New donors declined by 11 percent. New donor revenue dropped by $11.3 million. Had the suspension of its direct mail acquisition program continued, the American Cancer Society (ACS) projected a loss of almost $30 million over five years.
ACS leaders decided in late 2012 to pause the organization’s donor acquisition program for 2013 amid a three-year organizational restructuring that consolidated the nearly $1 billion operation from 13 separate divisions into a single entity. ACS was back in the mail by June 2014, re-launching its acquisition program.
Direct mail acquisition had generated about $10 million in revenue and brought in roughly 252,000 donors annually. The goal for the first year back was a 12 percent increase in revenue and 125,000 new donors through direct mail acquisition and a cost per dollar raised (CPDR) of $1.05. ACS officials said the organization surpassed both goals, bringing in 136,000 new donors at 99-cents CPDR, in addition to beating its $4.4 million fundraising goal by $300,000. ACS brought in $571,000 at 30-cents CPDR for the period July to December 2014.
The Atlanta, Ga.-based charity provided a look at its re-entry into acquisition mail during the recent Direct Marketing Association Nonprofit Federation’s Nonprofit Conference in New York City with a presentation titled, “Direct Mail Acquisition — Engine for Growth or Treadmill for Survival?”
Catharine Holihan, director of direct marketing, led the panel that also included Lauren Ashcraft, senior consultant, direct mail renewal, Peggy Jaynes, senior consultant, direct mail, acquisition, ACS, and representatives from its marketing agency, Merkle, including Jeff Patrick, chief strategy officer and vice president, nonprofit, and Senior Vice President Jennifer Quinlan.
“The donor demographic shifting to online and traditional legacy channels get a lot of pressure to continue to perform, so for a lot of us, direct mail is the bulk of revenue for direct response programs,” Holihan said.
Some attendees at the DMA conference were critical of the presentation for its rudimentary direct marketing lessons without much substance. Karen Downs, vice president, direct response marketing at ACS, declined to respond to those criticisms directly but said she’s heard positive feedback from her nonprofit peers, who wonder if they have the right level of investment and the right balance. “It’s a common challenge we all share,” she said.
“When they first took the action, many of us thought, somebody who really doesn’t know what they’re doing has taken control, making not very intelligent decisions,” said one observer who asked not to be identified. “At some point, they will be back. That was kind of the way most of us looked at it,” the person said.
Downs said she’s received positive feedback about the ACS panel and insights. “It helped inform other nonprofits and marketing staff that are struggling with the same challenges we have and tough decisions when it comes to budgeting, return on efforts, and strategies in place,” Downs said. “There was a lot of positive feedback we got from our nonprofit peers who appreciated the decisions to share back in 2013 and provide where we are today,” Downs said during a follow-up interview regarding the restructuring.
“When an organization makes decisions very public yet not very public about decisions and strategies, there can be a lot of attribution and conclusions that are flawed because everyone doesn’t know the whole story, nor could we tell the whole the story,” CFO Catherine Mickle said. “You run into these situations but we’re comfortable with what we did and why we did it.”
Historically, ACS was very siloed by channels, Holihan said. Prior to the ACS “transformation,” each of the 13 divisions decided its own level of participation. Holihan said, “The important question became ‘How are we doing to reinvent the direct mail program to align with the organization’s new priorities.’”
Downs, vice president, direct response marketing, said the $30 million was a projection based on if they had continued to not mail. There was no specific level or “magic number” that triggered re-igniting the acquisition program. “There was a lot of data work done a year ago. To boil it into single number would be not accurate,” she said.
After reviewing the data 12 months into the hiatus, Downs said the impact on renewal direct mail was “much faster than anticipated.” Any organization that slowed down has seen that impact but the pace was faster than expected, she said.
When the direct mail acquisition was put on hiatus, it was still to be determined at the time when it would return, Mickle told The NonProfit Times. “We made a very specific, deliberate and data-based decision. Any time this organization makes a decision like that, we don’t consider it a failure. We did not do it for a financial reason or to test what would happen with our renewal file,” Mickle said.
ACS has been a very one-dimensional direct mail program. “We knew we were lagging in that space and we needed to come up with a more dynamic approach,” Mickle said. Managers thought it could yield a better return than what the organization was getting. “What’s our strategy — from direct to consumer, start to finish? Acquisition is just one part of that,” she said. “We had different leadership and staff through that process but it had nothing to do with us pausing and looking at different strategies. It happened to coincide with that timing,” Mickle said.
The transformation resulted in employee buyouts and was followed by executive-level turnover in a number of departments, including the retirement of longtime President and CEO John Seffrin. Former board chairman Gary Reedy was appointed Seffrin’s successor earlier this year.
“It was understood that immediately, direct mail acquisition revenue was going to decline and we also knew revenue across other direct mail programs would decrease over time,” Ashcraft said. “What was apparent really quickly, our renewal program was impacted immediately,” she said, adding that direct mail feeds other programs such as planned giving and events.
Digital and email channels might be less expensive but it became evident that it would take longer to break even and fill the funnel, Jaynes said. “These channels weren’t necessarily going to fill the funnel as quickly as direct mail had,” she said, adding that it had to be multichannel to come back.
Suspending direct mail and expecting to replace donors through the online channel might not respect the wishes of direct mail donors, according to Holihan. ACS “reinvented the program and implemented an integrated strategy — not just direct mail — we’re digital, we’re email, we’re telefundraising,” Ashcraft said. “We’re focusing on net revenue efficiency and high-value donors,” she said.
“The transformation really opened the door for communication not just in marketing team but across the organization. This dialogue was critical. Our finance team could actually talk about our marketing programs when we’re not in the room,” Holihan said. “Conventional wisdom doesn’t always apply. To step back and look at programs with fresh eyes helps greatly. Test different things. See what will work for your organization,” she said during the presentation.
The question became how the organization was going to reinvent direct mail programs to align with its new priorities, according to Holihan. New programs include DRTV, face-to-face and digital advertising to support monthly giving. “Ultimately, we’re looking for that right mix that drives value over time,” she said.
The hiatus was a strategic decision to orient fundraising programs to maximize revenue from existing donor audiences and grow into new ones, Holihan said. “To create a more relevant experience to get the most from fundraising programs,” she said, and do better to engage a changing demographic versus relying on single-channel engagement. “Because we were structured in a siloed fashion — email separate from online, etc. — we knew we weren’t serving our audience well,” she said.
There was a “shift to aim for more digital and email,” Jaynes said. They were perceived as less expensive channels but it became evident as a long-term strategy that it would take longer to break even and fill that funnel, so they were higher-cost channels than direct mail had been, she said. “We needed a balance between investing in online and direct mail,” Jaynes said.
“We are looking at all channels, the way we can engage people not already engaged with us, through monthly giving asks with DRTV, optimization in the way we communicate digitally,” Downs said.
“We’re in a better place for having done this,” Downs said. “There’s a lot more information that’s driving decisions. Strategic decisions are informed by what we’re doing now,” she said.