Going Flat Raises ROI

March 15, 2008       Mark Hrywna      

If you had to pay two or three times as much for something next year as you did this year, you’d probably make some changes or try something different. When a nonprofit mails well more than 2 million pieces each year and is faced with gargantuan postage increases, well, there isn’t much choice. But the bigger question for organizations willing to change might be, “How will donors react?”

The Association of Marian Helpers sends 120 mailings per year, in three languages, to its 430,000 active members. That’s a big postage bill, one that was going to skyrocket last Spring because so many of the mailings were classified by the United States Postal Servive (USPS) as flats.

The association changed its mailings to qualify as a USPS auto flat or an auto letter. Keeping everything the same would have meant additional postage of nearly $600,000, according to Jim Morrison, manager of donor development for the Stockbridge, Mass.-based organization who presented the information at a recent DMA Nonprofit Federation conference. But the drop in revenue from reducing the number of pieces mailed to stay within their postage budget would have outweighed any savings.

In all, Marian Helpers saved $431,250 on postage and expects future savings of $512,500 based on the changes made. Some of the changes include:

  • The Marian Helper magazine, of which 1.8 million are sent each year, was reformatted from 8 x 10-1/2 to 6-1/8 x10-1/2, for a postage savings of $225,000;
  • The size of Fuente magazine was modified, saving $12,500 on the postage for 100,000 mailings.
  • An enrollment card package of 10 cards became five cards, and with an average of 20,000 mailings each year. The new format and size saved $5,000; and,
  • A premium that includes a pen and personalized notepad, was repackaged. Savings on postage totaled $140,000 on the mailing of 700,000.

The jury is still out on another mailing the association adjusted. It’s possible that lost revenue could exceed $81,250 projected savings on its 15-year enrollment folders, Morrison said. The nonprofit will monitor the results closely before making any change permanent. “We knew what we’re saving, we don’t know what we’re losing yet,” he said.

Catholic Relief Services (CRS) was staring down postal rates that would have more than doubled, from $130 per 1,000 to $326 per 1,000. CRS raises nearly $70 million each year in private contributions, much of it through direct response. Premium packages traditionally have been oversized or lumpy mailings, such as a pin package, which the new rates hammered. The Baltimore-based relief agency was looking for ways to reduce production costs to help offset some of the postal increases as well as design new packages to meet lower letter rates. Targeting and mailing only top donors and previous premium donors would reduce overall expenses, said Janet Drnach, senior manager for annual giving. Postage savings turned out to be enormous and the changes resulted in production savings as well.

Most current packages are #10 or 6 x 9, and premium performance has declined during the past several years, compared to straight letter appeals, Drnach said. CRS was looking for ways to reduce costs without dramatically decreasing average gift and response.

CRS made “a risky and bold decision,” Drnach said, to try mailing a small calendar and four Christmas cards instead of a large calendar and eight Christmas cards. The calendar’s mail date also was adjusted to avoid conflicting with catalogs and other fall mailings, she said, and the mail date of two months earlier may have caused a revenue decline.

The changes resulted in declines in response rate, average gift and net revenue for both the calendar and cards, although postage and production costs from previous years were reduced significantly. The lower costs allowed CRS to reach deeper into the file, reactivate some lapsed donors and reach lower- dollar donors, Drnach said.

With the calendar, the reduced cost also allowed CRS to test a less expensive calendar format. The calendar test increased response and decreased the average gift, Drnach said. For the Christmas cards, postage costs essentially were sliced in half, helping to drop cost per dollar raised (CPDR) and drive return on investment (ROI) dramatically higher. Cary Castle, senior vice president of development and communications for United Spinal Association in New York City, has just one message for mailers: size can matter.

The association, which changed its name from Eastern Paralyzed Veterans in 2002, gets its primary source of revenue from direct mail fundraising, particularly in front-end premiums like return address labels, so postage hikes would cut into its net income.

Castle talked about results of several tests the association did on calendars, pocket planners and back-end premiums, with analysis based on CPDR, ROI and net revenue.

Size isn’t just about postal rates, but also how potential donors will respond to the mailing. In one test, Castle said the results for a 6 x 11 calendar was only two-thirds what an 8-1/2 x 11 calendar generated in terms of response and average gift. Likewise, a pocket calendar also did woefully for response and average gift compared to the 8-1/2 x 11 calendar, generating barely a third of its response but almost matching it in average gift.

In a duel between premiums involving Thank You cards, Castle reported that a back-end premium of two cards up front and four cards on the back end yielded a response almost a quarter less than all six cards on the front-end, despite a slightly higher average gift. Castle, who previously worked at Consumer Reports and National Audubon Society, also stressed testing against your control package. “I’ve heard enough horror stories about changing controls without testing,” he said.

A back-end premium offer of a mug had a 10-percent better response and 17 percent higher average gift when added to the association’s control, Castle said. Another back-end premium, this time an offer of three free issues of a health newsletter guide, yielded slightly better results as well: 3 percent better response and 8 percent greater average gift.

Castle said that he has always been a big proponent of sweepstakes. An association mailing offering a chance to win a 56-inch plasma television or $5,000 cash saw an average gift of 2 percent less than the control, but scored a 7 percent better response.

A raffle control package from Consumer Reports pitted a #11 versus a 9 x 12 package. The 9 x 12 results were 20 percent better in response with a 27 percent higher average gift. – NPT