Acquisition premiums could set a hard-to-maintain precedent.

By Jim Hussey

One of the most frequent questions I hear as a fundraising consultant is, “Do you believe in using premiums to recruit donors?” It disturbs me, because it almost always is positioned as a “yes” or “no” question. But it’s
really not that simple.

On one hand, premiums can be viewed as a wonderful cure to the problem of low response rates. The offer of a low-cost/high-value item as a reward for a contribution often will generate much higher response rates than offers that provide nothing.

But on the other hand, donors acquired with premiums can get addicted to them, and it’s hard to wean them off. Once a donor receives that cute plush animal or a tote bag for her donation, she’ll expect further rewards for further contributions.

Do you need a premium?
Explaining the effective use of premiums can’t be accomplished through a
simple answer. First, you need to determine whether you really need to use premiums … and then if you do, how to do so effectively. Begin with the mentality that using premiums in a fundraising program should be kept to a minimum.

Donors recruited with premiums usually aren’t as dedicated as regular donors, and they have higher attrition rates. Some of those who respond to a premium do so just to get the item, not because they truly support your mission. Attrition rates also are higher because premium donors often give lower donation amounts than those acquired through solicitations without such incentives. Statistics prove that the lower the donation, the less chance you have to retain that donor.

Also, premium donors often cost more to recruit due to the extra expense, which includes the item and shipping costs. And since such donors expect premiums in exchange for contributions, more premiums must be used to gain additional donations, which means the cost of maintaining these donors is more than that of traditional contributors.

So if you can generate a successful response rate from a list of potential donors without the use of premiums, you should do so. But it’s difficult to recruit new donors from the lists of organizations that already depend on premiums without using a premium of your own.

That’s why some of the most successful fundraising programs use a two-tier approach that first taps those lists that don’t require premiums. And once the source of non-premium lists is tapped out, they reach out to premium-based lists with a premium-based offer. Such programs allow organizations to tap into the premium market without corrupting their non-premium donors.

Too many organizations use a premium offer for all their donor-acquisition efforts, even to lists that could generate sufficient results without it. By including such lists within their premium campaigns, these organizations are contaminating these donors … thereby increasing their costs to recruit and keep them, and driving down average donations and retention rates.

So before you choose to addict donors to that cuddly teddy bear or notecards printed with Norman Rockwell paintings, be sure to thoroughly explore your non-premium options, and then use premiums cautiously and only when necessary.

Jim Hussey is president of Adams Hussey & Associates. Contact: jhussey@ahadirect.com.