Direct Mail Fundraising: the pitfalls and pluses of premiums
December 8, 2003
By Louise Chatterton Luchuk
The adage says, "it's better to give than to receive" but with the
increasing use of premiums as incentives for donors to give, the line
between giving and receiving is blurring. From address
labels and calendars
to t-shirts, mugs, and even more elaborate incentives, premiums are
an increasingly popular way of making an organization's direct mail
piece stand out amidst the myriad of other appeals...which
has its benefits
and its pitfalls.
A premium primer
Think of a premium as spending money to make money. There are different types
of premiums with different purposes. Premiums may be used to prospect
for new donors, to reactive lapsed donors, or to retain current donors.
There are "up front" premiums as well as "back end" premiums.
As the name
suggests, up front premiums are giveaways that arrive with the direct
mail package. Back end premiums are only sent when a donor responds to
an appeal and, as a result, they are usually worth more
money. The right
premium can also build the organization's brand and integrate
key messages
to educate the public and raise awareness. The public begins
to recognize
the organization by its premium.
That branding value couldn't be more true for the Easter Seal Society of Ontario. Formerly
known by their legal name, the Ontario Society for Crippled Children,
the organization adopted the name that we are familiar with
about twenty
years ago. The new name reflected one of the premier ways
they were known
to the public - through their easter seals campaign. The Easter Seal -
an adhesive non-postal sticker - was introduced into Canada in 1947 and
adopted for use in Ontario two years later. Today, the Easter
Seal Society
of Ontario uses a variety of premium and non-premium direct
mail approaches,
but the address labels consistently have the highest return
on investment.
In the experience of Julia Iannuzzi, manager of direct
marketing,
the most successful premiums are the items that are viewed as useful,
like the address labels, note cards or calendars.
Test, test and test again
"We pride ourselves on our analysis of our premiums," comments
Iannuzzi. "We have a stringent analytic process to make sure we are
getting the highest net return. That means we are always asking what
works with different segments of our donors and what doesn't
work."
Caroline van Nostrand, director of community giving for the Princess Margaret Hospital Foundation
in Toronto, shares Iannuzzi's rigorous approach. She has experimented
with many combinations and permutations: various donor segments, the copy
used in direct mail letters, and the look of their address labels. What
van Nostrand discovered was that the most beneficial use of their address
labels (used as a premium to attract new donors) was to gear the direct
mail package to women and to pair the address label with a message about
breast cancer.
"Buyer Beware!"
That's the message that Anthony Toth, executive director of
the British
Columbia Wildlife Federation has for any organization
contemplating
a contract with a premium-supplying direct mail company.
Toth's organization
is dealing with the fallout of a contract that has gone sour with one
such company and there is still another year left in their
five-year contract.
Premium-supplying direct mail companies offer to help
organizations significantly
increase their mailing response by supplying and sending out
the premium-based
direct mail packages. They make their money on the mark up of
the premiums
and the handling charges, says Toth. "My experience is that
you have an
enhanced rate of response at the start...but after one or two
cycles people
start to get ticked off but you're still stuck with the contract."
The British Columbia Wildlife Federation sent out 30,000 t-shirts to
donors and one thousand of them came back with angry letters from
donors. Letters focused on dissatisfaction with donor money paying
for premiums and complaints about receiving more than one
solicitation per year contrary to donor wishes (and the expressed
wishes of the British Columbia Wildlife Foundation). "I strongly
recommend any organization to be ultra careful because the offers
sound good." And while there will be no more long-term contracts with
premium-supplying direct mail companies for Toth's organization, he
doesn't rule out offering authentic premiums in the future as part of
their in-house direct mail fundraising...and fortunately for the
BCWF, their other in-house fundraising campaigns are currently doing
well.
Donor reaction
Harvey McKinnon, president of Harvey McKinnon Associates - a consultancy
that has helped hundreds of nonprofits develop more successful direct
mail fundraising - admits he has "always been wary of premiums because
the mission of the organization should guide direct mail appeals." van
Nostrand refers to those who only respond because they have received a
premium as the type of donor who is really subscribing to a service rather
than believing in the cause. "My theory," explains McKinnon, "is that
what you are often getting if you are sent $25 for a set of note cards
is a response made out of guilt but not great commitment to the cause.
There is a less emotional connection." To McKinnon, long-term value is
crucial in the analysis of whether premium-based direct mail fundraising
makes sense. Will the premium-induced donation translate into a long-term
donor? Probably not.
van Nostrand concedes that donors who respond to premiums don't stay on
your house list as long. However, "if they are new donors
that you wouldn't
have brought in otherwise, well, the risk is worth taking."
For Iannuzzi
it is a question of total dollars. "Although we are always looking for
a non-premium package to outdo our premium package, they
never out-perform."
she says. "People do express true concern [about wasting
money on premiums]
but we know from all our testing that premiums routinely
generate higher
net revenue for us to provide more equipment and programs for children
in Ontario with physical disabilities." Database technology
makes it easy
for fundraising professionals to honour requests from donors who do not
want to receive premiums with their direct mail appeal.
McKinnon urges organizations to evaluate the costs and goals of each
test to see if offering premiums is a cost-effective way of meeting
direct mail fundraising needs. It's not that premiums don't work,
they certainly do. It's that in order for premiums to be beneficial,
the messages for the day are "test, test and test again" and "buyer
beware".
Louise Chatterton Luchuk is a freelance writer and consultant who
combines her love of writing with experience at the local, provincial
and national levels of volunteer-involving organizations. For more information,
visit www.luchuk.com.
