Does that headline tick you off?
Does it irritate you knowing how much budget is allocated to direct mail every year?
Does this make you wonder how, as a direct response fundraiser, I could wish something as terrible as that on you and your organization?
Let me clarify…
I don’t hope YOU fail. I don’t hope your organization fails either. But I do hope your direct mail program fails.
Miserably.
Because I think what most of us see as “failure” is going to be the best thing for your organization’s bottom line. Here’s why…
The original purpose of direct mail programs was to create a pipeline of donors who have the affinity, interest, and capacity to support your organization at significant levels. The most effective direct mail programs help organizations to identify the donors who are raising their hands and inviting the organization into deeper, more personal relationship that should eventually result in a personal, face-to-face philanthropic relationship.
Unfortunately, we (those in the nonprofit sector, and specifically in the direct response fundraising industry) have created a framework that has convinced — and made it really easy — for nonprofits to believe that they can exist and grow by only investing in direct response fundraising. What’s really happened here is that we’ve defined success incorrectly. Somewhere along the line someone decided that success looked like a direct response fundraising program that yielded a 3:1 – 5:1 ROI, and didn’t require anyone at a nonprofit to go out and meet with donors. After all, putting your fundraising on auto pilot is convenient, right? And those aren’t BAD numbers, by the way. But they aren’t GOOD numbers either. They’re OK. Just OK. But if you’re in the business of looking for a cure to cancer or ending global poverty, or educating our next generation of leaders, should “OK” really be your success metric?
I think not!
We’ve learned to abuse the integrity of direct response fundraising as the entry point to donor cultivation and instead, positioned it as the sole cash cow, never to be questioned. In fact, this is a pervasive enough issue that I’ve had multiple discussions this year with development officers who were hired to cultivate donor relationships, but because no one wants to kill the direct response cash cow, those development officers aren’t allowed to talk to the organization’s best donors! Instead, they’re told to go out and develop cold relationships with people who might someday give a major gift.
Is it any wonder those people and organizations aren’t hitting their goals? Or that major gift officers at organizations like this tend to turnover every 12-18 months? Or why donor attrition nationally is at all-time highs?
Today we see this played out as nonprofits continue to send millions of pieces of mail each year to acquire and renew donors, constantly struggling to achieve revenue growth, reduce donor attrition, and stay relevant to the masses. It’s a vicious cycle where success looks like generating a 3:1 – 5:1 ROI on a direct mail program. Maybe you look at those numbers and think, “Wow, I’d take 4:1 ROI on my mail program any day!” Which only serves to highlight this deeply grafted problem.
In my career, I’ve worked with 100+ nonprofits who historically were very successful with direct mail fundraising, but soon that success became intoxicating. The inebriation paralyzed nonprofits small and large alike from investing in relationship-based fundraising. Then 2008 happened. The markets tanked overnight, and philanthropic revenues began to decline. Some donors stopped giving. Many stopped giving to charities that were new to them. Donor acquisition became increasingly more difficult, something surprising also happened: the donors that stuck around gave more money on a per-donor basis.
The organizations that survived the market’s downturn and grew out of it are those that diversified their fundraising approach and invested early on in major gift fundraising programs. Major gift fundraising steadied those organization’s revenue when direct mail couldn’t.
But the organizations that continue to struggle are those that continue to neglect their need for focused attention on major gift cultivation. It just wasn’t the priority, because like so many of us, they’d bought into the myth that direct response fundraising could carry the entire organization. When that plan didn’t pan out, they were left scrambling to create programs and hire qualified staff while their revenue and donor base continued to decline at the same time. For many of these organizations, I’d say it’s better to be late to the party than to never arrive. But just think of how much more financially stable they’d be today had they diversified funding streams early on!
That’s why I see another path toward success for my nonprofit partners…
Nonprofits that are thriving today are those shifting a percentage of their direct mail spend to fund expansion of their mid-level and major gift programs. These dollars are best spent on hiring high quality staff who can build relationships with donors and consistently make personal asks.
These organizations are also building structures that create the highest levels of accountability within their organizations to make sure that those who are doing the work are truly making the impact we all hope. It’s not enough just to hire major gift staff – if you don’t have a structure that is supportive and promotes accountability, you’ll fail.
Lastly (and most importantly), successful fundraising organizations are elevating donors out of the standard direct mail programs and into modified communication streams that support the end goal of 1-to-1 relationships rather than detracting from it.
Doing this well means that your standard direct mail program ROI will decrease (and that is ok). Instead of getting a 5:1, you might only get a 2:1. Maybe even a 1.5:1. Could you live with that?
Because… with that strategic tradeoff, these same organizations are seeing funds shift and increase across programs – raising more money and generating anywhere from 10:1 – 20:1 (some orgs get as high as 50:1) ROI by engaging this small group of highly committed, high-capacity donors in personal relationships.
I’d trade half of my direct mail ROI to get that kind of increase in total revenue and overall return on investment. Wouldn’t you?
The end result is that organizations willing to challenge and optimize the direct response cash cow, allocating donors to the best matched cultivation stream available are raising significantly more money. They are retaining their best donors longer, upgrading them more effectively, and providing the kind of donor experiences that result in happier, more engaged and deeply committed donors.
These organizations aren’t completely turning off their direct response fundraising – nor would I advise them to do so. But they’ve stopped expecting direct mail to carry the largest share of the fundraising burden. If that’s your goal, I can only hope you fail. Because successful organizations are embracing the idea that direct response fundraising is a feeder channel used to create opportunity for personal relationships – direct mail revenue is not the end goal unto itself. These nonprofits are changing the conversation internally around fundraising program goals and making clear that in order for the overall organization to succeed, some specific channels need to “fail.”
The question is, are you ready to start failing your way to more successful fundraising results?
Andrew, we need more articles like this! Thanks for challenging what is perceived as “common practice” in our industry and providing fresh perspective.
Thanks, Zach! Appreciate you!
I enjoy the jaunty and provocative tone of your piece, but I must say I’m mystified. Are there really organizations out there that rely solely on net-positive direct mail programs but don’t do other kinds of individual fundraising? Can you give me an example?
Thanks for sharing this, Andrew. I admire the lively, provocative writing.
But I must confess to being a bit mystified. I’ve never heard of an organization that runs a robust direct mail program and doesn’t also run a sophisticated mid-level and major gifts program. Are there really such organizations? Can you name one?
It seems to me that most fundraisers at large organizations understand that direct mail is one small but valuable slice of the fundraising pie. When run well, it yields — for some organizations — meaningful net revenue. I don’t think those organizations think of them as their primary sources of major gifts prospects — though it never hurts to comb through the rolls.
Do you disagree? I’d be interested to hear real-world examples of what you describe.
Thanks so much.
Matt
Hi Matt,
I appreciate your comments. You’d be shocked. There are thousands of organizations that are spending millions each year on direct mail programs, but not investing in mid-level or major gift programs.
Several months ago I met with one of the leading orgs in the disability services space. They have 250,000 constituents on their file, spend close to $14 million/yr on direct mail. They have exactly zero FTE’s dedicated to major gifts. No major gifts infrastructure in place. A year ago I met with another large player in the health/disease space. They spend $20 million/yr to raise $26 million with premium direct mail (i.e., labels, note cards, etc.). Again, no major gift infrastructure in place, no intentional plan around major gift fundraising. Then there’s the social service sector. I’ve personally advised more than 300 organizations in that space (homeless shelters, food banks, Catholic Charities, etc.). This is a prevalent issue in that sector. Often I encounter executives who are willing to double their investment in new donor acquisition before they’re willing to hire a single major gift officer.
You’re right about organizations not thinking of their direct mail donor base as including prime candidates for major gift fundraising. That’s more fiction than fact. In fact, my first book, Rainmaking: The Fundraiser’s Guide to Landing Big Gifts came about because of that exact claim. My co-author and I actually ran an analysis on direct-mail acquired donor files for roughly 40 domestic hunger/homeless service organizations. We looked at orgs in large and small markets, rural, urban, and suburban markets. It included organizations raising as little as $1 million/year, and as much as $15 million/year. What we found is that regardless of market size, market type, or revenue, the percentage of donors with $1 million+ of liquid assets ranged from 18% – 23%. It was very consistent across organizations. So for every 1,000 donors on these direct mail files, an organization has 180 – 230 people who, if engaged appropriately, could give a major gift. Unfortunately, very few are actually pursuing those relationships or securing those gifts.
Best,
Andrew
Thanks Andrew.
First of all, I apologize for the double comment. I thought I was on LinkedIn and couldn’t understand why my comment didn’t appear so I assume it was lost in cyberspace. Now I realize that I was the one lost in cyberspace!
More important, I’ve gone from mystified to stunned. I’m just amazed that you’ve encountered so many organizations that focus exclusively on direct mail. I hope they read your post and take it to heart!
Best,
Matt