Several of our clients have asked for my input on a couple topics in the past week: the first being the postage increase that takes effect on April 17th (first class and standard mail presort will see an average rate increase of 1.8 percent) and the second being the recent blog post by Roger Craver questioning whether the top 83 direct response fundraisers should be fired. My response to both topics is the same… it is time for nonprofits to mail smarter.
As Roger Craver points out, new donor conversion rates continue to drop, while the USPS continues to increase postage rates. This is a double-edged sword for donor acquisition. So, how can we use analytics to reduce postage costs in acquisition without harming results?
The first step is to evaluate the projected long-term value (i.e. 24-month) of the newly acquired donors by list source. (Note: long-term value should consider subsequent communication costs after the donor is acquired.) Nonprofits do not consider the complete picture when they make decisions on list selection solely by measuring initial response rate, cost per donor acquired and average gift. The more important question, “Are we acquiring the right donors, the donors who have the greatest potential to become multi-year donors?”
You may have used the same acquisition lists for several years. If so, look at your acquisition lists from 2008/2009 then calculate your average18- or 24-month long-term donor value by list. (Be sure to include the costs of subsequent communication.) Are you breaking even or making money on the majority of lists, but not others? You should strongly consider eliminating the lists where you are not receiving positive net income within 24 months.
After considering long-term value and narrowing the field to worthy acquisition lists, the next step is to use additional data analytics to eliminate unresponsive donors. By using a statistical approach, we can eliminate “bottom-feeding” prospects by creating a cloning model to identify the profile(s) of valuable donors. This additional level of suppression saves money by removing unproductive prospects.
We use a statistical approach based on each client’s unique database; rather than a more generalized cooperative model. For one nonprofit, a specific profile may be unproductive, but a similar profile for another nonprofit may perform very well. For example, Leisure Buffs and Aging Upscales may be more heavily weighted for one nonprofit; whereas, Gen X Singles and Jumbo Families are better performers for another. For this reason, Convio through our recent expanded team and offerings, creates models uniquely for each client.
The modeled approach allows nonprofits to focus on engaging the best possible prospects while lowering the cost to acquire a donor. Case in point, Convio created an acquisition model that suppressed 28 pecent of the intended acquisition mail universe, thus decreasing mail costs by the same margin. The nonprofit client saw a 4 percent increase in average gift from new donors (due to the fact that we were suppressing lower value donors). Additionally, the modeled test group demonstrated a 30 percent increase in net revenue over the control group. Now, that’s smart mailing.