Busting Myths: “Multi-Channel Donors are More Valuable”

Busting Myths: “Multi-Channel Donors are More Valuable”

This is a longer one. If you don’t like details, skip to the ending. The Question For at least the last 10 years, I have heard it said often that donors who give through more than one channel are more valuable than those who give to only one channel. Let’s take a deeper look with a typical org’s data.          Where the Myth Began First up is the misleading calculation that has been used to justify that Dual-Channel donors are more valuable than Single-Channel donors – Lifetime Value of Single-Channel vs. Dual-Channel Donors: Simply comparing the LTV of Dual-Channel to Single-Channel donors paints what appears to be a clear picture: Dual-Channel donors aresignificantly more valuable.                                 While technically true from one perspective, in the actual spirit of the analysis, it is false. Dual-Channel has an inherent bias in that it requires a donor to have 2+ gifts, thus inflating their value against many single-gift, Single-Channel donors.               An Insightful Tweak                        A more rigorous look controls for the problem above by comparing the value of donors who have given 2+ gifts.                                 When you look at it this way, Dual-Channel donors ($847) are still more valuable than Direct Mail Only donors ($258), but in this case slightly less valuable than Online Only ($936). What Does This Mean? Does that mean you should stop cultivating your Online donors in the mail for fear of downgrading them? Absolutely not. Online Only donors are generally harder to retain than Direct Mail. In fact, Online donors are lot less likely to give multiple gifts in the first place. 44% gave a 2nd gift within 3 years...
A Walk Into the Sunset or a Walk Off a Cliff

A Walk Into the Sunset or a Walk Off a Cliff

Blackbaud Institute’s 2018 Charitable Giving Report was recently released, and though giving was up 1% (due to large donors), the most disappointing metric for 2018 is that online giving remains stuck below 10% of total giving. Ten years ago, most of us (including myself) predicted that more money would be coming in online than offline by 2019. But donors have been stubbornly resisting the digital transition. This pesky fact has been the subject of much discussion around the watering holes at fundraising conferences. Digital has disrupted nearly every facet of the economy since its arrival a generation ago. Remember travel agents, mail catalogs and Blockbuster Videos? Yet, by and large, the old ways of fundraising remain unchanged. I think most of us would agree that digital fundraising will replace direct mail at some point. The question on my mind is whether direct mail will have a slow, steady walk into the sunset, or will it walk off a cliff because of some new Silicon Valley...

Are My Response Rates Statistically Significant?

I’m taking a different approach in today’s blog to discuss a problem I continue to run into when I am working with clients. And that is testing whether the response rates in a direct mail test are meaningful. Now response rates are relatively uncomplicated to test. Anyone can do it. That’s because there are only two possible outcomes: Response or nonresponse. Here’s an online testing tool for you to use. After you click on the link, you will need to enter your data. The “base sizes” are the number of pieces mailed in each of your tests. The “proportions” are the number of responses for each test divided by the number of mailed. You can choose your confidence level (we recommend 90%), and then click calculate. Voila! I suggest using a 90% confidence level because it is a high standard. That means if you have this difference in 100 tests, in 90 of those tests the difference will be real. The “Results” box will state either “Significant” or “NOT Significant.” You don’t need to understand statistics to use this tool! Another helpful metric to know is your average gift size. Now, testing average gift size is more work to calculate, because the values you are testing can range from $0.01 to $1 million or more. That means you can’t use summary statistics (averages) to calculate significance. Instead, you need the entire gift distribution. Plus, you will need a more robust software tool than Excel to do this. We use SPSS. We suggest that you talk with your analytics people to have them help you through testing average gift size...
Postage Going Up

Postage Going Up

On January 27, first class postage is going up to 55 cents, a 5-cent increase. This is the largest increase in almost 30-years. As this article states: “The Postal Service lost $3.9 billion in 2018, attributing the losses to drops in mail volume and the costs of pensions and health care. It marked the 12th year in a row the agency reported a loss despite growth in package shipping.” $3.9 billion. That’s a big number. To put this in context the USPS lost almost a half million dollars every hour, 24-hours a day. That’s just not sustainable. We have been fortunate in this country to have had such a great postal system. It has been fast, accurate and affordable. Nonprofits have been doubly blessed by the US Postal Services’ postal subsidy for nonprofit organizations. But that is changing before our eyes. Delivery of nonprofit mail is getting slower and slower and impossible to predict. Nonprofit mail is now delivered in batches. That means when your appeal does finally get delivered, it’s hitting your donors’ mailbox at the same time as every other nonprofit’s mail. This fall I received 8 appeals on the same day. So now not only are your appeals unpredictably slow on delivery, they are facing greater competition. I can’t help but think that the nonprofit postal subsidies will likely end soon. Here’s what I recommend while there is still time: Analyze the ROI of your donor segments this fall and test first class postage in top performing segments. With access to reliable nonprofit postage, first class postage is an extravagance. However, you are paying a lot...

Improving the Acquisition Experience

Allegories for Unintegrated Direct Mail Acquisition Testing Activities: • Tailor fitting a funeral suit • Climbing a tall ladder on a building that’s on fire • Planting orange trees above the freeze line Don’t get me wrong. I love direct mail. But sometimes, context matters. Spending hours and hours coming up with new ideas on how to beat your direct mail acquisition control kit is probably not the best use of your time right now – especially if you aren’t integrating your direct mail with other media campaigns. Realistically, moving your direct mail acquisition response rate from 0.36% to 0.56% isn’t going to solve all your problems. New donor acquisition is a long-term problem, and you need an integrated solution. I suggest, this time, you stick with your tried and true acquisition kit. Reinvest the time and resources you’d otherwise spend in direct mail testing protocols into brainstorming ways to engage a new audience that’s completely different. I know from a career standpoint that seems bold. That everyone knows you can’t get fired for doing the “safe” thing. But as you can tell by looking at our stock market, there are no safe things right now. These new layers to an old problem require innovative solutions. So be bold. Test something that’s never been tried – and then tell us about...
My Fall Mailbox

My Fall Mailbox

Like many of you, my mailbox is stuffed with nonprofit appeals between October 1st and December 31st. Here is a recap of the direct mail I received this year, and the insights I noted: • I received an even 50 pieces of direct mail. Thirty-five pieces were appeals from 11 organizations I have previously supported, while 15 pieces were new donor acquisition kits. • Sadly, direct mail with nonprofit postage arrived all on the same day of the week. It appears that the Post Office holds all of your direct mail and then efficiently bulk delivers it. This is a killer for nonprofit organizations, as their appeal must compete with all the other messages delivered that day. It may be worth testing the use of first-class postage in fourth quarter acquisition next year, to limit direct competition in the same mailbox. • I received the most pieces from The Salvation Army (14) – though half of them were duplicates. I have supported The Army in two different Divisions, both of which sent me identical appeals. I contacted one Division about this issue last year, but the message must not have reached the right people. • I received 7 appeals from my local PBS station. • All the other organizations I have sent money to in the past sent me between 1 and 3 pieces of direct mail – probably reflecting my lapsed status . . . • World Vision sent me the only two catalogs I received. The sole difference between them was the cover. It appears we are in a down cycle for catalogs, as I used to...