Where we’ve been
In today’s direct mail marketplace, the fundraiser’s biggest struggle is the search for new donors. No matter how great our stewardship and retention efforts are, the fact remains that we need to replenish about a third of our direct response donor base annually if we want to avoid shrinking our donor pool.
This is a LOT easier said than done…
I’ve been doing direct response fundraising for some 30 years, and I can remember a time when charities traded donor lists with each other, and prospected for new donors at break even. In other words, new donors were FREE. (Imagine that!)
Over the years, the cost of acquiring a new direct mail donor has crept slowly but steadily up. To $25, then to $50. New donors are no longer cheap, and they can no longer be taken for granted.
Over the past decade or so, a lot of fundraising executives have looked at the trend of more expensive new donors, and have decided to curtail their acquisition efforts – or to cut them out altogether. This ‘glass half empty’ thinking is understandable. If a new donor costs more than it used to, let’s not spend the money.
Taking the pulse of today’s market
This year, Good Workers decided to put in the effort to get an accurate read on where direct mail donor acquisition is today. 52 Canadian charities (who sent a combined 11 million pieces of mail in 2019) stepped up and offered to share their data with us. We all owe them a debt of gratitude for their contribution to best practice for direct response practitioners from coast to coast.
Good Workers crunched all the numbers. And, the result is our Canadian Direct Mail Benchmarks Study. It’s the only research in Canada that gives you an up-to-date and comprehensive overview of direct mail giving behaviours.
The donor acquisition benchmarks
Our research revealed three key performance indicators (KPIs) that are crucial to understanding your direct mail donor acquisition performance:
- The average donor acquisition mailing response rate for our participating organizations was 0.87%. Some charities still do considerably better than this rate, and others perform below it. The key thing to appreciate for experienced direct mail practitioners is that the days of 1% and better response rates for acquisition mailings are probably gone for good.
- On a more positive note, the average gift in response to donor acquisition mailings in our study was a whopping $62.98. While response rates have been dropping off over the years, gift sizes have held their value (and we suspect increased).
- The average cost to acquire a new donor in our study came out at $78.87. While new donors don’t come cheap, it’s worth noting that the participating organizations in our study that did acquisition mailings actually grew their donor populations, while those that didn’t do acquisition mailings experienced a sizeable shrinkage in their number of donors. Short term pain for long term gain.
(Note: Donor acquisition cost is literally the ‘price’ a charity pays for a new donor, who will generate net revenue over the longer term. To calculate the cost of a new donor, simply divide the loss you incur on a prospect mailing by the number of new donors you acquired through that same mailing.)
Using these benchmarks
We live in a multi-channel philanthropic marketplace, where fundraisers constantly have to evaluate where to invest scarce dollars to achieve maximum net revenue. Calculating the lifetime ROI of new donor investments through various channels is the smart way to make the best possible investment decision.
The cost of acquiring a new donor is the first part of the equation. When you go on to calculate the lifetime value of these newly-acquired donors, you’ll be in a position to compare direct mail to other tactics and channels in your portfolio.
Your glass can be ‘half full’ if you’re smart
So you’re looking at how expensive new direct mail donors are to acquire, and your leadership is pressuring you to cut back.
What if you knew that each of these new donors (that cost you $63* each) were going to give you 1.6* gifts of $85* per year for the next 3.5* years? That adds up to a $476 gross revenue return on your $63 investment – and makes you look petty smart!)
(* – The donor acquisition cost, gift frequency, and donor average gift values used in the above equation are taken from the Direct Mail Benchmarks report. The 3.5-year life expectancy number is an extrapolation from the active donor renewal rate in the report.)
Don’t forget the biggest payoff
And while you’re thinking of lifetime value, don’t forget the potential for legacy gifts! Earlier Good Works research has revealed that fully 75% of all Canadian bequests come from direct mail donors.
Once you’ve read these reports, you’ll have the map you need to successfully navigate your way to the revenue growth you’re searching for. Good luck!