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Sweepstakes Make a Slight Rebound

By Tom Pope - November 1, 2002

Perry Chapdelaine hopes to win big in a sweepstakes. His view of winning would be his nonprofit’s sweepstakes fundraising rebounding from the decline it and most sweeps have suffered during the past few years.

The Arthritis Trust of America (ATA), in Fairview, Tenn., depends on a sweepstakes strategy for virtually all of its direct marketing. At one time, income reached as much as $2.5 million. It hit an all-time low this year at just $668,000.

Chapdelaine, the organization’s executive director and secretary, expects a rebound. "I would like to see it go up to a couple of million. But realistically, I expect it to bounce back to $800,000," he said.

His prediction may be on target. There has been an up-tick in use of sweepstakes mailings, according to Glenn Lalich, research manager in the New York City office of the Minneapolis-based direct response firm ParadyszMatera.

ParadyszMatera, through its MarketRelevance program, tracks fundraising appeals of all types and reported there has been an increase in use of sweepstakes mailings. The online direct mail and email tool shows that fundraising sweeps mailers for the year 2000 were at 4.5 percent of all mail, but drastically fell to 1.5 during 2001. Lalich said that it’s approximately 3 percent of all mail this year. "When the sweeps decline hit, everyone dropped," he said. "The decline hurt publishers more than nonprofits."

For consumer magazines, the sweeps volume was at 6.5 percent in 2000 and plummeted to 1.5 percent this year. "Fundraising is the one area that seems to have a rebound," Lalich said. "When the anti-sweeps feeling occurred, it was on Publishers Clearing House (PCH) and the American Family Publishers (AFP). Fundraisers were not in that mix so they didn’t take the brunt."

During the summer of 2001, a settlement was reached between 26 states and PCH requiring the sweepstakes giant to make significant and permanent changes to how it conducts contests, along with paying $34 million to consumers nationwide.

One advantage for fundraisers is that sweeps are not being used by charities to sell merchandise, so a different focus exists, according to Lalich. The public usually sees a different slant because nonprofits are viewed as being above board, he said.

The message of the social concern is usually mixed into the letter and the public is astute in seeing the difference between the commercial world and the nonprofit, Lalich said.

While the largest category using sweeps for fundraising are disease-oriented nonprofits at 41 percent, some 31 percent is by religious organizations. Veterans or animal organizations round out the list at 28 percent, according to data from MarketRelevance.

"Sweepstakes is seeing a rebirth because it still works for some people," Lalich said. The public responds because of another reason. "Those consumers see far fewer sweeps than in the past, so the organization is not competing with as many other sweeps programs."

Chapdelaine’s mailings for ATA vary each month, from 3,000 to 30,000 pieces. He was mailing half a million pieces prior to the sweepstakes’ recession.

The nonprofit has two types of sweeps. One mailing offers a $2,500 prize, the other a $25,000 award. "When the court went after them (PCH and AFP) the number of lists we could rent dropped drastically," he said.

With a shrinking market and less list availability, the North Shore Animal League America (NSAL) in Port Washington, N.Y., had to work harder to get more targeted segments to perform, said Lisa Wilson, director of development. "Response continues to be high," she said. "However, we have seen an increase in no-dollar responses."

At one time the donation response to non-donation was 50-50. Donation response is only 35 percent now, she said.

Sweeps once was a major revenue source for NSAL, with 75 percent of its fundraising from its sweeps program. For almost 30 years monthly promotions to donors and for acquisition offered a range of prizes, such as a television or $1,000. An annual contest rewarded winners with $25,000, a Jeep, or a cruise.

"We work harder to make the same level we reached several years ago," Wilson said. "We had to start other fundraising programs to hedge the bet."

NSAL pulled back on certain lists and segments to mail more effectively. Wilson targets potential donors or players by testing more and searching deeper into the numbers through regression modeling and demographic overlays to. "You can’t just mail to 1 million people," she said. "We know women respond better than men, and certain ages respond better. But, it’s hard to identify the exact profile."

NSAL uses 12 locating controls for testing, although Wilson said the biggest challenge is constantly reviewing the package to cope with changes in various state regulations. NSAL had to change outer envelopes and add to the copy, along with modifying its font sizes to make the package comply with legal standards.

"Changes over the last couple of years require you to say a number of times when you ask for the donation that it’s not required for the entry," said Barry Giaquinto, senior advisor to the president and CFO of NSAL. "The trick is mentioning the comment pretty close to the donation or right after it."

Nonprofits should always be aware of the legal guidelines, said Karin Kunstler Goldman, assistant attorney general of the state of New York and president of the National Association of State Charity Officials. "Basically, they are concerned about misleading statements," she said.

Kunstler Goldman warned nonprofits to look at the cost of promotion, along with the return, as well as whether the public will be satisfied with those returns. "The public, since 9/11, is more vocal about how funds are used," she said. "If it’s a costly fundraising effort, maybe the public will look down on it."

Some state guidelines focus on avoiding the implication that people are winners when they are not, on disclosing the winnings, along with the chances to win.

The Salesians of Don Bosco in New Rochelle, N.Y., runs a sweepstakes program six times a year that blends in with a culture found in many church parishes. The sweepstakes is clearly marketed as such, with specific mention that there’s no obligation to contribute. However, the size of the ticket mirrors some parish raffles.

"Our sweeps might be familiar to many who participate in one of the parish raffles," said Father Edward Cappelletti, director of the development office. "We don’t talk about the sweepstakes beyond the minimum because we don’t want to motivate people to give just because of the sweeps."

The Salesians mail 100,000 house names and 200,000 acquisition names each time and avoids the confusion many commercial sweeps offer by having prizes for each contest, rather than waiting until the end of the year. Further, the nonprofit sticks to small prizes of a car or money at the $10,000 level.

"Our message talks about how we can help give a lunch and remedial reading to people as part of our programs," he said. "Most Catholic organizations are not soliciting for religious purposes but for social reasons."

Sweepstakes makes your mail look different, according to Rev. Cappelletti. "The sweeps means an extra inclination to open the mail," he said. "Our prize isn’t important to wealthy people, but it makes a difference for those who give gifts of $10 to $20."

A sweepstake isn’t for every nonprofit. Easter Seals, based in Chicago, reached a peak several years ago and decided to scale back from the strategy two years ago. "We went through a process of scaling down, then ceased any acquisition with it," said Chris Cleghorn, executive vice president for direct and interactive marketing.

Five years ago more than 20 percent of the nonprofit’s direct mail income was from sweeps. In this fiscal period it will record only around 1 percent from some existing donors.

"The popular perception about sweeps began to be seen as a problem, in part because of some commercial organizations using unethical techniques," he said. "We were always getting a few negative comments, but then began to find an increase (in them)."

Easter Seals decided to focus on strategies that developed donor conversion and renewal. "Sweeps donors never showed up as those with a longer term value," he said.

Organizations are using more non-sweeps packages, along with the sweeps program, as an alternate strategy, according to ParadyszMatera’s Lalich. "They might have split controls where they mail sweeps to certain prospects and it decreases the reliance on one single strategy," he said.

Who is best fitted for the sweeps approach? "The only reason the Arthritis Trust of America uses the sweeps is because we don’t have high visibility like other major organizations," Chapdelaine said. Aside from the viability of the organization, the visibility of the package may determine who should use the technique.

"A sweeps program has a place as an attention-getter to prompt people to open the mail," said NSAL’s Wilson. "It shouldn’t be the only strategy, but it can exist within a family of communications that go to different audiences where you try to get the message to as many people as possible."

 

Tom Pope is a New York City-based journalist who writes about management issues.

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