You can spend money on anything. That’s why it’s called money.

Economists call this fungibility, which has nothing to do with mushrooms.  It has everything to do with how a dollar can be used for rent or food or entertainment or whatever.

In our minds, though, we hate fungibility.  People have sophisticated mental jars of money earmarked for different purposes.  It causes us mental pain to take from one bucket to use on another bucket.  This is called mental accounting.

All this is to warn you: this post may cause you mental pain.  It advocates breaking your mental jars of acquisition money and (shockingly) using them where they can do the most good.

M+R’s excellent benchmarks report, which came out last week, reminded me of this.  Here are how nonprofits spend their digital ad budgets and the return thereto (adding in average gift as a calculated field):

Pop quiz: what would you rather do: invest $204 to get $139 in display ads?  Or invest $41 to get $156 in search ads?

This is not a trick question.  It seems like it would make more sense to shift investment from display ads to search ads.  And these are likely managed by the same person in your organization.  They are just in different tabs of your spreadsheet.

(Note the “um, actually” crowd: 1) thanks for reading, for I am one of you and 2) yes, search ads may have an artificially low cost because of in-kind donations from Google Grants.  In that case, replace “search ads” with “social media ads” in the previous paragraph and the point still holds.)

This is the peril of separate mental buckets of money: it hurts us to move spend from display to search (or social) even though, as an industry average, it would raise more money if we did.

This is far from the only incidence I’ve seen of this.  Arbitrage opportunities abound for those willing to break out of acquisition silos:

• If you haven’t looked at your metrics lately, you might find that mail has a 24-month payback period and online a six-month one.  You may also be eschewing channels like F2F and DRTV because they didn’t compare well to what your mail and online metrics used to be, rather than what they are.
• Lapsed reactivation versus new donor acquisition. I used to tell my agency that I wanted to go deep enough to lapsed that I was reacquiring them for the same price as donors from outside lists.  That was until I realized that my reactivated donors had nearly double the retention rate and higher average gift than new donors.  If your lifetime value on reactivated lapsed donors is twice that of newly acquired donors, you should be willing to spend twice as much to reacquire than to newly acquire.
• Non-Google CPC ads versus Google CPC ads. Yes, there are non-Google search engines  – Bing has a 33% market share in the US.  Yeah, not what I expected either.  Despite this, ReportGarden reports that average CPC on Bing is less than half of Google,  This is likely because marketers are making the same assumptions I was about market share.  Let’s assume Bing and Google searchers have similar donation patterns (which I would assume, but test).  You can shift investment from Mountain View to Richmond and lower your CPC and CTA.
• Do you run the same acquisition mail volume or ad spend every month?  If so, look at your seasonal results.  My Spidey-Sense is that, over the years, you have good months and bad months (and those probably correlate with when people are searching for you if you want to look at Google Trends to test this theory).  If your media blitz is in April and that gives you a tailwind, it makes no sense to spend no more acquiring donors then than you do in July.
• And, yes, different techniques in the same channel, like search versus display versus social ads.

These are just some of the swaps to get more out of acquisition.  An easy question to ask (and hard to answer) to assist you is: if I had $1 in my acquisition budget, where would I put it?

The answer to where to put the next dollar is probably the same as where you should have put the last dollar and the one before that.  This will help you approach your acquisition with a blank-ish sheet of paper.

But it’s all for naught if you flush new donors away.  That’s what we’ll discuss tomorrow.

Nick