The mindset shift in online versus offline costs

Almost everything you pay for in online direct marketing is a fixed cost.  You need to buy an email platform, an online database, an advocacy platform, donation management, a content management system, etc.  Once you have these things, they scale relatively well with few costs.  Sure, there may be tiered pricing for a lot of things, but usually not many tiers.

Almost everything you pay for in offline direct marketing is a marginal cost.  If you want to send one more mailer, you have to pay for the additional paper, printing, postage, envelope, etc.  Very few own their own printing presses; you pay someone a marginal cost to absorb that fixed cost.  

This leads to vastly different outlooks on life for online and offline marketers, each with its own flaw.  An online marketer (especially from five years ago or so) is comfortable to pray and spray, counting on multiple emails to to sway where quality of email does not.  Similarly, if ads are CPC or CPA (go here for a glossary if these terms are new), you can put out bad ads and wait for volume to save you.  Your costs were up front.

These ignore the hidden marginal costs of online: time and attention.  Time is the human resources you are putting into delivering and sending messages, which do go up with the number of different messages that are going out.  But more importantly, the attention of your audience is a finite resource.  Every time you deliver a message of valid and important to that person, you fill up that resource.  Every time you deliver an irrelevant message, you draw from that well — until there’s nothing left.

A recent DMA blog post talked about how ad blocking is a bad choice because it is a nuclear option, shutting down all ad communication with a consumer that is really trying to shut down bad ads.  I agree with the sentiment, but think the fault for that lies not with consumers choosing ad blocking or the ad blockers themselves, but in the advertisers that favor bulk over connection and interruption over permission.

 

On the flip side, offline direct marketers have been trained to the net.  Because there is a marginal cost to a piece, that cost must be covered by marginal revenue.  This leads to equal and opposite mistakes:

  • Overcommunication to donors with pieces that have positive net, never looking at the irritation caused or the declining revenues per piece until you have 20 pieces netting $.05 per when you could have four pieces netting $.50 per.
  • Underinvestment in strategies that are temporarily net negative.  This can be:
    • Acquisition, which can pay for itself over time
    • Lapsed reactivation – ditto
    • Cultivation communications.  Research shows that you can reduce churn significantly by asking about someone’s donor experience. Will this have upfront costs?  Yes.  But the cost will be more in the long term to have to reacquire those donors or get new ones to replace those to leave.

In short, offline and online need to learn from and appreciate the differences in their cost structures.  But they shouldn’t be bound by these structures to inevitable, unenviable fates.

The mindset shift in online versus offline costs

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