Give a Little, Get a Lot?

Charities try to be creative about using premiums to attract donations, though some fund raisers still criticize the practice

Dime-store candy is bringing in thousands of dollars for a small New York City AIDS group.

To get the attention of its top donors, the Community Research Initiative on AIDS sent them a prescription bottle filled with red, yellow, and blue jelly beans. The jar was accompanied by a chart showing a three-drug regimen typical of what an AIDS patient might take, and recipients were urged to take the jelly beans according to the regimen. They were also asked to provide at least $500 to further the AIDS group’s efforts to help develop effective therapies. The appeal has brought in $12,500 — at a cost of just under $450.

The AIDS group is one of many charities that are trying to become increasingly creative in the ways they use small gifts — often called premiums — to attract direct-mail donors. Organizations say they need to set themselves apart from the pack as more and more groups include token gifts to elicit contributions. Conventional premiums like return-address stickers, greeting cards, and calendars are particularly plentiful during the holiday season.

“We’re always trying to think of something that hasn’t been done a million times before,” says Daniel Stricker, executive director of the Community Research Initiative on AIDS.

The jelly-bean idea was conceived when the charity’s leaders were trying to figure out ways not only to raise money but to drive home the point that even though research has extended the lives of people with AIDS, their health depends in part on taking medications on a very precise and complicated schedule.

The appeal succeeded in that goal, Mr. Stricker says. “We’ve gotten calls from people who have said, ‘I had no idea how difficult taking these drugs would be.’ It became real to them.”

The use of premiums to attract direct-mail donors has long been controversial among fund raisers. While some people say premiums are the ideal way to catch the attention of potential contributors, others say that people who give in response to token gifts are unlikely to give again unless another premium is offered. What’s more, charities often net less from premium mailings, since gifts made in response to such mailings are often smaller than donations secured with other techniques — and premiums themselves add to the cost of a mailing.

“You should only resort to a premium if you absolutely have to,” says Charlotte Divoky, president of Divoky and Associates, a fund-raising consulting firm in Boston. “You’re getting a better-quality donor, a much-more-committed donor, if you don’t use them.”

Still, some charities swear by premiums — and many have improved their odds of reaping big dividends by changing the type of premium they offer. For seven years, the American Society for the Prevention of Cruelty to Animals in New York sent greeting cards along with a letter asking for a contribution. The mailing initially brought in donations from 15 to 25 per cent of recipients — an average range many charities shoot for when they seek gifts from previous donors.

In the past few years, however, the returns have dwindled to 9 per cent.

Last spring the A.S.P.C.A. decided to try a new premium — wrapping paper and matching gift cards with pictures of dogs and cats. The number of respondants jumped to 17 per cent — double what the cards had brought in recently.

“It’s so perfect for our donors,” says Melanie West, executive vice-president of Lautman & Company, a Washington consulting firm that came up with the idea. “And the wrapping paper was a little less expensive than the standard greeting cards.”

In sending the premium, the group used a three-part approach. First a letter went out announcing that the premium was on the way. Six weeks later, the wrapping paper and gift cards were mailed. A few weeks after that, donors who had not responded received a follow-up letter asking once more for a gift.

The first mailing — telling people to expect the wrapping paper — produced gifts from 7 per cent of the recipients, slightly more than the 5 per cent who respond to appeals from the group with no mention of a premium.

The wrapping-paper premium brought in gifts that averaged $2 less than donations from a mailing with no premium, says Ms. West, but the volume of donations was three times as high.

The idea of sending out something different from time to time has another benefit, she adds. It offers a fresh approach to the job of writing a solicitation letter.

“Finding something new to write about is always tough,” she says. But the new premium allowed her to bring a new focus to the letter.

Some charities have elaborate systems for freshening their appeals — often by keeping close tabs on donors’ interests. Paralyzed Veterans of America has thrived on premium-generated gifts for decades, in part because it continuously tests new products and encourages feedback.

The charity sends surveys — some as long as eight pages — to donors periodically. The questionnaires ask them to provide information on a wide range of areas, such as whether they like to garden, if they enjoy music, what magazines they read, how they vote, whether they have a disabled family member, and if they have small children.

In focus groups, which are held every other year, donors are asked how they like different products, what they think of the way products are presented, how much they would probably donate for particular items, even what they think of names and logos the charity is considering for new appeals.

This year the organization has pumped more money into the effort by taking its direct-mail lists to several commercial companies that can provide background information about the association’s donors. Depending on the length of the list and how many categories are matched, it can cost $50,000 to $400,000, says Jim McLachlan, director of development at the veterans’ group.

For example, the charity spent $400,000 to match 10 million names against a commercial company’s master list, getting information in 25 categories such as who owns his or her own home, who enjoys crafts, and who has a compact-disk player or purchases Bible devotionals.

The expense is worth it, says Phyllis Freedman, associate executive director of the veterans’ group. “The notion of junk mail comes about when people get things in the mail that they don’t want,” she says. “If we can send people things they want, they will be less frustrated by the mail they get from us.”

A few years ago, the veterans’ organization sent out a Christmas booklet with recipes, lyrics to carols, and holiday-related stories. Slightly more than 13 per cent of the people who received the booklet made a donation, and the average gift was $10.45. The next year the charity tested the booklet against another premium — an audiocassette with Christmas music by little-known artists. Response to the cassette was even better than to the booklet: Nearly 25 per cent of recipients made a gift, with an average donation of $20.90. The amount the charity netted per piece rose from 94 cents to $3.16.

But despite the popularity of the cassette, the veterans’ group continues to test new premiums. This year some previous donors will get a new Christmas cassette, with well-known performers. Another group of previous donors will be sent a holiday cookbook with healthful recipes. A third list will receive a Lenox angel ornament with a certificate of authenticity.

“Even when we have a solid winner, we know it’s not going to last forever,” says Ms. Freedman. “All products fatigue.”

Despite their popularity, premiums are not a panacea, and some experts caution against using them without first taking a good, hard look at the pros and cons.

Bonnie O’Neill, vice-president of the Chicago consulting firm Meyer Partners, says she does not rule out the use of premiums, but she worries that if a charity leader “is not well informed, you can easily get sucked into the premium style of fund raising because at first it seems more attractive.” But, she says, if charities do calculations to figure out the value of using premiums over five or ten years, they will usually find that they are better off without them, because of lower costs, higher donations, and a greater loyalty to the charity.

Others agree. A large percentage of donors who respond to premium offers are giving to the cause, not the organization, they say. The result can be donors who may not even know much about the charity.

Wheat Ridge Ministries, a Lutheran organization in Chicago that supports health and humanitarian programs, had been sending Christmas stickers along with its appeals. In 1992, it decided to hold a series of focus groups to talk to donors who had responded to its premiums — but it did not tell them that they had been invited by the ministry.

“We asked them, ‘Who are your favorite charities?’ ” says Ms. O’Neill, who conducted the focus groups. “They named Habitat for Humanity and the Salvation Army and the Rescue Mission. Nobody mentioned Wheat Ridge.”

When asked what they thought of Wheat Ridge, the participants responded enthusiastically that it was a worthy charity. But when asked what Wheat Ridge did with their donations, only one person in sixty knew.

“That gave us real insight,” says Ms. O’Neill. ”Now when we do appeals we try to give examples of what Wheat Ridge is doing.”

Despite the downside of raising money with premiums, many charity officials say it is hard to argue with success. For some, premiums continue to be a valuable way to bring in much-needed dollars.

The John Wayne Cancer Institute in Santa Monica, Cal., has tried to distinguish itself by offering a higher-quality premium than many organizations do — and is trying to prove wrong the conventional wisdom that donors cannot be weaned from premiums.

To appeal to potential new donors, the organization sent a 9- by 12-inch limited-edition hand-drawn portrait of John Wayne. More than 1 per cent of recipients made a gift, says Wendy Katz, vice-president of Epsilon, a fund-raising consulting firm based in Burlington, Mass., that works with the center on its mailings. Many groups aim for a 1.5 to 3 per cent response rate from lists of people who have not given to the charity before.

A few months later, the center sent out a second appeal to 10,000 of the people who responded to the mailing with the premium. The appeal, which featured the hospital’s breast-cancer center, did not include a premium. Nevertheless, 15 per cent of those donors responded with a gift.

Ms. Katz believes that part of the reason for the success of the mailings was the quality of the John Wayne portrait, which was done on heavy stock. She says the first mailing attracted bigger gifts than typical premium solicitations — the average donated was $25 — and that meant the charity could ask for bigger gifts in the second mailing.

“What we’re trying to do is blend the best of all possible worlds,” says Ms. Katz. “We don’t want to hammer them with premiums. We are trying to think innovatively how to give them a goody but turn them into a proper kind of donor.”