September 23, 2017
 
Show Me the Premium

By Marla E. Nobles

Aside from list selection, the argument holds that nothing will have a greater influence on the success of an organization’s direct mail program than the offer. So, in an attempt to capitalize on the popularity of the premium, an increasing number of nonprofits are putting a unique spin on this mainstay of direct response fundraising.

Premium Addiction

According to a monthly survey completed by May Development Services, a division of direct marketing services firm Direct Media, Inc. (DMI), there is an even split between those organizations that send appeals containing a premium, and those that send a straight appeal. “It’s sort of remained unchanged over the past couple of years,” said Larry May, CEO of the Greenwich, Conn.-headquartered DMI.

But according to May, for those organizations using premiums, the landscape has not remained unchanged. “There’s more and more expensive premiums being mailed,” said May. “Premiums are a way of getting the public’s attention and engaging the donor. To get donors to slow down and pay attention and give a gift to support the charity, the perceived value (of the premium) has to be great.” And often, that means the cost goes up.

At the National Wildlife Federation (NWF), a philosophical concern has arisen. “We worry about premium addiction,” said Georgina Price, senior analyst, membership, at the Reston, Va.-based organization. Especially amongst the tenured donors, “they seemed to want more and more and more,” she said.

According to Price, NWF was one of the first organizations to offer front-end premiums, and continues to do so via its 12 mailings per year. During 2000, NWF began including a back-end on renewal in its first-year acquisition mailings, usually a plush toy or key chain. Four years later, the organization tested a different sort of front- and back-end premium – the lifestyle premium.

A fleece blanket premium, said Price, was tested against the polar bear plush toy control. “It was an item that donors could use in their everyday lives,” said Price, of the fleece. According to Price, during a 2004 test run on acquisition mail, the fleece performed exceptionally well, with response rates experiencing a 49 percent lift, compared to the 14 percent lift with the polar bear plush. Average gift with the fleece increased by 11 percent, while the cost to acquire donors decreased by 61 percent. The plush toy didn’t come close on either.

During test runs on renewal with the same donors, Price said the results dropped off when donors acquired with a fleece were offered upon renewal the plush toy, a premium with less perceived value. Those renewed with a tan fleece blanket performed slightly better, with response rates increasing by nearly 17 percent, average gift up by 6 percent, and net revenue up by 27 percent. A second test was completed the following year, with the fleece lifestyle premium again outperforming the plush toy.

“Sort of a side and unexpected benefit of using the fleece was the branding for the organization,” said Price, who said the NWF logo appears on the blanket.

To offset the costs of the more expensive lifestyle premium, Price said NWF acquires donors with less costly premiums (e.g. its membership publication, postcards and emails) and by using non-premium-based appeals.

“We can’t make the premium disappear,” said Price. “We can only keep testing and do our best to stay ahead of the game.” While the search is underway for “that great mission package,” for now, she added, “give the people what they want.”

Lifestyle premiums are definitely a newer trend, said Jill Querceto, vice president of sales and marketing at the Rumford, R.I.-based premium vendor Capitol Design. Querceto listed fleece blankets, pet accessories (e.g., dog tags) and gardening tools as some of the more popular back-ends, but nixed umbrellas. “Umbrellas are too expensive, and you can’t get a good enough umbrella for what the nonprofit wants to spend,” said Querceto.

According to Querceto, The Nature Conservancy uses a variety of lifestyle premiums, including a garden bag, baseball caps and fleece blankets. The National Audubon Society uses a fleece blanket.

It’s Like American Idol

A study completed by New York-based direct response firm ParadyszMatera found that 25 percent of all unique acquisition mailings during the past three years included name labels.

Organizations as varied as St. Jude Children’s Research Hospital, The Humane Society of the United States, and The Anti-Defamation League consider them a staple of direct mail acquisition packages.

“One would think that America would get enough of name labels, but they just don’t,” said May. “It’s like American Idol.”

Name labels “had fallen off the radar for a while,” said Capital Design’s Querceto. “But they’re back because of the innovative printing out there, and there’s better quality control on the personalization, so you’re not screwing up people’s names.”

An interesting twist has been to include multiple premiums in a single package. This “bundling” approach, said Amy Koop, account director at ParadyszMatera, does two things: it works to increase the perceived value of a mail piece, which is reflective of the trend toward more expensive premiums; and in some cases, it allows organizations to test safely into a new creative or premium by keeping a key element (the name labels) of the control package.

Since 2005, St. Joseph’s Indian School has found increasing success using the “bundling” approach with its front-end acquisition mailings, according to Kory Christianson, CFRE, executive director of development at the Chamberlain, S.D.-based school.

Guilty Until Proven Charitable

With premium-based programs, attrition is a constant concern, and more so these days.

“An advantage is that you grow your donor file quickly, but the downside is you create a lot of one-time gifts and lapsed donors,” said Christianson, who said he attributed the high attrition to guilt. “The person receives the item and might feel a little bit guilty, so they’ll send you $5. There’s a lot of that.”

On the other hand, added Christianson, if you have a program in place to deal with attrition, “you’re definitely growing your file faster and you’ll have more donors available for planned giving, wills and bequests, and things like that.”

There is a guilt factor for the low dollar givers, said Tom Harrison, president and CEO of the direct response fundraising agency Russ Reid, in Pasadena, Calif. “In general, these donors have a low lifetime value (LTV).”

Conversely, there are many charities that rely heavily on the low-dollar donor, and “probably have a million donors on their file who give under $10,” said Harrison. “But a lot of them give under $10 every time they’re asked.”

According to May, inducing guilt isn’t necessarily a bad thing. “Guilt is absolutely one of the major motivations for all charities. So anything you can do to get (donors) into that frame of mind is probably a good thing.”

Still, the question remains: How valuable is a donor to a charity if the person is giving a small amount because of the premium? And in some cases, is this merely a product purchase?

Mission marketing

According to Harrison, charities must decide when it’s appropriate to use a premium. “I think the first question you need to ask is if you can do it without a premium,” said Harrison. If the answer is that an organization cannot successfully run its direct mail program without a premium, Harrison advised testing both mission-related and non-mission-related premiums.

One organization that seems to have the mission-related premium down pat is World Vision in Seattle. Since the late 1990s, the organization had been using seed packets as part of its donor involvement — or bounce-back — program, according to Atul Tandon, senior vice president for donor engagement, but recently made some adjustments.

According to Tandon, the new donor involvement program involves sending the seed packets to donors and having them keep the premium — as opposed to sending it back along with a donation such as a regular bounce-back — as a reminder of the people the organization serves. “Our initial findings are that donors appreciate this very tangible and visual reminder of World Vision’s agricultural programs,” explained Tandon, of the seed packets. “Moreover, we have found that it is more efficient and economical to purchase the seeds in the nations where we work.”

While Harrison advised that an organizations should work hard at trying to find an offer that’s mission-related, “if you’ve tried everything else and this is the thing that works the best, I’d say use it. All that matters is the return on investment (ROI).”

Social compliance

According to Querceto, a hot-button issue these days for many nonprofits is whether their premium vendors are operating with a conscience.

“Charities want to know about the social conscience of where these items are being produced,” said Querceto, who recently made a trip to Capital Design’s factories in China on a social compliance visit. More often, charities are requiring their premium vendors provide documentation that fair labor is being used, and that the environment is being protected.

This article has been edited for length from the original, and has been republished with permission from the July 15, 2006, issue of The Nonprofit Times.

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