Nonprofit direct mailers are following the Christmas carol instructions about “making a list, checking it twice” for end-of-the-year mailings. But forget about naughty or nice – these mailers want donors.
Save the Children is preparing to mail approximately 300,000 lapsed donors this coming fall, according to Gail Arcamone, director of direct response marketing at the organization’s Westport, Conn. headquarters.
Arcamone said that the organization plans to mail smarter by modeling the lapsed donor list, scoring individuals based on their potential to give. So instead of mailing the entire donor file, “we can just really mail more efficiently to the donors who are most likely to respond.”
“It’s working a little more efficiently with the donors we do have on our database,” said Arcamone. The modeling will look at most recent gifts, frequency and donation size and score donors, allowing the organization to mail the potential top scorers that might be most responsive, she said.
Save the Children will also mail some non-donors on the file, prospects and inquiries that expressed interest in the organization but haven’t had a financial transaction. Arcamone said the organization never included these people in the fall mailings, but hopes that a similar modeling technique will target those people most likely to donate.
Nonprofits are fighting battles on several fronts. Giving USA Foundation recorded that donations last year declined an estimated $6.42 billion, or 2 percent, but 5.7 percent when adjusted for inflation — the largest drop in donations since it started tracking 54 years ago.
New donor numbers have fallen three times faster since the recession began than in either of the two previous years, according to the 2009 First Quarter Index of National Fundraising Performance released by Target Analytics. And the percentage of nonprofits looking at programmatic redesign, layoffs and reductions to program activity to save money has all increased, according to a recent Bridgespan survey.
Arcamone said nonprofits must keep those factors in mind when developing their year-end mailings. “We’re seeing a drop in responses and average donations and I think we have to work harder and smarter to continually acquire more donors, and retain more donors and continually appeal to them,” she said.
“As costs increase and as the industry’s direct mail response rates soften, it becomes more and more important to have as efficient a direct marketing machine as possible,” said Matt Cobbett, Target Analytics director of cooperative database products.
Cobbett said that 10 years ago people were questioning why they would need to model data. Now, he said, list modeling is becoming an industry necessity, hastened by the recession. “In the current economy, we are seeing agencies and organizations focus even more on driving value from those lapsed donors. So house file modeling has certainly grown even faster over the last year than it has in the past,” said Cobbett. “If you can mail a lapsed population and make money you should be doing so and modeling can help you do that.”
Modeling lists for acquisition and deeply lapsed donors are similar in that the data variables, such as frequency or monetary, can be scored, sometimes expressed as different tiers or deciles. But Cobbett explained that acquisition and deeply lapsed donor modeling lists could still have fundamental differences.
“When you are building acquisition models, you need to focus more on data that comes from outside of the organization,” he said. So for example, you’d want data that describes how people behave toward other similar organizations, he said.
“When you are looking at someone’s house file and trying to score their lapsed donors, the picture is a bit different. You’ve got more of an opportunity as a modeler to incorporate quite a bit of giving behavior between those donors and the organization itself — capturing their pre-existing relationship with the organization,” said Cobbett.
He explained that the best solutions incorporate the external data and internal data about past behavior, giving a more holistic view of the donor’s behavior.
But modeling is just one tool in the nonprofit arsenal that people are using to save money for year-end mailings. Paul Krizek, executive director and general counsel of Christian Relief Services (CRS), said the Alexandria, Va.-based organization started looking at efficiencies when postal rates increased a few years ago. With the current economic climate, Krizek said the organization would just build on those segmenting and targeting tactics for the end-of-the-year mailing.
Krizek said years ago the organization would send 10 to 12 mailings to the whole house file. Now they are more targeted with the communications they send. He explained that certain donors have a history of responding only to certain appeals, such as the year-end mailing. “So, guess what? We’re not going to send them the other ones,” he said.
Mark Hanlon, senior vice president of Colorado Springs, Colo.-based Compassion USA, agreed that sending every message to each donor isn’t efficient. Compassion USA sends an appeal in late August that asks sponsors to give a Christmas gift to their sponsored child and a little extra for those children who might not receive anything from sponsor parents. Hanlon said the appeal receives a nearly 60 percent response rate, with many donors giving extra.
He explained that one strategy is that Compassion USA sticks with its known donor base instead of renting lists during year-end. “We find that it’s much more effective to get better response, better return on our stewardship investment of fundraising dollars if we go to our internal base,” said Hanlon.
Compassion USA drops a second appeal in late November focusing on key funding areas, such as a fund for children waiting to be sponsored. The mailing gets a 4 to 6 percent response rate, which trended toward the higher end last year, according to Hanlon.
But he said that Compassion sends a different offer for those donors who haven’t responded to the appeal in past years. Instead of a year-end donation, the organization asks donors to find other child sponsors within their sphere of influence.
“The concept of making the right offer to the right audience is really the key to our appeal strategy,” said Hanlon. “Obviously, it takes more effort, but we think it’s worth it.”
Krizek said CRS is taking those savings from segmented house mailings and putting some of that money back into the mail on the acquisition side. He explained that the organization slowed down prospecting a few years after the September 11, 2001 terrorist attacks and those cuts now accelerated attrition rates. For this year, he said the organization plans to expand prospecting by around 20 percent compared to the past two to three years.
Jennifer Bielat, assistant vice president for direct marketing at Chicago-based Easter Seals, also said attrition was to blame for a smaller 2008 year-end mailing compared to 2007. “Just like everyone else we needed to scale acquisition as the economy got weaker,” said Bielat. This summer, the organization planned to increase acquisition 15 percent compared to last year, which “will hopefully bring some new names on to the file that will be available for us to mail during the time period,” she said.
Easter Seals sends two mailings in November as a part of the year-end campaign, one with a 12-month calendar premium and another with mailing labels. This year, Easter Seals will add a third holiday mailing in the beginning of December.
“The holiday time is one of the best times for fundraising mailers to be reaching out to their constituents. So we had an open opportunity to be able to reach out to them again,” said Bielat.
The organization doesn’t have a control package for the third mailing and is still determining if it will also contain a premium. She said that total year-end campaign, including the third mailing, should be around 2.5 million pieces.
Bielat explained Easter Seals is maintaining a robust testing program and nonprofits shouldn’t cut testing completely. Bielat recommended looking at reducing package costs, “so you can offer an opportunity for your donors to give — all donors, not just the high-end of your file.”
She said there are two types of testing: low-cost, potential high-impact testing and high-cost, potential high-impact testing. Most nonprofits should be able to swing low-cost testing, such as copy tests. Bielat said high-cost tests, such as trying a new premium or a completely different format, may be more expensive “but the upside is that if it works, it’s equally as great.”
Arcamone said Save the Children shifted a strategy for this year for its holiday catalogue. In the past, the organization looked at the catalogue, which offers donation gifts such as sending a girl to school for a year or providing children with micro-nutrients, as an acquisition tool. Now in its third year, Arcamone said the organization took a step back and determined “let’s make this work with our existing donors before we go out for acquisition.”
Arcamone hopes that the new strategy will provide a boost to catalogue response. She said that the recession might also shape response rates and is “hoping that during these difficult times that the gifts that people do buy that maybe they’ll purchase a life-changing gift for a loved one versus going out and buying a tie.”
Krizek said CRS is also testing something new to the year-end campaign Ð telemarketing. CRS recognizes every donor with a thank you, an effort that may be prohibitive “when you are really counting your pennies,” said Krizek.
Instead of mailing a thank you, Krizek hopes to test a few thousand calls, where the caller will thank donors for gifts but explain that they will not receive future acknowledgements unless they opt-in. The call will also try to get supporters to sign onto gifts via direct debit.
Hanlon said Compassion has been around for a few recession cycles and learned from that experience. “What we have found is that this is not the time to forgo market research and testing,” said Hanlon.
“We may cut back a bit, but we are not going to eliminate it because you have to keep looking and keep that pipeline filled with what’s coming downstream. So we need to make sure we are ready when we are coming out of this,” he said. NPT