By Sean Triner
I just came back from a visit to the UK where I met up with my wonderful financial mentor, Martin Richardson. He was CFO at Action Research (now Action Medical Research) when I worked there back in ’95-’97. Back then Action Research was a pioneer – they were APPCO’s (then working with Caring Together) first ever charity clients making them face to face pioneers.
Martin is still CFO and it was good to catch up, but it was sad to reflect on what happened over the fifteen years between ’98 and ’13. Basically, the first few years of face to face were fantastic – and then other charities jumped on band wagon and results declined. Attrition went up, costs went up and ROI began to decline. So towards the end of the century they stopped.
Throughout the noughties Action Research invested cautiously in face to face donors – but lots of other UK charities did decided to throw lots of money at it. It wasn’t that face to face didn’t work anymore, it was just that Action Research were a victim of their own success. By being first, they got some great results and some great donors. Face to face and direct mail were still great in 2000-2010, just not as good as 1995-2000.
As Martin says “If you have a fundraising method that has a much better return than traditional investments – do as much of it as possible until you find something better or the returns decay back to traditional investment level”.
Martin carries on “Increased competition, market saturation and increased costs have all eroded the ROI and whilst not as good as it once was it is still our first choice for recruiting new regular givers. What we are all looking for is that next great method so smaller and medium sized charities can be first to market like Action Research was with payroll and then door to door.”
It would appear that the last few years in Australia have provided a new, better or at least comparable return technology: direct mail.
Benchmarking across 70 odd charities from the two nations confirms just how dominant these channels have been. Face to face can take credit for most regular givers across the sector, and direct mail the ‘one off donors’.
If a charity has a good regular giving upgrade program, is good at converting some of its direct mail donors to regular giving, and follows up for bequests and major donors then we see the two programs yield comparable returns for the charity.
Like many things, a balance of the two is usually the best solution for mid and large sized charities (and small charities who want to be mid or large sized).
Direct mail – especially using premiums or incentives – is great in the short term (cash flow) and long term (bequests and major donors) whilst face to face is great in the medium term (solid, ongoing income growth with low risks).
As you can see from the charts, the best year for both methods was last year, with direct mail growing exponentially in the past few years and face to face linearly. That exponential growth is pretty much all premium direct mail acquisition. Of course, direct mail doesn’t work every time, or for everyone, but across the sector it has done very well recently.
Over the years, I have attended many conferences to hear ‘face to face has had its day’ or is ‘reaching saturation point’. It is true to say that things are tougher now: face to face is more expensive, has (in general) worse retention rates and only slightly better average donations. But it is still the best way to get large volumes of regular givers.
And after just two – three years, premium direct mail is getting the same feedback – and it is tough out there; with response rates expected to decline and average donations eventually to come down. But it is still the best way to get large volumes of cash donors.
SMS giving, online giving, Facebook acquisition all have their place but none are yet providing the results of those two traditional media – face to face and direct mail.
If you are thinking about starting one of them; I am sorry to tell you it would have been a little bit better a couple of years ago, but pleased to say – well done, because it will probably be much tougher in five years.
If you read this far, you probably work for a charity, which means you do good. Saving lives, saving trees, changing society, protecting animals. I hope that the need to help makes you impatient, because you should be.
Have realistic expectations, and appreciate the concept that net income over the next few years is your most important goal.
Get more donors now, because the next lot will likely cost you more and not be as valuable.