Why do results decline as volume goes up?

At a basic level, each new communication cannibalizes results from those communications around it.  Looking at one study here, researchers found that each additional mailing generated 1.81 Euro in revenues, but that 1.21 Euros of that was cannibalized from future mailings.  Thus, only 37% of the revenues that are “new” when you add a mail piece are from that mail piece.

To quote the authors:

“A charity maximizing its own revenues will stop mailing once the marginal additional revenues – the direct revenues minus revenues lost through cannibalization – exceed the costs of sending out the mailing. Cannibalization is estimated to be about 63%, so mailings are profitable for the charity as long as the costs are lower than 37% of the revenues.”

That’s a passable answer to “how many mail pieces should I send out” if your goal is to maximize net revenues.  (Of course, it ignores any customization by donor, which you should definitely do, but it will at least give you a default rate.)

How many times in my career did I mail a piece where the costs exceeded 37% of revenues?  I’ve done it a lot.  I was looking at marginal net revenue, which is a good measure, but I wasn’t testing the alternative – what would I get if I didn’t mail the piece?

That cannibalization is massive.

It’s not, perhaps as significant for online because of the near-absence of marginal costs.  But going back to the hero charity from the M+R piece that started this week’s series  (Charity A, which emailed four times as much as Charity B), it’s difficult to convince me that every one of those emails was a winner, giving more in gross revenue than it was taking from other emails.  And, in fact, I’ve run campaigns where the net revenue from two emails beats the revenue from three emails sent to an A/B audience.

But why is there cannibalization?  Put bluntly, irritation.  Another study found that donors who have increased frequency to direct mail have increased irritation, decreased goodwill, and decreases likelihood of giving, quarter over quarter.  Here again, I’ll let the researchers speak for themselves:

“[Donors] who donate frequently are less likely to donate in the near future.  These findings are not only stable over time, but also replicate across two large data sets.”

And when donors get too many communications, they set up defense mechanisms. For those who think I’m being melodramatic, I’m getting this from a study titled Defensive Responses to Charitable Mail Solicitations.  These mechanisms include lists of when they donated list, a maybe box of appeals, limiting their giving to just certain types of charities, etc.  The most mail they get, the more they agree with the statement “I feel I must protect myself from the mail I get from charities.”

And before you email marketers think you are immune from defensive responses, look at your open rates, your click-through rates, and the industry deliverability rates.  You are facing digital versions of these analog defensive responses.

When the Institute of Fundraising in the UK surveyed donors about charities asking more or less often, here were their results.  Note the lack of positive news for asking more often:

Further interrogating these data, why do donors get irritated from solicitation?  Twenty percent of all comments to nonprofits are about too many or the wrong type of communications.

Listening to donors who ask to be removed from lists turns up three camps:

1. “I never asked for this.” These are largely people whose relationship with  an organization started in one channel and the organization tried to move to another.

 2. “Why are you wasting your, and by extension my, money?” The tone of these comments is generally disappointed (“I don’t need snail-mail reminders; email is fine. [Organization] doesn’t need to waste paper and postage on me. Is there a way to be contacted by email ONLY?”), but sometimes pleading (“I am a committed [organization] donor. I regularly encourage others to donate to [organization]. Please stop sending me mailings. I will donate when I want to donate. Wasting paper and postage does not improve those odds. Please stop sending me mail! I am a teacher so my employer cannot match a donation. There is no reason to send me mailings. Please stop them! Please!”)

3. “I tried, but this is too much.” These are constituents who don’t mind getting communications – they mind getting communications in what is to them an absurd amount.  And rather than request reduced communication like our people in the next category, they were so turned off by the experience that they just wanted out. One unretouched response: “DO NOT SEND ME ANYTHING IN THE MAIL. PLEASE DO NOT. EVERY SINGLE TIME I DONATE I ALWAYS GET MAILERS. STOPPPPP!!!”

It’s psychically painful to turn down a funding request.  Your donors believe themselves to be good and want to believe you ask an appropriate amount.  So when they turn you down, there’s cognitive dissonance: they are a good person doing a bad thing to an organization that does good things.  The response to cognitive dissonance is to change one of these conditions.  And let’s face it, it’s easier to believe the organization wrong than yourself.

But for the fundraiser, it is fine to send out 16 mailings, 36 emails, and four telemarketing campaigns asking for money and get 1.6 gifts per year – if donors renew their support at a rate in line with the stagnant industry standards, you have more upgrades than downgrades, and can acquire more grist for the mill, it’s a good day’s work.

If the donors don’t want the appeal, they can trash/not answer it.  Each appeal that doesn’t work has helped build brand and issue awareness and speeds the day the donor will give.  Each snowflake in the avalanche pleads not guilty.

Each of these unanswered missives is painful to the donor.

This, at a donor level, is why volume is not a strategy.  So what is the alternative?  More on that tomorrow.

Nick