Seeking Better Returns

To recruit donors, charities revamp mailings; try new tactics

For more than a decade, the American Heart Association’s efforts to attract new donors through direct mail

were on a roll. Every year, the association, which runs one of the nation’s largest charity direct-mail operations, received gifts from more and more people who had never previously supported the charity.

But last year, for the first time in 15 years, the streak came to an end as the number of new donors it obtained from its 43 million mailings declined.

Sherry Minton, who oversees the charity’s direct marketing, says that even though 2003 was especially bad, signs of trouble had been building for a while. “In the last two years, it got really bad,” she says. “It has been a real struggle.”

This year, Ms. Minton says, the charity’s mailings seem to be faring better, grossing 8.3 percent more in revenue than in 2003. That’s in part because the association has revamped its approach to include more address labels, notepads, and other small gifts in the hopes they will inspire donations. It is also making aggressive moves to cut the costs of mailings to potential donors.

Like the heart association, many charities are getting better returns as they seek new donors. A three-year analysis of direct-mail returns for 34 charities that together raised more than $1-billion annually found that the number of new donors recruited by the organizations dropped by 6.6 percent from 2001 to 2002 and then increased by 1 percent last year.

Conducted by the Target Analysis Group, a Cambridge, Mass., direct-marketing consulting firm, the analysis found that new donors gave a median first gift of $31 last year, an increase of 4.3 percent over 2002. The company found that solicitations mailed to the charities’ active direct-mail donors were doing a little better, too: After no gains in 2001, the number of donors who kept giving for at least two years running, in both 2001 and 2002, rose by 1 percent.

Reaching a Low Point

But for many organizations, such increases have failed to reverse a long-term trend of declining returns. Charities that use direct mail to find new donors are still struggling to win as many as they did before the economic downturn touched off by the 2001 terrorist attacks.

“The low spot was about a year after 9/11,” says Mark Meritt, a marketing analyst at Doctors Without Borders, an international relief organization that mails four million to six million solicitations to potential donors each year. “Things got a bit better in 2003, but I wouldn’t say things have ever got back to pre-9/11 levels.”

Cutting Back

Some charities, particularly smaller organizations, have cut mailings to recruit donors entirely, due to high costs and dwindling returns. The Arizona-Sonora Desert Museum, in Tucson, stopped sending appeals to potential new donors a year ago, which caused the museum’s membership to drop from 25,000 households to 22,232, with a corresponding decrease in membership revenues. Museum officials say that they hope the organization’s finances will improve enough to resume the mailings soon.

Even in good times, mailings to prospective donors typically don’t prompt more than 1 percent of recipients to give, so charities don’t recover their costs for the mailings until the new donors make repeat gifts over the years. While most fund raisers have tried other ways to attract new donors, they have yet to discover a working alternative to direct mail. E-mail solicitations aimed at new donors, for instance, are often considered spam. Other approaches, such as 30-minute television programs used by charities seeking donors to “sponsor” needy children, are usually too expensive to justify dropping direct mail entirely.

Still, many charities are finding ways to make their direct mail more efficient or supplementing it with other methods. Among the tactics:

Using statistics to predict returns. A growing number of charities are hiring outside companies to analyze characteristics of their direct-mail donors — such as how recently they gave, type of appeals they respond to, average gift, number of gifts per year, and total amount given, as well as other demographic characteristics gleaned from public records, such as age, sex, and home ownership. Using a process known as “predictive modeling,” the companies then use those characteristics to create a statistical model that enables charities to predict which people on a mailing list are most like their best donors and therefore most likely to give.

The Nature Conservancy, which sends appeals to 20 million potential donors a year, has increased the size of the average gift made in response to some mailings by as much as 70 percent over the last two years by using a predictive model.

“These donors tend to be more loyal over time, and they give more frequently and upgrade more quickly,” says Lisa Steen, the charity’s senior manager of new-member acquisition.

That, she adds, enables the Nature Conservancy to recover its costs more rapidly.

Because most recruiting mailings are also sent to previous donors who have stopped giving, modeling can also help fund raisers figure out how likely or unlikely those people are to renew their support.

Catholic Relief Services, which sends 11 million appeals to former and potential donors each year, has used modeling over the past 15 months to reduce the number of people it mails to each year. “It’s not the holy grail, but we see modeling as a way to screen out the bottom 20 percent,” says Kevin Whorton, who oversees mailings for the charity. As a result, Catholic Relief Services has managed the economic downturn better than many. “We’re holding steady,” Mr. Whorton says.

While modeling can save money for charities with big mailings, it is less cost-effective for smaller organizations, experts say. A charity that sends 100,000 appeals to potential donors might reduce its costs by 10 percent to 15 percent or about $10,000, says Ray Grace, chairman of Creative Direct Response, in Crofton, Md. But because modeling generally costs $5,000 to $7,000, regardless of the size of the mailing list, the charity’s savings would be negligible unless it sent millions of pieces.

“A lot of small- to medium-sized nonprofits think modeling is the answer, but it’s not cheap enough to satisfy everyone’s needs,” says Mr. Grace.

Including gifts in mailings. Nearly 40 percent of all charity mail to prospective donors last year contained address labels, greeting cards, pins, and other small gifts, according to ParadyszMatera, a New York company that assists nonprofit groups with direct mail, online marketing, and related services. The company, analyzing more than 6,000 different recruiting mailings by more than 1,000 charities from 2001 to 2003, found that the use of such gifts, often called premiums, was on the rise. Address labels were the most common, accounting for nearly 25 percent of the token gifts last year.

Mothers Against Drunk Driving, which has long enclosed premiums in letters it sends to 9 million to 12 million potential donors annually, has been doing better than most charities in the past 12 months by including multiple premiums in its appeals. Unlike most mailings to win new donors, which lose money, many of MADD’s new appeals have more than covered their costs.

One version of the new approach, an elaborate box mailing about the size of a legal envelope but a quarter inch thick, includes a pen bearing the advocacy organization’s name, a red ribbon reminding people not to drink and drive that recipients can attach to their cars, a membership card, and a calendar. The mailings have drawn gifts from 3.5 percent to 8 percent of recipients, says Bobby Heard, MADD’s director of marketing and development. “We have a unique set of packages that get more attention in mailboxes, and our acquisition has been phenomenal.”

But most charities aren’t that fortunate. Using premiums can be tricky because they increase the cost of a mailing and typically bring in smaller gifts than mailings without them.

What’s more, people who respond to premiums tend to be less loyal than other donors; even when they do make repeat gifts, they are apt to do so only in response to another premium.

Still, some groups like the American Heart Association have successfully used premiums to offset shrinking returns from mailings without them.

About four years ago, when response to its long-used appeal, a simple letter with a return envelope, started to dip, the association began replacing some of the letters with solicitations that included address labels or other premiums. Now more than half its donor-recruiting appeals contain such enclosures.

Ms. Minton, the association’s direct-mail chief, says she will never abandon traditional letters completely, due to the expense of premiums and the concern that donors who receive them are less loyal. However, appeals with premiums produce gifts from 1.5 percent of recipients, significantly better than the 0.5 percent or 0.6 percent who gave after receiving the traditional letter, she notes. And with more people giving, the charity has decreased costs from a high of $1.80 to raise a dollar from a new donor to $1.25.

Tailoring appeals to men and women. Last year, when fund raisers at the National Trust for Historic Preservation decided that they needed to win more new donors, they began testing alternatives to the organization’s 20-year-old appeal: a four-page letter accompanied by a formal-looking invitation.

In testing a less expensive two-page letter, Dolores McDonagh, vice president for membership development, says the organization discovered that when both men and women were asked to give $15 to join the trust and then add on some money to support the organization, men gave $23.55 on average, while the women’s average gift was $18.44.

Using those findings and results from additional tests, the organization has developed new “male” and “female” appeals. While both are two pages long and request a minimum of $15, the women’s letter features a more colorful design and personal tone. In initial tests, although the gender gap remains, both men and women are giving more than they did in response to the 20-year-old appeal: The average gift from new female donors is now 25 percent higher, while men’s is 37 percent higher, on average. Based on those returns, the National Trust recently mailed nearly 850,000 appeals with different approaches for men and women.

Paying for television spots. Charities have long used public-service announcements and infomercials to explain their work and ask viewers to make monthly gifts. Recently, however, some charities have won significant numbers of new donors with 30- or 60-second television spots.

In July, for example, the American Society for the Prevention of Cruelty to Animals paid to run a 60-second spot four times on the Animal Planet network. The ad prompted more than 1,000 people to call a toll-free number or go online and sign up to give the charity $18 a month.

The spots, in addition to a longer 30-minute infomercial the society airs on local independent networks, have had an unexpected benefit: In Chicago, Los Angeles, and New York, where the broadcasts ran, 18 percent to 20 percent more people made gifts in response to direct-mail appeals.

“In these hard times, it’s important to have multiple options for donors, and we want to solicit donors in new ways,” says Todd Hendricks, who manages the charity’s direct-mail fund raising. Mr. Hendricks, who declines to say how much the society paid to air the 60-second spots, says they are part of a strategy to diversify the charity’s methods of reaching new donors and enroll more people in its monthly giving club, which has helped increase the amount people give annually. Mr. Hendricks says that the society has projected that monthly giving can reduce the cost of recruiting new donors from 35 or 40 cents for each dollar down to as little as 8 cents.

Recruiting donors in person. The Missouri Historical Society, in St. Louis, held a recruitment drive at its exhibit on the American explorers Meriwether Lewis and William Clark.

During the exhibit, which opened in January and ended in September, the institution tried hiring professional salespeople who greeted visitors and asked if they would make a gift to join the society. The salespeople pointed out to visitors that annual memberships did not cost much more than the exhibit’s admission fee, especially for families, and would provide donors with benefits such as gift-shop discounts and unlimited visits.

The salespeople fared better than the museum’s mailings. An appeal sent to 315,000 potential donors, which also mentioned the Lewis and Clark show, attracted 2,701 new members in eight months. During roughly the same time, the salespeople recruited nearly 6,000 new members — and at a much lower cost. The society spends up to $1.50 for every dollar raised from new members through the mails; the on-site effort has cost 32 cents for every dollar raised.

Many types of organizations can take advantage of the same approach, says Dana Hines, president of Membership Consultants, a St. Louis firm that helps museums and other arts groups build member rosters. “If you have a new building, an opening, or an event that brings people in,” she says, “consider asking them to donate.”

But not all nonprofit groups believe in-person recruitment is cost-effective. Greenpeace USA, for example, gave up direct-mail appeals a year ago in favor of sidewalk solicitors, but is now doing a study to determine if donors recruited that way give enough over time to justify the cost.

“Our preliminary figures are telling us there is a high attrition rate with these donors, so we’re checking this out,” says Rick Gentry, the charity’s acquisition coordinator. He says that Greenpeace has hired a new fund-raising director from the international organization Oxfam, in Britain, who is planning year-end tests of a new mailing to potential donors. “He’s trying to put the ‘wow’ factor back into Greenpeace,” Mr. Gentry says, “and it could be that our old package was stale.”

Rebecca Gardyn contributed to this article.