Direct mail prospecting has proven time and again the most cost-effective method for attaining new donors. However, it is essential for your organization to understand three fundamental rules of donor prospecting. Without a good grasp of these rules, many have prematurely ended their donor prospecting and forfeited outstanding long-term financial benefits.
Rule No. 1: Successful donor acquisition efforts do not always generate a profit on the front end.
Occasionally, donor prospecting does generate a front-end profit. But it is the exception rather than the rule to generate net revenue over and above costs when prospecting to external mailing lists.
The most successful mailers are thrilled when they acquire new donors or buyers at a net cost of less than $10 per new name. Other mailers are quite happy paying up to $50 per new name. It is not uncommon for the lifetime value of a new donor to be more than $5,000. Obviously, spending $10 or even $50 to acquire such a donor would be money well spent. They also know that if a new donor costs less than $10 to acquire, the second time that donor gives probably will offset the initial investment.
Rule No. 2: If you do not have a regular mail program to your donor list, the value of a new donor to your organization will be diminished greatly.
It does not make sense to spend money acquiring new donors if an organization is not going to mail them regularly. The most important thing is not necessarily getting the initial gift, though that in itself is difficult, but rather getting the second gift.
Why? Because 80 percent of those who give a second time to an organization continue giving regularly, provided the group has a regular mail program. Most new donors welcome this contact, and they generally will not give unless they are asked. If an organization is not mailing a second time to its new donors, it is missing a great deal of revenue.
Suppose it costs $15 per contributor to acquire 1,000 new donors through a first-time direct mail campaign. Then suppose only 50 percent of these 1,000 new donors give a second gift after receiving a house mailing within the same year, which is a typical response rate. This likely will bring in another $17,000, based on an average gift of $35.
Furthermore, 80 percent of these 500 second-time donors probably would continue to give regularly. Each of these 400 new regular donors typically would be worth $80 to $150 yearly in support value. So the $15 initial cost to acquire a new donor is a small investment for such a large ongoing return.
Rule No. 3: Results vary from mailing to mailing.
Often organizations show initial enthusiasm for direct mail, only to put the brakes on future mailings after one generates a less-than-expected outcome. This is shortsighted and strangles donor acquisition.
Many factors affect mailing results. What needs to be understood is that a one-time disappointing mailing must be viewed in light of rules No. 1 and No. 2. A prospecting program undertaken without full comprehension of these fundamentals will fail. However, once an organization learns these rules and adopts a long-term financial outlook, it will see that direct mail prospecting is a cost-effective method of attaining new donors.