costs

Free solutions for your direct marketing program

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In a perfect world, all of our direct marketing costs would be marginal, so they scaled as we mailed, helping us to pick the exact right quantities and people every time.

Of course, in a perfect world, we wouldn’t have to solve the social ills we are trying to solve as nonprofits.  So that’s a good indicator that we are not in such a world.

In this world, most solutions (which are like products, but more expensive) have a fixed cost.  You are forced to do the math – am I going to use X enough to justify spending Y?  What if it doesn’t work?

But then there are the products that have the best fixed cost of all: zero.  Many free solutions are classic cases of “you get what you pay for,” but some rise above and can be valuable parts of your technology stacks:

  • Buffer.  Schedule your social media posts; I use this for some morning retro Twitter posts.  Paid version allows you to queue up more – be patient and it’s free.
  • Canva.  I suck at design. Canva makes it easy.  Like Photoshop, but free.
  • Fiverr.  OK, this isn’t free.  It is, in fact, $5.  But that’s five dollars for ad creative, copy writing, proofing, and other tasks you may need to get done, quickly and not by you.  Most solutions will cost more than $5, as there are increases for quantity or tight timelines, but it’s far better than many services that are much more expensive.
  • Google Analytics.  Really, there are many Google products that could be on this list.  And while the free version doesn’t have the bells and whistles of its paid counterpart, neither does it have the $150,000 price tag.  You’ll be able to track traffic, see how your site is functioning, and, best of all, set up your goals and see how you are generating your conversions (and how you aren’t).
  • Google Scholar.  Want to see if anyone has tested what you are thinking about testing?  Or learn the psychology of donors?  Google Scholar brings you scholarly articles about all manner of subjects.
  • Hemingway. Put your copy here.  It will simplify it.
  • M+R’s Toolbox.  Quick tools to help you with your T-tests, chi-squareds, benchmarks, and more.  Subscribers to my newsletter have known about this for months (become one here!).
  • QuickSprout.  An audit of your site to let you know what you can be doing better.
  • Simply Measured free tools.  They have a lot of paid tools, but their free ones will give you a good idea of the basics around your social media presence.
  • SplitTester and Split Test Significance Calculator. Never again wonder if you will ever achieve statistical significance on your ad test.
  • WordPress. I use it for this blog.  Some may say that isn’t a huge endorsement, but there are other, more attractive sites there as well.  You can also have static landing pages in addition to your blog using the Pages tool.
  • Wordstream’s Free AdWords Grader. What it says on the tin.

And, of course, my free newsletter – it’s what every stylish marketer will be wearing this summer.  Or reading.  Or something.

Free solutions for your direct marketing program

Saving money with DIY analytics

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I probably should not be the person talking about DIY.  I have a T-shirt that has a bit of every paint color I’ve ever painted a room, because I am physically incapable of not dripping on myself.  And that is minor compared to some of the crimes against home-anity I’ve committed.

Let me take the opportunity to apologize to everyone who has ever bought a house I’ve worked on.  I hope the electrical burns have healed by now.

But I do believe in DIY analytics and tricks to save money.

You can and should be using professionally produced models.  Many of them will help save you money and/or produce additional revenues.

But you can do a few things on your own to avoid breaking the bank, speed the rate of progress, or both.

Here are some cost-saving things you can do in your own spreadsheet:

Any others that Direct to Donor readers have used?  Please let me know at nick@directtodonor.com so I can share with the community.

Saving money with DIY analytics

Mail acquisition cost savings tips

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Now that you’ve driven some costs out of your mailings with postage tips from yesterday, let’s talk about driving costs out your acquisition efforts.

One of the big costs of acquisition mailings is the lists themselves.  Chances are fairly good that if a list works for you, your list works for them.  Thus, make sure you have list exchange agreements set up with these nonprofits, as you can both save each other money.

(Note: if you have a source of names that are not traditional direct mail donors, you may want to take them off of both the rental and the exchange markets.  Most donors are loyal to doing good works and perhaps less so to your organization.  However, if you had a source of donors that are loyal specifically to your organization like your most loyal volunteers, you may not want to exchange these with everyone and their brother.)

Speaking of unique sources of names, another way to save on costs are to try to “acquire” your own names.  That is, you have some lists of people who are constituents of your organization who haven’t yet donated – volunteers, advocates, white paper downloaders, service recipients, etc.  These names may not all make money on the first go-around, but you can usually acquire these at a higher response rate and/or average gift than someone off the street and there are no list costs.

While it will be an additional investment, I remember customizing your copy for that person’s status with your organization.  Indicating that you know they are a volunteer and thanking them for their service will not only cut down on your complaints; it will also very likely increase your response rate.  After all, you don’t want to do business with someone who doesn’t know who you are – why would your donors?

Even if you don’t have these names in your active acquisition efforts, be sure to keep them in your database of record.  When you rent or exchange a list with another nonprofit, it goes through a process called match back.  This is where they run your names against the incoming list – any matches are returned to the origin nonprofit and you don’t pay for them since you already had them on your file.

However, that ping from an outside list can indicate to you that the person that you hadn’t been mailing because they only downloaded one white paper three years ago is giving to other organizations and could be a quality acquisition candidate.  Thus, you can put them into acquisition at no cost.

Another source of “free” names are your lapsed donors.  You likely have a list of people whose RFM analysis (or hopefully modeling or RFM+ analysis) indicates that they shouldn’t be getting donor pieces anymore.  That’s fine and natural.  However, that doesn’t mean you should stop trying to re-acquire them.  Now they are in a limbo between donor and, as the song goes, just somebody that you used to know.

Mailing them with the same piece that attracted their attention at first can be a good way of getting them back into the swing of donating.  And it’s likely a good investment – reacquired lapsed donors tend to have better retention rates than newly acquired donors.  Just don’t take them for granted – they’ve told you with their behavior that they aren’t head over heels for you.  Once you’ve reacquired them, make sure they get your love so that they won’t lapse again.

When you do rent or exchange with outside lists, look at the many variables you can select: recency of donation, amount of donation, demographics, location, etc.  This is a case where you don’t want to scrimp on costs.  If a list is not performing for you as it had, you may want to spend more on it (counterintuitively) by asking for more recent donors, larger donors, only females (if your organization skews this way as most do), or adding a ZIP code select (asking for only donors in your top performing ZIP codes).

On the flip side, if a list is performing very well, you may be able to relax these variables, helping you get additional productive names and saving on costs.

Also, remember that just because you bought the name doesn’t mean you have to mail it.  If your analysis/modeling of an outside list name indicates that they won’t pay for themselves, don’t throw good money after bad money.  The list cost is sunk; you need not be.

It’s important you have a good relationship with your list broker.  They should know your strategy and whether you are driving for quality or quantity of donor.  Chances are if they are doing a good job for you, they will already be optimizing for many of these things, but it never hurts to ask.

Mail acquisition cost savings tips

Postage techniques to save money on your direct mail

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We face pressures to our net income from all sides:

  • Response rates are down
  • Retention is down, challenging and expensive (but well worth the effort!)
  • Costs of materials are up
  • Platforms and consultancies have high fixed costs before you ever send the first email or mail piece
  • Postage can be expensive

jefferson-nickel-unc-obvThis week, we want to look at tips and tricks for getting everything you can get out of your costs.  As someone who will squeeze a nickel until Thomas Jefferson begs for mercy, I hope these can help you recover little bits of your net.

In the mail, one of the primary cost drivers is postage.  As nonprofits, we get lower postage rates than commercial mailers (but less than members of Congress), but even this cost can be very high, especially for smaller mail runs or non-standard envelope sizes.

So the first tip is test a standard envelope size if you aren’t already doing it.  That oddball envelope may help you get noticed in the mail, but at what cost?  Some research shows that a simple plain white envelope has the highest offline open rates, so you may be paying more for your postage to little or negative effect.

You should also try commingling.  As you might guess, the USPS’s cost of delivering a mail piece increases the number of times a mail piece needs to be touched.  Let’s say you dropped a letter to a donor into your local mail box.  It would then go to, in order:

  • Your local USPS office
  • Your local Sectional Center Facility (SCF)
  • Your regional Network Distribution Center (NDC)
  • Donor’s NDC
  • Donor’s SCF
  • Donor’s USPS office
  • Donor’s mail route
  • Donor

At your NDC, your donor’s NDC, and your donor’s SCF, your letter has to be sorted, organized, and bundled with like envelopes.

Thus, if you can get 150 pieces in the same three-digit ZIP code (the first three digits) and deliver them bundled, you get a discount.  If you have 150 in the same five-digit ZIP code, even better and even more of a discount.

The trick is that you don’t have 150 pieces for each ZIP code.

But your mailer likely does.  Thus, you can save money if your mailer bundles your mailing with other mailings that it is doing (and packages them properly and puts on intelligent bar codes and such).  This is called commingling.

You might ask why someone wouldn’t do this.  When I took over a program, it was specifically banned, because the powers that preceded didn’t want our pieces to go out at the same time as everyone else’s.  I reversed this and laughed all the way to the bank.

There’s another trick you can use beyond commingling and that’s drop shipping.  This involves delivering your mailing to your SCF or NDC yourself, thus cutting two or three steps out of the process.

Note that by “yourself,” I don’t actually mean yourself.  Your mail vendor should be able to do this.  Talk with them about the cost trade-offs of doing this.  If your mailing is large enough (or the mailings you are commingling with are large enough), you should be able to get cost efficiencies here as well.

At the very least, these should be worth discussing with your mail vendor.  If they have never heard of these things, that’s probably a good indication that you are now in the market for a mail vendor.  They should be able to discuss with you the tradeoffs and efficiencies they are able to get.  Also, ask them about how many commingles they do per week.  Ideally, you want three or more so a missed commingle doesn’t delay your mailing by more than two days.

It may only get you a couple pennies per piece here and there, but those are the types of advantages you will scratch and claw for on the response rate and average gift side.

Postage techniques to save money on your direct mail

Easy growth is dead

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ef-hutton-commercial2There are some people that, like the old EF Hutton commercials, when they talk, you listen. Mary Meeker is one of those people as one of the lead analysts on online and high-tech issues.  

To give you some perspective, she was lead manager of the Netscape Communications IPO in 1995; usually when someone says they have over 20 years of online business experience, you assume they are padding their resume.

On June 1, Meeker put out her Internet Trends report, highlighting the evolution of the sector.  You can see the full report here.  Among the over 200 slides are some key takeaways for us nonprofit folks, so I wanted to highlight a few of them this week.

I’m on the record as opposing any article that proclaims The Death of X — that’s even what I called a NonProfit Pro article on the topic.  

So here I am violating my own rule.

In the report, on slides 37 and 38, Meeker articulates the five epic economic growth drivers of the past two decades and how they are all waning:

losing mojo
What do these drivers look like for the nonprofit sector?

  • Nonprofit giving remains at two percent of GDP.  Has been for 60+ years and looks unlikely to break out anytime soon.
  • As Meeker says, overall GDP growth is slowing across the board because of these demographic factors.
  • The number of nonprofits is increasing.
  • The number of donors is waning, with 103 donors lost for every 100 donors gained.  This is offset by average gifts going up, but getting more and more from fewer and fewer is the buggy whip model for success.
  • Anecdotally, nonprofits are increasing their quantity of communications in an attempt to cut through the noise.
  • With giving increasing by less than the amount communication quantity is increasing, costs are up and response rates per communication are down.
  • Meaning that response rates per donor are down.

We need, as an industry, to find a way out of this.  Other than the nonprofits that are working to decrease death, we can’t solve for the N and increase overall population.  Nor is there anything I think we can do at the nonprofit level to prevent other nonprofits from forming.  And we’re unlikely to budge GDP.

So, easy growth is dead.

Thus, there are but a few choices:

  1. Increase the percentage of people who give.
  2. Increase the amount that people who give give.
  3. Decrease the costs of getting people give.
  4. Die off.

All of these will come into play at some point.  We keep overfishing the same donor waters; we will have to find new donors.  In order to break 2% of GDP, we need to change our value proposition to those who donate to us.  And we need to be smarter about how we solicit and receive gifts.  Those who don’t do at least one of these three things will do the fourth.

Tomorrow, we’ll talk about a Meeker-inspired way to help potentially increase both your retention rates and your donors’ experiences (that is, working on #1 and #2).

If you’d like to get these types of tips on a weekly basis, please sign up for my weekly email here.  You’ll get digests of this information, plus additional subscriber-only content like 30 days to firmer thighs.

OK, I’m lying about that last part.

Easy growth is dead

More donors versus better donors: cost of fundraising

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Previously on Direct to Donor…  the question was raised as to whether it is better to have fewer, better (that is, higher value) donors or more, lower value donors.  And now, today’s episode…

point counterpointWe’ll try this debate style.  Betty will be arguing for our better, fewer donor model (aka the Ravenclaw strategy) and Mo will be arguing for our more donors regardless of how much they give (aka the Hufflepuff strategy).

Betty:  Simply put, many donors just don’t pay for themselves.  Let’s say you have a robust multichannel solicitation program that costs you about $5 per person to run.  If your $10 donors don’t average more than a half a gift year (which may be pushing it, assuming that a healthy portion of them are first-time donors), these donors are literally losing you money every time you communicate with them.

Mo: Then don’t mail them so much.  Solicitation costs are something that are under your control.  Lower-dollar donors don’t have to have the same cadence as a higher-dollar donor.  Nor do you have to send the same packages or use more expensive means like telemarketing to keep your lower-dollar donors.  Try to convert them to less expensive means like giving online.

In fact, because volume is a big predictor of communication costs for means like direct mail, you save money on all segments by having more people on file.

Betty: First, let’s dispense with the notion that a $8 offline donor is suddenly going to become a $50 online donor.  Honestly, at that level, you wouldn’t even pay to e-append them.

Second, bulk of donors will save you per piece, but only by a couple cents per piece.  That doesn’t compensate for the vast differences in net per piece value from a strong donor.  In fact, that’s why you can communicate much deeper into your file with higher-dollar donors; even a small chance of getting a gift from a $100+ donor is better than a good chance of getting a gift from a $5 donor.  

And in very strong average gift segments, you can be making over a dollar, two dollars, five dollars, or more per communication to your strong segments, a virtual impossibility with lower dollar segments.  So your fundraising efficiency is much greater.

Mo: Fundraising efficiency should not be a metric.  You can tell it’s unimportant and misleading because Charity Navigator measures it. (rim shot)  What you want is to be able to maximize the net revenue you can deliver to the mission of the organization.  And thus you want to have these donors.  There are some segments of donors that like to give $5 at a time, but they will do it to every other or every third communication you send them.  While it’s not a home run, getting on base often means something.

And these donors are much cheaper to get.  Sometimes they are half of the cost of acquiring a larger-average gift donor.

Betty: But because they make smaller gifts and usually have smaller response rates, they are far less able to make back the investment.  A quality donor is a gift that keeps on giving and lower quality donors simply aren’t.

Mo: But you don’t know the hidden gems when you acquire them.  Having more donors is likely panning for gold.  And so you want quantity.

Betty: That would be true if donors generally upgraded.  However, if someone gives you the same amount three times, chances are you are going to be getting that amount for the rest of their useful donor life.  Upgrading is good to try to do, but you can’t count on it for the bulk of your audience.  And loyalty goes up as average gift goes up, so you really can tell from average gift whether someone is more likely to become a good donor for you.

The verdict: This one is a split decision.  The case for more donors makes some good points and you should be doing whatever you can do to minimize your costs with low-dollar audiences.

But, by a nose, we have to give this to the case for better donors.  There is a point in every file where donors just stop being profitable.  For some, it’s at $5; for some, it’s at $15.  At that point, you don’t have a good way to make money for your mission from them.  And when you can’t fund your mission from them, you should aim not to acquire them.

“But wait!” Mo says.  “What about the non-monetary benefits of having more donors?”  Well, that will be tomorrow’s debate.

More donors versus better donors: cost of fundraising