Direct Mail Premiums: Pros and Cons From a Former Pro
September 13, 2016 - by Pia Payne
Love them or hate them, direct mail premiums have a long track record of lifting response and, at least initially, average gift. But the degree to which they work, and the effort they take to manage, is dependent upon your needs and abilities.
In my early 20s, I received a card package from a prominent veterans’ organization. To this day, I can recall the overwhelming feelings it gave me: delight (I got a present!) and guilt (Yikes! Those poor people—I better send them some money.) And I did. It was the first time I gave in response to a direct mail piece. Little did I know, a few years later, those upfront premium packages would become my daily grind. I went on to work in nearly every aspect of direct mail premiums: production, creative, copy, analytics. I even went to China to source premiums and gather new ideas for my clients to test.
So I confess, I love premium mailings. Designing and testing new product ideas, finding an angle to connect to the mission and the donor, and seeing them perform—sometimes with an acquisition response rate as high as 18 percent and a net positive—was very rewarding. But they have their downsides, too. So, after 10-plus years of working every possible angle with premiums, here are a few things I’ve learned.
If your goal is to quickly increase your house file, then acquisition upfront premium mailings is the way to go. In my experience, the ones I’ve seen perform best for all types of organizations (health, environmental, animal welfare, religious) are notecards, member kits, notepads with labels and a pen, and tote bags. These packages almost always had a high response rate and net positive, especially if paired with a simple paper follow-up: “Hello Donor! I hope you received your gift.”
However, they are expensive, especially if you don’t have the higher volumes to support not only the volume discounts for production and postage, but also testing within your mailing (more than 100,000 total in the mail.) It’s almost pointless to invest so much time and money into your mailing if you can’t always be testing at the same time. Test or die, as they say.
Speaking of testing, now that analytics have gotten so much better in recent years, there’s no shortage of evidence that premiums actually have a negative impact in the long run. According to the Journal of Economic Psychology, giving becomes a selfish act and not one ?motivated by the mission, therefore the long-term value diminishes compared to mission-based motivation. But if your goal is the quick win for response and average gift, that number-crunching a few years down the road won’t matter to you.
Or, you can do your own testing. I know multiple nonprofits that would never dream of trying to move their notecard, member kit or calendar-mailing donors off that track. Their donors love those packages and look forward to them each year. Is it possible they may have given a little more in the long run if they were never started on premiums? Maybe. But how long would it take to get there? And some experts argue that because the response rate is so much higher than non-premium mailings, over time it becomes a wash—even though the average gift becomes lower than a mission-inspired gift, there are more donors to work with. The tricky part is finding the balance in the cost of those premium programs versus an average gift that often declines after the first gift. And many fundraisers don’t think it’s worth it.
Breaking the Dependency Cycle
Smaller nonprofits, especially, can get stuck in a cycle of dependence on premiums to keep their donors, eventually drowning in the cost of their programs. (It seemed like such a good idea early on, when they were trying to get their house files off the ground.) But a smart fundraiser can find the happy middle ground to help transition the donor.
That’s what Lesley Hostetter, vice president at Lautman Maska Neill & Company, is doing for some of the agency’s clients. The organization works with an environmental/animal welfare nonprofit, helping it transition away from a premium-heavy direct mail program and into a tighter, more mission-focused program. Instead of a costly upfront tote bag acquisition package that was becoming increasingly difficult to recoup costs for, it began testing new acquisition packages and landed a few wins right away. It’s dramatically ?improved return on investment in all programs.
“So you can see, the transition away from premiums is just that—a transition,” Hostetter said. “But we’ve dramatically lowered the cost to acquire a name (cut it in half). And we’re acquiring true donors who have proven to respond to regular old renewals—membership cards, invoices, statements, etc.—without needing a follow-up free gift. The organization has seen the average gift of donors increase by 25 percent, and net revenue has improved considerably year after year.”
Another trade-off for the high response rate bulky premiums yield is greater potential for complications—more than in a traditional mailing. These include postage rate mishaps (sometimes the average weight and postage rate is not the same as when your data was sorted on the front end), quality control issues (like the time I unwittingly mailed four-fingered gloves) and delivery issues. It might only be a handful of broken items, but when you or your client is getting irate calls, it feels like your whole mailing must be in the tank.
And don’t forget sourcing. Do you absolutely trust who is sourcing and producing your premium? Or are you mailing a toxic item? I was once sold on a plastic-like material that was supposed to be biodegradable. I redesigned an eco-friendly membership kit for an environmental client to test, and had items made with this new “green, bio-friendly” material—only to learn from a donor that the material was only biodegradable in specific circumstances. Of course one of the mailing recipients had to be a scientist. I promise you, crazy things will happen.
But the reward is there too. Sometimes you land on a winner, like the fleece blanket that one of my clients mailed to its house file for several years that averaged a net of more than $1,070 per thousand names. Another huge win for an upfront premium was a shoelace package mailed by Wounded Warrior Project. It’s tied so closely to their mission, and used so cleverly as part of the ask (“Can you imagine not being able to tie your own shoes?”) that I’m not sure it even counts as a premium. Who cares if you use the shoelaces or not! The message to the donor is impossible to miss.
My parting advice? If your nonprofit is looking for a donor bump, and if you’re willing to experiment and carefully track your results, testing a small premium could give you the lift you need—and the ability to convey your message and connect with your donors in new and creative ways. Start small. Something as simple as a decal offers your donor a chance to identify with your organization—if aligned properly with your mission, premiums help your donors feel like they’re part of the cause.