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Direct Response: Ways to Cut Costs, Not Returns

Resource Center - Foundation

(Jan. 12, 2009) Looking to tune up your direct mail campaign and trim some excess costs? Before you start loosening screws and removing parts, read this advice from a veteran direct response expert.

“Stick with what is working well,” says Mal Warwick, founder and chairman of Mal Warwick Associates, provided you are seeing fair returns on your program. “In a bad economy, the best course is caution. He emphasizes that now is no time to panic. “For most nonprofits, panic leads to pulling back dramatically and essentially no longer asking for money,” Warwick says. “Not asking, however, is exactly the wrong thing to do.”

There are ways to save money without harming your program in the short term. For one, if the machine runs, don’t spend time tweaking it. “A recession is a bad time to be testing, especially testing minor questions such as the color of envelope when your overall package is performing fine. We shouldn’t stop doing tests, but we need to pay more attention to the value of the ones we conduct.”

Warwick explains that there are definitely engine parts that need to stay intact. “Don’t stop testing lists and don’t stop acquiring new donors,” he says. “That’s a recipe for bankruptcy.” Conversion rates of first-time donors to repeat donors are, as a rule, low, he explains. These numbers may be even lower in a recession, so if an organization cuts back on acquiring new donors, its donor file will inevitably shrink. Fundraisers, therefore, cannot afford to stop prospecting.

So, no drastic changes. Don’t build a new engine or remove critical elements. But what about trimming down to meet a thinning budget?

Where to Cut Costs

Warwick gave eWire a sneak peek at his upcoming new book called Fundraising When Money Is Tight:  A Strategic and Practical Guide to Surviving Tough Times and Thriving in the Future. In a chapter titled, “Cut costs—with a scalpel, not an ax,” he offers the following advice:

Rethink where you draw the line between major donors and small donors. Too often donors who give $1,000 in response to a letter or phone call are handed over to the major gifts department for future cultivation. But experience has shown that $1,000-size gifts and greater can be effectively collected by direct marketing (phone, mail and online) techniques. This saves you having to hire more major gifts officers and frees up the ones you have for even larger gifts.

Consider outsourcing gift processing and donor file maintenance. Calculate the real cost of having an in-house back office—including hiring, training and supervisory costs, the space, the hardware and the software—and you may find that hiring a good processing firm that specializes in fundraising can actually be a significant cost-cutting measure.

Concentrate on reactivating lapsed donors. We know that renewing the support of those who have not given in a year or two is cheaper than acquiring a brand new donor. If you have a substantial number of lapsed donors (5,000 or more) it is cost-effective and highly worthwhile to create a special mailing targeting them. Telemarketing to these lapsed donors can also be very effective.

Gang print your materials. Find ways of printing at once the components of different mailing projects. Order six or 12-month supplies of standard materials, such as envelopes, rather than making a new order each mailing. Collaborate with a non-competing organization to print at once items of similar specifications (same size and shape of paper, ink colors). A better knowledge of the printing process and a good relationship with your printer can make for efficient—and thereby cheaper—projects.

More Resources

More advice from Mal Warwick can be found in the white paper, “Fundraising in Tough Economic Times.” His new book on facing a bad economy will be released late-March. Other recent titles by Warwick can be found in the AFP Bookstore:

Also check out the November/December 2008 issue of Advancing Philanthropy for extensive coverage of trends and techniques in direct-response fundraising (pgs. 35-41).

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