometimes you just need to get your numbers up, and premiums can definitely help. The long-term return, though, can be more challenging. Premium donors are generally a lot harder to renew. Some organizations need to enroll four times as many premium as non-premium donors to net the same amount of revenue.
MBG: Has it changed over the past few years?
PB: When I started in fundraising 34 years ago, premiums were incentives to get a gift, and they may or may not be related to the mission. I found in one organization we were essentially operating as a tax-deductible book-of-the-month club. With the tightening of budgets, premiums have become persona non grata in many nonprofits. Also, studies have shown that premium donors are not always as “sticky” as non-premium donors. That’s why I advocate for mission-focused premiums, not simply trinkets. Premiums can play an important role if they are built into the strategy, not just tacked on in a desperate attempt to breathe life into a dying program or mailing list.
WT: I think, and hope, that people are starting to mail smarter. We’re seeing fewer and less elaborate premiums overall. It could be that direct-mail investment is down due to economic uncertainty, but it could also be that people are learning more about when premiums make sense and when they don’t.
MBG: What are the pros/cons of using premiums for fundraising?
PB: Premiums can encourage a fence-sitter to give a first gift. They can encourage the second gift. They can also help build a habit of giving. I suggest what I call a “continuity premium.” This was used successfully for donors acquired via DRTV. They received a premium when they gave and were offered a complement to that for a second gift, third gift, etc. It was mission-focused and low-cost, but it felt like it “completed” the premium. (I stole this idea from Bradford Exchange after I ordered one plate and eventually bought all eight in the series rather than feel like I had an incomplete set.)
Con? They cost money, and many people just give to get. That’s why I keep repeating “mission-focused.” Don’t become the dollar-store version of a charity, giving away cheap trinkets for a few dollars; that’s when it just becomes a sales transaction, not a donation.
WT: Premiums can be a relatively inexpensive way to boost results, enhance the visibility of your brand and extend your sphere of influence (to a degree). On the other hand, donors brought in on premiums are usually less loyal and have lower lifetime value.
MBG: What are the most valuable types of premiums for fundraising?
PB: Mission-focused! Also, think about shelf life. I received a water bottle from an environmental nonprofit at least three years ago. I still use it, and it still reminds me of the organization — and I still contribute at least annually.
Secondly, think about ones that have a broad reach appeal among your typical donors. Not everyone wants a children’s book or a snow scraper. For premiums, consider the entire cost — not just purchasing the premium but also shipping it to the donor. Bookmarks are low-cost, can be very mission-focused, have shelf life and mail in a No. 10 envelope. Ceramic mugs break and take up storage space. Don’t just buy the latest “thing” — ask it if fits the lifestyle of your typical donor.
And make sure you get a quality product; even if it’s free, donors can be miffed if the flashlight doesn’t light or the pen won’t write. (And you don’t want to have to quality-check every single item before you ship it.)
WT: Ah … that’s what makes a horse race. It might be one that reflects your mission, like a key ring for a housing organization, or it could be good, old-fashioned mailing labels, or a hard “membership” card, or anything else. Like everything else, you’ve just got to test your way to it.
MBG: Any other thoughts you might want to share?
WT: The use of premiums doesn’t have to be an either/or proposition. With some time and testing, organizations can develop a best package/best list strategy. It means that periodically through the year they mail low-cost trinkets to the premium-responsive segments of their file, and non-premium packages to their mission-responsive donors. It takes a bit of doing, but it can be quite profitable and yield a very efficient ROI.