Ten years is a long time in fundraising, and it was around ten years ago that offshore premium acquisition started to enter the Australian market.
Modelling done back then, based on early trials, showed that the addition of premiums rejuvenated Direct Mail acquisition, long term analysis post acquisition over five plus years also supported this.
For a number of years, particularly from 2010 to 2013, when the Australian dollar was at parity, or higher against the US dollar, the acquisitions continued to perform well. Many of these campaigns were profitable and gave a good return.
Even then there were some worrying signs – such as dropping response rates and ongoing giving, but an acceptable initial ROI made up for these shortcomings.
More recently, with higher production costs, and market fatigue, many charities have struggled to make DM acquisition pay in the medium term, and probably the long term too.
Is there anything that can be done?
The first thing to ask is what stage are you at in your DM program?
There are still some excellent results to be gained for charities with relatively small programs who can leverage shared data sources such as Swaps and CoOps along with offshore premium packs to generate net positive acquisitions. PA Research Foundation recently achieved a break even result from a mailing. The lower value recruits need to be managed appropriately and dropped from the program before they become a drain, but if done correctly the program can be grown to a level where it can be maintained sustainably.
If you have a more mature DM program it will be harder to achieve results like the PA Research Foundation, but there are some things to do, although testing against controls is always recommended.
Keeping costs lower – looking at some recent results, onshore packs (like Kidney Health Australia’s pack below), still containing paper based premiums – have matched or out performed off shore equivalents in terms of ROI. They typically have a lower response rate, but the ongoing giving is better, so over time they will generate a better return for the charity.
Encouraging higher value donors – this again results in a lower response rate, and typically a lower initial ROI. If the ROI is close enough to the lower ask group, then the higher ask will out perform the lower ask in the longer run. The ongoing cost will be lower, and again the ongoing giving rates will be slightly better.
The other factor to consider if chasing value over volume, is to manage the sharing of donors. Consider all swap partners carefully. When donors are swapped there is an impact on the warm program. Think about if you have enough donors to repay the swap, without overly compromising the warm program or second gift rates.
Realistic targets are essential – making sure any growth targets can be achieved in a sustainable and profitable way. Overall, as returns have reduced, the sector as a whole has reduced acquisition, and there has been an improvement in returns. The key is not to overplay this improvement and return to the mass acquisitions of a few years ago. If you have targets for retention along with targets to grow the donor base by sharing data, remember they may be in conflict, so you need to be realistic.
The world is very different from 10 years ago, but by making informed decisions about DM acquisition and retention strategies, there is still scope for charities to thrive.