Introduction to Direct Response Fundraising
Direct response does exactly what it says - goes to the donor to get a direct response to a request for a donation. It gives people the opportunity to contribute to a cause directly. And it's amazingly effective. Even in this day of internet marketing, there's still something powerful about direct mail. It's tangible, and because it's in the mail, the recipient is far more likely to see it (instead of hitting delete without noticing the topic). And it continues to help non-profit organizations raise hundreds of millions of dollars every year.
I have worked in the non-profit field for more than 25 years, beginning with a job fundraising for a community development organization in the South Bronx. Specifically, my job was to begin and build a direct mail campaign.
Because my father was in charge of fundraising for an international non-profit, I had great exposure to and familiarity with direct mail and its value. It was a fantastic way to raise both money for and awareness of a cause. Its most attractive attribute? It gave people all over the New York region the ability to do something concrete to help a cause about which they cared deeply or just a little bit. And people did care about helping the South Bronx.
This was back in the day when the South Bronx looked like bombs had dropped, full of burned-out buildings and barren landscapes that spread for acres. President Ford had recently told New York to "drop dead" while President Carter stood amid the rubble at Charlotte Street promising to do something to help the South Bronx. Meanwhile, the movie "Fort Apache" was busy scaring America and Tom Wolfe was doing research for his terrifying book, The Bonfire of the Vanities.
Our campaign worked, in part because we began when concern for the people of the South Bronx was reaching its crest. Our first donor acquisition packages went out to people who already were donors to community development and anti-poverty causes. We promised to exchange our lists with the organizations whose lists we borrowed - a practice that continues to this day. The fact behind this: people who already give through the mail are more likely to give to another organization through the mail. And people who support one social cause are more likely to support another one. There were lists we rented, too, because we knew those donors were very good prospects yet we couldn't arrange a trade.
The initial mailings were very small in number - 50,000 pieces was the most we mailed at one time. And many mailings were smaller. We never mailed less than 10,000 pieces, however, because we wouldn't generate enough responses to see if the particular package was effective. Our direct mail program eventually grew to include 3,000 donors and generate more than $250,000 a year in income.
Since that first job, I've overseen a lot of direct mail fundraising. For 11 years, I was the Executive Director of City Harvest, an anti-hunger group in New York City that generated 60% of its $11 million annual funding from individuals. While I was there, we quintupled our donor base to more than 50,000 donors.
In my early days, I learned that we were doing extremely well when 1.5% of the people we asked for money actually made a gift. In fact, any response rate over 1% is considered good in the direct response field. I thought these response rates to direct mail pieces were amazingly low considering that we raised more money than we spent on the donor acquisition mailing.
The wonderful thing about direct response is that we can collect lots and lots of data about who responds to what, over what period of time, with how much, at what time of year, etc. The first time a direct mail package is used, we mail to a fairly small set of potential donors in order to see what the response rate will be. At City Harvest, we once did a new donor acquisition mailing and got a 2.5% response rate - almost unheard of and quite celebrated in the non-profit direct mail universe (and much copied).
If a package gets a successful response, then you "roll out" the package to a much bigger group of potential donors (usually comprised of lists of donors to other charities). That becomes a "control package." It will remain the control package until another donor acquisition package exceeds its average response rate.
A direct mail package consists of several pieces:
* a letter describing the organization's work and actually asking for a gift, signed usually by the organization's chief executive
* a response device with the potential donor's name and address and listing several gift amounts (as well as providing information about getting the organization's financial reports)
* a reply envelope (either unstamped or a postage-paid Business Reply Envelope or BRE)
Sometimes, the package includes a brief fact sheet or brochure to further educate the potential donor about the organization's work and its impact.
Testing new packages goes on all the time, always with small groups of potential donors. Other tests also are done, with potential and with current donors - envelope size, real stamp versus machine stamp, celebrity signer versus CEO, enclosing pictures or not, the list goes on and on. Only one thing is tested at a time, though - it's the only way to isolate what works or not.
One example: We tested whether to include a business reply envelope (with the organization paying for return postage) or provide an envelope that required someone to put on their own stamp. We found there was a slightly higher response rate to the no-stamp envelope - not statistically significant but enough to let us know that we could stop using BREs which cost us a lot of money. (Charities pay the postage AND a handling fee - it really does matter when you add your own postage).
I also learned that it becomes increasingly difficult to cover the costs of acquiring new donors, the more pieces you mail. So why continue trying to acquire new donors? Because once your organization gains a donor, it's highly likely those donors will make another gift. Donor "renewals" are what yield the real fundraising income.
It turns out that it costs far less to get another gift from a donor than it does to get the first gift. There are no lists to rent, less printing to pay for, fewer stamps to be purchased. Most important: donor "acquisition" mailings are investments in the future. People who give $50 or $100 to an acquisition campaign may give two or three times that amount the next time. They may do that over three to five years. Also, a new donor may become what we call a major donor - someone who gives at least $1000. And some donors eventually become so interested in and committed to the organization that they join the Board of Directors and both give and help raise tens or hundreds of thousands of dollars.
If an organization wants to start a direct mail program, it's best to talk to people at organizations that already raise money this way. There are also many consultants who can help. The Direct Marketing Association has a non-profit arm full of experts.
