Do Label Packages Work?

by Stephen Hitchcock

Lots of clients and prospective clients have asked us recently whether all those packages they see with mailing address labels are effective.

Yes, many nonprofit organizations are experiencing great success with these so-called "label packages." In test after test, these label packages produce a higher percentage of response, and so organizations are able to acquire more new donors or members.

Millions of prospective donors are receiving mailings which include a stack of labels with their names and addresses on them. In some cases, these labels are actually sheets of peel-and-stick labels, again with the donor's name and address. In some cases, these labels include "red ribbon" art work (for AIDS service organizations), the organization's logo, or some other graphic element related to the organization's work.

The success of these packages is evident in the number of letters we receive from friends and family members -- with a name sticker or label in the upper left corner. The organizations we work with also tell us that donors and prospective donors call asking for more labels -- or labels with a corrected name and address.

Because these label packages generate more contributions and because they meet with favorable acceptance by the public, this type of mailing has helped many organizations sustain and expand their direct mail acquisition programs. In other words, many groups are losing less money in acquisition mailings and they're getting fewer complaints about "junk mail."

But label or name sticker packages present nonprofit mailers with some big problems:

1. They're only cost-effective in large quantities, typically 250,000 pieces or more.

2. Even in larger quantities, label packages are more expensive so organizations have a greater capital outlay (and thus greater financial risk).

3. Just a few printers and mailers produce these packages, and they require very long lead times with rigid production schedules.

4. The format of these packages isn't conducive to sending long letters that explain to prospective donors an organization's mission and programs.

But the biggest challenge is that the new donors acquired by these label packages have a very low renewal rate. We've seen renewal rates that are five, ten, and fifteen percent lower than for donors acquired by more conventional packages.

Why aren't these new donors renewing their support? Why aren't they sending second and third gifts? (Remember, that's the whole point of direct mail fundraising: to build a base of individuals who send gifts year after year -- along with a precious few who send several gifts each year.)

As I watch the return envelopes from these label packages being opened, I see lots of $1 and $5 bills. And lots of $5 and $10 checks. It's as though the recipients are sending back a token amount to help offset the cost of name labels.

This same kind of response is seen when organizations use greeting or note cards to acquire new donors.

Some development directors may not notice this plethora of token gifts because the average gifts look acceptable on the reports they're reviewing. That's because the label packages do result in some generous gifts -- which raises the average for all responses and helps "hide" the large percent of $1 and $5 gifts.

Yet all those very small gifts do serve as a financial subsidy for direct mail acquisition. So, if you're mailing in large quantities and as long as the response rates hold up, label or name sticker packages may be ideal for you.

But do remember to beef up your new member or new donor welcome efforts. Send a warm thank you letter and a packet of information to those who send gifts of more than $20 or $25 (these are the donors who are the best prospects for repeated gifts).

And you'll need to make your membership renewal series or annual fund mailings even more sophisticated. Make sure you don't spend too much money on those individuals who are sending token gifts. Once again, your renewal efforts need to be targeted so that you spend more on those donors or members who are most likely to give repeated gifts and more generous gifts.

Other articles on acquisition:
•How to get started with direct mail (for small organizations)
•Is it OK to take a loss on acquisition mailings?
•What should you test?
•Choosing the right lists
•What's the best postage for direct mail letters?
•How to handle donor complaints about duplicate appeals