Mining for the golden donor prospects
During the early days of the California Gold Rush, gold was easy to
find -- even with the simplest of tools. But once the easy gold was
taken, prospectors had to turn to more inventive techniques to find
the gold that remained.
There are numerous similarities between gold mining and direct mail
marketing today. Rather than using a knife, pick, shovel and a pan,
we began using 4 inch by 6 inch index cards, which later developed
into more inventive mining techniques and sophisticated database
For instance, take the act of prospecting for new constituents. Are
we not panning for gold - looking for that one person in 100? And
what about after we've acquired that one person? Did we acquire gold,
or was it fool's gold?
It's my belief that within every batch of new responders the ratio of
gold to fool's gold is no better than 15 percent to 85 percent.
Therefore the largest percentage of the annual marketing budget is
being spent on people who won't respond to your offer.
Let me illustrate: For every 1,000 prospects mailed, 10 respond. The
following year let's say less than 30 percent renew their support,
and no more than 50 percent of those remain active into their second
year after their initial gift. What this means is that only 1.5
people out of the initial 1,000 people mailed migrate into what's
referred to as their "core value" years.
As the cost-to-revenue ratios continue to increase in our industry,
you must acknowledge that you can no longer afford to invest so much
of your marketing dollars in these non-responders. Instead, you need
to be more targeted in your expense allocations.
However, you must first understand how to distinguish between the
gold and fool's gold - those responders that are most likely to
migrate into the core value years and those who are not.
There are several ways to tell the difference between gold and fool's
gold. It all starts with having the proper tools - a combination of
databases, advanced analytics and industry knowledge - to drill deep
beneath the surface of traditional performance evaluations so that
you can understand such things as motivations of those who respond -
compassion versus passion; unique characteristics (demographic and
behavioral) of those who subsequently respond and those who do not;
and value potential and cost-to-revenue investment outcomes.
The ability to quickly understand how to differentiate between the
two groups is becoming far more important and valuable in our
industry. It is imperative that you accelerate the process,
literally reducing what typically has taken years to understand to
just a few months, or perhaps instantly. That's because the
consequence is far too costly.