Yesterday, I discussed the idea of budgeting to a bad-case scenario budget that is approximately one standard deviation out in terms of results. (Note I do not say a worst-case scenario. As the Backyardigans have clearly articulated, things could always be worse.)
This is what you get listening to the father of small children.
This scenario planning allows for another benefit – to know where you are toward your budget and be able to adjust it.
So let’s say you are on a calendar-year basis, you have a one-standard-deviation-down budget as recommended, and as of April, you are hitting the middle-case scenario, exactly where you thought you would most likely be and ahead of your budget. What do you do?
Well, yes, you could throw a party, I suppose. But I meant “what do you do with your program for the rest of the year?”
Too often, the automatic response will be that you continue to execute the plan you budgeted for. This is not unreasonable – the plan seems to be working, after all.
But this also leaves opportunity on the table. If you have a potential surplus and the rest of your organization is performing to budget, this is an opportunity to make additional investments to increase your program. Note the “your organization is performing to budget” point. This is a key factor – sometimes you will be asked to supplement the budget in other areas that are not performing to goal; do this willingly, as it will be these areas that supplement you the 16% of the time you are having challenges.
This is why as a part of your budgeting, and then dynamically throughout the year, you should be looking at “if this, then that” investments. In your budgeting process, this can be as simple as “if we are $100,000 ahead by April, I’m going to spend an additional $50,000 in acquisition.” Note that this would increase your costs and decrease your ROI compared with budget, which is another reason these are false indicators for your program.
When you get into your direct marketing year, however, you will want to be more specific with your goals based on performance so far. Let’s say that one of the reasons you are better than budget is that your deep lapsed 37-48 month segments have been performing better than you had projected and the surprising success of the soft ask on an email mainly targeted at advocacy efforts. You may still want to make that $50,000 investment, but you don’t want to put that into straight mail new donor acquisition just because that’s where you thought you would go at the beginning of the year.
Instead, you may look at:
- Testing deeper lapsed audiences with the messaging that worked best for your 37-48 month constituents.
- E-appending deeper lapsed audiences that you might normally to double down on an audience that seems more responsive than you’d planned.
- Testing a mail version of your advocacy email series.
- Looking to shore up weaknesses in the program. If you found that you were not hitting your targets for online acquisition, but had a strategy that was working, upping the investment there could be beneficial.
These are the same sorts of the things you will be looking at in scenario planning if you find yourself under budget in April. While the fluidity of investment opportunity can be heady and thrilling when you are above budget, your goal when you are under is to minimize soul-crushingness and longer-term opportunity damage.
So you’d be looking at this in converse. If lapsed reacquisition was doing well, but new donor acquisition was significantly off target, you may be able to shift a portion of your new donor acquisition budget to lapse reactivation and maintain your donor file while preserving your net. Other tactics to minimize damage as you trim investment is to reduce or shift testing. While it is painful not to get the knowledge from new communications that you normally would be able to get, it can be less painful than having a smaller or worse donor file at the beginning of next year.
Here, online testing can be your friend. If you have a telemarketing script or mail piece that you were looking to see if would work for your file, try a version of it online first.
I can hear you saying “these are difference audiences” and you would be right. However, you can minimum the difference by looking at the responsiveness of just the people on your email file that were originally acquired through the mail or phone, then joined your online family. These donors will look more like your mail- or telemarketing-only donors than the entirety of your file. In a declining budget situation, you can then cut your testing costs by only rolling out with offline tests that have worked online. Here you have the additional advantage of being able to set up an audience of people who responded to the appeal online as well to help you create that valuable multichannel donor.
If you are really doing well or poorly, you can also look at what can be referred to as cheating. This is to say if you are doing immensely well and you have a piece scheduled to go out on January 3rd, you may want to change the mail date to December 29th so that the costs are incurred in the previous fiscal year (insert your own different fiscal year logic here). This can help you use one good year to significantly increase the likelihood of having two straight good years.
I know, I know. It doesn’t change the underlying realities. An organization should value being up $300,000 one year and down $200,000 the next versus budget more than it values on budget both years. But these artificial distinctions are important to your finance department, your ED, and your board, so it’s important to keep an eye on them, even if it is a skeptical eye.
To summarize a week’s work of virtual ink, for some, budgeting is a once-per-year process. For you, however, it should be a constant process of refinement and adjustment. Eisenhower said it perhaps best:
In preparing for battle I have always found that plans are useless, but planning is indispensable.
So don’t let your plan get in the way of what you actually do.