Inflation Demands Fundraisers Intelligently Rationalize Direct Mail Volumes

Direct mail has always been an effective method for economically engaging donors, sustaining their participation and securing meaningful levels of giving. While direct mail is not the only way to fundraise, it is still one of the core pillars of direct response fundraising.

Nonprofits can move donors to the optimal level of giving by improving the nature of the appeal, images employed and materials selected, as well as deploying personalized solicitation cadences and amounts.

While this formula seems straightforward, we all know it is challenging to execute well and consistently. Direct mail does not provide the real-time feedback that digital channels offer, but digital has limitations, too. For example, excessive emails lead to low response rates and can drive a donor to permanently unsubscribe, cutting off their lifetime potential. The billions of emails nonprofits send out also have material environmental and operational costs.

Choosing direct or digital is not a zero-sum game. Instead, it is a matter of finding the right balance between the two. Nonetheless, the anchor for direct response fundraising is still direct mail. For example, many donors reference a direct mail piece while making an online contribution.

Regardless of the channel, fundraising is facing its most significant threat in years, thanks to inflation. My discussions with numerous nonprofit leaders indicate that the combined costs of paper, envelopes, address windows, freight, postage and labor is up at least 20% over last year.

Given the impact of direct mail on the psychology of the donor, it’s more important than ever to secure a new level of insight and operating discipline around two critical decisions:

• The cadence of solicitations
• Knowing precisely how much to ask of the donor in an inflationary environment (Remember: Inflation affects the donor’s giving propensity as much as it impacts the cost of soliciting gifts through direct mail channels.)

While the fundraising appeal is still the purview of top-notch marketing agencies, decisions around solicitation cadence and knowing how much to ask of a donor at a specific moment in time are now best rendered by behavioral economics modeling (BEM) for artificial intelligence services.

Optimizing the Cadence of Solicitations

Throughout 2022, donors providing gifts of less than $100 per year are becoming much more inelastic in their giving. This is even more pronounced when giving drops below $50 per year. If this is both intuitively logical and we see it in our donor response rates and gift values, then why are we still mailing everyone all the time in our renewal file? Why do we over-invest in lapsed and acquisition campaigns? The impact of inflation on fundraising costs compounds these questions. As discussed earlier, the cost of direct mail has increased by at least 20% in the last year, making over-solicitation a very costly operating issue.

The solution to both the over-investment and inflation is simple: Nonprofits can send fewer pieces of mail per campaign, while retaining donors and enhancing giving levels — but this is not a simple, uniform, blanket decision. It is one that needs to be done in a personalized manner by modeling individual donor sentiment at the moment of each solicitation.

While nonprofits should not solicit individuals who are unresponsive to giving requests at the time of solicitation, organizations should not lose contact with donors. Instead, nonprofits should balance relationship cultivation efforts with straight solicitations, by providing inspirational stories to donors featuring the impact of their services in fulfillment of their mission. This compelling content secures a strong connection with donors, cultivating loyalty without causing them to feel overly solicited for giving.

The use of BEM for artificial intelligence can optimize the omnichannel cadence of donor solicitations by revealing how often a nonprofit should solicit a specific donor based on their propensity to give today. This information prevents the nonprofit from unnecessarily engaging donors who inherently wish to receive fewer solicitations or have a low propensity to give. Costs are reduced by selectively reducing the number of donors solicited.

While nonprofits may fear a drop in revenue if they solicit less, BEM for artificial intelligence increases net proceeds. This increase comes from lowering the fundraising costs associated with unproductive solicitations, while employing gift array values that improve giving level performance.

Optimizing How Much to Request

Solicitations need to be optimized for each donor, precisely at the moment of solicitation. When gift array values misjudge donor sentiment, campaigns underperform relative to potential. BEM for artificial intelligence accurately measures donor sentiment, aligning the donor’s passion for the organization’s mission with their lifetime giving levels.

The challenge has traditionally been about operationalizing this capability with large donor files. BEM for artificial intelligence provides individual insights on donor sentiment in real time at material fundraising scale and generates a unique ask array for each individual donor that is designed to optimize lifetime giving. BEM for artificial intelligence operates at scale, easily processing millions of donor records per day, enabling economically viable personalized gift arrays for individual direct response fundraising campaigns.

Today’s inflationary fundraising environment requires nonprofit leaders to secure new methods of proactively ensuring predictable revenue production while reducing the cost per dollar raised. BEM for artificial intelligence can address both revenue and cost—while curtailing donor alienation and preserving brand equity.