The Holidays Are Over

January 15, 2009       Mark Hrywna      

The month of January is often a time of reflection and assessment. “Who am I? Where am I going?” For fundraisers, it’s a time to assess their holiday fundraising efforts. If they don’t, the questions of “Who am I?” and “Where am I going?” become much, much simpler if revenues aren’t there.

Despite the holiday season being the biggest fundraising period for charities, examining performance of fundraising lists isn’t all that different from other times of the year.

All lists are judged by the same criteria no matter what type of list it is, according to Debbie McLain, director of nonprofit brokerage at RMI Direct Marketing in Danbury, Conn. Fundraisers look at how much it costs to raise a dollar, the response rate, average gift, revenue and cost to determine how well a list does, she added.

Whether a list makes the overall mail plan or not depends on the organization’s cut off or goals. “If it’s close, you look for ways to improve the cost to raise a dollar,” McLain said. “If the response rate is low, you look for ways to improve it, like tightening up the recency. If the average gift is low, you increase the dollar select. If the cost is too high, you try for a better cost per thousand (CPM) and/or net name arrangement.”

There might be a seasonal lift at year-end, according to Larry May, chief executive officer of Greenwich, Conn.-based Direct Media. “A list in October or November might be 10 or 20 percent greater than other times of the year,” he said.

Commercial lists also might be seasonally driven, such as catalogs that sell most of their merchandise during the holidays, which May said might bring in more active, responsive buyers. “If you’ve got a hotline list from September or October, it might be more responsive” than something mailed in the winter or spring, he said.

Response rate and gift size are keys to look at when examining a list’s performance. May suggested looking closer at how individuals convert to second-time and further donors. “Many organizations do that, but many don’t,” he said.

May emphasized finding benchmarks and putting results into context. Most mailings appear to be a little soft this past fall given the economy, he said, so nonprofits could be testing lists and be disappointed with their performance, compared to what would be acceptable in the past. “Pick something that is a tried and true list, something you can rely on as an average,” May said, and use it as your benchmark. Exactly what that might be could vary among nonprofits because there is no universal standard. Nonprofits must know their own standards and what can generally be found in the marketplace, May said. From that you develop overall acquisition and retention mail plans.

Heather Maylander, managing director at Lake Group Media in Rye, N.Y., said net per donor makes clear the initial investment to bring in a donor. For commercial lists that are different from straight fundraising lists, she examines long-term value metrics for 12 months out. “Those are probably on marginal files,” she said, adding that if a list’s long-term value is strong it might be enough to keep them, despite net per donor being down.

Response rates have been declining since this past September while average gifts remained steady, Maylander said. But average gift is being impacted now as well, especially in October campaigns. Depending on the markets, average gift is down 5 to 8 percent while response rates are down 8 to 10 percent, she said. “I think that will continue to be the case, because people are so stretched with money,” she added.

Maylander stressed getting “back to basics,” such as exploring segmentation opportunities and expanding on a nonprofit’s best lists or other lists that might have dropped off in the past. New ROI criteria might highlight a list that hadn’t been examined in awhile. She also suggested tighter recency, modeling, and using co-ops, essentially fine-tuning mailings wherever possible to make them as strong as possible.

RMI’s McLain said assessing fundraising lists, regardless of what type, is all about the cost to raise a dollar and long-term value. “You’re always assessing to meet revenue goals, and I don’t think…that changes,” she said.

In this economy, results are down across the board, McLain said, with double-digit declines in new donor acquisition, and though renewal rates are not off by as much, they are down as well.

All agreed that mailing in general has been down a bit of late, expressing concerns about nonprofits cutting back on acquisition creating a “snowball effect” with less revenue coming down the road.

What’s different between now and the previous economic slowdown, after the terror attacks of Sept. 11, is that was more of a shock event that eventually wore off and people got back to normal, McLain said. This time, it’s more about struggling with budgets because of the decline, she said.

Fundraisers have seen drops in acquisition the last two years, McLain said and stressed mailing the “smartest lists” at the best costs. “All that long-term, high-dollar revenue you’d generate you can’t make up over the years because it’s too late,” she said. NPT