Is It OK To Take a Loss

Is it OK to take a loss on a direct mail campaign?
by Stephen Hitchcock

Dona Dodson, membership manager for the Denver Museum of Natural History, asked for help in answering this question for her fellow staff members and the museum's board of trustees: "Why is a direct mail campaign being mismanaged if the organization makes money (comes out ahead of expenses)? Why is it okay to break even or to take a loss on a direct mail campaign?"

The short answer to Dona's question is that when you're making money in mailings to acquire new members or new donors, you're almost certainly not mailing to enough prospects.

The long answer -- and the longer-term reason for "losing" money in direct mail -- is that it is the only way to acquire enough new members and new donors to sustain your organization in the future.

There's also a historical answer to Dona's question.

At the risk of revealing what a crusty old curmudgeon I've become, let me tell you about the good old days when I got started in direct mail fundraising. After securing special permission from the local postmaster because I had printed thousands and thousands of envelopes with the wrong zip code, I was ready to send out my first direct mail campaign. I provided the post office with nonprofit postage to cover the cost of that mailing -- at $18 per 1,000 pieces.

That first mailing took place just over 20 years ago. By the time you read this, we'll be sending the post office $125 for every thousand pieces mailed.

And, you know, 20 years ago most of the contributions we received were $25. Today, the average gift is almost identical -- which means that given the increased cost of postage (as well as for paper and for list rentals), you don't have much of prayer to break even or make money in direct mail acquisition.

Fortunately, though, there's a very positive upside to this era of direct mail fundraising.

Even though initial gifts are about the same average, those members and donors who stick with you are more generous than ever before. And the charitable bequests they leave are greater than ever before.

And as the donor population becomes ever more educated, they are more interested in additional information and opportunities for involvement. Through monthly sustainer programs, giving clubs, major donor campaigns, and planned giving cultivation, every new member or donor can become a major donor.

Thus the smartest, most forward-looking organizations are investing in regular, consistent mailings to acquire new members and donors. Those mailings are resulting in initial gifts that add up to half or less than half the cost of the mailing. Those wise organizations know that this is the cost of doing business. They are enabling individuals and families to become involved in organizations that -- as donors -- they will generously support in the future.

All of this is easier to keep going if you -- and your staff -- stop thinking about individual mailings, but rather focus on the larger, total direct mail program. And then view that program as part of the larger development strategy of your organization.

Then you can shift the attention of your senior staff and your trustees to really important questions like:

1. Is our membership growing?

2. What percentage of our members are renewing?

3. What percentage of our donors are upgrading their gifts? Giving more than one gift per year?

4. How many donors have told us they're remembering the organization in their wills?

5. Are we raising more money this year than last year -- from all sources and all fundraising activities?

Other articles on acquisition:
•How to get started with direct mail (for small organizations)
•What should you test?
•Do label packages work?
•Choosing the right lists
•What's the best postage for direct mail letters?
•How to handle donor complaints about duplicate appeals