The Five Warning Signs of Direct-mail Fundraising Trouble
The Five Warning Signs of Direct-mail Fundraising Trouble
Dec. 6, 2005
By Mark A. Jacobson
Veterans of direct-mail fundraising campaigns know the challenges they face in keeping program ROIs on target: renewing donors acquired by premiums, trying to persuade telephone donors to renew by mail or e-mail, and battling increased lapsing rates among even the best donor segments.
These issues and others like them decide direct-mail results in the here and now. But wouldn't it be great to deal with the challenges that lie at the base of these bigger issues before the Sword of Damocles appears over our heads?
In direct-mail fundraising, it's not uncommon to discover problems exist only after income begins to ebb. Here are a few scenarios that might raise some red flags for your organization before gross income declines:
1. Attrition is not made up by new/recaptured donors. One tried-and-true method of gauging if your program is really growing is to compare the attrition of your 12-month donor file vs. the combined totals of recaptured lapsed donors (from 13-plus months) and new donors during the same year. If you're adding/recapturing more than you're losing, then strategies that increase gift size and frequency can result in real, sustainable growth.
But trouble here can go unnoticed for as much as a few years. During this time, a shrinking base can be upgraded and/or gift frequency increased -- resulting in what appears to be income growth. But it won't last. Within a couple of years, continued roll-backs in the number of donors will become a burden that cannot be offset by the increases in gift size and frequency. Unfortunately, by the time gross income begins to ebb as a result, retention has usually become an extraordinarily difficult trend to reverse.
What to do? First, see if you can increase your recent donor renewals. Decrease your attrition. Even a few percentage points will provide meaningful income, and it will render those donors more likely to give again soon. Second, find small, limited pockets of lapsed donors that will respond favorably to more frequent or improved packages.
2. Lapsed program cost-per-donor-acquired is higher than some acquisition. Making direct-mail strategy decisions based on the ROI performance of your entire lapsed program can lead to the rendering of some "false positives." Instead, try stratifying results by year of last gift, lifetime value and/or gift patterns before lapsing. The keys are identifying at what point the cost-per-dollar-raised recapturing of a lapsed donor exceeds that of acquiring a new one -- and adjusting strategies to react. By qualifying the lapsed file -- eliminating high-expense/low-return cells -- you'll be able to maximize your allocation of resources. Money saved can be used to improve other portions of the program. Or it can, on its own, improve your net return.
3. Number of donors making two-plus gifts per year is in decline. Gift recency and frequency are still the overwhelming predictors of when a donor will make his/her next gift. Donors making two or more gifts (versus only one) within the past year can be three to five times as likely to give in the next six months. If your multiple donors' vital signs are down, initiate a quick fix, this year, before the problem compounds. Consider a more aggressive thank-you program, a stronger push in monthly giving or additional appeals to the heart of your donor file.
4. The lapsing rate of your new donors is increasing. The method, medium and/or tool used to acquire the first gift must be heavily factored into second-gift conversion efforts. It's highly likely if you used a premium to acquire, you'll need another one to renew. Emergency-appeal donors will require similar urgency. If the first gift came in as a result of a telephone call, the donor probably will need something more interactive than direct mail to secure the second gift.
For new donors, two other factors will influence renewals. The first is when you ask for the renewal. If it's more than six months from the point of the first gift to when you ask again, chances are your results will be poor or mediocre. Find a way to recapture their attention once again as soon as possible, and be sure you ask for another gift no more than three to five months after the first event.
The second issue is the thank-you process. Special thank yous -- perhaps even a New Donor Welcome Kit -- can reinforce the new donor's involvement and support of your mission. And it will likely secure renewal gifts all by itself. Statistics show that donors making follow-up gifts via an acknowledgment mailing are among the easiest to subsequently renew and keep involved.
5. You follow the thinking, "Our strategy this year is what we did last year; it's what our donors want." Chances are good that if you've read this far, your numbers aren't that good right now. Or at least you have a hunch that all's not as good as you'd like.
Continuity -- in message, branding, appeal scheduling -- all can be positives. But it also can lull an audience to sleep and generate a false sense of security. Are you sure last year's acquisition program was successful? The proof lies in your renewal results since then. Did you obtain new donors who have maintained their interest and support? Or did you use a package that attracted donors that by nature wouldn't renew?
Direct-mail fundraising is a marathon, not a sprint. By all means, use every technique available to you to generate that first gift. But don't conclude success or failure on immediate returns alone. You're in it for the long haul ... your ROIs are profitable only when you're into the renewal phase. All that glitters may indeed not be gold -- at least at the outset.
Mark A. Jacobson is vice president of fundraising for Brockton, Mass.-based Direct Response Solutions, full-service direct-response fundraising and marketing firm. He can be reached by calling 508.313.1032.