Are Smaller Organizations Missing Out on The Direct Mail Advantage?
I’m getting more curious and more concerned about why so many nonprofits sector so neglect the “basics.” Simple things like updating addresses. Identifying deceased donors. Or promptly sending a prompt and truly heartfelt “thank you”—on paper… in an envelope… with a stamp.
“Basics” that are considered mundane but left unattended damage every organization. Many caring fundraisers who work inside organizations spend time and money on good conferences and knowledgeable consultants. And these consultants spend hours doling out solid advice on strategy, creative, techniques and other good “how to” stuff.
Yet, right below the surface of so many organizations seeking “best practices” is a very shaky foundation of bad data, and clunky or indifferent technology that stand as a bigger barrier to the use of good “how to” advice than I think many understand. It’s as though the organization invests in buying a great refrigerator, but doesn’t have electricity to operate it.
I’m particularly focused on smaller organizations—those with fundraising revenue under $3 million: partly because the bigger guys can fend for themselves, but mainly because I’m curious if there are basic needs and inexpensive tools that would be helpful in meeting some of these basic needs for smaller groups given their limitations of staff, time and budget. (I’ve outlined a couple examples of these in the P.S.)
Now… my specific 5 minute request of you.
I’m seeking your help because I’ve been puzzling over the following statistics and trend:
A recent DMA study noted that average response rates from direct mail at 4.4% are a whopping 37 times higher than average email marketing rates at a mere 0.12%. Other studies show the same disparity although the open, click-thru and response rates vary slightly.
This disparity between postal mail and digital mail coincides with the trend that the commercial sector is undergoing a resurgence and growth in the use of direct mail by 40+% a year while it seems to me that the nonprofit sector is doing less direct mail and more digital.
Stats like these, along with the recent 2019 M+R report noting that in the nonprofit world digital may have plateaued or is declining, triggers the following question:
Are smaller nonprofits taking advantage of the power of postal mail/direct mail? Do they understand its financial potential? If they do understand its potential why aren’t they using more direct mail/postal mail?
These are some of the questions worth asking if for no other reason than the answers may well improve revenue for smaller groups —and probably for larger groups as well. For example, if an email to donors has on average a 20% chance of being opened and a postal mail letter a 50% chance… and if the response rates average about 0.5 percent for an email while a printed letter delivered to the donor’s home enjoys a 4% response rate, that’s quite a difference in results.
Assume the average gift for both channels is $30. An email to 1000 donors, assuming no cost, but a .05 percent response rate will produce $150 from those thousand donors. The direct mail letter assuming it costs $750 to reach those thousand donors with a response rate of 4% will produce a total of $1200 minus the $750 cost of the mailing for a net income of $450. For a group with 10,000 donors that’s a $2,000 difference in favor of postal mail.
It seems obvious to me which channel is preferable. But there must be reasons why many organizations don’t take advantage of this.
Is my concern warranted? Is there an under-use of direct mail/postal mail among smaller nonprofits?
If so, why? I can think of many reasons for this under-utilization – lack of knowledge, the logistical hassle of producing copy and art, selecting data, wrangling printers and mail houses, not to mention a belief among some that digital is ‘free” and on and on.
BUT… these are all guesses and personal insights that come from the two or three smaller organizations I volunteer with and messages I get from Agitatorreaders, so I need your help.
That’s why I’ve created this Brief Survey on the Use of Digital and Postal Mail (that’s the 5 minutes I’m asking of you) to gain far more insight and guidance than I could ever gather on my own.
The questions are drafted so that both staff fundraisers and outside consultants can participate. So, whatever your role, I’d really appreciate your giving these questions some thought and contributing your time to complete this Survey. (And please comment as much as you wish.)
My thanks,
Roger
P.S. I’m conducting this Survey because I’ve decided to do far less consulting and instead focus on creating inexpensive, easy-to-use tools designed to solve some of the most “basic” problems faced by smaller nonprofits.
As an example of what I mean by “basic”, take the stumbling block of outdated addresses and therefore undeliverable mail. The average small nonprofit has between 5% and 7% bad addresses which means those donors will never see that great creative, best story, most powerful package or great strategy you create because they’ll never receive your mail. What a waste!
I doubt that most small nonprofits (and also the large ones) are aware of T. Clay Buck’s estimate that a file of only 10,000 donors with a 1% undeliverable-postal-address-rate costs the organization $155,000+ over a five year period. And since most organizations average 5% bad addresses that adds up to five-year income loss $750,000 for a nonprofit with 10,000 donors.
That problem can now be solved with a simple, easy-to-use, and inexpensive service called TrueNCOA that can be found in the Agitator Toolbox along with other tools for identifying deceased donors… and inexpensively appending age, income, real estate and other wealth data. (By the way, Bloomerang has fully integrated all this into their CRM system and makes automatic nightly updates available to their subscribers without charge and with no work or time on the part of the nonprofit .)
Your guidance will provide insight into what additional low-cost, automated direct mail tools may be helpful. Again, thank you.
14 responses to “Are Smaller Organizations Missing Out on The Direct Mail Advantage?”
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Ah tristesse, Roger. I started my 32nd year as a fulltime consultant in January 2019. Before that I was an ignorant (but learning!) ED and then a knowledgeable CDO. AND I still see the same problems in fundraising and governance…
** “I just don’t have time to read and learn. I’m too busy doing the work.”
** “My boss won’t let me do the ‘right stuff’ that I do learn.”
** “Everyone knows that technology, online, etc. is THE way to do the BEST work quickly and cheaply.”
WTF?!?!?!?!? I’ve seen too damn little change in the years (since 1975) that I’ve worked in this beloved nonprofit sector. People and their orgs seek the silver bullet, the shiny new thing. People are not lifelong learners. And on and on and over and over.
You and other greats can invent new tech stuff. Write great blogs and books. Lecture and push and … But change is too damn slow and full of excuses and and and. Tons and tons of people do pay attention. You and I see them at conferences, on twitter, through email thoughts and questions. But they’re outnumbered by the others.
Our beloved and critically important nonprofit sector – more and more essential to fight stupid governments and the lack of diversity and lack of inclusion and damn little equity, and power mongering by wealth, gender, race and on and on and on — runs rampant.
Well… Hmmm… I guess your morning Agitator agitated me. Thank you! Thank you, Roger.
Ahhh Simone….
What can I say except: Keep stirring the pot. Keep rolling the rock up the hill. Keep raising hell. We’ll eventually get there– I think.
Roger
Thanks for once again bringing to light such important insights and caring about those nonprofits raising less the 3M each year. We share the same passion for helping the 96% of the registered charities in the US and Canada that fall into that no so small category!
I look forward to seeing the survey results and perhaps uncover the “WHY” that comes into play on why direct mail is not seeing more “LOVE” when it should be.
Finally, thanks for the shout out about Bloomerang’s use of TrueNCOA! We are so pleased with the results and our customers are reaping huge increases in deliverability, which we all knows means revenue increases and better funding of missions!!
Jay,
You’re absolutely right that we pay far too little attention to the smaller organizations and that’s a shame. It’s also a financial reality that most agencies, consultants and suppliers, of necessity, have to work where they can be paid.
That’s why it’s so important to do all we can to create time-saving, results-producing tools that both save time and take the guess work out of as much of the process as possible.
My hat’s off to you and the folks at Bloomerang for putting your money where your heart is.
Roger
Roger, this is such an important question – thrilled you’re asking it and focusing on it. Having spent a fair amount of time in “small” shops over the last 20+ years, I am convinced the challenge is both budget and lack of knowledge.
Too many times I’ve been in the position of – or, during consulting days, had clients in position of – making the tough choice between spending additional money on a best practice in direct response (e.g. a second page of the letter or personalizing response device) knowing that decision would mean not doing something later on in the budget year. Once did a mailing that yielded very low response rate, but average gift was nearly $200 and 62% opted for recurring gift. CFO nixed it and all future direct mail b/c it didn’t break even or earn profit. Age old, “I’d never give to that.”
For small shops w/ limited resources, the focus is on big wins. Events, major donors – hard to play the long game with limited budget and little to no support.
I think as fundraisers, we fall into a trap of making great cases for donor support, but not great cases for the support of our work to our own organizations. Frequently, my fellow leaders (and even board members) ask, “Why spend the money on a letter? Just send an email…it’s free!” If a fundraiser isn’t equipped with the above data (industry and from their own org) to make their case to their peers, they just send the email.
At my current organization, that’s exactly what happened to my predecessor. And in just two years, with the support of direct mail (and a multi-channel strategy to boot), we’ve doubled our annual fund revenue–and without increasing spend!
Yes, they are missing out. I connect with many small agencies that feed the hungry as part of my job, as the amount of work they can do always comes down to how much fundraising they support. Usually, not much. When it comes to direct mail, the variety in the skill sets needed to execute one simple appeal – whether done in house or with a printer – is staggering to someone who has never done it before. In my current job (and I have had much bigger more complex jobs running massive DM programs) I had to go on a weeks long hunt to find our NPA with the post office (it was carefully filed in a drawer that I didn’t have access to). At least I knew what that was! Many don’t. And that’s just the start. I never thought that the ability to do a mail merge would turn out to be one of my most valuable professional skills. It is.
Thank you, Terri
I’m keeping a list of ‘barriers’ and appreciate you sharing some of that you encountered — especially the scavenger hunt for the postal permits. Over the years I’ve also been there, done that.
And, given what we’re hearing from others some of the most basic ‘givens’ like doing a mail merge or eliminating duplicates, etc., etc.are not small inconveniences, they’re massive blocks to using this effective medium.
Thank you.
Roger
So I’m looking at a blog that mentions that 2018 report from DMA. They note that response rates to house lists were around 9% from DM and 5% for prospect lists. This was a big bump over 2017. They also note that the sample size was small.
I had a few questions on the analysis:
Are these number from all industries or just nonprofit fundraising?
Is this what DM firms serving nonprofits are seeing? 9% for active donor lists seems very low return — at that rate, it will take 13 mailings to non-renewers (if my math is right) to get to a 70% renewal rate.
And doesn’t 5% for acquisition seem very high?
I’m not disputing that DM is still useful. Just questioning the numbers.
Gayle,
You’re right to question the stats. Indeed they vary from study to study and organization to organization. The DMA study cited are largely for commercial organizations and, like you, I think the DM acquisition rates are mighty high. As for appeal rates in nonprofits they’re also all over the lot depending, I guess, on the file selects/segmentation. Recently I’ve seen them running between 2 and 12%
HOWEVER…the key point is the great disparity between direct mail’s higher response rates as compared with digital. In a perfect world every organization would understand the difference as it applies to them and would factor this into its tactical fundraising decisions.
Here’s a blog that has lots of interesting studies and stats on direct mail both from a performance and involvement standpoint.
https://www.datatargetingsolutions.com/blog/2018/11/16/20-direct-mail-statistics-for-2019
Thanks for the link, Roger. The data on persuasive power is great. It aligns with previous studies that say paper is more powerful than screen. http://www.ceffect.com/2014/08/15/donor-messages-stick-better-paper/
Most small organizations that I work with use direct mail as the means for renewing most of their donors along with additional appeals. What they don’t do is mail enough to those who haven’t renewed yet and they don’t segment their house lists to differentiate by whether they are mailing to a donor (and at what size), a lapsed donor or a prospect in their file.
It is the rare small organization that launches a direct mail acquisition campaign to rented lists. It’s been quite a while since I’ve been running DM programs, but the challenges faced then were: The upfront costs to do anything of significant size can be prohibitive and as most DM acquisition does not immediately break even or produce a net gain it can be hard to justify this investment to upper management. In small states or in small service areas, it can be a challenge to find high return lists of any significant size to surpass minimum list costs.
Confession time….
Even after nearly 20 years in this non profit world, DM remains a mystery to me for regular giving/appeals. I now work in a small but growing org with a really good (albeit mostly part time, and not hugely experienced) team with an income less than £0.8 million. We’re good at individual major giving but the bread and butter donors who could transform our sustainability are largely beyond our ken. Expertise, practical data knowledge and knowing how to spend limited budgets remain something we try to learn about but struggle to implement. There is no database admin.
Honestly, as much as we read and learn and ask questions – my subscription to the Agitator is part of that effort to continue learning – the whole world of producing even a single effective appeal mailing seems like a huge reach for a number of reasons. Experts online at conferences dazzle us with statistics, construction of text, use of language, this image or that, data, suppliers, segmentation….it seems so scientific that it can freeze us (me?) into inaction as we don’t believe we know enough to delve into this area of work and we can’t afford an expert (even though my board does invest in fundraising, technology, risk and failing). Instead, our attentions and strategy turn to other things, and not necessarily the quick wins. For now, we’re concentrating on developing legacies as an income stream for the future and expanding the staff team in community fundraising. IG/DM? One day….
Hi Virginia,
Thanks for taking the time to so clearly explain some of the difficulties organizations run into when it comes to the use of direct mail. Your candor is not only appreciated but quite informative when it comes to figuring out some possible solutions. Will keep you posted as we work on this.
Again, thank you.
Roger
Several thoughts:
1. No time — Many EDs are running the development show alone or with a PT or sometimes new DoD who has little knowledge of best practices.
2. Free — People mistakenly think (Roger, as is suggested even in your article, that email and social media are free). Someone had to write and post the information and hopefully, someone is following up. We should be encouraging people to track the true ROI of all methods including staff time. I’ve done this around events, it’s lead at least one client to drop two events and not look back with any regret.
3. Lack of information but even when informed sometimes it’s the result of small thinking — let’s raise just what we need (heavens so many could do more if they just used some of the methods).
4. What Virginia said — I too am new to DM, it’s overwhelming and daunting. And many of my clients do not have large enough files to do meaningful AB testing.
5. Orgs that don’t even have a database beyond Excel, don’t understand why they need one and don’t know how to select one. I see lots of info about selection but it’s mostly provided by companies. I respect database providers but believe the sector would benefit from a good book about why data matters, how to select a database, and how to use it to your benefit.
6. Boards (Simone is the expert here and can outline the issues far better than I).
Finally, people don’t realize that they are “competing” with 1.5 M U.S. NPOs and NGOs around the world. Even though they are probably regaled with DM at home and with email they don’t see things from the view of the donor.
Thanks for your crusade Roger, it’s an important one or many are going to suffer as small NPOs lose out to the “big boys and girls” who are so much farther ahead.