The Daily Mail Accidentally Gets One Thing Right
I say accidentally, because they sure tried to get everything wrong. The piece I’m talking about is “How the first YEAR of your charity donation ends up in the hands of the chuggers” and talks about how the payback period on face-to-face recruitment is one-to-two years(ish).
(Why didn’t I link to it? Because it isn’t worth your time. I’ve put it in a postscript at the bottom if you really want to read it.)
The main critique here is nothing new: the ridiculous suggestion that we should be outraged by acquisition costs and payback periods. As Roger said last month, Starbucks spends $1400 to acquire a coffee customer and Amazon spends $240 to acquire a $79 Kindle purchaser. You spend money to acquire customers and donors.
This is exactly the type of piece Nick talked about last week where people misunderstand our sector. If newspapers are really so clueless about how business works, print journalism would be worse off than it is already. But, sadly, I believe the Daily Mail is manufacturing outrage on a slow news day.
Or, as Daniel Fluskey from the Institute of Fundraising said, “I look forward to the follow up story where the Daily Mail sets out how much they charge charities for adverts in their paper and expressed outrage that some of your donations goes to paying them.”
But, we know that crossing our fingers and hoping that donors should be no more concerned about this than Starbucks customers is pure fantasy. Because in the world of reality the optics on this are horrible, which is of course why the Daily Mall runs it – ‘if it bleeds it leads…”
So what did the Daily Mail inadvertently get right?
Nothing directly but indirectly they raise a somewhat hidden question that should be raised by all charities and suppliers looking for opportunity. (Unless of course the cost to acquire (always going up) and the yield (always going down) trend lines are satisfactory for you, in which case keep whistling past the graveyard.)
UNICEF plans to raise 5.2 million pounds over four years. They pay their fundraisers 1.3 million pounds. Good for them; there is nothing inherently wrong with this. But it does (or should) raise a question about alternative models. Why does the charity – for all acquisition, not just F2F – bear the full risk and brunt of the upfront cost? Why isn’t a shared risk model – one that pays a premium to the agency willing to do it (seems none are…) – more commonplace? The optics instantly look better in this scenario.
Hell, the optics can look great if there is an agency model that does all the financing. Why is it, in every other facet of life it is not only permissible but desirous to use lender financing (e.g. car, home, to buy another company, to fund plant expansion, to build a school) to create financial leverage?
Risk you say? How is being on the hook on a piece of paper less risky than fronting all the cash up front and always being exposed to the mindless reporter looking for click bait? That click-bait opportunity goes to zero if the charity can legitimately say that all the money to recruit was paid by the agency and they will be paid back over time; meaning most of the $10 from Donor X in Month 1 will go to the charity, not the agency.
Why would an agency do this? Well, the vast, vast majority will not because they lack vision, appetite for risk, business acumen, interest in bettering the sector and solving a solvable problem or some combination.
The agency that would do it has some or all of these attributes and will be rewarded with disproportionately stealing share, creating new demand and charging a risk premium (it is called interest) as well.
And what if this new agency/charity model tackled the other elephant in the room, the one the reporter won’t write about because it is too nuanced and not nearly as outwardly outrageous.
The Quantity Game (like Hunger Games but they’ll never make a movie about the former and probably shouldn’t have with the latter): the requirement to recruit twice what you “need” because you will lose half, leaving the half that stays with the burden of covering that upfront cost.
It is foolhardy to suggest retention will ever be 100% but no more so than saying “we want quality” with no actual quality measure at the point of acquisition and by extension, a far less than complete understanding of why donors stay and why they go. In short, a different recruitment model, one based on measuring what goes unmeasured and using it to change the quality/quantity ratio on the front-end and improve retention (through fuller understanding of what is actually causing attrition) post sign-up.
A great example in doing this is Amnesty Belgium. They increased their six-month retention rate from 60% to 80% by collecting commitment and satisfaction data at point of acquisition. This allowed them to fix issues for their committed donors and to fix their systems to get and retain more of those committed donors. The full story is available in detail here but some important points:
- Commitment and satisfaction were the most predictive variables in their modeling, so collecting these data was like buying a crystal ball.
- They reached out to committed donors dissatisfied with their interaction. These are the donors most likely to forgive and become productive long-term donors with a bit of apology.
- They rewarded those who brought in the most committed donors, not the most donors, because the fight against churn and burn fundraising begins at acquisition.
If you are a charity or an agency you have a choice, available today, to change your recruitment and retention model. If you aren’t demanding this then join the others at the graveyard and bring your whistle. This won’t change the media optics but your business will run a hell of a lot better and that balm can treat a lot of wounds.
And if you are a charity open to different financing models (most, oddly, are not it would seem) that transform the ROI, reduce your very real risk and all but eliminate the click-bait drivel from the media then you can privately give voice to it here or publicly in the comment section.
Why give voice you ask, what’s the point? Because the future is already here, it just isn’t evenly distributed.
Kevin
P.S. Here is the article, if you must.
9 responses to “The Daily Mail Accidentally Gets One Thing Right”
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hi, there were some direct response vendors in the past that helped finance acquisition campaigns for organizations and they’re out of business.
Some telemarketing agencies provide a no-risk for lapsed reactivation and that seems to be doing okay because they’re getting other campaigns to help pay for it. Just fyi, cheers, erica
One word to consider- Quadriga.
Quadriga was engaged in all sorts of shady behavior (evidenced by paying a massive fine, which technically is not an admission of guilt, and reconstituting themselves under different trading name).
However, serving as a funding source was not one of them.
The financial shackles and limitations charities place on themselves by only considering two funding sources – those who want to donate and govt $ – is crippling. Oddly many large charities are very sophisticated in how they manage their reserves, why that knowledge and specialized talent isn’t turned loose on the funding side is a mystery.
Debt is not a dirty word. Neither is equity financing for that matter.
What should be considered a dirty word (ok, phrase…) is status quo thinking. Nothing is more debilitating to the organizations and more importantly, the missions they serve.
Unhappily, the history of “no risk” funding by direct response businesses is a history of predatory relationships, which — it should not go unmentioned — did nothing to dampen media appetite for fundraising “exposes.”
This is called financing. It occurs in every walk of life. If you don’t like the idea of an agency providing it, go to a bank. Some will fund this.
The lack of financial ingenuity (as if a loan is somehow a sophisticated financial instrument) in the sector is startling. Growth is hampered not by opportunity but by appetite and willingness to think there is money available beyond the whims of govt funding a tiny sliver of the public willing to give away their money.
How did anyone buy their house? Cash? I doubt it. Your car? Need capital for a business, to fund your education? You get financing. Why is this so foreign a concept? I’ve talked to banks (community and national brands) that work with charities to provide the most basic of financial instruments (e.g. checking account) and they all report that lack of sophistication and risk aversion prevent their clients from considering much of anything, including a line of credit. It isn’t unwillingness on the part of lenders nor is it ample opportunity to get a return.
The paradox is with the larger charities that have boards replete with business acumen and often a reserve fund managing by top shelf financiers.
I would think that if it were common practice for nonprofits to get financing and share risk with consultants, we would be shocked by a vendor using the pricing model we use now for F2F.
The concern, a very legitimate one, would be that the risk is all, or almost all, on the charity’s side. Once a donor gets to month 1-3 (depending on the vendor), the risk of getting that revenue is all on the charity. You’d look at the incentive structure and say to yourself “They have every incentive to bring in quantity of donors, rather than quality. They get paid per donor and have no stake in ongoing revenues.” And you would be right, smart person that you are.
We would not accept that from a telemarketing vendor – most that I’m aware of will do acquisition efforts as part of a donor campaign. That is, the TM vendor gets ongoing revenues from having quality donors they acquired.
We would not accept that from a mail or online agency, both of whom will be judged in future years based on their ability to get donations from the donors they help acquire today.
Why then do we trust and not verify that a F2F vendor’s goal is to get you a sustainer who will retain for 5+ years?
Personally, I like when the vendor has incentives that align them with my goals.
Kevin –
You’ve prompted a very worthwhile discussion.
In my former agency, I tried your idea several times, in careful conversations with clients. I found two obstacles, CFOs and CDOs who didn’t understand that acquisition financing could work — and work well — for their organizations.
Incidentally, I’m surprised Bob Tigner didn’t mention the nearly insurmountable barrier likely to be erected by state regulators.
Thanks for the soft pitch, Chris. Yes, at a minimum, financing and shared risk would substantially increase an agency’s annual compliance costs by many thousands (not to mention the costs associated with random acts of oversight from skeptical state officials). And, in the not-so-long-ago, risk-sharing would have deprived nonprofit mailers of the right to use “discounted” nonprofit postage rates. But none of this is to say one couldn’t cook up a financing scheme beneficial to both financier and organization.
Great article. Great comments.
Agencies do offer different models of pricing, but most are up-front fees with varying different mechanisms for claw-backs based on retention/attrition.
FYI, my experience shows KPI’s on age and Gift Aid make no difference to these.
The recruitment, training and engagement processes of the fundraisers that the agency/in-house team employ does. MASSIVELY!
Understanding “WHY” the supporter decided to support, and building a bespoke stewardship journey for those “WHY” reasons is key to retentions and LTV improving through F2F.
Internal understanding, data pathways and collaboration between fundraising functions is needed to create a far better supporter service and experience of engaging with your charity.
One agency, Wesser Ltd, takes all the up front financial risk, and now has possibly the longest standing relationship with a single client in the UK.
F2F can evolve, and offer far more opportunities to the public to engage with a F2F fundraiser and the cause other than to sign-up to a DD. Events teams need participants, individuals may rather volunteer, engage through their business, etc.