One of the very few useful concepts I remember from undergraduate economics is the difference between fixed and marginal costs. This is in part because I was taught in the pre-behavioral economics days, so the world the equations described was entirely unfamiliar to me. But it’s also because this difference reverberates for me even today.
To review, the difference is what you have to pay regardless of the scope of the project (fixed costs) and what you have to pay per quantity generated (marginal costs). If you want to send out a mail piece, the copywriting costs are fixed — they are the same regardless of whether the piece goes to one or one million. But the paper, postage, etc., are not.
For implications, think of Metcalfe’s law that the value of a communications network is proportional to the square of the number of users connected to it (which is why Facebook will be hard to dislodge — it’s tough to leave a place where all of your friends are). A recent HBR article showed the dark side of this law when the marginal cost of some communications are so low:
It’s tempting to look at this graph and say “30,000 messages? Sounds like Thursday.” And that’s the challenge — we are inundated as consumers and inundating as marketers.
This means we want to maximize the real estate that we have in our communications. While we have a constituent’s or donor’s attention, we want to milk it for all it’s worth.
Often, this is done crudely. When a direct mail envelope is stuffed with so many offers, buckslips, and tchotchkes to make a 1980s-era Publishers Clearing House mailing blush, the effectiveness of any one offer is diminished and the ask can often go missing.
(Incidentally, the modern Publishers Cleaning House is a great transitional story; look at this case study for a quick idea of just the social media side.)
Similarly, many email newsletters look like nonprofit Christmas trees, where every department wants to hang a few ornaments on them.
But this week, we’re going to explore some untapped resources and hidden gems — places you can put content that are both impacting and low (marginal) cost.
And, since every blog post should have at least one good tip in it and not be full of just introductory material, one of the biggest and easiest of these is:
When you decide to send a mail piece or make a phone call to a person, the vast majority of the costs of that communication are already incurred. Then, it’s just a question of what you put into that communication.
True, there is an additional cost of customization. But once you customize anything in a phone script or on one side of a letter, the marginal cost of adding in additional customization is almost nothing — maybe some additional data costs.
The return is almost always positive. And, since the alternative to getting additional revenues is likely communicating more, which incurs additional costs and has diminishing returns, it’s a preferred route.
So here are some ways to customize your communications that will let your donors know you know them and increase their receptiveness to your appeals:
- Name. As I explain here, we start listening for our own names selectively at age 13 months. And we don’t stop.
- Location. I’ve seen location as broad as a state increase response rates by 30%. More recently, we talked about how putting in city-specific data can increase average gift and response rate.
- Donation history. Red Cross found out that including “Previous Gift: XX/XX/XX” at the top of their letters to lapsed donors increased response rate by 20%. Similarly, letting long-term donors know that you know they have been with you for a long term only increases their loyalty.
- Ask strings. I’ve talked about how zip code modeling can help you select the right donors for your acquisition packages. But you can also likely presume that donors in the richest part of Beverly Hills will behave differently from the poorest part of Detroit. This type of elementary modeling can help you correct for mistakes you made in asking that Beverly Hills donor for $10 in your acquisition package.
All of these can cost you little, but bring you significant results. This is what we’ll shoot for for the rest of the week, so if you don’t think you’ll be back, please sign up for our weekly newsletter here for a digest of these tips and tricks, plus some secret subscriber benefits.