Growing Your Program In Today’s Market Part 1
It seems like our little direct marketing bubble has, indeed, burst. The elevated reality we have been blissfully living within over the past several years does, in fact, seem to be returning to a more leveled playing field. And while this shouldn’t be a surprise necessarily, especially given the continued calls for prudence over the past year, “reality bites” as they say.
In looking at some trends across a variety of organizations (from an array of verticals), the time to breakeven from the initial acquisition gift has grown significantly over the past 2 years. While many organizations were seeing breakeven times of 12-18 months (on the long end), these same organizations are now experiencing timeframes double, or even triple, that timeframe. It is important to note, however that these timeframes are projected and include future state data that can still shift/reduce with specific improvements made.
This significant increase is due to a variety of factors:
Increase in costs: when it comes to direct mail, the level of cost increases may have softened, but costs will now continue to rise from our inflated baseline on an annual basis. And while direct mail might show the most pronounced increase, don’t forget that the cost of doing business across any channel has only gone up in recent years, and unfortunately, no channel is spared here.
Reduction in response rates: overall response rates are softening industry wide.
Finite audience: there is a somewhat finite audience of direct marketing responsive donors. Data from the National Center for Health Statistics (see below) illustrates that the population of people turning 50 (AKA our most responsive audience) hit its high in 2015, and its corresponding low in 2025, with another high point not realized for another 20 years.
These three factors on their own have an impact on acquisition strategies, but in combination, they are a game changer. Increases in costs, coupled with reduction in response rates from a finite audience compound the impact and clearly can protract the time to breakeven on your investments to grow your program.
Faced with these data points, what does a thoughtful direct response strategist do?
The thing NOT to do is turn off one-time gift (OTG) acquisition – especially when it comes to direct mail. Donors coming in through direct mail are critical when it comes to maintaining a healthy and robust fundraising program. They feed the pipeline to offset natural attrition, and serve as a feeder pool for mid, major and planned gifts. Further, while other channels may generate some success in generating OTG donors, at this time, no other channel is as proven or successful in generating the volumes of new donors needed for most multi-channel direct response fundraising programs.
This doesn’t mean you shouldn’t make adjustments to your direct mail investments – you probably should. It just means proceed with caution and make sure we don’t throw everything we know about this important channel away because of the market we’re facing today.
What we can (and should) do is use this information to adjust and create strategies that address this challenge – while not being afraid to change the status quo. Specifically, we know we can reduce the time to breakeven by adjusting a variety of levers:
Value over volume strategies: by prioritizing value strategies, overall revenue may be optimized both in upfront performance, as well as in subsequent giving – decreasing the time to breakeven.
Expedite 2nd gift conversion: generating the second gift earlier has many benefits including reducing the time to breakeven so incremental net revenue is delivered to the organization sooner.
Create a culture of monthly giving: entertaining a monthly offer early (even within the initial acquisition ask) can produce many positive outcomes, one of which being a reduced time to breakeven.
What do these levers look like in the real world? Come back later this week and read part two of this blog for additional information on how and why to implement these adjustments. Until then – happy fundraising!
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