The Ideal Premium?
Ideally, no premium.
Seth Godin has been promoting End Malaria the past couple of days, and here explains the case for that fundraising initiative using a book premium.
He says the book is better than a tote bag.
Now, I’m not a fan of premiums, period. Yes, I know they can lift response (not always), but they’re prone to generating low value, low loyalty tippers. So analysis of lifetime value usually indicates a rather poor return compared to non-premium responders.
But today I’m simply taking issue with the ‘book is better’ claim. I’m not at all sure a book (full of business and work habit tips) is better than a tote bag or a refrigerator magnet or any other premium that at least directly reinforces the cause/nonprofit’s brand and helps in some small (and ideally, frequent) way to keep it top of mind.
Plus, there’s more chance of the biz book overshadowing the cause, making the ‘donation’ even more incidental, than there is the tote bag doing so.
The first step toward improving lousy donor retention rates is to recruit more committed donors. Premiums — of any kind — blur the picture. But, if forced, I’d opt for the premium that might reinforce — and signal clearly to others — my donor’s commitment to my cause.
What do you think … tote bag (or a some other badge of the tribe) or biz book? Or no premium … simply offering the donor the peace of mind of doing good?
Tom
12 responses to “The Ideal Premium?”
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Tom,
I agree with you. I read Seth’s post yesterday and was a bit taken a back at the comparisons.
I think having a great tote bag that let’s your supporters show that they’re a member / supporter of your organization in some ways shows stronger affinity to the cause. It helps promote the brand and defines your supporter community. An image comes up for us when you think of who carries the NPR / PBS bags.
While you can make the case that it can take away from a straight donation, few are making a donation just to get a bag or stuffed animal. If that was the donors’ goal, there are cheaper and easier ways to get tote bags at the checkout of your local grocery store. These tote bag carrying donors are advertising for their causes.
Donna
What makes this work isn’t the book, or the fact that there’s a premium at all. What makes it work is Seth Godin and Seth’s near unparalleled online network of supporters and fans — people who, like The Agitator authors, read him every day and do what he says.
But what really makes it work is that he’s found 60-plus other Seth Godin’s out there to contribute to the book and evangelize it throughout their networks.
Honestly, this has nothing to do with the fact that this book is technically a “premium” and everything to do with the fact that Seth Godin and these other 60-plus digerati are pimping a charity. A better analogy for this is a celebrity fundraising strategy. The “premium” is quite honestly beside the point.
I don’t write this to debase Seth or the strategy by the way, I think both are brilliant. But the success here really has very little to do with giving away a book.
dave connell
I think the more relevant comparison is the difference between perceived v intrinsic value. Both the book or a tote bag have intrinsic value. But a photo of a child you’re helping, sent after the gift, is something of perceived value.
Back in the 1980’s I offered an Inaugural Medallion from Reagan’s inauguration in a test against a photograph of Reagan’s inauguration.
The photograph produced both a higher response rate and better lifetime donors — which I monitored for over 10 years.
The photograph cost $0.25; the medallion cost $5 and was worth $25.
It is the donor’s view of the premium that counts — not the actual cost or value.
Premiums should reinforce the fundamental mission or they should be left out.
Quick addendum to my point:
The real lesson here is that a “celebrity strategy” can be very successful without bringing in a traditional celebrity — especially online. To me, and thousands like me, Seth Godin is a celebrity. My wife? She wouldn’t know him if she tripped over him.
We’ve found that premiums are counter productive for initial donations, but more positive for increasing existing donor’s giving level.
So if a person starts their relationship with your org and gets a gift, they will come to expect something. But if you say “you have $50 last year, but this year, if you give $100, you will get X gift” you might be able to bump up givers without the downsides.
Or so goes the theory.
I couldn’t agree with you more. And premium mailings can be quite costly. Try explaining a premium mailing to a long-time supporter who hears about it from a friend and wonders how wisely you’re spending his/her donations.
Premiums work well when two things are in place:
1. They are tied to the org’s mission as best as they can possibly be – cases in point: Fountain House, Project Renewal, Helen Keller International, to name a few.
2. (This goes for non-premium acquired donors, too.) What relationship-building and upgrading systems are in place to retain and bond those donors to your organization? To make them ‘lifers’?
Otherwise, acquisition programs are just about collecting names.
While the book might seem to be an attractive premium — and it might be to some recipients of the fundraising campaign. It sounds like a costly gift, one that might hurt the ROI of the campaign.
I’d much rather offer donor’s or potential donor’s something with the organization’s logo on it that they might use in public.
The most loyal donors are those who support an organization for what it does, rather than to receive a fancy premium.
Why is it an either or? Why not have two programs, premium and non-premium? I have seen it work and provide a great deal of added income to fuel the mission. However, if one thinks premiums are “dirty” tools then do not do it. One has be committed to both programs in order to be successful.
In general, I wholeheartedly agree – premiums typically generate a lower value, less committed donor. But there is an exception to every rule. We have one client with a back-end premium-driven acquisition package that has proven to be a success. The premium directly relates to their mission, prominently displays their logo, and is what can be considered a high-value premium (as opposed to labels or plush toys). Our analysis shows that it is holding up against the organization’s non-premium acquisition package because the higher price point for the premium increases the initial average gift by 38% – indicating a higher commitment then the typical premium donor. To date, the 1st year retention is lower for the premium package, but the 1-3 year donor values for both packages are equal.
It sounds like there’s a consensus building (at least amongst the “premiums-aren’t-evil” camp — of which I am a member) that as long as the item is relevant, it’s okay. And I agree.
But, more important, there are several references to testing in these comments. Which is of course, what you should do instead of just declaring that premiums are always bad (or always good).
We do a lot of work with public broadcasters and I worked at a station for 11+ years, including having started their online fundraising program (which was tied to the pledge drives at the outset). In analyzing which type of premium taker was more likely to renew, it turned out they were all pretty much around the same (all stations are different, of course, but it would be safe to say that first year retention of a new pledge donor is less than 20% for most PBS stations).
There had been a study done earlier that the lower the initial gift, the likelier a premium taker was to renew. We didn’t find that to be true at all. So our reaction was to charge more per premium. Mark up the cost by at least 10x. Because if they aren’t going to renew anyway, take as much money as you can and run! And their lifetime value is incredible!
On the other hand, some stations are experimenting by deducting the fair market value of a premium to come up with the “philanthropic” portion of the donation. There are as many motivations for giving as there are people. So, every premium gift is part donation and part purchase. The idea is figuring out which part is donation and using that amount to renew someone instead of the whole amount is a strategy being tested.
Who knows if that’ll work in the end and clearly, I could go on for some time about this, but I think using premiums is fine — if they work. In this malaria case, I would have charged much more than $25/$20. I’m guessing the writing cost nothing and the printing (of the Kindle version) cost nothing and the shipping is being borne by the donor (since the purchase is through Amazon) and maybe even the list costs are nothing (if they’re using the authors’ followers) so it’s nearly all profit for the org. If they can make money on acquisition, why not do it?
Sorry for the late comment – I think you’ve misunderstood what Seth is saying in the post. He is using ‘tote bag’ as a catch all for premiums, and talks about the book as a digital tote bag. Then goes on to say
“Instead, I hope you’ll buy a copy today even if you don’t buy books, even if you don’t even intend to read it, even if you don’t have a Kindle or a Kindle app. That would be fabulous, because it means that the transference of emotion has kicked in, and you have realized what a screaming bargain it is to pay $20 for the peace of mind that comes with saving someone’s life.
Way more useful than a tote bag.”
He’s not saying the book is better than a tote bag (the book is the tote bag), he’s saying the opportunity to save someone’s life is better than the tote bag/book. So whilst he is offering a premium he is also actually making the case for “simply offering the donor the peace of mind of doing good”.
Also, even if he were saying the book were better than the tote bag, for his audience it would probably be true. This of course doesn’t necessarily follow that because a marketing book is a good premium for the readers of a marketing blog that it is also a good premium for a direct marketing appeal to a charities mailing list.
I guess what I’m saying is that there isn’t any one ideal premium, there are good and bad premium’s for particular groups of supporters (segmentation) for exampe I’d quite like a tote bag, but have zero interest in a fridge magnet. Seth Godin seems to have understood this point and is offering his audience something that he thinks will work as a premium for them – a donor centric approach to fundraising. By making a blanket argument for the fridge magnet because it reinfoces the charities brand, you appear to be arguing for the opposite approach.